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Nationalizing the DEBT is what we'd like to avoid, though...
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<Reverend> IRC is just multiplayer notepad.
I like your SNOOPY POSTER! - While you Wait quote. -
Since you can't nationalize or send people to jail the only remaining option would be regulations to discourage the speculative behavior which caused the problems.Originally posted by snoopy369
The problem is that a failed bank damages the economy as a whole, and damages society. It's something of a catch-22 ... you don't want to bail them out to encourage more speculation, but you have to in order to prevent further failures and a lack of confidence in other banks.
Perhaps a solution would be nationalizing them, but that is not consistent with US economic policy ... but I can't think of anything else you could do that would still be a big enough penalty to discourage the ownership doing it (except sending them to jail
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Try http://wordforge.net/index.php for discussion and debate.Comment
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Nationalizing the debt is what always occurs. Just look at the 1987 Savings & Loan crisis. The average guy on the street gets hung out to dry while the bankers get get bags of money from the Federal government. Not really a good solution, in fact I find it completely unjust, but it is the American way. **** the little guy but save the fat cats.Originally posted by snoopy369
Nationalizing the DEBT is what we'd like to avoid, though...
My own opinion is if the taxpayers are going to have to flush money down the toilet then I'd rather give it to average Joes. That doesn't do a thing to restoring market stability though.Try http://wordforge.net/index.php for discussion and debate.Comment
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In the Bear Stearns buyout, the Fed nationalized about $30 billion in assets (and related debt), but I think JP Morgan bears a lot of risk on the assets/debt other than the $30 billion as well.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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As to the OP, we haven't even entered a bear market yet! We're not dead yet!I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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It will be interesting to see how things go today (I suspect a sizable sell off of financial stocks and other assets).Try http://wordforge.net/index.php for discussion and debate.Comment
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The problem is that the speculative behavior is not entirely bad, as it fuels positive economic growth (particularly in an economy that has little left to grow in except speculation ... it's not like we produce much anymore); and it's very hard to determine where to draw the regulatory lines. And again, this is not the free-market way (nor is bailouts, of course); it would be much better to find a free-market solution to this free-market problem.Originally posted by Oerdin
Since you can't nationalize or send people to jail the only remaining option would be regulations to discourage the speculative behavior which caused the problems.
In some ways, I think the best solution could very well be to have a separation between Speculative Banks and NonSpeculative Banks. Re-work the Federal Reserve legislation to the following:
1. The Federal Reserve will only support banks who agree to follow regulations blah blah blah no speculation blah blah higher reserve levels blah blah etc.
2. Banks not following these regulations are still permitted to exist, and may do whatever they want speculation-wise; but they will not be bailed out and their reserves are not FDIC-insured. They may continue to borrow money from non-Fed sources, but may not borrow money from the Fed.
3. No bank that is Fed-supported may own, or be owned by, or be jointly owned with a non-Fed supported bank, directly. Indirect ownership is only allowed in the normal ways where one bank's fall would have no effect on the other banks.
I think you could end up with a situation, similar to mutual funds, where you have 'safe' banks that offer lower returns but are quite safe, and 'speculative' banks that offer higher returns and are somewhat risky. It depends on the returns and the regulations of course - but that would give some of the advantages of the free-market solution while still having safe, regulated banks at the core of the system. You'd have to also have regulations regarding how much the safe banks can lend to risky banks, but that's simple to enact.<Reverend> IRC is just multiplayer notepad.
I like your SNOOPY POSTER! - While you Wait quote.Comment
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Snoop,
The obvious problem with that is that banks have to earn a profit to function. They earn thier money by speculating. I don't know how you are going to seperate speculating from non-speculating banks. Also, if you could you are going to affect lending in a huge way. There is going to be a lot less money available for whatever you are calling speculative.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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there is always the risk that a bank failure will damage the economy and naturally politicians are very wary of that. bankers forecasting the collapse of western civilisation if their bank fails, only add to the pressure. of course there's no problem with helping banks in certain situations, such as temporary liquidity problems. however, where there is something fundamentally wrong, such as the business model relying solely on cheap credit, or the assets of the bank being near worthless, then it does far more harm than good when these institutions are bailed out IMHO. it sends entirely the wrong signal to say that if you are big enough, no matter what you do, we won't let you fail.Originally posted by snoopy369
The problem is that a failed bank damages the economy as a whole, and damages society. It's something of a catch-22 ... you don't want to bail them out to encourage more speculation, but you have to in order to prevent further failures and a lack of confidence in other banks.
Perhaps a solution would be nationalizing them, but that is not consistent with US economic policy ... but I can't think of anything else you could do that would still be a big enough penalty to discourage the ownership doing it (except sending them to jail )
banking seems to be the only industry where the profits are privatised and the risks are nationalised."The Christian way has not been tried and found wanting, it has been found to be hard and left untried" - GK Chesterton.
"The most obvious predicition about the future is that it will be mostly like the past" - Alain de BottonComment
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Let the good times roll..."The issue is there are still many people out there that use religion as a crutch for bigotry and hate. Like Ben."
Ben Kenobi: "That means I'm doing something right. "Comment
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...and thus at the first whiff of trouble, all the "informed" customers pull their money out, and the banks crumble under a run.Originally posted by C0ckney
as i understood it the first £2,000 is completely protected and 90% of the next £33,000. in the wake of northern rock crisis it was extended to 100% of the first £35,000 and then subsequently to all deposited money. if you are keeping that sort of money with an organisation, then i don't think it is unreasonable to expect you to know a little about it, and the potential risks which go with keeping your money there. i don't believe that i should be protecting someone who has £10,000s in a bank account with a failed bank, anymore than someone who invests in a failed company.No, I did not steal that from somebody on Something Awful.Comment
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I still think stricter lending guidelines is a better way to go or failing that restricting the issuance of "mortgage backed securities" or possibly rules to make it easier for buyers to know if the loans are risky/nonperforming. As I understand it several unscrupulous companies deliberately made finding out what was actually in the repackaged mortgage backed securities as difficult as possible so that risky loans could be bundled, repackaged, and then sold off to punters who wouldn't figure it out until it was to late.Try http://wordforge.net/index.php for discussion and debate.Comment
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Make crazy profits in the good times and get saved by the taxes of the ordinary joe when it all goes wrong.Originally posted by C0ckney the message that our governments seem to be sending, is that if you're big enough and important enough, no matter how bad your business plan, you won't be allowed to fail.Comment
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If it makes you feel any better, most of those taxes don't come from the average joe
"The DPRK is still in a state of war with the U.S. It's called a black out." - Che explaining why orbital nightime pictures of NK show few lights. Seriously.Comment
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Originally posted by Patroklos
If it makes you feel any better, most of those taxes don't come from the average joe
It doesn't matter where it comes from. Tax money benefits everyone.
I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
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