Obama 7 - now what?

[Plante26]

Re: Obama 7 - now what?

1) Selective amnesia. Try a company like State Street Bank, one of the top 9 financial companies involved in the original TARP discussions. They had nothing to do with the bad loans, mortgages, or derivatives that were causing the panic, and their stock price got killed. If a company with little to no exposure lost 4/5th of its value, what would happen to companies that DID have that exposure once that info hit the press? Answer - they'd be out of business. It was only a matter of time, and there's precedent for this in the run on banks of the 1930's.

2) Banks are interconnected. If you lended a billion dollars in CP's to a company that went under, guess what - you're $%&^ out of luck collecting that. Now 5 of those banks went under, and suddenly your "strong position" looks a lot more tenuous. That's why Lehman's collapse caused such widespread problems. Multiply that by however many banks you would have liked to have seen fail and watch them take a lot of others with them. The idea that banks exist in a vacuum displays an amazingly simpleminded opinion of how things actually work, and I'd invite you to spend more time in your studies before commenting further on something you're having trouble grasping.

Your precedent isn't valid for a couple of reasons. First of all, the FDIC exists to insure depositors--something that wasn't around during the Great Depression. Secondly, State Street would be amongst the banks I mentioned: banks that were bogged down amongst the other institutions in the financial sector, even though they were comparatively performing well.

Again, I worked in the financial sector. You're not telling me something I don't already know. The very fact that banks DON'T exist in a vacuum is exactly WHY spreading the TARP money was a bad thing--it elevated the failing banks and at the same time brought the well-performing banks down closer to their level based on the idea that differentiation is a bad thing. State Street is an example of a bank regaining over half of its stock value despite the TARP mismanagement. Of course, this unprecedented "leveling of the playing field " by forcing bailout money on all of the major banks is most likely why you're a fan of the Citi/AIG/BofA bailout--just as any good liberal would be.

 

[ScottM]

Re: Obama 7 - now what?

I see your point, but this scenario could have been avoided by an orderly sell-off of assets (and debt) to the smaller institutions, who would need (most of) the existing employees to manage them. Consumer confidence could easily have come from this line of action as opposed to throwing good money after bad.....which is currently just BARELY keeping BofA and Citi alive despite the continued losses these two giants are posting.

Orderly? Were you even paying attention last fall? The Fed and the Treasury were basically trying to change tires on a car going 60 MPH. Any type of "orderly" sell-off or disposition would have been unlikely to happen.

 

[Plante26]

Re: Obama 7 - now what?

Orderly? Were you even paying attention last fall? The Fed and the Treasury were basically trying to change tires on a car going 60 MPH. Any type of "orderly" sell-off or disposition would have been unlikely to happen.

It mostly likely WOULD have happened had the Fed and Congress not started chucking money every which way prior to TARP. TARP took how many months to be completely dispersed? A couple, IIRC. Long enough to at least get a plan in place before the Fed ATM went on tilt.

 

[5mn_Major]

Re: Obama 7 - now what?

It mostly likely WOULD have happened had the Fed and Congress not started chucking money every which way prior to TARP. TARP took how many months to be completely dispersed? A couple, IIRC. Long enough to at least get a plan in place before the Fed ATM went on tilt.

Perhaps to Scotts point...how would a bank customer (or perhaps you) feel if they had their savings, loans, stock portfolio and retirement account in Wells Fargo...and it was announced that Wells was going bankrupt in 6 weeks and they would be dismantling the company? And as the country would be sailing into absolute crisis mode, I don't know if it would help to know that the first bank of des moines looked like it would be taking over your stock portfolio.

 

[Tundra]

Re: Obama 7 - now what?

Perhaps to Scotts point...how would a bank customer (or perhaps you) feel if they had their savings, loans, stock portfolio and retirement account in Wells Fargo...and it was announced that Wells was going bankrupt in 6 weeks and they would be dismantling the company? And as the country would be sailing into absolute crisis mode, I don't know if it would help to know that the first bank of des moines looked like it would be taking over your stock portfolio.

It would be FDIC insured. backed by the governement. andgovernment could have said we'll back the deposit 100% just like they theydoing now with the bad assets held by banks and when they backed the moneymarket accounts.

Plus CIti and Wells is a commercial bank so they would be orderly under RTC instead of bankruptcy. They are currently looking to create RTC system for non-banks like AIG, Fannie, Lehman or even GM but that shouldn't be under Federal reserve at any cost.

Plante26's idea would have worked fine, although you're going to lose all those "talented" people. I've to laugh at the amnesia comment, the panic didn't really stop when TARP was passed. it stopped when the Federal Reserve BANK Chair Bernanke said they will NOT let any more BIG banks fail. why did these banks fail? not because of the drop in stock prices, although this meant they couldn't raise money by selling stock. they failed because they had to raise more money or sell the assets to meet the reserve requirments (margin) hence they wanted to change how they calculated the assets from mark-to-market to "what they think its worth" market.

In any case the debate now in congress is creating RTC for the systemic companies that are not commercial banks. which is fine but it shouldn't be under Federal Reserve. And we might think about breaking these big companies into smaller ones or spliting commercial bank from investment bank again.

 

[mookie1995]

Re: Obama 7 - now what?

Your precedent isn't valid for a couple of reasons. First of all, the FDIC exists to insure depositors--something that wasn't around during the Great Depression. Secondly, State Street would be amongst the banks I mentioned: banks that were bogged down amongst the other institutions in the financial sector, even though they were comparatively performing well.

Again, I worked in the financial sector. You're not telling me something I don't already know. The very fact that banks DON'T exist in a vacuum is exactly WHY spreading the TARP money was a bad thing--it elevated the failing banks and at the same time brought the well-performing banks down closer to their level based on the idea that differentiation is a bad thing. State Street is an example of a bank regaining over half of its stock value despite the TARP mismanagement. Of course, this unprecedented "leveling of the playing field " by forcing bailout money on all of the major banks is most likely why you're a fan of the Citi/AIG/BofA bailout--just as any good liberal would be.

1) Selective amnesia. Try a company like State Street Bank, one of the top 9 financial companies involved in the original TARP discussions. They had nothing to do with the bad loans, mortgages, or derivatives that were causing the panic, and their stock price got killed. If a company with little to no exposure lost 4/5th of its value, what would happen to companies that DID have that exposure once that info hit the press? Answer - they'd be out of business. It was only a matter of time, and there's precedent for this in the run on banks of the 1930's.

2) Banks are interconnected. If you lended a billion dollars in CP's to a company that went under, guess what - you're $%&^ out of luck collecting that. Now 5 of those banks went under, and suddenly your "strong position" looks a lot more tenuous. That's why Lehman's collapse caused such widespread problems. Multiply that by however many banks you would have liked to have seen fail and watch them take a lot of others with them. The idea that banks exist in a vacuum displays an amazingly simpleminded opinion of how things actually work, and I'd invite you to spend more time in your studies before commenting further on something you're having trouble grasping.

state street 'bank' stopped being a bank years ago....

 

[gregg729]

Re: Obama 7 - now what?

This issue isn't big enough anymore to affect the 2010.

Still: I wonder how bad his sealed grades are. Or how radically his college papers lean left.

Don't we all wonder. Too bad he won't just show us like most politicians do. It's a shady President we have.

So who's bringing this up again?

Maybe Obama is ashamed of his scores like Mccain was with his grade from the academy where he graduated at the bottom 1%. How about we make all future Presidential candidates to release all school records? And show birth certificate since some people just don't believe the official statements.

I agree, Obama could very well be ashamed of his scores. But don't compare it to a military academy though, he had it very easy compared to Mccain.

I have an alternative to your sarcastic suggestion. How about we agree to hide the past of all those who run for public office? You think that would be a great idea, don't you?

 

[gregg729]

Re: Obama 7 - now what?

I'll double down on my insults .

That's cool, no one on here really respects you for the intelligent conversation so much as the demagoguery.

 

[Plante26]

Re: Obama 7 - now what?

state street 'bank' stopped being a bank years ago....

It's still a fiduciary bank, and affected by the stock trends in the financial sector.

.......

 

[Rover]

Re: Obama 7 - now what?

It's still a fiduciary bank, and affected by the stock trends in the financial sector.

.......

Mookie's record of stupid, off the topic comments is like what Cy Young's 511 wins is in baseball. Its such a high total that it will never be equaled from now until the end of time.

Back to the topic. The FDIC is not going to insure all deposits. Its going to ensure them up to a limit. Furthermore, the big problem a place like Indymac had was although deposits are guaranteed, you can't go to the federal reserve bank ATM and start taking out your money. In short its in limbo until the bank gets sorted out. Beyond retail deposits, its no secret that banks lend out or borrow against a good portion of their assets. Commerical paper, repos etc. These are large amounts of usually short term borrowing as you well know working in the industry. The problem is, and the problem was specifically with Lehman, is that when they go under nobody gets paid. Once that happens, all lending to your bank ceases and other investors (non depositors) start pulling out. That's what happened to Bear Stearns, which was not a retail bank and therefore FDIC deposit rules don't apply. The domino effect was in full, severe, and swift force last September, and in no way was the answer to the problem to let it run its course.

Regarding "should the TARP have been given to the 9 largest banks regardless" and other issues, what I will say to that is its a good idea to review what was necessary and what wasn't. Given the unprecedented need for quick action, all in all I can't complain with what was done. What they could have done is allowed some companies to pay back quicker, but again the govt correctly had each bank stress test their ability to survive if dire economic conditions happened again, and then repayment was allowed, so not a travesty IMHO.

 

[Plante26]

Re: Obama 7 - now what?

Mookie's record of stupid, off the topic comments is like what Cy Young's 511 wins is in baseball. Its such a high total that it will never be equaled from now until the end of time.

Wow. That is quite the record.

I don't know that the domino effect was going to get to the stronger banks, primarily because their paper was cleaner and balance sheets much stronger. I don't like that the regulators let the asset/loan ratios get as thin as they did, and I believe that allowed a lot of the banks to overextend themselves. But many--and I would argue the majority--of the lenders stayed conservative, and didn't jump in head first. And those banks weren't rewarded for their restraint--they were punished by the government bolstering of their idiot counterparts in the industry. I firmly believe that the 2+ months that TARP took to be instituted and distributed offered enough time to go about things in a more orderly and much smarter manner. At that point, the government dropped the ball and sent good money after bad.

Like I said, I believe that TARP was necessary. I just didn't like the way it was distributed. Too much leeway for the Bush Administration to spread it around, and the Obama Administration hasn't handled it any better. Unfortunately, I don't know that we'll ever see the money back now that Barney Frank has his claws in it. He's said as much--that the money will be spent in other ways, so the "investment" we made in the financial system will end up being part of the pork barrel.

 

[Tundra]

Re: Obama 7 - now what?

That's what happened to Bear Stearns, which was not a retail bank and therefore FDIC deposit rules don't apply. The domino effect was in full, severe, and swift force last September, and in no way was the answer to the problem to let it run its course.

Investment bank customers are usually protected under SIPC $500,000 and they usually have protection up to $2-5million ... although if that protection was bought from AIG than it would obviously have been worthless if AIG went bankrupt.

The TARP was only useful for those companies needing cash. it infused companies needing cash like AIG that had to pay off CDS insurance bets and Fannie/Freddie paying off $billions of insurance on the $5trillion mortgages that we taxpayers own now.

Obviously if we let the insurance company Fannie/freddie/AIG go bankrupt and they don't pay the $300billion or whatever to those holding the CDS and mortgages insurance then those banking companies will be in the world of hurt. Only problem with the way the Fed/Treasury handled it was that everyone got paid, including the crooks that got us into this mess and all the gambling hedgefunds with large CDS bets.

Underline problem for most large banks were the value of the assets the banks were holding as collatoral. If it was marked to the market then almost everyone was insolvent. Hence our regulators allowed these guys a free pass by guaranteeing the assets and by paying off 100% on the toxic loans the "market" was set by the Federal reserve. Not to mention the trillions of dollars infused into the banks with the 0% interest rate.

The Federal Reserve has too much power. period. They need to be curtailed by congress and the regulators need to limit the leveraging power of the OTC /CDS and other derivatives market. And we definitely need a Resolution Trust Corp power for non-banking systemic risky too big to fail companies.

 

[mookie1995]

Re: Obama 7 - now what?

It's still a fiduciary bank, and affected by the stock trends in the financial sector.

.......

more than you know.... but they no longer take numerous deposits and make loans.

they earn fees from assets under custody. markets fall, revenues fall.

 

[Plante26]

Re: Obama 7 - now what?

more than you know.... but they no longer take numerous deposits and make loans.

they earn fees from assets under custody. markets fall, revenues fall.

Ummm.....thanks? Not sure what for, but thanks.

.....

 

[Patman]

Re: Obama 7 - now what?

Conjecture: The H1N1 response is designed to test the emergency systems in case of a real serious public health problem.

Just a thought.

 

[Plante26]

Re: Obama 7 - now what?

Conjecture: The H1N1 response is designed to test the emergency systems in case of a real serious public health problem.

Just a thought.

If that is the case, when will they put out the "If this were a real emergency......" disclaimer?

 

[Kepler]

Re: Obama 7 - now what?

Conjecture: The H1N1 response is designed to test the emergency systems in case of a real serious public health problem.

Just a thought.

Somebody's already on the case...

 

[walrus]

Re: Obama 7 - now what?

I'm surprised no one is talking about Soros comments regarding how China should be the the new #1 instead of the US. He seems like a great guy

 

[Patman]

Re: Obama 7 - now what?

I'm surprised no one is talking about Soros comments regarding how China should be the the new #1 instead of the US. He seems like a great guy

People don't want to believe in Soros because they think people like him are only in the shadows and minds of great movie writers looking for a perfect foil. That is to say, people like him can't really exist.

 

[Tundra]

Re: Obama 7 - now what?

I'm surprised no one is talking about Soros comments regarding how China should be the the new #1 instead of the US. He seems like a great guy

Did he say that? I know his partner Jimmy Rogers moved to China awhile ago to invest and raise his kids there. It actually makes sense, China owns $1 or 2 trillion of our national debt. And the trade deficit is actually worse than what we had with Japan in the 80's when people were calling for the "Rising sun" Japan to takeover the #1 spot. British-America-Japan?-China maybe India or Brazil to follow as we fade in the economic power.

We're on borrowed money ($12Trillion and counting)... and borrowed time with the new technology (which are being outsourced to China and India).