View Poll Results: Which party is more responsible for the state of the economy?

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Thread: Which party is more responsible for the state economy?

  1. #91
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by X Factor View Post
    Maybe you should reexamine your own reading comprehension. I haven't read the second post you linked, but the first you use as evidence that Lord T put some blame on the govt doesn't do that at all. In fact, he's denying that putting pressure on banks to give loans to people who couldn't pay them back had anything to do with the housing bubble. He's actually saying the banks made those bad loans because they wanted to. How is any of that saying the government shares some blame?

    Edit: Ok, looked at the second post and it's the same thing. It's poor Fannie and Freddie that were just being forced to try to compete with those unregulated, evil, private lending institutions. Not only is the govt not responsible, it's actually the victim.

    When did Freddie and Fannie force any financial instutition they did not want to? Why did Texas avoid the housing bubble when it is subject to the same federal regulations that Nevada (ie CRA, Fannie, Freddie among others), why did the UK and Ireland have housing bubbles depsite not being subject to the CRA or Fannie or Freddie, heck why did housing prices in Canada go up similarly in price (housing bubble that has not burst yet) despite not being subject to the CRA, Fannie and Freddie.

    The point that should be obvious to anyone, the banks took on excess leverage and in the search for yield willingly provided loans to millions of people who should not have received them. They were able to make the loans, and sell them off as a means to unload the risk of the loan to someone else.

    The govermnment played a part, it weakened regulations allowing for increased risk and leverage, it reduced the lending standards, and it did not regulate Fannie and Freddie properly. But as Texas should strick mortgage regulations by the government (in this case state regulations) can prevent the idiocy of banks to make loans they shouldnt, and stop people from making loans they shouldnt. Countrywide was never forced to make bad loans, it wanted to do so.
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  2. #92
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Centinel View Post
    How did it prevent banks too big to fail?



    And why is it necessary to keep investment banking separate from commercial banking? What is that designed to protect us from?
    Re the second point

    It limited the amount of risk commercial banks could take on. By not being able to take on the risks that investment banks can and often do, the commercial banking industry would be more stable and less likely to require bailouts (especially those subject to the FDIC) In other words it was a firewall to prevent commercial banks putting the general populations savings at high risk

    People put their money into BoA for safety, people put their money into Goldman to make a lot of money. By allowing BoA to act like Goldman, the safe place to put ones money was gone
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  3. #93
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by whysoserious View Post
    If this recession staves off a double dip, I would say during this recession you could look for it as evidence that it worked - considering how bad it was supposed to be. Unemployment actually capped at around 10%, which is not great but better than it could have been. However, I am sure less was spent than what should have been since we could not afford to deficit spend due to our already large IOU bill. That's the whole point of Keynesian economics and if we had practiced it, we would have more room to continue expansion of spending to stimulate the economy until it regains strength.

    To me, Keynesian economics makes far more sense than any supply-side, "just keep not taxing the rich" idea. Combined with unchecked spending, it has earned us quite a bit of debt.
    Was I high when I wrote this 20 minutes ago? Half of the sentences don't even make sense. I fixed it to what it should be in the edit above since it was probably almost impossible to read before.

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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Lord Tammerlain View Post
    Re the second point

    It limited the amount of risk commercial banks could take on. By not being able to take on the risks that investment banks can and often do, the commercial banking industry would be more stable and less likely to require bailouts (especially those subject to the FDIC) In other words it was a firewall to prevent commercial banks putting the general populations savings at high risk

    People put their money into BoA for safety, people put their money into Goldman to make a lot of money. By allowing BoA to act like Goldman, the safe place to put ones money was gone
    Totally agree. Depositing one's money for safekeeping is a totally separate consumer activity than investing in stocks or bonds. In the former case, the deposit account acts as a secure extension of one's wallet and doesn't represent the acquisition of a financial instrument. The latter involves risking one's capital in a financial instrument, and is in essence a business venture.

    The problem we have in our banking system is that when I deposit my money for safekeeping in my demand deposit account the bank embezzles my money and invests it as if it were its own. Yet the bank assures me that I continue to be the owner of my funds, and that I may withdraw them or use them to pay my rent at any time, when in fact the bank has taken my money and put it into God knows what investment.

    It is impossible for two different people to simultaneously be the owner of the same asset. Either I own my deposited rend and grocery money, or the person to whom the bank has loaned it is the owner, but we cannot both be at the same time. The bank is creating a legally and economically untenable situation by taking what I supposedly own and loaning it to another entity. The same money is an asset on two people's balance sheets. Can you say financial bubble?

    So I see how Glass-Steagall is an attempt to limit the level of risk I am placed under when the bank embezzles my money. For example, the bank loaning my deposited rent and grocery money to a local business is a good thing, while investing my rent and grocery money in a financial instrument is a bad thing. But that doesn't solve the underlying problem. If I deposit my rent and grocery money in a bank for safekeeping, and the bank takes my money, money I legally own and may withdraw at any time, and they use it for their own money-making investments, then they ought to be charged with embezzlement.

    If I as a consumer wish to risk my money investing in equities, bonds, certificates of deposit, or any other business venture, then I am perfectly free to assess the risks, make the investment, and live with the profit or loss involved in my business decisions.

    However, if I should also be able to choose to simply to keep my money in a secure facility and use that money to pay my rent and groceries. The depository institution should be required to hold every penny of my money in my account at all times for my immediate withdrawal, and as the legal bailee, the depository institution should be forbidden from putting my deposit at risk by embezzling my money and using it for their own business ventures.

    That is the only way to prevent bank failures from impacting depositors. Glass-Steagall is just nibbling around the edges, because even supposedly safe business and farm loans can and have gone bad, wiping out depositors.
    Last edited by Centinel; 11-05-11 at 12:20 PM.

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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Centinel View Post
    Totally agree. Depositing one's money for safekeeping is a totally separate consumer activity than investing in stocks or bonds. In the former case, the deposit account acts as a secure extension of one's wallet and doesn't represent the acquisition of a financial instrument. The latter involves risking one's capital in a financial instrument.

    The problem we have in our banking system is that when I deposit my money for safekeeping in my demand deposit account the bank embezzles my money and invests it as if it were its own. Yet the bank assures me that I continue to be the owner of my funds, and that I may withdraw them or use them to pay my rent at any time, when in fact the bank has taken my money and put it into God knows what investment.
    I don't see how that is much of an issue as long as they have enough on hand to pay out what you need. To begin with, if you want to earn interest on your deposits, then you have to expect that they are going to be using your money on investments. Secondly, they are not just taking large amounts of your cash and investing it - there are very specific formulas they use to decide how much money they can take without taking on too much risk - keep in mind they are the ones who are liable so it is in their interest to safeguard your money.

    For instance, currently I am trying to self-learn about how derivative prices are set based off of interest rates and market volatility. My only reason for bringing that up is because it is also a way to assess risk, cut losses, and defeat any market arbitrage. Though banks clearly screwed up by too much bad debt - leading too many failures in 2008 - generally they are pretty damn good at managing risk.
    Last edited by whysoserious; 11-05-11 at 12:25 PM.

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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Centinel View Post
    Totally agree. Depositing one's money for safekeeping is a totally separate consumer activity than investing in stocks or bonds. In the former case, the deposit account acts as a secure extension of one's wallet and doesn't represent the acquisition of a financial instrument. The latter involves risking one's capital in a financial instrument, and is in essence a business venture.

    The problem we have in our banking system is that when I deposit my money for safekeeping in my demand deposit account the bank embezzles my money and invests it as if it were its own. Yet the bank assures me that I continue to be the owner of my funds, and that I may withdraw them or use them to pay my rent at any time, when in fact the bank has taken my money and put it into God knows what investment.

    It is impossible for two different people to simultaneously be the owner of the same asset. Either I own my deposited rend and grocery money, or the person to whom the bank has loaned it is the owner, but we cannot both be at the same time. The bank is creating a legally and economically untenable situation by taking what I supposedly own and loaning it to another entity. The same money is an asset on two people's balance sheets. Can you say financial bubble?

    So I see how Glass-Steagall is an attempt to limit the level of risk I am placed under when the bank embezzles my money. For example, the bank loaning my deposited rent and grocery money to a local business is a good thing, while investing my rent and grocery money in a financial instrument is a bad thing. But that doesn't solve the underlying problem. If I deposit my rent and grocery money in a bank for safekeeping, and the bank takes my money, money I legally own and may withdraw at any time, and they use it for their own money-making investments, then they ought to be charged with embezzlement.

    If I as a consumer wish to risk my money investing in equities, bonds, certificates of deposit, or any other business venture, then I am perfectly free to assess the risks, make the investment, and live with the profit or loss involved in my business decisions.

    However, if I should also be able to choose to simply to keep my money in a secure facility and use that money to pay my rent and groceries. The depository institution should be required to hold every penny of my money in my account at all times for my immediate withdrawal, and as the legal bailee, the depository institution should be forbidden from putting my deposit at risk by embezzling my money and using it for their own business ventures.

    That is the only way to prevent bank failures from impacting depositors. Glass-Steagall is just nibbling around the edges, because even supposedly safe business and farm loans can and have gone bad, wiping out depositors.
    Of course the risk is not eliminated and never would be ( reason for the FDIC to exist)

    As for the bank not being able to loan out the money that you deposited, if it did not do so, the fees you would have to pay would increase dramatically, and getting interest on your deposits would not occur at all
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by X Factor View Post
    Maybe you should reexamine your own reading comprehension. I haven't read the second post you linked, but the first you use as evidence that Lord T put some blame on the govt doesn't do that at all.

    In fact, he's denying that putting pressure on banks to give loans to people who couldn't pay them back had anything to do with the housing bubble. He's actually saying the banks made those bad loans because they wanted to. How is any of that saying the government shares some blame?
    Lord T:
    Sure the federal government promoted home ownership
    Hmmm. Government incentives creating a condition where banks increased questionable lending means that the government isn't at fault at all here? You sure you want to level that charge that I have a reading comprehension problem? I like how you jump on the CRA only issue while ignoring the conditions that partially caused non-CRA banks to engage in risky lending as proof that I can't read. That would be a lie of omission and you need to realize that people aren't as inherently lazy as you and will go back to cite portions that 1) prove you a liar and 2) prove you are wrong.

    Try again. And with less fail.

    Edit: Ok, looked at the second post and it's the same thing. It's poor Fannie and Freddie that were just being forced to try to compete with those unregulated, evil, private lending institutions. Not only is the govt not responsible, it's actually the victim.
    pushed Frannie and Freddie into trying to cover that market as well. People should remain aware that even though the GSE were "covered by the government" they were for profit companies with non governmental ownership seeking a return
    Hmmm. Looks like you are wrong again. Can I add you to the list of people with reading comprehension problems?
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by whysoserious View Post
    I don't see how that is much of an issue as long as they have enough on hand to pay out what you need.
    Yes, as long as the bank has enough on hand to satisfy depositors' withdrawals, everything should be fine. What could possibly go wrong?

    To begin with, if you want to earn interest on your deposits, then you have to expect that they are going to be using your money on investments.
    I don't wish to earn interest on my deposits. I want a guarantee that my deposits will always immediately be available for my exclusive use. When I deposit my money for safekeeping I am no more loaning it to the bank than I am loaning my coat to the coat check. It is mine, I am entrusting it for safekeeping, and I do not expect that the bailee is going to turn around and use the money for his own money-making purposes.

    If I wanted to loan my money out at interest, I would buy bonds or certificates of deposit, and I would certainly not expect to simultaneously be capable of spending the money I just loaned out. Loaning money is a business proposition, and those who make loans must understand the risk of default and be prepared for the consequences. A loan also clearly transfers ownership of the asset from the lender to be borrower. The lender doesn't loan money and then expect that he can also simultaneously use the loaned funds to pay rent and buy groceries.

    Quote Originally Posted by Lord Tammerlain View Post
    Of course the risk is not eliminated and never would be ( reason for the FDIC to exist)
    Life is risk, so I agree that risk is never eliminated. But as soon as the bank embezzles my deposited money and uses it as their own they have set up the failure. The bank and I cannot simultaneously both own the same asset. That is the essential nature of the risk, not whether the bank invests the money in a local mortgage or in some other more risky financial instrument. As soon as they take my money and use it as if their own, they have put me, the depositor, at risk. That is what should be outlawed.

    As for the bank not being able to loan out the money that you deposited, if it did not do so, the fees you would have to pay would increase dramatically, and getting interest on your deposits would not occur at all
    I would never expect to earn interest on my deposits, since I am not loaning them. I am depositing them.

    And of course, I would expect to pay for the services of keeping my money safe and for the various services of check clearing, debit card processing, online banking, etc.

    As I said above, If I have money I wish to risk in a business venture, I would buy equities, bonds, or CDs. But I would undertake these investments knowing that they are risky and that I bear the risk. Deposits, on the other hand, should be 100% guaranteed, as they should only leave the bank when I withdraw them or cause them to be withdrawn through a check or debit card.

  9. #99
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Centinel View Post

    If I wanted to loan my money out at interest, I would buy bonds or certificates of deposit, and I would certainly not expect to simultaneously be capable of spending the money I just loaned out. Loaning money is a business proposition, and those who make loans must understand the risk of default and be prepared for the consequences. A loan also clearly transfers ownership of the asset from the lender to be borrower. The lender doesn't loan money and then expect that he can also simultaneously use the loaned funds to pay rent and buy groceries.



    Life is risk, so I agree that risk is never eliminated. But as soon as the bank embezzles my deposited money and uses it as their own they have set up the failure. The bank and I cannot simultaneously both own the same asset. That is the essential nature of the risk, not whether the bank invests the money in a local mortgage or in some other more risky financial instrument. As soon as they take my money and use it as if their own, they have put me, the depositor, at risk. That is what should be outlawed.



    I would never expect to earn interest on my deposits, since I am not loaning them. I am depositing them.

    And of course, I would expect to pay for the services of keeping my money safe and for the various services of check clearing, debit card processing, online banking, etc.

    As I said above, If I have money I wish to risk in a business venture, I would buy equities, bonds, or CDs. But I would undertake these investments knowing that they are risky and that I bear the risk. Deposits, on the other hand, should be 100% guaranteed, as they should only leave the bank when I withdraw them or cause them to be withdrawn through a check or debit card.
    What you would want would be a safety deposit box, not a savings account or chequeing account. Both the savings account and the chequeing account come with the general condition the bank will lend that money out.

    A safety deposit box is yours and you do pay a few on it, the institution will not use the contents of it to further their own profits, and just do their best to safe guard it.

    Regarding savings accounts, the bank does not own that money, just has it as assets under management. Commercial banks used to have more restrictions on how they used that money, and the depositer had a better understanding of the risk of depositing it into a commercial bank
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    Re: Which party is more responsible for the state economy?

    Quote Originally Posted by Lord Tammerlain View Post
    What you would want would be a safety deposit box, not a savings account or chequeing account. Both the savings account and the chequeing account come with the general condition the bank will lend that money out.

    A safety deposit box is yours and you do pay a few on it, the institution will not use the contents of it to further their own profits, and just do their best to safe guard it.

    Regarding savings accounts, the bank does not own that money, just has it as assets under management. Commercial banks used to have more restrictions on how they used that money, and the depositer had a better understanding of the risk of depositing it into a commercial bank
    No, I don't want a safe deposit box. I want a checking account that contractually prohibits the bank from lending out my money. It would 100% eliminate the possibility that I as a depositor would be left holding the bag if the bank's investments go sour. I would then not need Glass-Steagall or the FDIC to protect me.

    The Glass-Steagall is trying to solve the problem the wrong way. Regulating whether banks may invest only in morgtages or whether they may invest in exotic financial instruments is closing the barn door after the horse is out. The root of the problem is that the bank is loaning out money that depositors consider as their assets. The same dollar cannot be simultaneously owned by two different people. That is the root of the problem.

    And if the response is that depositors would rather have their interest, well then they are not depositors, they are either lenders or investors, and as such I see no reason why the government has any obligation to backstop any lender's or investor's risk.
    Last edited by Centinel; 11-05-11 at 07:41 PM.

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