Aren't you Glad you Bailed Out These Poor Banks?

[froggy]

People Take Over Bank of America Branch in DC | AlterNet

 

[Mad Scientist]

I'm glad to see more and more people realize it isn't about Republican vs Democrat, it's about Us vs the Banks.

The Feds print money and give it to the banks claiming they need "liquidity". Then those same banks lend it back to us at credit card rates.

Nice scam if you manage it.

 

[froggy]

looks from the lack of comment, most here faired from these bank bailouts.

 

[JWBooth]

So long as the Fed exists to manufacture money the banksters will continue to win.

 

[Rental Lease]

While I don't love my tax dollars going to the banks any more than anyone else does, I do think it's worth considering just how f#cked we would have been if people around the world lost faith in US banks. There would be runs to withdraw cash, credit and lending would have come to a screeching halt, and the whole foundation of our economy system would have collapsed.
Even if the entire system hadn't collapsed, if more banks had gone under the credit markets would have tightened even further, making small business loans and mortgages nearly impossible to obtain, which would mean the job market and the real estate market would be even worse off right now than they already are. Even if I weren't a real estate investor, I don't think most homeowners would want to buy their next house in cash.
Anyway just wanted to mix things up a little on here, cheers!

 

[william the wie]

BofA is a casebook of banking incompetence only citigroup comes close. While I can understand people that get mad at the Morgans and Goldman what I don't understand is getting more upset at them than at the idiots who caused the mess.

 

[LordBrownTrout]

I was against any bailout of the banks. I would have preferred them to fail on their own and would have had all sorts of confidence in the banks that survived and weren't doing screwy things.

 

[william the wie]

I was against any bailout of the banks. I would have preferred them to fail on their own and would have had all sorts of confidence in the banks that survived and weren't doing screwy things.

That makes way too much sense for our politicians to go with it.

 

[Cuyo]

I was against any bailout of the banks. I would have preferred them to fail on their own and would have had all sorts of confidence in the banks that survived and weren't doing screwy things.

That makes way too much sense for our politicians to go with it.

wtw - Aren't you an economist? I'm shocked to hear you go along with that statement, unless I have you mistaken for someone else.

When BofA fails, how much does FDIC have to pay out in tax dollars? How many people are just f#cked out of balances in excess of $100k? What does this failure and consequential domino effect do to M1?

Personally? I'd have rather seen the bank seized instead of 'Bailed out.' But pull out and let them fail? Poverty; massive, widespread, and immediate.

 

[william the wie]

I was against any bailout of the banks. I would have preferred them to fail on their own and would have had all sorts of confidence in the banks that survived and weren't doing screwy things.

That makes way too much sense for our politicians to go with it.

wtw - Aren't you an economist? I'm shocked to hear you go along with that statement, unless I have you mistaken for someone else.

When BofA fails, how much does FDIC have to pay out in tax dollars? How many people are just f#cked out of balances in excess of $100k? What does this failure and consequential domino effect do to M1?

Personally? I'd have rather seen the bank seized instead of 'Bailed out.' But pull out and let them fail? Poverty; massive, widespread, and immediate.

Relax, the bondholders become stockholders in bankruptcy. Admittedly some retirees will go to the ER when they find this out (CDs are bonds), a lot of people will be sued and no one will be happy but otherwise you let the same incompetent management team destroy even more wealth. The military axiom for Paulson, Geithner and Bernancke's handling of the meltdown is "Reinforcing Failure" also known as snatching catastrophe from the jaws of tactical setback. And no my background is in banking finance not economics although I do study economics.

The majority of major banks were out of real estate in 2005. The screw ups such as WaMu, BofA, Lehman Brothers, Bear Sterns, Lehman Brothers and Citigroup had bad balance sheets as early as 2004. By 2006 most of them should have been shut down by regulators. Bear Sterns and Merril Lynch should have been put in bankruptcy in the summer of 2007 but this was not done. WaMu, Countrywide and New Century in early 2006. Instead BofA paid a premium for both Merril Lynch and Countrywide. Citigroup was less psychotic than that but was still encouraged to add the loans and accounts of defaulted banks by the FDIC. The meltdown was a case study of what not to do from 1994-2008. Rewarding incompetence was the watchword under Clinton and Bush. In the financial sector York financial was offering a 10% discount for direct purchase of their shares in 1992 or 93. Almost all and maybe all of the deposit banks mentioned above also had direct purchase share discounts and to the best of my recollection those discounts generally equaled or exceeded the 5% underwriting charge for secondary offering with the majority of those discounts going back to the 90s.

Chase Manhattan back in 1996 offered 5% discounts on reinvested dividends and 3% discounts on direct purchases. ("Buying Stocks Without a Broker" by Charles B Carlson) Chase morphed into JPM and was the most liquid bank in the country in 2008. That is an indictment of Greenspan, Bernancke and all of their works that's hard to top. So, yeah the regulators were over a decade behind time in straightening out the mess and now we are headed for an even worse decade of failure reinforcement. This current policy is the lost decade recipe on steroids.

 

[iamwhatiseem]

Nothing spreads as fast as corruption.
And nothing pays as well either.

 

[william the wie]

Nothing spreads as fast as corruption.
And nothing pays as well either.

I wish it were just corruption but I think worldclass incompetence is a far better description. You might have to go with inter-library loan to get all of the data but catalogs of DRIP and DSP stocks have been around since the 80s and discount rates for purchase and dividend reinvestment of stocks bought straight from the company are usually found in tables in the catalogs. They come in three varieties:

Employee and customer plans. FPL has had purchase and reinvestment discounts for employees and Florida residents as far back as I can recall. This type of plan builds employee and customer loyalty and if the discounts are less than 5% the company is generally solid. Even greater than 5% discounts for employees can mean the company is good and solid.

Less than 5% discounts for everybody. Really do your homework if either purchase or dividend reinvestment discount exceeds 3% then you are getting a 12.96% return boost annually for moving your money around 4 times a year. Even a 2.41% discount locks in a return of 10% in a flat market. At least one mortgage company with 1% discounts went belly-up in 93 or 94. (One month it was on my watch list and the next month it was gone and it had a name similar to Fannie Mae, Ginny Mae or Freddie Mac to draw in the suckers and I am glad I didn't get around to buying it. That was a close call I had my check ready to send in when I found out that it had gone bye-bye.)

At 5% discounts for everybody on purchases and reinvesting dividends the company is giving you better than 22.77% return for just moving your money around and a lot of but not most banks were in this danger zone in the 90s. Other than multi-family REITs, NG utilities and more rarely non-gas utilities in high growth areas no one can justify this high of a cost of capital.

It cost about $100/year to get this information in the 90s but I have seen no evidence that either the Fed or the FDIC bothered to acquire it. Much of the meltdown would have been avoided with even semi-competent regulation.

 

[froggy]

The worst part is "This year Bank of America is receiving the "income tax refund from hell" — $666 million for 2010".

 

[iamwhatiseem]

Nothing spreads as fast as corruption.
And nothing pays as well either.

I wish it were just corruption but I think worldclass incompetence is a far better description. You might have to go with inter-library loan to get all of the data but catalogs of DRIP and DSP stocks have been around since the 80s and discount rates for purchase and dividend reinvestment of stocks bought straight from the company are usually found in tables in the catalogs. They come in three varieties:

Employee and customer plans. FPL has had purchase and reinvestment discounts for employees and Florida residents as far back as I can recall. This type of plan builds employee and customer loyalty and if the discounts are less than 5% the company is generally solid. Even greater than 5% discounts for employees can mean the company is good and solid.

Less than 5% discounts for everybody. Really do your homework if either purchase or dividend reinvestment discount exceeds 3% then you are getting a 12.96% return boost annually for moving your money around 4 times a year. Even a 2.41% discount locks in a return of 10% in a flat market. At least one mortgage company with 1% discounts went belly-up in 93 or 94. (One month it was on my watch list and the next month it was gone and it had a name similar to Fannie Mae, Ginny Mae or Freddie Mac to draw in the suckers and I am glad I didn't get around to buying it. That was a close call I had my check ready to send in when I found out that it had gone bye-bye.)

At 5% discounts for everybody on purchases and reinvesting dividends the company is giving you better than 22.77% return for just moving your money around and a lot of but not most banks were in this danger zone in the 90s. Other than multi-family REITs, NG utilities and more rarely non-gas utilities in high growth areas no one can justify this high of a cost of capital.

It cost about $100/year to get this information in the 90s but I have seen no evidence that either the Fed or the FDIC bothered to acquire it. Much of the meltdown would have been avoided with even semi-competent regulation.

Well it is hard to believe that anyone could be so incompetent...however if anyone could be...it is the government.
I think it is a mixture of both. The fact that Bear Stearns had a AAA rating the day before the collapse -- no f*cking way was that just incompetence. This had to have been known by every wall-streeter down to the guy who cleans the toilets. But the fix was in, waaaay in...everyone was raking in tons of cash based on thin air all over the market - so what if one of the key financial companies had nuclear assets kept off the books? You could still make money off their stocks.

 

[Jroc]

Well...I think all in all the bank bailouts worked, I wasn't for them at first but considering the alternative it probably had to be done. The bank bailout money has actually all been paid back, not AIG of course, but they are not a bank. The problem is all the money that was paid back was just spend by Obama.

 

[Dont Taz Me Bro]

But pull out and let them fail? Poverty; massive, widespread, and immediate.

And why do you think that shouldn't have happened just because it would have been bad? It's called learning the harsh lessons of life and reality. Instead, the message that was sent by the government was that "important" institutions and industries can be as careless as they like because the government will always be standing there with a pooper scooper ready to dig them out when they fuck up.

 

[Zoom-boing]

From the link

Who is NPA?

National People's Action (NPA) is a Network of community power organizations from across the country that work to advance a national economic and racial justice agenda. NPA has over 200 organizers working to unite everyday people in cities, towns, and rural communities throughout the United States.

Racial justice agenda???

 

[Dont Taz Me Bro]

From the link

Who is NPA?

National People's Action (NPA) is a Network of community power organizations from across the country that work to advance a national economic and racial justice agenda. NPA has over 200 organizers working to unite everyday people in cities, towns, and rural communities throughout the United States.

Racial justice agenda???

It's a more palatable way of saying cultural Marxism.

 

[william the wie]

iamwhatiseem, if you are talking about simply private corruption I heartily agree. To call the ratings agencies a pack of whores is an insult to the vast majority of prostitutes.

 

[skeptic]

The fact that Bear Stearns had a AAA rating the day before the collapse -- no f*cking way was that just incompetence.

It was a con job. Just like the 30 other ponzi like schemes upon which our whole economy rests.

I saw some startling stat the other day that said 3600 folks were indicted in the savings and loan scam of the 80's.

Today about 13 people have been indicted for the current and much larger crisis.

Fraud on a grand scale is business as usual. Nobody goes to jail anymore. They just get a bonus and a chance to be in the next presidential cabinet.