Fannie May, Freddie Mac, Indymac, Oil

We is in trouble…

Yep.

What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?

[quote]LIFTICVSMAXIMVS wrote:
What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?[/quote]

I think it’s better to bail it out than to not. But it’s really fucking scary when massive financial institutions are caving. And eventually the government won’t be ABLE to bail it out.

[quote]jsbrook wrote:
LIFTICVSMAXIMVS wrote:
What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?

I think it’s better to bail it out than to not. But it’s really fucking scary when massive financial institutions are caving. And eventually the government won’t be ABLE to bail it out.[/quote]

Why could not the government have an IPO on new stock to pay for the bail out? For example if right now they have 100 stocks and the value of each stock is 100 dollars and it would take 1000 dollars to bail them out all they would have to do is offer 10 stocks at the price of 100 dollars

[quote]pittbulll wrote:
jsbrook wrote:
LIFTICVSMAXIMVS wrote:
What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?

I think it’s better to bail it out than to not. But it’s really fucking scary when massive financial institutions are caving. And eventually the government won’t be ABLE to bail it out.

Why could not the government have an IPO on new stock to pay for the bail out? For example if right now they have 100 stocks and the value of each stock is 100 dollars and it would take 1000 dollars to bail them out all they would have to do is offer 10 stocks at the price of 100 dollars

[/quote]

Who would be the Buyers? One of the reasons the companies are having so much trouble and their stock prices are in the shitter is that there is no confidence in them. Probably rightly so. Even a 1% increase on loan defaults (because the economy is so bad)is crippling when we’re talking about trillions of dollars.

Depressions always happen when hegemony is lost. Part of the natural cycle in economics.

[quote]pittbulll wrote:
jsbrook wrote:
LIFTICVSMAXIMVS wrote:
What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?

I think it’s better to bail it out than to not. But it’s really fucking scary when massive financial institutions are caving. And eventually the government won’t be ABLE to bail it out.

Why could not the government have an IPO on new stock to pay for the bail out? For example if right now they have 100 stocks and the value of each stock is 100 dollars and it would take 1000 dollars to bail them out all they would have to do is offer 10 stocks at the price of 100 dollars

[/quote]

Fannie and Freedy are public companies. They’re not nationalized. So, there can be no IPO. I don’t know about Indymac. Some people have actually been saying that they SHOULD be nationalized. But I don’t know that this is any good solution.

[quote]pittbulll wrote:

Why could not the government have an IPO on new stock to pay for the bail out? For example if right now they have 100 stocks and the value of each stock is 100 dollars and it would take 1000 dollars to bail them out all they would have to do is offer 10 stocks at the price of 100 dollars [/quote]

While it technically wouldn’t be an IPO, the two companies in theory could issue more shares in exchange for an infusion of cash.

But no investors would buy their shares to bail them out, for lots of obvious reasons - the most obvious being that investors tend to want to get out of distressed troubled businesses, not get into them.

[quote]LIFTICVSMAXIMVS wrote:
What would happen if we applied the principle of not allowing a bank to fail to all businesses no matter how big or small?

When is it OK for a bank to go out of business?[/quote]

Mabey in time of war or for national security. Otherwise, let them fail.

[quote]jsbrook wrote:
Fannie and Freedy are public companies. They’re not nationalized. So, there can be no IPO. I don’t know about Indymac. Some people have actually been saying that they SHOULD be nationalized. But I know that this is any good solution.[/quote]

Nationalisation would be a colassal overreaction. In the long term this is a little blip. I find it very hard to see this happening again. If you let these guys fail they will learn their lession. These little speculative bubbles happen all the time. The are mearly corrections and not allowing corrections to happen is rediculous. Some people make money, some lose money.

I fail to see how these organisations failing is all that devistating. I am not sure that it wouldn’t be, I just can’t figure it out why.

As long as there is money in good mortgages there will be people to underwrite them.

[quote]dhickey wrote:
jsbrook wrote:
Fannie and Freedy are public companies. They’re not nationalized. So, there can be no IPO. I don’t know about Indymac. Some people have actually been saying that they SHOULD be nationalized. But I know that this is any good solution.

Nationalisation would be a colassal overreaction. In the long term this is a little blip. I find it very hard to see this happening again. If you let these guys fail they will learn their lession. These little speculative bubbles happen all the time. The are mearly corrections and not allowing corrections to happen is rediculous. Some people make money, some lose money.

I fail to see how these organisations failing is all that devistating. I am not sure that it wouldn’t be, I just can’t figure it out why.

As long as there is money in good mortgages there will be people to underwrite them.
[/quote]

I meant that to read ‘I DON’T know that is any good solution.’ Edited.

Pull out yer money cause worthless paper money is better than worthless digital money!

[quote]dhickey wrote:
jsbrook wrote:
Fannie and Freedy are public companies. They’re not nationalized. So, there can be no IPO. I don’t know about Indymac. Some people have actually been saying that they SHOULD be nationalized. But I know that this is any good solution.

Nationalisation would be a colassal overreaction. In the long term this is a little blip. I find it very hard to see this happening again. If you let these guys fail they will learn their lession. These little speculative bubbles happen all the time. The are mearly corrections and not allowing corrections to happen is rediculous. Some people make money, some lose money.

I fail to see how these organisations failing is all that devistating. I am not sure that it wouldn’t be, I just can’t figure it out why.

As long as there is money in good mortgages there will be people to underwrite them.
[/quote]

Why wouldn’t it be? Think a bit about the domino effect this would have. Also ask the people who are only getting back 50 cents for every $ over $100,000 invested. Collapse. Stagnation. No investment. No growh. Much loss. etc…

[quote]jsbrook wrote:

Why wouldn’t it be? Think a bit about the domino effect this would have. Also ask the people who are only getting back 50 cents for every $ over $100,000 invested. Collapse. Stagnation. No investment. No growh. Much loss. etc…[/quote]

All temorary. All investments have risk and if you are risk adverse you need pay better attention to risk involved in your investments.

[quote]dhickey wrote:
jsbrook wrote:

Why wouldn’t it be? Think a bit about the domino effect this would have. Also ask the people who are only getting back 50 cents for every $ over $100,000 invested. Collapse. Stagnation. No investment. No growh. Much loss. etc…

All temorary. All investments have risk and if you are risk adverse you need pay better attention to risk involved in your investments.[/quote]

All investments have DIFFERENT levels of risk. Some investments are inherently risky and have a much higher rate of return. Banks in this country have been considered safe to the utmost degree for decades, and it’s unprecedented and extremely worrisome that huge financial institutions would collapse like this. Savings accounts can scarcely be considered investments at all. You might say that it’s the natural economic cycle and that we’re due for a huge economic downturn. But if we can prevent it without making things worse, we should. We’re gonna have a lot of people who’s investment plan consists of hiding money under the mattress. It took a long time to recover from the Depression and it never would’ve happened without WWII. Maybe we can hope for World War Three to rescue us from the shitter we’re headed for.

[quote]thunderbolt23 wrote:
pittbulll wrote:

Why could not the government have an IPO on new stock to pay for the bail out? For example if right now they have 100 stocks and the value of each stock is 100 dollars and it would take 1000 dollars to bail them out all they would have to do is offer 10 stocks at the price of 100 dollars

While it technically wouldn’t be an IPO, the two companies in theory could issue more shares in exchange for an infusion of cash.

But no investors would buy their shares to bail them out, for lots of obvious reasons - the most obvious being that investors tend to want to get out of distressed troubled businesses, not get into them.[/quote]

I would buy stock but it would have to be a bargain basement price

[quote]jsbrook wrote:

All investments have DIFFERENT levels of risk. Some investments are inherently risky and have a much higher rate of return. Banks in this country have been considered safe to the utmost degree for decades, and it’s unprecedented and extremely worrisome that huge financial institutions would collapse like this. Savings accounts can scarcely be considered investments at all. You might say that it’s the natural economic cycle and that we’re due for a huge economic downturn. But if we can prevent it without making things worse, we should. We’re gonna have a lot of people who’s investment plan consists of hiding money under the mattress. It took a long time to recover from the Depression and it never would’ve happened without WWII. Maybe we can hope for World War Three to rescue us from the shitter we’re headed for.[/quote]

Banks are still safe…up to the federally insured limit. Even the ones that fail. Banks failing isn’t all that uncommon. It was far worse in the early 90s. How many people do you think have more than $100k in a single account? Only idiots or those willing to take the risk for some degree of gain.

Savings is exactly the same as investment. What do you think they do with deposits? Your return is free checking or an interest rate or both.

Bailing these guys out makes it worse. This has already been covered.

Wars don’t pull us out of depression. Too late to explain but just pick up an economics book. Or do a search for “Adam Smith” and “broken window”.

[quote]dhickey wrote:
jsbrook wrote:

All investments have DIFFERENT levels of risk. Some investments are inherently risky and have a much higher rate of return. Banks in this country have been considered safe to the utmost degree for decades, and it’s unprecedented and extremely worrisome that huge financial institutions would collapse like this. Savings accounts can scarcely be considered investments at all. You might say that it’s the natural economic cycle and that we’re due for a huge economic downturn. But if we can prevent it without making things worse, we should. We’re gonna have a lot of people who’s investment plan consists of hiding money under the mattress. It took a long time to recover from the Depression and it never would’ve happened without WWII. Maybe we can hope for World War Three to rescue us from the shitter we’re headed for.

Banks are still safe…up to the federally insured limit. Even the ones that fail. Banks failing isn’t all that uncommon. It was far worse in the early 90s. How many people do you think have more than $100k in a single account? Only idiots or those willing to take the risk for some degree of gain.

Savings is exactly the same as investment. What do you think they do with deposits? Your return is free checking or an interest rate or both.

Bailing these guys out makes it worse. This has already been covered.

Wars don’t pull us out of depression. Too late to explain but just pick up an economics book. Or do a search for “Adam Smith” and “broken window”.[/quote]

Based on your theory, why would should there be a federally insured limit at all? And do you really not understand risk-return. Of COURSE, savings is an investment. But historically, they have been considered quite safe ones. ALMOST non-investments. That’s why interest rates on savings accounts are low. The risker the investment, the higher the rate of return must be. Think private equity funds. This is basic economics. And you’re telling me pick up a book? I fully understand your point about bailing these banks out and agree with all of the problems that will arise from it. But I don’t feel you’ve made your case that it would be WORSE than letting them fail. At all. The only thing that will really work for the future is regulations that force executives to give up their bonuses and face criminal penalties for irresponsible lending practices. Make it in their self-interest to behave properly and live the details to them. This is what SOX has done and it’s worked very well at combatting corporate fraud. As far as your last point, many indeed feel that WWII is what spurred the econonmy and got us out of the depression, including top econmists. Research. But if you’re an Adam Smith fan, you should agree with the point about making it it executives self-interest to behave properly. We should have some common ground on that point.

It’s definitely not moronic to have over $100K in the bank. Bank failure is pretty uncommon. It happened in the depression. It happend in the 70s, and it’s happening now. Despite the Savings and Loans crisis, it was not all that widespread in the 70s. Where do YOU think people who actually have some money and want to take a pretty conservative approach should keep the bulk of it if not banks?