What I don't understand about this bailout

[Chris]

There is plenty of mortgage money around. The majority of lending institutions are sound. The Federal Reserve is lending money to these institutions at a low rate. So why bail out the bad guys?

Banks keep purse strings tight in credit crisis - Sep. 25, 2008

The littlest guys are still lending
While the credit crisis has shaken Wall Street to its core, the thousands of community banks that make up the lion's share of the nation's banking system remain, to a large extent, quite secure.

"Our lending window continues to remain open," said Jonathan Fox, the chairman and CEO of The Fowler State Bank, a Colorado-based bank an hour's drive from Pueblo with about $56 million in assets.

Fox admitted that, since the credit crunch began, his bank has taken a harder look at the value of a piece of real estate involved in a loan as well as a customer's income.

But he said that his bank, which traces its roots back to 1899, can continue to lend freely because they didn't get caught up in the subprime mortgage market.

 

[sealybobo]

They need it because no one is buying anything for awhile. If they can dump all the bad loans then they get to hitbthe reset button.

So our pay needs to go up to keep up with inflation.

If Obama wins, wallmart might go union. Force them to pay a livable wage.

Tax the offshore companies. That's $100 billion made up.

Take back the tax breaks to the rich and give them to companies when they hire people. Americanbpeople. We need to get people spending again.

Credit cards can only charge a max of 10 percent interest.

Fixing Americas bridges, roads and levys will cost but the money will be spent in america.

End iraq war and finish afgan. Save $240 billion yr.

Cut defense spending in half. We spend more than every other country combined. On what? Haloburton and blackwater?

If the dems spend on bullshit, vote them out in 2010.

Tax stock trades. That slows the market down. Used to be a quarter of 1 percent so not much to us but slows the rich people down. But of course the gop will say it will kill the economy.

The gop are like unions. They'll shut the economy down if they don't get their way.

 

[AVG-JOE]

There is plenty of mortgage money around. The majority of lending institutions are sound. The Federal Reserve is lending money to these institutions at a low rate. So why bail out the bad guys?

Banks keep purse strings tight in credit crisis - Sep. 25, 2008

Do you remember the John Wayne movie where he is the richest dude in a mid 1800's era western town and he decides to help the town grow by opening a bank? He has a line... "Why not? All you need to open a bank is money, and I have plenty of that."

He then goes on to loan money to several local entrepreneurs who open up a general store, livery stable, saloon, etc. and everyone drinks in moderation and the town grows in size and stature. John's character ends up a wealthy, salt of the earth kind of old guy whom everyone in town is proud to know and the town grows into a perfect turn of the century American city...

Well...

The rich dudes that have been bankrolling our economy and 'growing our town' as they see fit, have run out of liquid cash. They fucked up and let the cash flow a little too fast, lots of money was borrowed and lots of assets were manufactured, so many so that the price of the assets they were holding as collateral dropped. The drop in prices made the paper that they were holding worth less than the money they had loaned out on it. Combine that with the fact that there are several of them out there and they are competing for with each other for profits and influence, and you end up with rich dudes unwilling to loan out their cash any more, but are afraid that the other rich dudes are going to make more money than them.

Adding to the confusion is a pesky democracy that not only has a shit pile of money of it's own to toss around, but actually has power to set rules over them. Some rules are fun. Corporations being given basic human rights to enter into contracts was very profitable! The rule makers can be used to increase profits... They have been trying like hell to control the rule makers, and with some success. They have raised the price of politics to the point where there are only two viable parties and neither candidate can win without lots of money, which they control, but complete control was beyond even their means. Thank goodness they were mistrustful of each other and chose to compete for the most part instead of collaborating more...

Sorry, I can ramble a bit when I'm stoned...

-Joe

 

[Hum Dinger]

Sorry, I can ramble a bit when I'm stoned...

-Joe

Man I wish I was stoned, I haven't been stoned in 15 years.

Ya know, you're like the only person on this message board that actually makes sense and knows whats going on....

Man I never should have stopped getting stoned!

I really think it makes you smarter...but then again everyone else hates you.

 

[NOBama]

There is plenty of mortgage money around. The majority of lending institutions are sound. The Federal Reserve is lending money to these institutions at a low rate. So why bail out the bad guys?

Many small banks ranging from community to regional institutions don't even trade publically, nor did they get involved with “creative financing” or borrow as much as 40 times their net worth like the bad boys on Wall St. did. Hence, they’re not overburdened with loan defaults or debt, like the fat cats who screwed us are.

Additionally, there are actually some banks that trade publically who only made loans to buyers who meet their fully documented qualification requirements. Hudson City Bancorp (HCBK), out of Paramus, NJ is a perfect example. They have money to loan, but part of their qualifications is an extremely high down payment – in the range of 30+%. So, not many people are going to walk away from those mortgages. I bought shares of HCBK in 02/08 at just over 14.00 a share and the stock has maintained a fairly constant uphill trend (given the volatility in the market) to around 18.50 +/- per share today.

In my opinion, for the foreseeable future, even after we get the 700B$ “Loan to Nowhere” from the fed, the only people who are going to get mortgages are those who fully qualify and have a decent down payment.

 

[sealybobo]

Man I wish I was stoned, I haven't been stoned in 15 years.

Ya know, you're like the only person on this message board that actually makes sense and knows whats going on....

Man I never should have stopped getting stoned!

I really think it makes you smarter...but then again everyone else hates you.

I must not say it right then because I say things like that all the time. Even though I have tons of circumstantial evidence, it is all written off as conspiracy theories.

Maybe he said it more simply. Like telling the 3 bears story. He didn't give you dates and names, but still he put it so anyone could understand. I'll try to copy that technique.

 

[AVG-JOE]

Many small banks ranging from community to regional institutions don't even trade publically, nor did they get involved with “creative financing” or borrow as much as 40 times their net worth like the bad boys on Wall St. did. Hence, they’re not overburdened with loan defaults or debt, like the fat cats who screwed us are.

Additionally, there are actually some banks that trade publically who only made loans to buyers who meet their fully documented qualification requirements. Hudson City Bancorp (HCBK), out of Paramus, NJ is a perfect example. They have money to loan, but part of their qualifications is an extremely high down payment – in the range of 30+%. So, not many people are going to walk away from those mortgages. I bought shares of HCBK in 02/08 at just over 14.00 a share and the stock has maintained a fairly constant uphill trend (given the volatility in the market) to around 18.50 +/- per share today.

In my opinion, for the foreseeable future, even after we get the 700B$ “Loan to Nowhere” from the fed, the only people who are going to get mortgages are those who fully qualify and have a decent down payment.

The other side of this coin is that the small local banks A) don't keep 100% reserves, even if they are conservative, and B) do need to borrow from wall street if they are going to have the cash-flow to make the loan that keeps the construction worker employed building the house that Jack wants.

What I don't understand is why We, The Taxpayers can't make short-term loans straight to the conservative local banks without paying the Friends of GW a nice sum to do the paperwork, but that is another story for another thread...

-Joe

 

[Paulie]

The other side of this coin is that the small local banks A) don't keep 100% reserves, even if they are conservative, and B) do need to borrow from wall street if they are going to have the cash-flow to make the loan that keeps the construction worker employed building the house that Jack wants.

What I don't understand is why We, The Taxpayers can't make short-term loans straight to the conservative local banks without paying the Friends of GW a nice sum to do the paperwork, but that is another story for another thread...

-Joe

I'd love for someone to show me ANY bank in this country that keeps 100% reserves.

 

[NOBama]

The other side of this coin is that the small local banks A) don't keep 100% reserves, even if they are conservative, and B) do need to borrow from wall street if they are going to have the cash-flow to make the loan that keeps the construction worker employed building the house that Jack wants.

I agree. All I'm saying is that the smaller banks didn't get greedy like their big brothers did.

 

[AVG-JOE]

I'd love for someone to show me ANY bank in this country that keeps 100% reserves.

They can't. Some money has to go out the door in the form of loans. It is the only way that they can make money. That's why it takes a rich dude to start a bank.

It is not like they actually make something to sell - they make money... That is why mortgages are referred to as 'product'.

-Joe

 

[dilloduck]

They can't. Some money has to go out the door in the form of loans. It is the only way that they can make money. That's why it takes a rich dude to start a bank.

It is not like they actually make something to sell - they make money... That is why mortgages are referred to as 'product'.

-Joe

So why did the FED decide it was smart to set the prime so low.

 

[AVG-JOE]

So why did the FED decide it was smart to set the prime so low.

The Fed saw their mandate as one to drive the economy. Cheap money = lots of borrowing; lots of borrowing = lots of commerce; lots of commerce = lots of jobs and happy worker bees drinking Schlitz beer and voting for easily controlled incumbent politicians.

Self interest. That is why the Fed made money cheap. Well, that and the fact that the money wasn't theirs in the first place. They were playing for the commissions, which was maximized on volume of money moved, not quality of investment.

That is why we have a Walmart on every corner selling rubber dog shit from China instead of factories, bridges and electric plants that run on wind. There is no flow to the cash in infrastructure investment. Not like retail!

-Joe

 

[sealybobo]

The daily show just showed bush's 03 speech making his case for going to war with iraq and it is the exact same speech. scare us, tell us the risk of inaction would be far too great and he said we had to approve it right away or else. He lied then, so why do we believe him now?

This is amazing. The american people just don't care. Not us. We clearly pay attention. But most peeople just don't care.

 

[Chris]

I watched Pat Buchanan on The Rachel Maddow Show tonight, and he said, "Why should we give $700 billion dollars to the arrogant, stupid people who got us into this mess?"

You tell em, Pat.

 

[Zoomie1980]

They can't. Some money has to go out the door in the form of loans. It is the only way that they can make money. That's why it takes a rich dude to start a bank.

It is not like they actually make something to sell - they make money... That is why mortgages are referred to as 'product'.

-Joe

Yes, the very function of a bank is to loan money. They make some ancillary income from service fees but they make money by paying low rates on deposits then turning around and loaning out that money at a higher rate. The difference is their income.

Now when a loan defaults, the bank doesn't always lose money. If it is unsecured they lose that, but if it is a collateralized loan like a home mortgage or car loan, they take possession of the collateral. Some times, in the case of a home, it may sell for a good deal more than the balance of the loan, and in that case they at least break even or make whatever interest they collected before the loan went into default. Most of the time they take a hit, but only a partial hit because the collateral is always worth something.

The bailout is backed by actual houses that are worth something.

 

[Zoomie1980]

So why did the FED decide it was smart to set the prime so low.

The FED is not a profit based organization. Their purpose is completely different from a private bank. Normally, in sane times, they adjust the interest rate to keep a balance between inflationary pressures and sustaining a growth environment. Private banks exist to make money for their owners. They have no other purpose.

 

[dilloduck]

The FED is not a profit based organization. Their purpose is completely different from a private bank. Normally, in sane times, they adjust the interest rate to keep a balance between inflationary pressures and sustaining a growth environment. Private banks exist to make money for their owners. They have no other purpose.

So the Fed just does the banking for America out of the goodness of their hearts ?

 

[Zoomie1980]

So the Fed just does the banking for America out of the goodness of their hearts ?

Yea, basically. They are a GOVERNMENT organization. They exist to provide the basic financial function of the government. they have no profit mission. They basically are charged with the regulatory valve of managing the money supply. They do so by setting the base interest rate that private banks can borrow from the government. that essentially sets the base interest rate banks use to derive what they charge us. Their main purpose is to balance inflationary policy with growth based policy.

 

[dilloduck]

Yea, basically. They are a GOVERNMENT organization. They exist to provide the basic financial function of the government. they have no profit mission. They basically are charged with the regulatory valve of managing the money supply. They do so by setting the base interest rate that private banks can borrow from the government. that essentially sets the base interest rate banks use to derive what they charge us. Their main purpose is to balance inflationary policy with growth based policy.

I'll buy quasi government agency maybe. How much do we pay this organization to handle our banking for us ?

 

[editec]

Man I wish I was stoned, I haven't been stoned in 15 years.

Ya know, you're like the only person on this message board that actually makes sense and knows whats going on....

Man I never should have stopped getting stoned!

I really think it makes you smarter...but then again everyone else hates you.

I smoke dope to make everyone around me seem smarter, to be honest.

Well that, and so my head doesn't blow off my shoulders while I watch the news, of course.

Smoking hemp doesn't in any way keep you from seeing the truth of the matter, it just makes you not care quite so much when you do.

So many water towers, so hard to find hemp.