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Should the "too big to fail" be nationalised?

Should the "too big to fail" be nationalised?


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Canell

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If things start to go nasty again and new bailouts are on the way, should the "too big to fail" be nationalised instead? :coffeepap
 
If things start to go nasty again and new bailouts are on the way, should the "too big to fail" be nationalised instead? :coffeepap

Yes, and with minimal compensation to stockholders.
 
If things start to go nasty again and new bailouts are on the way, should the "too big to fail" be nationalised instead? :coffeepap

If by nationalized, you mean given explicit regulatory authority over the nation, then yes.

Banking would be a lot easier if banks could control consumer culture instead of affording debt-fueled hedonism where people live irresponsibly.
 
If things start to go nasty again and new bailouts are on the way, should the "too big to fail" be nationalised instead? :coffeepap

As I understand it, we did not get into this crisis because institutions were "too big to fail."

Rather, they got "too big to take risks."

There's a constant tug between risk and reward when it comes to investments. The greater the risk, the greater the reward. But there's also greater chance of loss of that original investment.

So what I think should be done is we should is for financial institutions the larger they are the more money they should put in safer investments and hold in reserve against losses.

Doing this will inherently reduce a firm to become "too big to fail" as the size of an institution directly indicates how much risk they can manage, and those that are the largest must invest in the least risky investments.

Of course, none of this will matter if we allow the financial institutions themselves to write the regulations they must follow...
 
Yes...and then broken up and sold off.

But we should also be proactive, and set very strict rules and forced sell offs and break ups of these institutions ahead of time. Problem is, if we look at the "big banks" these days, that would mean pretty much all major banks in the UK, US, and Europe should be broken up due to their over all size vs the risks they take. I mean the big US banks are BIGGER now than they were in 2007 when the sub-prime mortgage market collapsed and almost brought down the whole banking and financial system in the US.

We should also do one very important thing.. put back the firewall between normal banking.. aka what we depend on.. and the highly risky crap that caused the problems in the first place.. Yes Glass-Segal like legislation. Problem is the right in many countries are actually against such legislation.... which frankly is pathetic.
 
In a free market capitalist system those too inept to succeed should fail ! Nationalizing these companies would fundamentally change our system into either fascism or socialism both of which will rely more on the capriciousness of the controller. Think US Postal Service but delivering more than just mail !
 
If things start to go nasty again and new bailouts are on the way, should the "too big to fail" be nationalised instead? :coffeepap

Orderly liquidation into some number of smaller entities, kind of like what we do with monopolies.
 
If by nationalized, you mean given explicit regulatory authority over the nation, then yes.

Banking would be a lot easier if banks could control consumer culture instead of affording debt-fueled hedonism where people live irresponsibly.

Except the banks profit from that debt-fueled hedonism. Remember, it was the lending institutions who pushed for sub-prime loans. Nobody did anything about it because there were too many people making too much money.
 
In a free market capitalist system those too inept to succeed should fail ! Nationalizing these companies would fundamentally change our system into either fascism or socialism both of which will rely more on the capriciousness of the controller. Think US Postal Service but delivering more than just mail !


The problem with the free market system is that the realization of failure is after the crisis. Rather, the government should have a regulatory role so they are proactive in protecting the investors in these banks.
 
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The problem with the free market system is that the realization of failure is after the crisis. Rather, the government should have a regulatory role so they are proactive in protecting the investors in these books.
This thread is not discussing problems with these market systems only whether or not the problem companies should be nationalized.
 
Except the banks profit from that debt-fueled hedonism. Remember, it was the lending institutions who pushed for sub-prime loans. Nobody did anything about it because there were too many people making too much money.

What profit are you talking about?

The sub-prime loans went bust. The reason the government had to bail them out is because Fannie and Freddie were the insurance for mortgage backed securities.
 
This thread is not discussing problems with these market systems only whether or not the problem companies should be nationalized.

And it's a good thing we can talk about individual issues brought up in a thread to engage in thoughtful discussion and debate.
 
What profit are you talking about?

The sub-prime loans went bust. The reason the government had to bail them out is because Fannie and Freddie were the insurance for mortgage backed securities.

Well, banks profit from debt-fueled hedonism in general. Sub-prime loans were the worst because it allowed people with extremely low income to get mortgages that could be paid to the banks. So sub-prime loans were just a way for banks to get money from people who were poorer and poorer.

Credit cards are another part of this. Why wait 6 months to buy a $5,000 entertainment system when you can put it on your credit card and buy it at the price of $6,000 that you can pay back by the end of the year?
 
No private company should EVER be nationalized in America.

Additionally, no private company should EVER be bailed out again.
 
Well, banks profit from debt-fueled hedonism in general. Sub-prime loans were the worst because it allowed people with extremely low income to get mortgages that could be paid to the banks. So sub-prime loans were just a way for banks to get money from people who were poorer and poorer.

Credit cards are another part of this. Why wait 6 months to buy a $5,000 entertainment system when you can put it on your credit card and buy it at the price of $6,000 that you can pay back by the end of the year?

Right, I completely agree.

If we didn't live in a world where people consumed on debt so much though, there would be more investment opportunities because people would be committed to self-development and using their time wisely.

Instead, they splurge and get stuck working menial jobs that provide no fulfillment whatsoever.

There's a reason social and fiscal conservatism go hand in hand.
 
Right, I completely agree.

If we didn't live in a world where people consumed on debt so much though, there would be more investment opportunities because people would be committed to self-development and using their time wisely.

Instead, they splurge and get stuck working menial jobs that provide no fulfillment whatsoever.

There's a reason social and fiscal conservatism go hand in hand.

Yes, but there's a problem with that that conservatives refuse to address.

Yes, many people use credit cards for hedonistic purposes, but there are a lot of people who have used credit cards to purchase necessities.

What's been happening is that the price of goods have gone up steadily over the past 30 years - however, wages have remained relatively stagnant. So when prices go up but income remains static people have less purchasing power and can buy less.

And when this happens, I think it further fuels rises in price, such as the housing bubble.

People were getting mortgages on houses that were pegged at higher and higher prices. As credit got easier to get, the prices of these houses were rising higher and higher in order to get more money from those mortgages as people competed for housing.

Then people realized how much money they were spending on credit to get a house and the bubble burst.

Now, people have paid a tremendous amount of money on homes that are no longer worth the money they paid for it.

It's not that these houses lost in value, exactly - rather, the amount of money that people are willing to pay for these homes fell so much. And there's a difference between those two things.

And that's why I'm worried about people who want the housing market to rise again. They want the housing market to rise so they can sell their homes at a price better on par with what they paid for it. But I'm afraid that what that will mean is that the housing market will have to get inflated again somehow for that to happen.

So what conservatives really need to do is to find some kind of way for people with lower income to afford such necessities or that their wages increase much more on par with increases in prices to address the foundation of this issue.
 
What profit are you talking about?

The sub-prime loans went bust. The reason the government had to bail them out is because Fannie and Freddie were the insurance for mortgage backed securities.

True. That was largely the case, with a few other politically touchy situations (union pension fund deficits) added in for good measure. The gov't (actually the taxpayers) was on the hook either way; rather than admit that the 'troubling' bank activity was not only legal, but mandated by the gov't, the congress chose to use bank "bailouts", rather than let many (most?) of these 'troubled' assets be "called in" using the gov't mortgage insurance that secured them. IMHO, this 'bailout" was political expediency gone wild, to make the congress (president?) look like heros saving the people from "greedy bankers", that were not doing anything wrong (note that NO charges of wrongdoing were ever attempted), it just looked better to say that, than to have allowed the taxpayers to know that they (through their gov't representatives) had "guaranteed" to pay the mortgages on behalf of people that had no business being given a mortgage loan in the first place. These "troubled" assets were mostly just paperwork that gave away houses to people that had no way to pay a mortgage, much less maintain the property, that they were "buying", but many real estate agents, bankers, appraisers and gov't inspectors made lots of money with these "pretend they will work", relaxed lending rules also known as, "sub-prime" mortgages. Once the "music stopped", those holding these gems, could no longer trade this trash for (as?) cash, even buy "bundling them" with some good mortgage paper.
 
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Yes, but there's a problem with that that conservatives refuse to address.

Yes, many people use credit cards for hedonistic purposes, but there are a lot of people who have used credit cards to purchase necessities.

What's been happening is that the price of goods have gone up steadily over the past 30 years - however, wages have remained relatively stagnant. So when prices go up but income remains static people have less purchasing power and can buy less.

And when this happens, I think it further fuels rises in price, such as the housing bubble.

People were getting mortgages on houses that were pegged at higher and higher prices. As credit got easier to get, the prices of these houses were rising higher and higher in order to get more money from those mortgages as people competed for housing.

Then people realized how much money they were spending on credit to get a house and the bubble burst.

Now, people have paid a tremendous amount of money on homes that are no longer worth the money they paid for it.

It's not that these houses lost in value, exactly - rather, the amount of money that people are willing to pay for these homes fell so much. And there's a difference between those two things.

And that's why I'm worried about people who want the housing market to rise again. They want the housing market to rise so they can sell their homes at a price better on par with what they paid for it. But I'm afraid that what that will mean is that the housing market will have to get inflated again somehow for that to happen.

So what conservatives really need to do is to find some kind of way for people with lower income to afford such necessities or that their wages increase much more on par with increases in prices to address the foundation of this issue.

Inflation is a self-fulfilling prophecy with debt:

Demand-pull inflation - Wikipedia, the free encyclopedia

When credit becomes more available, that increases the money supply.

Ergo, prices go up.
 
True. That was largely the case, with a few other politically touchy situations (union pension fund deficits) added in for good measure. The gov't (actually the taxpayers) was on the hook either way; rather than admit that the 'troubling' bank activity was not only legal, but mandated by the gov't, the congress chose to use bank "bailouts", rather than let many (most?) of these 'troubled' assets be "called in" using the gov't mortgage insurance that secured them. IMHO, this 'bailout" was political expediency gone wild, to make the congress (president?) look like heros saving the people from "greedy bankers", that were not doing anything wrong (note that NO charges of wrongdoing were ever attempted), it just looked better to say that, than to have allowed the taxpayers to know that they (through their gov't representatives) had "guaranteed" to pay the mortgages on behalf of people that had no business being given a mortgage loan in the first place. These "troubled" assets were mostly just paperwork that gave away houses to people that had no way to pay a mortgage, must less maintain the property that they were "buying", but many real estate agents, bankers, appraisers and gov't inspectors made lots of money with these "pretend they will work" relaxed lending rules known as "sub-prime" mortgages. Once the "music stopped", those holding these gems, could no longer trade this trash for cash, even buy "bundling them" with some good mortgage paper.

Can I just point out that if we could get quality banking reform for regulations we would neither have banks doing shady business practices nor require bailouts to save them and the shareholders of these institutions?
 
No private company should EVER be nationalized in America.

Additionally, no private company should EVER be bailed out again.

They would have been "bailed out" anyway, just by calling the "bluff" of congress and demanding that Fannie/Freddie make the "sub-prime" mortgage paper "good" (using gov't backed mortgage insurance), which would have made the taxpayers responsible, in the end, anyway. Only the "blame" was shifted, not the costs. It just sounds better, politically, to make it the fault of the "greedy bankers" than to admit that the morons in congress made this mess. Yes they did!
 
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Can I just point out that if we could get quality banking reform for regulations we would neither have banks doing shady business practices nor require bailouts to save them and the shareholders of these institutions?

It was "banking reform", creating these "sub-prime" mortgage laws, that caused the problem, the banks were mere pawns in the GOV'T scheme. The gov't said lend this new and "fair" way, and the banks simply said OK, but only if you will "guarantee" these loans. Since the gov't "owns" Freddie/Fannie they went along with the scam and gave Freddie/Fannie authority for handsome "bonus" payments (hush money?), while knowing that Freddie/Fannie had no way to cover all of those "sub-prime" mortgage notes when (not if) they failed to get paid back.
 
In a free market capitalist system those too inept to succeed should fail ! Nationalizing these companies would fundamentally change our system into either fascism or socialism both of which will rely more on the capriciousness of the controller. Think US Postal Service but delivering more than just mail !

No private company should EVER be nationalized in America.

Additionally, no private company should EVER be bailed out again.

I agree entirely with the two quotes above.

Let any such company go through the proper, established bankruptcy procedures.
 
I agree entirely with the two quotes above.

Let any such company go through the proper, established bankruptcy procedures.

You misunderstand what the BULK of TARP was about. These banks were not bankrupt, they had GOV'T backed insurance via Freddie/Fannie for over 90% of the "troubled mortgages" that they held. If they did call the notes due (via insurance) then the taxpayers were still going to "bail them out", it would just have exposed congress for the morons that they are, rather than let congress pretend it was a "banking error", "real estate bubble", or "greedy bankers" that caused the need for bailouts, not simply stupid federal laws, that they had made. Did you not find it curious that not ONE bank was closed or charged with any wrong doing at all? This was NOT due to the action of "greedy bankers", it was due to the actions of DC morons, but either way the taxpayers get stuck with the tab. Yes they did!
 
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Yea, Bob doesn't seem to understand that finance is outsourced from government for a reason.

The government messed things up in communicating that it wanted more loans made, so it paid the price. If it didn't, that would have been principal-agent conflict where the bureaucrats and agencies (Fannie and Freddie) in charge of communicating the government's intentions weren't held responsible for their actions.
 
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