People Are Finally Figuring Out: Austerity is Stupid

[piezoe]

Achilles wrote:

I say nationalize the banks and funnel profits into Government budgets to subsidize tax revenue. That way, the interest on all loans goes to benefit The People who directly pay for the 'cost' of the loan, via debasement and price inflation.

Your interesting posts re banks caught my eye. I suppose you are aware that North Dakota has a publicly owned State Bank. It seems to have worked out exceedingly well for them, and the North Dakota economy was in good shape even before the oil and gas boom started.

 

[Ed Breen]

achilles, is the Gov going to simply seize the banks when they are nationalized, or will the Gov. pay for the equity in those banks? Is you 54T from the Fed just bank loans? Does it include investments in U.S. securities, Agency Bonds or loans to other banks? Does it include required and excess reserves that are account with the Fed?

If you buy all the banks assets, all thier investments, all their facilities, thier software, their computers, all thier branch facilities and buildings, what do you think that would cost?

And your 54T of loans yeilding a theoretical 3% yeild...do you think that is pure profit. Do you think there is no loan loss reserve, no liquidity reserve...do you think it takes no expense to run a bank? Most large banks today are not showing a profit from operations, they only appear to make money becuase they calculate that they reserved too much for loan losses last year so they can write it up to profit this year?

When the Gov, takes over all the banks...who will they loan money too...Solindra? Do you think they will improve the underwritting process. Will they hire all the existinig bank employees. Do you think the government will increase the profits from bank lending or do you think the loan loss going forward might overwhelm all profits.

What sort of a private banking system do you think they produced in Communist Russia back in the day...do you think it was easy to borrow money? Why do you need to borrow money when the state is running everything any way?

Just a few questions for you to chew on. Food for thought.

 

[piezoe]

Ed, I don't think nationalizing the banks is going to happen anytime soon. But the Bank owned by the State in North Dakota is an interesting concept, and I think a few other states are studying the concept.

I would not look forward to having to pass a political litmus test in order to qualify for a loan. :eek:

 

[oldtime]

Quote from piezoe:

Ed, I don't think nationalizing the banks is going to happen anytime soon. But the Bank owned by the State in North Dakota is an interesting concept, and I think a few other states are studying the concept.

I would not look forward to having to pass a political litmus test in order to qualify for a loan. :eek:

piece of cake, just like getting a student loan, or back in the day, a no doc mortgage

 

[piezoe]

Yah, that's the part that scares the hell out of me. I just don't see nationalizing the banks as a very attractive option. I like bankers. I had to shop around some, but when I finally found one that could walk and chew gum at the same time everything was copasetic.

The ET spell checker is telling me copasetic is misspelled. That spell checker sucks.

 

[oldtime]

Quote from piezoe:

Yah, that's the part that scares the hell out of me. I just don't see nationalizing the banks as a very attractive option. I like bankers. I had to shop around some, but when I finally found one that could walk and chew gum at the same time everything was copasetic.

The ET spell checker is telling me copasetic is misspelled. That spell checker sucks.

I use the spell chequer, so far no problem, apparently my speeling is impeccabel.

 

[Ed Breen]

Bank of North Dakota acts like a secondary market for other private banks in ND. It buys loans they originate. I think it owns something like 600B of ND real estate loans. Not that different from FNMA. Good thing mineral rights and farm economy works well in ND...imagine what kind of shape a Bank of California might be in...or FNMA for that matter.

 

[achilles28]

Quote from piezoe:

Achilles wrote:

I say nationalize the banks and funnel profits into Government budgets to subsidize tax revenue. That way, the interest on all loans goes to benefit The People who directly pay for the 'cost' of the loan, via debasement and price inflation.

Your interesting posts re banks caught my eye. I suppose you are aware that North Dakota has a publicly owned State Bank. It seems to have worked out exceedingly well for them, and the North Dakota economy was in good shape even before the oil and gas boom started.

Yes. Exactly right. North Dakotas all over America. Bank regulators could institute a 100% reserve requirement for all commercial banks, and only allow State and Federal chartered Government banks to fractionally compound credit (assuming profits are remitted to the Treasury).

 

[achilles28]

Quote from Ed Breen:

achilles, is the Gov going to simply seize the banks when they are nationalized, or will the Gov. pay for the equity in those banks? Is you 54T from the Fed just bank loans? Does it include investments in U.S. securities, Agency Bonds or loans to other banks? Does it include required and excess reserves that are account with the Fed?

If you buy all the banks assets, all thier investments, all their facilities, thier software, their computers, all thier branch facilities and buildings, what do you think that would cost?

And your 54T of loans yeilding a theoretical 3% yeild...do you think that is pure profit. Do you think there is no loan loss reserve, no liquidity reserve...do you think it takes no expense to run a bank? Most large banks today are not showing a profit from operations, they only appear to make money becuase they calculate that they reserved too much for loan losses last year so they can write it up to profit this year?

When the Gov, takes over all the banks...who will they loan money too...Solindra? Do you think they will improve the underwritting process. Will they hire all the existinig bank employees. Do you think the government will increase the profits from bank lending or do you think the loan loss going forward might overwhelm all profits.

What sort of a private banking system do you think they produced in Communist Russia back in the day...do you think it was easy to borrow money? Why do you need to borrow money when the state is running everything any way?

Just a few questions for you to chew on. Food for thought.

Good questions. I'll write more tomorrow. Dog tired. I see what you're getting at - market forces must exist (competition, failure, success) to encourage innovation and prudent management. Otherwise, it's a gigantic moral hazard. My response - align incentives with performance. Tie compensation to loan performance, at every level. Low defaults = higher and higher pay and promotions. High defaults? Shit canned. Possibly, fraud indictments. As for market competition, allow State and Federal banks to operate nationally. State and Federal Banks compete against each other for consumers. This isn't a bad idea. Look at the system we have now. It's a piece of shit that rips off the entire country to benefit the few hairy ball scratches at the top. As far as moral hazard, we've got that already and the industry is totally privatized! So what's the harm in going the other way. As far as nationalization, here's what I suggest: regulate all commercial banks to operate under a 100% capital requirement. Basically, reduce them to curious boutiques on the side of the road. Only allow State and Federal banks the ability to fractionally create credit assuming all profits are remitted to the Treasury. This sidesteps nationalization and puts commercials out of business. Now, if we can come up with a conservative banking model that could be run by contractors (for profit), but owned by The People, we'd have something very special. How does the Corporate world police itself? How does it innovate new and better products? How does it gain and hold market share from competitors?

 

[achilles28]

Here's another way to look at it: most who work in finance don't own shares in the companies who employ them. Incentives are tied to comp/bonuses. It works. This way, employees are motivated to innovate and outperform. And shareholder equity (held by The People), remains untouched. What's wrong wit that?