Banks set to get an extra 1.5 Trillion. OMFG

[gastropod]

Quote from Traden4Alpha:




This implies one of four options:
1. Allow the entire system, not just the flawed banks, to collapse
2. Buy the toxic assets (i.e., bad consumer debt) of the flawed banks for above market prices with taxpayer money (TARP as sold to Congress)
3. Inject taxpayer money directly into the flawed banks (TARP as implemented)
4. Nationalize the flawed banks and slowly unwind the asset and liabilities of the banks.

Actually, there is another choice:
5.) Create new banks with gov't money and let the old fu(king banks flounder for years until they die...all the mean time migrating deposits to the new and healthy banks. Screw the investors in the old shithead banks that wrecklessly lent money and entered into CDS/CDO and all the other bullshit "investments." The benefit here would be that the new banks wouldn't be paying off investors and trying to recoup bad loans - the new banks could start lending into the economy now...but, then again this solution wouldn't pay for the kronism/nepotism/payoffs "owed" by our present politicians to the asshole bankers who pumped money into their campaigns...so, it won't get done this way...but it should be done this way!

 

[Traden4Alpha]

Quote from gastropod:
Actually, there is another choice:
5.) Create new banks with gov't money and let the old fu(king banks flounder for years until they die...all the mean time migrating deposits to the new and healthy banks. Screw the investors in the old shithead banks that wrecklessly lent money and entered into CDS/CDO and all the other bullshit "investments." The benefit here would be that the new banks wouldn't be paying off investors and trying to recoup bad loans - the new banks could start lending into the economy now...but, then again this solution wouldn't pay for the kronism/nepotism/payoffs "owed" by our present politicians to the asshole bankers who pumped money into their campaigns...so, it won't get done this way...but it should be done this way!

I agree with the sentiment, but option #5 ("screw the old banks") == #1 ("total collapse") because:

1) "the investors in the old shithead banks" that you want to screw are all the consumers, companies, pension plans, insurance companies in the U.S. and in the world that do business with banks. Anyone who has a bank account, pension, or insurance policy is an "investor in the old shithead banks."
2) We can't "migrate deposits to the new and healthy banks" because the old banks don't have enough money to allow everyone to withdraw their deposits.

The reality is that banks don't have "your money" because they lent it to someone else (they may have even lent it to you). And if that someone else can't pay or isn't scheduled to pay, then you are screwed (not the bank). The only entity that can make money appear from nothing is the Fed, which is exactly what they are doing. And until the Fed creates and hands-out enough money to magically paper-over the losses of the stupid banks on stupid loans to stupid people to buy stupid over-built McMansions, SUVs, and plasma TVs, then the banks cannot and will not lend and depositors cannot withdraw their money from these banks because the banks do not have the money.

(There's also the long-term issue that even with a return to full liquidity, the banks should not return to lending nearly as much as they did in the past, which will have huge consequences for the long-term economy. But that's discussion is for another thread.)

 

[gastropod]

Quote from Traden4Alpha:

I agree with the sentiment, but option #5 ("screw the old banks") == #1 ("total collapse") because:

1) "the investors in the old shithead banks" that you want to screw are all the consumers, companies, pension plans, insurance companies in the U.S. and in the world that do business with banks. Anyone who has a bank account, pension, or insurance policy is an "investor in the old shithead banks."
2) We can't "migrate deposits to the new and healthy banks" because the old banks don't have enough money to allow everyone to withdraw their deposits.

The reality is that banks don't have "your money" because they lent it to someone else (they may have even lent it to you). And if that someone else can't pay or isn't scheduled to pay, then you are screwed (not the bank). The only entity that can make money appear from nothing is the Fed, which is exactly what they are doing. And until the Fed creates and hands-out enough money to magically paper-over the losses of the stupid banks on stupid loans to stupid people to buy stupid over-built McMansions, SUVs, and plasma TVs, then the banks cannot and will not lend and depositors cannot withdraw their money from these banks because the banks do not have the money.

(There's also the long-term issue that even with a return to full liquidity, the banks should not return to lending nearly as much as they did in the past, which will have huge consequences for the long-term economy. But that's discussion is for another thread.)

I hear what you're saying (ah, the beauties of a fiat fractional reserve system - just kidding) Even in a "worst case" scenario - because of the beauties of fractional reserve lending - at most - liquidate 10% of oustanding loans (or whatever % is necessary) to cover the depositors and...screw the rest...oh and then "burn" the dumb asses in the present banks and make it illegal for these dumb fucks to become an employee of the new banks. I think at a minimum we (the world's citizens) need to be MUCH MUCH MORE PUNITIVE in this crap. There needs to be jail time and hangings (for the big fraudulent banksters - and the big time fraudulent loan takers - the NINJA liars). We need to move these people away from the financial system - eternally - it needs to be like losing a medical license - lost and gone forever.

But, I think you have a point....there would probably be "runs" from the old crappy banks to the new banks...and the present system would be disastrously wiped out before the new banks could gain traction.

Ciao,
gastropod

I should clarify the hangings of the NINJA liars - I am not saying the dummy who bought "A" house on a lie - I am talking about the dumb ass who went and bought like 10 houses on NINJAs and now wants a bail out....off to the gallows he/she goes

 

[texrex2002]

Quote from gastropod:


I am talking about the dumb ass who went and bought like 10 houses on NINJAs and now wants a bail out....off to the gallows he/she goes

just because you didn't have the balls to do it... (lol, just kidding). Seriously though, always make the (hopefully long-term) best of any situation. If banks are pushing stupid loans, why shouldn't you profit from that? if you end up stuck in a position you can't unwind, then you fucked up... better luck next time. However, if you read the wrting on the wall in, say, 2006 or 2007, got out of your real estate position and went long oil or gold or fertilizer, more power to you!

I should add that I was smart enough to quit real estate in '06, but got into the commodity boom near the top and held all the way down (at least in my IRA)... Guess I couldn't read that handwriting... )