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Old 06-23-2012, 01:32 AM
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Default Re: Official fuck the banks thrad

Quote:
Originally Posted by AynMisesLibertarian View Post
Imagine a true free market,what would have happened?

This is the LOGICAL SCENARIO:

1) the banks who received the bail-outs failed
2)the self-correcting power of free markets fixed everything
3)???? everyone profits
Let's break this down. Keep in mind Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley, Wachovia, Merrill Lynch, and Countrywide- all the major banks- were insolvent. 734 banks received TARP funds.

In your scenario, we let these banks all fail. Banks that hold a majority of all the personal- and a huge number of the commercial- accounts in the US.

So then what? Either all accounts up to the maximum covered under FDIC are repaid to the account holders, via the FDIC- which had been massively underfunded. So where does the government get the money to repay all those accounts? Borrowing and revenue; i.e. from the taxpayer. The only plus is that the banks weren't rewarded for being too-big-to-fail. The downside is instead of loaning hundreds of billions, you just simply paid it out. Plus your infrastructure for mortgages, lending, banking, and business just collapsed. So there's that little problem.

The other scenario- where Libertarians take control and rescind FDIC insurance- in that scenario most of the US just lost everything they had in the banks. Including most businesses. Now what?

The US economy is largely dependent on consumer spending. Consumers depend on getting paid from their jobs. All surety that you will get paid? Gone. All reason to spend on anything but essentials? Gone. Reasons to employ people to make products no one is buying? None. The economy would actually collapse. Unemployment far beyond the Great Depression.

Your plan is to implode demand, crush businesses, and beat the weakened economy to death.

So now let's talk about, "the self-correcting power of the free markets."
First, of course, we have to make-believe free markets ever existed or that one existed in the US. Take your time, you may need to drink a lot first, or suffer some head trauma to get there.

Okay. Are you drunk enough? Great. Poof! The US now has a free market. Free market! Save us!

Well, let's see, new banks will spring up to compete on a level playing field and vie to hold your money for you.

Only no one has any money. Nor any jobs. No would-be banker can get a loan to start a would-be bank. Who is issuing credit in an economy that makes the Great Depression look like good times? Why would I need to put my bartered cabbages in a bank, anyway?

The invisible hand is not your friend.
Quote:
Originally Posted by AynMisesLibertarian View Post
What happened:

1)Big Government pushed for the bail-out,Obama and Keynesian economics(Krugman,DeLong,Stiglitz...all usual suspects)were the Master-head behind this
Wiki on TARP:
Quote:
The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008.
You have got to be shitting me. Secretary of the Treasury Henry Paulson built the plan, and George Bush signed it into law. In October 2008- before the presidential election had even been held. Also, please call the Keynesian economists and let them know they have some influence in this or the last administration, because it will definitely be news to them. Both administrations have roundly rejected their policy suggestions, or massively underfunded stimulus at best.
Quote:
Originally Posted by AynMisesLibertarian View Post
2)The banks were forced to accept the bailout and make more risks
The banks certainly made public mouth noises about how they didn't really need the money and they were only taking it because they had to, blah blah. The thing is, the banks were lying.
Bloomberg, Nov 2011:
Quote:
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
...>snip<...
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

‘Motivate Others’

JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
The banks weren't forced into this, nor forced to take risks. The fact that they are still overexposed after paying back the TARP funds, still deal in derivatives, in sub-prime mortgages, and still play with other people's money in risky markets is their choice. Every attempt to curb this has been lobbied against by the banks.

Quote:
Originally Posted by AynMisesLibertarian View Post
3)?????economics failure
There were many failures of the bank bail out. I still think that it was better than letting the banks fail; the main problem is that the too-big-to-fail banks all came out of the collapse even bigger, still underwritten so that they retain private profit on public risk, and still have outsized risks:
Quote:
NEW YORK — Moody’s Investors Service has lowered the credit ratings on some of the world’s biggest banks, including Bank of America, JPMorgan Chase and Goldman Sachs, reflecting concern over their exposure to the violent swings in global financial markets.

The downgrades late Thursday ultimately are a measure of Moody’s view on the ability of the banks to repay their debts.
As well the bailout did little for the homeowners impacted, and was a bandage on a larger problem.
It would have been less of a moral hazard and cost to the public if the government had instead bailed out or bought the sub-prime mortgages and underwater mortgages and repackaged them, and forgave some debt. That would have saved homeowners and shored up the banks, who would no longer be holding toxic assets. It would have been much better if the last two administrations had prosecuted the numerous instances of actual criminal fraud by investment banks, instead of what has happened: no significant prosecutions, and Obama's Administration letting the clock run out. If we seriously wanted to prevent this from happening again, we would have reinstated Glass-Steagall, and regulated the massive derivatives market. And we would have required the too-big-to-fail banks to split until they were no longer too-big-to-fail gorillas holding our economy hostage.

But back to your economics failure: this again goes back to the failure to recognize austerity as anything but a downward spiral of decreased demand, decreased revenues, and increased hardship, repeated over and over. Our economy is in bad shape. It could be a lot better. But there is no Libertarian economic policy that is helping. Instead Libertarian tropes about regulation being the problem and the faux-meritocracy of wealth are instead hurting the economy and drawing out the depression.
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