There is a simple way to fix all this - STOP BAILING OUT THE BANKS.
It is total crap that the economy/banking system would collapse without TBTF (Too Big Too Fail).
Healthy banks simply buy up the desired assets of failed banks.
Private citizens assets are covered by FDIC.
And their mortgages are simply sold to another bank.
All this fake panic that the gov't./banks try and instill in the masses that the banks MUST be protected is nothing but corporate cronyism.
Banks will NEVER stop taking gigantic chances so long as they know they will be covered if they mess up by taxpayers money - and why would they?
It staggers me that four years later there are people who believe the Community Reinvestment Act or some similar legislation is what caused the crash in 2008. The real question is what will they do when the banks come back for another bite at the apple. Maybe a better question is what will you do when they come back to rip us off again? Both of the "major" candidates running for president were for the bailouts so it's reasonable to assume that when the banks come bank for more they will get it.
I think people are forgetting what a screw job it was. It's not just that we gave them 700 billion but the treasury gave them much more than that. Also, remember the original request was for 700 billion and they passed a bill for 829 billion what the hell was that extra 129 billion for? Finally, we were told the banks had to receive this money to buy toxic assets and the day after the bill passed Paulson decided not to use it to buy toxic assets.
At one time societies hung speculators now we give them money when they f*** up. I'm opposed to the death penalty so I wouldn't want to go back to that or even speculation being a crime but it would be nice to see fraud and other criminal acts result in jail time. Justice announced this week they aren't going to prosecute Goldman, HSBC paid a fine for laundering drug money, Wachovia paid a fine for laundering drug money, Standard Chartered appears to be getting a fine for laudering money of a so called "terrorist" state and don't hold your breath on anyone going to jail for interest rate swaps based rigged libor rates.
The current America system is about getting over not producing a better widget and both parties do everything they can to keep it that way
Of course you can. Capitalism is flawed, because it has no checks and balances in the real world. That is why we need bureaucrats and government to prevent exploitation and "natural monopolies" happening. Problem is when capitalism buys the bureaucrats and hence the government, then you end up with capitalism's worst traits.You can't blame capitalism for bureaucrats insistence on getting involved in it and rendering it something other than capitalism.
Problem this time around was that it was not one bank, but pretty much all banks that would have gone down... and that cant happen. FDIC would not be able to cover the fall of all banks..... and that would mean it would be catastrophic.
2) You do realize that TARP had almost nothing to do with saving banks? And that Paulson had to threaten the big banks to take the TARP money? That is a documented fact.
In other words - there was no near catastrophic breakdown. A few banks went under. A few more would have followed without bailouts. But most banks were no where near collapsing. And if they were - why did they refuse TARP money, if they needed it to survive?
Last edited by DA60; 08-14-12 at 04:24 AM.
I tend to agree with you but there's very little chance we will ever know the complete truth because it would require subpeona powers and motivated investigators which isn't going to happen. If you read the "Shock Doctorine" ,which came out the year before the so called banking crisis, it outlines how other governments have been screwed over be it Russia, Poland or somewhere else and what happened in 2008 was very similar. That doesn't mean they're guilty but I would encourage everyone to read it because it will provide some perspective on things. If nothing else the reader will learn that Rahm didn't invent the concept of "never waste a crisis" in fact it's much more a tool of the Friedmanites.
We had one major "bank" go down and it caused a total credit freeze world wide. This was the result of the sub-prime mortgage scandal (which still aint fixed btw). No lending between banks is bad, very bad. The first thing that happens is they stop lending to people in general.. and companies, and companies cant function without credit.
The next thing they do is try to figure out what is actually worth something in their portfolio, and considering the constant fall in house prices and falling stock prices (at the time) then that in it self is hard to figure out.
And then there comes the liquidity issue.. banks lend money too, and if they cant finance said lending, then they go belly up. And since banks are leveraged more than 1-1, then they dont have the liquid or non liquid assets to pay off the consumer.. aka your money in your bank account.
So if the bank goes down, then you loose your money. Now we have the FDIC, but the problem with the FDIC, is that it is not designed for many or/and major bank failures at the same time. I have heard numbers like the FDIC insures 4 trillion in deposits, but only has 53ish billion in funds. Who do you think will have to make up the difference if suddenly the 2 biggest banks go belly up?
Yes, and that was to spark confidence in the financial system. Remember confidence in the system is key for any system to work.. regardless if it is the gold standard or not. If there is no confidence in the amount of gold backing up a currency, then that currency is worthless for example.2) You do realize that TARP had almost nothing to do with saving the banks? And that Paulson had to threaten the big banks to take the TARP money? That is a documented fact.
By forcing supposedly healthy banks with bail-out money, they stated that those banks all were backed by the government and were safe. Hence there would hopefully be no run on the banks... which there was not. Remember the banking records, who is doing good or bad, are secret.. so people knew some banks were hurting, but which ones was not known.. that is why the credit crunch happened. The banking secrecy issue also kept Lehmans and others running long after they should have been shut down... it is nice when you can hide your true nature eh?
Again you dont get it.In other words - there was no near catastrophic breakdown. A few banks went under. A few more would have followed without bailouts. But most banks were no where near collapsing. And if they were - why did they refuse TARP money, if they needed it to survive?
A "few".. try over a hundred in 2007 alone. 200+ in 2008. But they were small banks. We are talking about the biggest banks not only in the US but the world. Bank of America for example, Citigroup and so on. BOA and Citi are not small banks..BOA had 800+ billion in deposits in the 4th quarter 2007. Had BoA gone down, which it would, then the FDIC would have to cover 800+ billion.. money it did not have.
BOA has been a problem bank, and still is... since 2007. When BOA swallowed Myrill Lynch, it added crap on top of its own crap. CITI was also hurting big time and also had near a trillion dollars in deposits. Considering these two banks alone stood for almost half the total deposits in the US, then you can see the problem if said banks went belly up. And if you did not notice last year BOA sold 73 billion dollars worth of mortgages to Fannie for 500 million dollars... any guesses what kind of assets they were?
Fool Me Twice: Bank of America Plays Hide And Seek Using Fannie Mae - Forbes
TARP was not perfect but it was needed. The banking and financial industry can not collapse as a whole period.. it would be beyond catastrophic, and in a time where confidence is next to nothing, then leveraged banks/financial institutions would easily go belly up because they cant access the credit markets.
Now the irony is, these banks were saved and are today supposedly stronger, but they are also much bigger and even more "too big to fail".. yes I would love for them to be broken up. The issue should not be demonizing TARP, but to make sure that TARP is never needed again, and that means breaking up too big to fail banks and financial institutions. This has not happened, and those banks and financial institutions are now even bigger than they were in 2007/8, which is not good. And yes Obama has failed big time on this issue, although the GOP has not exactly been pushing for changes either.
Its not that certain buisinesses fail, its that the entire financial system, which the entire economy relies on ... fails ...It's not a failure of capitalism when government takes it over, bails it out, etc. Obviously capitalism leads to some capitalists failing, and government lets them fail, that's capitalism. That's what is SUPPOSED to happen in a capitalist society... failed businesses fail. If government steps in and start managing it, that's not capitalism.
I was against the bailout, but if the government just did nothing Capitalism would collapse.