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Should the Financially Strapped US Be Funding the IMF?

Should the US be funding the IMF?


  • Total voters
    16
Well, we've established your ignorance of corporate finance, at least.

Institutions that are profitable rarely borrow money except on a short term basis to manage cash flows.

This is so unbelievably stupid I can't believe you actually said it right after calling ME ignorant. Businesses borrow money for all sorts of long-term projects ALL THE TIME.

celticlord said:
When they do borrow, it's for business expansion--i.e., to ramp up a line of business that has yet to turn a profit.

That's exactly what the IMF is doing here. They're expanding their business (i.e. lending more money to nations with distressed currencies, since there are a lot more of them now).

celticlord said:
Ditto for raising capital via the stock market: the goal is to grow the business (or segment thereof) to a point of profitability.

Profitable businesses that borrow lots of money generally don't remain profitable for very long.

Can you please provide a few examples of well-known profitable businesses that don't have any long-term debt or outstanding stock? I'll settle for four.
 
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Well, we've established your ignorance of corporate finance, at least.

Institutions that are profitable rarely borrow money except on a short term basis to manage cash flows. When they do borrow, it's for business expansion--i.e., to ramp up a line of business that has yet to turn a profit.

Care to explain to me then why IBM, one of the most long term profitable companies in history has something like 10 billion dollars in debt since you think that institutions that are profitable rarely borrow money?

Basic financial leverage. If you can earn 5% on borrowed money while paying 3%, you do it barring other circumstances.

Ditto for raising capital via the stock market: the goal is to grow the business (or segment thereof) to a point of profitability.

Um, stock market issuance are done for all kinds of reasons. Some is to raise capital, but the reason for capital raising is not just to grow the business. Financials are issuing stocks merely to shore up their loan loss allowances. That ain't profitability. That's survival. Some issue to dilute their stock values without using a split.

Profitable businesses that borrow lots of money generally don't remain profitable for very long.

Like IBM? :roll:

Profitable businesses use financing for either short term cash management or long term business expansion.

Tell me, raising capital to make more profitable loans is which? :rofl
 
That's exactly what the IMF is doing here. They're expanding their business (i.e. lending more money to nations with distressed currencies, since there are a lot more of them now).

What the IMF is doing is particularly evil right now. Because countries are distressed, they take out significant IMF loans. As country specific programs are still less than ideal, the one size fits all is still somewhat in effect. Thus, the IMF can squeeze more than normal to extract significant profits from these loans over the course of the loan.

What I don't quite get is why certain people are complaining since what the IMF is, is really just a vanguard for Western business, breaking down the obstacles to entry and allowing US and European firms to enter markets formerly hostile to them. Bleeding heart liberals should be offended by this, but I'm not one of them.
 
Ah, the but the question is on private financing. The Federal Reserve for intensive purposes is the government. While it is financed outside of Congress, its members are approved by Congress and it is subject to Congressional oversight.

Did Citibank make hundreds of double digit billion dollar loans without thinking much of it?

They were against making crappy loans but were forced to loan anyway.

Obama sued Citibank Under CRA to Force it to Make Bad Loans

"Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 36013619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982.


Plaintiffs alleged that the Defendantbank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.


U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. BuycksRoberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995).


Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendantbank’s loan application files. BuycksRoberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).


The parties voluntarily dismissed the case on May 12, 1998, pursuant to a settlement agreement.

.."



Settlement=Agree to make bad loans you will never get back.
 
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What the IMF is doing is particularly evil right now. Because countries are distressed, they take out significant IMF loans. As country specific programs are still less than ideal, the one size fits all is still somewhat in effect. Thus, the IMF can squeeze more than normal to extract significant profits from these loans over the course of the loan.

The IMF is the "lender of last resort" and is not intended to be a charity. If the IMF can "squeeze more than normal to extract significant profits," fine. That's supply and demand. The IMF exists only to help stabilize currencies. Governments looking for developmental assistance should look to the World Bank, to charities, to foreign governments, or to the private sector. That isn't what the IMF does.

obvious Child said:
What I don't quite get is why certain people are complaining since what the IMF is, is really just a vanguard for Western business, breaking down the obstacles to entry and allowing US and European firms to enter markets formerly hostile to them. Bleeding heart liberals should be offended by this, but I'm not one of them.

You sound pretty offended by it...

The IMF plays a useful function in the global economy. It is not good for international trade if currencies are extremely volatile, and no one ever knows how much they're going to get paid from their foreign debtors. The IMF was created to eliminate some of the exchange risk and help nations stabilize their currencies. The results of these loans are not always pretty, but they're necessary.
 
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The IMF is the "lender of last resort" and is not intended to be a charity. If the IMF can "squeeze more than normal to extract significant profits," fine. That's supply and demand. The IMF exists only to help stabilize currencies. Governments looking for developmental assistance should look to the World Bank, to charities, to foreign governments, or to the private sector. That isn't what the IMF does.



You sound pretty offended by it...

The IMF plays a useful function in the global economy. It is not good for international trade if currencies are extremely volatile, and no one ever knows how much they're going to get paid from their foreign debtors. The IMF was created to eliminate some of the exchange risk and help nations stabilize their currencies. The results of these loans are not always pretty, but they're necessary.

Top Ten Reasons to Oppose the IMF

"The IMF was originally designed to promote international economic cooperation and provide its member countries with short term loans so they could trade with other countries (achieve balance of payments). Since the debt crisis of the 1980's, the IMF has assumed the role of bailing out countries during financial crises (caused in large part by currency speculation in the global casino economy) with emergency loan packages tied to certain conditions, often referred to as structural adjustment policies (SAPs). The IMF now acts like a global loan shark, exerting enormous leverage over the economies of more than 60 countries. These countries have to follow the IMF's policies to get loans, international assistance, and even debt relief. Thus, the IMF decides how much debtor countries can spend on education, health care, and environmental protection. The IMF is one of the most powerful institutions on Earth"


It has not served its original purpose for quite some time.
 
The IMF is the "lender of last resort" and is not intended to be a charity. If the IMF can "squeeze more than normal to extract significant profits," fine. That's supply and demand. The IMF exists only to help stabilize currencies. Governments looking for developmental assistance should look to the World Bank or to the private sector.

Be that as it may, the IMF's policies for stabilization should make the country have a goal other than loan repayment. You know, fixing the problem that got them to where they needed the loan in the first place. The IMF doesn't do that and hence why it's kind of evil. It's nothing more than profit driven institution that veils itself under the guise of economic aid. IMO, that's kind of funny, but kind of not.

You sound pretty offended by it.

Just cause I call it evil does not mean I'm offended by it.

The IMF plays a useful function in the global economy. It is not good for international trade if currencies are extremely volatile, and no one ever knows how much they're going to get paid from their foreign debtors. The IMF was created to eliminate some of the exchange risk and help nations stabilize their currencies. The results of these loans are not always pretty, but they're necessary.

While that is true, the way that IMF goes about its loans is where the questionable behavior happens. Jamaica was a good example of how the IMF totally shafted the country. Tunisia was another. In that country the IMF forced the country to eliminate lifesaving healthcare for millions resulting in the decimation of the workforce. The IMF got their profit and the country was in the end worse off. While the loans are necessary, it is the mechanisms of the stabilization package that needs serious reform. Last I checked that is occurring. Just not quickly.
 
They were against making crappy loans but were forced to loan anyway.

Citibank CRA loans never ever even came close to a single normal loan issued by the IMF.

Remember that total CRA loans in aggregate for the entire country never at any time exceeded $20 billion. Mexico got $50 billion during its 1995 crisis.
 
Over the past 30 years. Seriously. Stop acting like a hack. The IMF and World bank have made large numbers of huge loans to countries.

The important fact isn't the amount of loans made, it's the amount of loans repaid or being serviced according to schedule.
 
"Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 36013619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982.

The Thirteenth Amendment?

"1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

A bank violated this by using common sense in it's lending practices?

How?
 
The Thirteenth Amendment?

"1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

A bank violated this by using common sense in it's lending practices?

How?

Well im losing track now between all the massive payouts and loans. Does the government own the banks or do the banks own the government? I think money could be a religion. Where are all the separation of church and state peeps to fight this battle?
 
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Im all for foriegn aid, but the problem is that the IMF takes advantage of undeveloped nations and therefore they are not a good way for our donations to help the world.

But that still puts me with a "no" for this poll, even if it is a different reason then others might have.
 
Citibank CRA loans never ever even came close to a single normal loan issued by the IMF.

Remember that total CRA loans in aggregate for the entire country never at any time exceeded $20 billion. Mexico got $50 billion during its 1995 crisis.

Citibank Bailout: $300 Billion Doesn't Sound Like A Lot Anymore


"The Wall Street Journal reports that Citibank (C) has become the latest recipient of a government bailout - this one to the tune of $300 billion, or thereabouts, depending upon how you do the math which, in this case, appears to be quite complicated."



Citibank Bailout May Leave You Holding the Bag in More Ways Than One

"it was Citigroup's 1998 lobbying efforts, as reported by Open Secrets, that paved the way for banks to get involved in other forms of business such as insurance. Citibank lobbyists were also front and center when bankruptcy reform was discussed, and consumers currently hoping for Chapter 7 relief know how much more difficult this process has become."


Feds step deeper into Citi bailout





"The new deal Friday did not give the bank any additional taxpayer dollars. But the government is taking on a greater risk by assuming more volatile common shares. The market price is well below the $3.25 per-share conversion price the government is paying.

Taxpayers will also lose roughly $2 billion in dividends, because the preferred shares they are giving up paid 8% dividends. Citi suspended its common stock dividend as part of the agreement."


Citi Jet Purchase: $50 Million, 12-Seat Plane Despite $45 Billion Bailout

"The New York Post's Jennifer Keil and Chuck Bennett reported in Monday's paper that Citigroup, which has received $45 billion in government bailout funds, is about to upgrade to a new $50 million, twelve-seat corporate jet.

The plane, the Dassault Falcon 7X, is a luxurious jet with a range of 5,950 nautical miles (meaning it can fly from New York to all of Europe and South America, as far east as Riyadh, and as far west as Honolulu or Petropavlovsk, Russia). The Post reports it has "plush interior with leather seats, sofas and a customizable entertainment center."

The Dassault website describes the wide, generously appointed cabin, but says the "the airplane's most welcome feature may be Dassault's breakthrough environmental system." It touts "quieting acoustics" and advanced temperature monitoring that contribute to a more comfortable passenger experience."




The trick is the imf and the fed are key players in helping the US government "gift" these "failing banks"(I dont buy that for a minute) tons of cash which they turn around and loan back to the US on interest.

Old school Usury. They used to hang people for that.

Before the US puts any more money out on these hairbrained schemes an independent comprehensive audit(How they will find someone like that I wonder) should be performed on the Federal reserve and the IMF and a couple of others money organizations.
 
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Not sure what was the point of that post. Citibank is suffering from a variety of problems. One, it's too big to manage efficiently, two it's trying to be a one stop financial shop but provides inferior services opposed to financials that offer a few really good services. Three, it got involved into subprime which is different from CRA. Remember if EVERY single CRA loan went bad at the same time, it would not even materially compare to the total amount of subprime loans given out that were not required by legislation. Fourth, Citibank was more or less doing what Enron was doing with its SPVs and the debts on those SPVs came back to bite Citibank in the butt. Fifth, Citibank offered lines of credit way back when to companies that are now in trouble. They are legally obligated to provide those lines of credit even though the chance of getting that money back is slim, thus the losses on those lines have been quite massive.

Lack of foresight, bad management, bad decisions and essentially bad accounting are screwing them.
 
Not sure what was the point of that post. Citibank is suffering from a variety of problems.

Lack of foresight, bad management, bad decisions and essentially bad accounting are screwing them.


It is not too big to manage efficiently. Crappy managers dont have much luck managing efficiently period...especially hamstrung by being forced to make crappy loans.

Cut the head off this snake and bring in some aces.

A "run" on the bank was inevitable with massive corrupt (Franks) government interference.
 
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It is not too big to manage efficiently.

Given their restructure plan, it does appear to be.

Crappy managers dont have much luck managing efficiently period

At a certain size, all endeavors become too hard to effectively focus on specific goals that make that company function well. Citi has appeared to hit that point.

especially hamstrung by being forced to make crappy loans.

This does not make sense. Citibanks's loans are well into the hundreds of billions of dollars. Even if Citibank had made all of the CRA loans, their loss allowances could easily cover all of them if they all went bad. The CRA loans are nothing more then a scapegoat. The sheer lack of size in CRA makes them for most purposes, immaterially. When losses on banks in aggregate approach high triple digit billions, $20 billion is chump change.

Citi needs to refocus on what it does well and forget the rest. The one stop financial shop model does not appear to work well and Citi needs to recognize that and abandon it. That and come clean about its SPVs.
 
I hear the Trends Research Institute predicts a depression in 2012.
 
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