Tesa

Is This the End of 'Too Big to Fail'?

It shouldn't be just the size that is material here. Financial companies which are vested in stock markets should not subsidize various operations with different risk portfolios and lump them together.

A single bank should have multiple listing in the stock market with operations that are insulated from each other with no intermixing of risk types or racketeering. Financial companies should offer salaries that are directly related to the losses and gains and the executive should suffer losses or negative salaries deducted from what they have banked when their companies collapse or suffer major losses.

Big Banks: The Consensus Is Cracking

Its not just the bigger banks that are corrupt. There many small banks that issue credit cards with 30-75% annual interest rates too. The systematic problem with the financial industry is not related to their size. It is related to lack of regulation that contains their rackets.

Both small and large banks have incentives to scam the public and participate in increasing systematic risk because only high risk actions are very profitable.

High Frequency Trading: We Fear What We Do Not Understand

Combination of net capital available for investment and speed can and will drive the markets otherwise no single algorithm could extract cash from the markets so readily. The famed "velocity of money" works perfectly for those who also push market information to the markets. They upgrade, downgrade and trade it fast. Nothing beats that. The periods where the market information is supplied by those that they can not control is always preceded and followed by periods where they do so intensively.

Somebody has to lose for others to make a bundle and who will be the loser.

Looting Goes Mainstream: The Trouble with Government-Backed Risk

Richard Leader, that correct. That completes the life cycle of looting till the next pass.

Looting Goes Mainstream: The Trouble with Government-Backed Risk

Haigh, your argument is not valid at all and those that claim this often do so to cover up for private institution fraud by avoiding the real topic.

Those Social security are not looting anyone, they are merely receiving the results of their labor agreements and their contract with the government.

If any population declines, each generation receives less social funding than the previous generation till population decline stabilizes otherwise there should not be funding issues. Other countries have managed with far more server population decline.

Looting Goes Mainstream: The Trouble with Government-Backed Risk

Kudos to the author for telling the truth. New York Times article is very accurate.

All the cries about socialism and Communism is designed to cover the fact these private institution were colluding to pass their losses to the public and governments.

Passing the losses to the public while those that benefit can live the life of luxury is name of the game. Giving massive bonuses to managers of failed institutions was about collusion. Rating agencies that produced fake ratings did in fact collude.

Glass-Steagall: If Not the Cause, Maybe the Cure?

"gu econ", yes it would have prevented it in fact. Many of the institutions that had purchased CDOs were regular banks who insuring high risk CDOs with an institution that insured banks and these high risk activities. There would have been no intermingling if the act was there. The act would have disallowed that.

The moral of the story is that low risk assets should not be used to insure high risk assets; at least not being hedged and the hedging requires fairly regulated body that does not cheat. Glass-Steagall is just one act that could have interfered with that process but there are others that could have replaced it but what was the replacement!.

Just think about it, imagine someone uses their house as collateral for gambling. Only the paid portion can be used as collateral otherwise other people will hold the bag for the gambler. If the house is mortgaged, its peak value should not value as collateral. Another way is o hedge against the loss of its market value when its used as collateral. The hedge should not be devised fraudulently and that means that the gambler can not do the hedging or use other gamblers to do the hedging in collusion.

Glass-Steagall: If Not the Cause, Maybe the Cure?

Nova, a good potion of what you say is valid but you are wrong in one aspect, in fact no one forced the banking system into sub prime loan making.

State governments were trying to halt the activities to protect their population but the banks were lobbying to nationalize and legalize the predatory lending. The did so for profiteering purposes.

In fact the sub-prime and predatory lending were anti-social and they were known to cause poverty because the financial institutions would try to extract more funds from those that couldn't afford it.

To top that off, many of these institution converted real estate to cash machine by allowing more and more borrowing against properties without any invested equity.

I hope you read this article to understand that there was no social engineering involved here but rather many mainstream banks were involved fraudulent practices to make more money.

www.cjr.org/the_audit/...

On Mar 09 02:46 PM nova wrote:
> -- Forcing banking system into making loans for

Glass-Steagall: If Not the Cause, Maybe the Cure?

Here were the arguments for and against the act in 1987. Its obvious now that none of arguments for its removal were valid. Conflicts of interest was not resolved and the diversification only worsened the situation by exporting more fraudulent assets. The more blurring of disjunction between loans and assets were outcome of the act.

"The argument for preserving Glass-Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

The argument against preserving the Act (as written in 1987):

1. Depository institutions will now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.

2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.

3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them – by diversification

4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation.[7]"
en.wikipedia.org/wiki/...

Bank Liabilities: Why the Discussion Isn't Explicit

It was not just one scheme. Many many schemes were use to extract cash from the public and their investments. The sub prime was designed specifically to extract cash from house buyers. And they are still scheming, they are hoping and are acquiring assets pennies to a dollar and they extract a huge profit from it as middle men. It never ends.


On Mar 07 11:26 AM Gold is Good

Bank Liabilities: Why the Discussion Isn't Explicit

Market can require to collapse the entire western civilization by that comment. The private capital and market could not save the market at the point of collapse. Only the social capital can save the markets at that junction.


On Mar 07 11:18 AM User 371607 wrote:

> These banks are insolvent because they were poorly managed or because
>
> The free market demands that poorly run companies go OUT OF BUSINESS

Bank Liabilities: Why the Discussion Isn't Explicit

mr freddo, AIG only bled 60 billion last quarter, that does not add up to something like a 130 trillion dollar default. Most of the speculative derivatives must have been hedged. Whether the xombie banks recover or not, the economy will recover.

Bank Liabilities: Why the Discussion Isn't Explicit

Its the opposite. The AAA ratings were designed to swindle the public and foreign banks to hold the bag of derivative losses designed by fraudsters running the US banking system.


On Mar 07 10:27 AM Jimmy Lathrop wrote:

> stupid derivative bets for
> the benefit foreign institutions and a select few banking institutions
> like GS. The discussion isn't explicit because we have a concept
> in economics called risk premium, meaning that writing derivatives
> or CDOs involve a certain amount of risk, and that risk was mispriced
>

Bank Liabilities: Why the Discussion Isn't Explicit

You have got it crossed to justify your rants, There is not enough "private" capital to save it. US government will not run out of cash . It can always print money and that is why the banks rely on it to hold their bags after swindling the public.


On Mar 07 09:33 AM The Geoffster wrote:

> Fitz919 is right on! The notional debt is larger than any possible
> gov't guarantee. Treasury and the FED are treading water hoping the
> system will right itself. Meanwhile, the crisis is tailor made for
> Obama's brand of socialism. The largest loss of wealth in history
> will be followed by the largest transfer of wealth in history.

Bank Liabilities: Why the Discussion Isn't Explicit

They may not recover in 10 years but 15 years they usually don't then in 20 years if they are hard assets. T

he housing market that collapsed "Lincoln Savings and Loan" in 1980s did eventually rebound and Keatings actually cashed on it by buying them at discount.

These assets should be separated an locked up in vault and held for 15 years and then be reevaluated for fair value.

On Mar 07 09:27 AM paul1307 wrote:

>. The mortgage was for $480K and the house was listed at $305K,
> and the bank owed two years back real estate taxes (which they would
> have had to pay off in the event of a sale). The house is now worth
> about $200K.
>
> When your portfolio goes down 50%, it then has to go up 100% for
> you to break even. Get it? Housing down 50% requires herculean growth