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Regarding a fractional reserve banking system, the Rothschild brothers once said "The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." I am that rare individual they didn't... More
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Josh Dowlut
  • How the banks paying back TARP: borrow at 0% lend at 3+% 3 comments
    Dec 15, 2009 10:46 PM
    How are so many of these banks (and note it's only the big ones like Wells, Bank of American, and Citi) able to pay back their bailout money only a year after being on the verge of bankruptcy??????? Simple: 

    Borrow at 0%, lend at 3-4% 

    Now, where did they borrow from? The government (technically the Fed which is a member owned non government agency, but since they effectively have the power to coin money they are acting as a government entity). 

    Where did they loan the money to? The government in the form of risk free US treasuries paying 3-4%. 

    Yes, it really is that simple. Yes it really is that corrupt. Yes that's why most average Americans are continuing to suffer and Wall St's biggest problem is how they are going to hide their record bonuses from public ire. Yes Obama was talking tough on 60 Minutes last night. Yes the bankers came away smiling after meeting with him today. 

    Two academic questions that arise: 

    1. In the interests of transparency should we allow the Treasury to print money and eliminate the Fed--->member bank ------>Treasury smoke and mirrors??? 

    2. If the banks don't start lending again, and this money doesn't make its way from the monetary base (M Zero) to the overall monetary supply (M2) and we don't get hit with a wave of runaway inflation, will anyone have been robbed/any harm been done? I'll wait for commentary before weighing with my own answer to this question but a hint is it involves the widely accepted false supposition of the evils of deflation. 
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  • Josh Dowlut
    , contributor
    Comments (110) | Send Message
    Author’s reply » Also raises the question of what happens to the banks if we see a flat or inverted yield curve?
    15 Dec 2009, 10:51 PM Reply Like
  • Josh Dowlut
    , contributor
    Comments (110) | Send Message
    Author’s reply » Citi is getting a "quite" 38 billion dollar tax break that will wipe out even these questionable repayments tot he public.

    16 Dec 2009, 12:46 PM Reply Like
  • sugardog
    , contributor
    Comment (1) | Send Message
    You are also missing the point of leverage. Banks can borrow from the fed at 0% and use leverage ratios to lend 7:1 or 10:1 in US Treasuries. So they get huge returns from guaranteed lenders (USA) and then use the profits to pay themselves. The only person that is really paying for all this is the US Taxpayer that is floating the interest rate returns to private and public banks. In summary, they are publicly taking the money from us and then making the profits private while bankrupting the country. Thanks Obama
    4 Feb 2010, 08:19 AM Reply Like
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