Obama Goes All Out For Dirty Banker Deal

[Allan from Fallbrook]

[quote=pri_dk]Buffett has been doing his thing for half a century. He was successful long before the word “bailout” was a household word. He has always favored financials.

But now that he’s an Obama supporter, his whole life story is rewritten.[/quote]

Pri: Boy, talk about strawman. This is cheap polemic, that’s all. No substance, no fact, no proper understanding of either the circumstances or the context.

[ucodegen]

[quote=DomoArigato][quote=ucodegen]
Considering that our current national debt stands at $14 trillion (total for all presidents past and present), how do you come up with $16 trillion being given to the banks? Any facts or referring documents to back up your contention? Do these numbers factor in money that was paid back to the fed?[/quote]

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
[/quote]
But did you really read it? Quoting one of your statements:

No one else who screwed up got anywhere near this kind of bailout. All of that $16 trillion went to Obama’s criminal bankster buddies like Lloyd Bankfiend (CEO of Government Sachs) and Jamie Dimon (CEO of JPM).

But quoting from the link you provided states:

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

There is nothing stating that there was a conspiracy of this current administration to pay of the bad bankers. AND if you read through your own reference and the GAO findings (From an audit of the Fed done because of Frank-Dodd legislation passed during this admin) you will find that many of the statements of Ron Paul may just be right.. effectively that the Federal Reserve is outside of governmental jurisdiction and that it may be running amok. I may be a Republican who may not like Obama being president as well as this current administration, but I am not going to pillory him for something he did not do.

[quote=DomoArigato]To put the size of the bailouts in perspective, JPM received a $390 billion bailout. That is almost 3 times their current market cap. Could you imagine if all homeowners received a bailout that equaled three times the cost of their house? There would be so many cries of socialism from the hypocrites in the criminal bankster class that you wouldn’t be able to hear yourself think.[/quote] Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.

[ucodegen]

[quote=DomoArigato][quote=ucodegen]
Considering that our current national debt stands at $14 trillion (total for all presidents past and present), how do you come up with $16 trillion being given to the banks? Any facts or referring documents to back up your contention? Do these numbers factor in money that was paid back to the fed?[/quote]

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
[/quote]
But did you really read it? Quoting one of your statements:

No one else who screwed up got anywhere near this kind of bailout. All of that $16 trillion went to Obama’s criminal bankster buddies like Lloyd Bankfiend (CEO of Government Sachs) and Jamie Dimon (CEO of JPM).

But quoting from the link you provided states:

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

There is nothing stating that there was a conspiracy of this current administration to pay of the bad bankers. AND if you read through your own reference and the GAO findings (From an audit of the Fed done because of Frank-Dodd legislation passed during this admin) you will find that many of the statements of Ron Paul may just be right.. effectively that the Federal Reserve is outside of governmental jurisdiction and that it may be running amok. I may be a Republican who may not like Obama being president as well as this current administration, but I am not going to pillory him for something he did not do.

[quote=DomoArigato]To put the size of the bailouts in perspective, JPM received a $390 billion bailout. That is almost 3 times their current market cap. Could you imagine if all homeowners received a bailout that equaled three times the cost of their house? There would be so many cries of socialism from the hypocrites in the criminal bankster class that you wouldn’t be able to hear yourself think.[/quote] Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.

[ucodegen]

[quote=DomoArigato][quote=ucodegen]
Considering that our current national debt stands at $14 trillion (total for all presidents past and present), how do you come up with $16 trillion being given to the banks? Any facts or referring documents to back up your contention? Do these numbers factor in money that was paid back to the fed?[/quote]

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
[/quote]
But did you really read it? Quoting one of your statements:

No one else who screwed up got anywhere near this kind of bailout. All of that $16 trillion went to Obama’s criminal bankster buddies like Lloyd Bankfiend (CEO of Government Sachs) and Jamie Dimon (CEO of JPM).

But quoting from the link you provided states:

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

There is nothing stating that there was a conspiracy of this current administration to pay of the bad bankers. AND if you read through your own reference and the GAO findings (From an audit of the Fed done because of Frank-Dodd legislation passed during this admin) you will find that many of the statements of Ron Paul may just be right.. effectively that the Federal Reserve is outside of governmental jurisdiction and that it may be running amok. I may be a Republican who may not like Obama being president as well as this current administration, but I am not going to pillory him for something he did not do.

[quote=DomoArigato]To put the size of the bailouts in perspective, JPM received a $390 billion bailout. That is almost 3 times their current market cap. Could you imagine if all homeowners received a bailout that equaled three times the cost of their house? There would be so many cries of socialism from the hypocrites in the criminal bankster class that you wouldn’t be able to hear yourself think.[/quote] Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.

[ucodegen]

[quote=DomoArigato][quote=ucodegen]
Considering that our current national debt stands at $14 trillion (total for all presidents past and present), how do you come up with $16 trillion being given to the banks? Any facts or referring documents to back up your contention? Do these numbers factor in money that was paid back to the fed?[/quote]

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
[/quote]
But did you really read it? Quoting one of your statements:

No one else who screwed up got anywhere near this kind of bailout. All of that $16 trillion went to Obama’s criminal bankster buddies like Lloyd Bankfiend (CEO of Government Sachs) and Jamie Dimon (CEO of JPM).

But quoting from the link you provided states:

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

There is nothing stating that there was a conspiracy of this current administration to pay of the bad bankers. AND if you read through your own reference and the GAO findings (From an audit of the Fed done because of Frank-Dodd legislation passed during this admin) you will find that many of the statements of Ron Paul may just be right.. effectively that the Federal Reserve is outside of governmental jurisdiction and that it may be running amok. I may be a Republican who may not like Obama being president as well as this current administration, but I am not going to pillory him for something he did not do.

[quote=DomoArigato]To put the size of the bailouts in perspective, JPM received a $390 billion bailout. That is almost 3 times their current market cap. Could you imagine if all homeowners received a bailout that equaled three times the cost of their house? There would be so many cries of socialism from the hypocrites in the criminal bankster class that you wouldn’t be able to hear yourself think.[/quote] Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.

[ucodegen]

[quote=DomoArigato][quote=ucodegen]
Considering that our current national debt stands at $14 trillion (total for all presidents past and present), how do you come up with $16 trillion being given to the banks? Any facts or referring documents to back up your contention? Do these numbers factor in money that was paid back to the fed?[/quote]

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
[/quote]
But did you really read it? Quoting one of your statements:

No one else who screwed up got anywhere near this kind of bailout. All of that $16 trillion went to Obama’s criminal bankster buddies like Lloyd Bankfiend (CEO of Government Sachs) and Jamie Dimon (CEO of JPM).

But quoting from the link you provided states:

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

There is nothing stating that there was a conspiracy of this current administration to pay of the bad bankers. AND if you read through your own reference and the GAO findings (From an audit of the Fed done because of Frank-Dodd legislation passed during this admin) you will find that many of the statements of Ron Paul may just be right.. effectively that the Federal Reserve is outside of governmental jurisdiction and that it may be running amok. I may be a Republican who may not like Obama being president as well as this current administration, but I am not going to pillory him for something he did not do.

[quote=DomoArigato]To put the size of the bailouts in perspective, JPM received a $390 billion bailout. That is almost 3 times their current market cap. Could you imagine if all homeowners received a bailout that equaled three times the cost of their house? There would be so many cries of socialism from the hypocrites in the criminal bankster class that you wouldn’t be able to hear yourself think.[/quote] Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.

[DomoArigato]

[quote=ucodegen]Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.[/quote]

I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.

A 3% risk-free spread on $390 billion is almost $12 billion. No wonder the U.S. government borrowing rates are staying so low. The Fed is giving $16 trillion in bailout money at near zero rates to the criminal bankster elites who are turning around and buying government debt with it in order to turn a risk-free profit.

What homeowner wouldn’t love to earn a risk-free return on 3 times the amount of his home? Too bad this level of criminality can only be played by the elites.

[DomoArigato]

[quote=ucodegen]Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.[/quote]

I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.

A 3% risk-free spread on $390 billion is almost $12 billion. No wonder the U.S. government borrowing rates are staying so low. The Fed is giving $16 trillion in bailout money at near zero rates to the criminal bankster elites who are turning around and buying government debt with it in order to turn a risk-free profit.

What homeowner wouldn’t love to earn a risk-free return on 3 times the amount of his home? Too bad this level of criminality can only be played by the elites.

[DomoArigato]

[quote=ucodegen]Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.[/quote]

I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.

A 3% risk-free spread on $390 billion is almost $12 billion. No wonder the U.S. government borrowing rates are staying so low. The Fed is giving $16 trillion in bailout money at near zero rates to the criminal bankster elites who are turning around and buying government debt with it in order to turn a risk-free profit.

What homeowner wouldn’t love to earn a risk-free return on 3 times the amount of his home? Too bad this level of criminality can only be played by the elites.

[DomoArigato]

[quote=ucodegen]Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.[/quote]

I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.

A 3% risk-free spread on $390 billion is almost $12 billion. No wonder the U.S. government borrowing rates are staying so low. The Fed is giving $16 trillion in bailout money at near zero rates to the criminal bankster elites who are turning around and buying government debt with it in order to turn a risk-free profit.

What homeowner wouldn’t love to earn a risk-free return on 3 times the amount of his home? Too bad this level of criminality can only be played by the elites.

[DomoArigato]

[quote=ucodegen]Sounds like you don’t understand fractional reserve banking and how it might relate to market cap. Remember that for a bank to make a loan, it often has to borrow money itself. In some cases that money may be your own bank account. In order to pay you interest, it has to generate money from it somehow. It does this by lending the money out. When things went south, the money that the bank borrowed had to be paid back.. Basically the market cap is related to Assets – Liabilities (it is not pure assets). The Fed money was to help plump up the Assets because house values (or effectively the loans face value) dropped like a stone.[/quote]

I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.

A 3% risk-free spread on $390 billion is almost $12 billion. No wonder the U.S. government borrowing rates are staying so low. The Fed is giving $16 trillion in bailout money at near zero rates to the criminal bankster elites who are turning around and buying government debt with it in order to turn a risk-free profit.

What homeowner wouldn’t love to earn a risk-free return on 3 times the amount of his home? Too bad this level of criminality can only be played by the elites.

[ucodegen]

[quote=DomoArigato]I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.[/quote]
And you don’t belong to one or another of those two parties? We currently have a two party system here.. so there is not much choice beyond the two parties. I do wish the Independent party would field someone reasonable.

You also forgot “reserve” in “fractional reserve” banking. Imagine if you are a bank and have 100mil in assets, you have to hold back a percentage.. ie 20% and can loan 80% (20% reserve). One way to do this is loan out the 80mil holding 20mil in safe securities, ie treasuries. The other approach is to use that 100mil as reserve and borrow 500mil to loan out. The 100mil becomes the reserve. The problem is that when things turn upside down, you are on heavy leverage. You now have 100mil in liquid assets in hand, 500mil in liabilities, but those loans are now sour and are worth lets say 250mil (probably less).

Your previous position was 100mil(reserve) +500mil(on held loans) – 500mil(obligations in the form of loans where you as a bank borrowed( for a net total of 100mil => meeting your reserve requirement of 20%.

Your current net position is 100mil(reserve) + 250mil(in held soured loans) – 500mil(obligations where you as a bank borrowed), for a net total of negative 150mil and not able to meet your reserve requirements. The net reserve you had, vaporized with the collapse of the housing ponzi.

To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension.. something has to offset the diff and re-establish balance and reserve. 250mil has to come from somewhere. Remember that previously their net worth was 100mil. This is how the loans from the fed end up being bigger than the previous market cap which is ‘net’ related. The ‘re-established’ reserve HAS to be held in safe securities, ie treasuries or cash (looking at the current gold rush, might have been better to be in gold than treasuries – though unwinding a gold commodities position of that size could be problematic).

PS: The situation is even nastier than I showed above.. I am just oversimplifying to make it easier to diagram/explain. By the way, the only treasuries that are currently yielding 3% or more are 20 and 30 year. There is a risk in holding such treasuries when rates go back up. Current yields are 1Mo=0%, 3Mo=0.01%, 6Mo=0.02%, 1Yr=0.09%, 2Yr=0.20%, 3Yr=0.33%, 5Yr=0.94%, 7Yr=1.52%, 10Yr=2.19%, 20Yr=3.13%, 30Yr=3.54%

What also has to be remembered is that banks are having to deal with the state and fed meddling in established loan contracts.. ie. the foreclosure forbearance and changing terms for when a bank can foreclose. Additionally, there is a potential for bankruptcies to yet again change the terms. So as a bank, it may be safer to not loan the money out.

It seems that people want to borrow, but when things get tough, they want the banks to eat it. Unfortunately these people ignore that the money the banks lend out actually belongs to someone else.. maybe even the pension of the person borrowing the money.

[ucodegen]

[quote=DomoArigato]I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.[/quote]
And you don’t belong to one or another of those two parties? We currently have a two party system here.. so there is not much choice beyond the two parties. I do wish the Independent party would field someone reasonable.

You also forgot “reserve” in “fractional reserve” banking. Imagine if you are a bank and have 100mil in assets, you have to hold back a percentage.. ie 20% and can loan 80% (20% reserve). One way to do this is loan out the 80mil holding 20mil in safe securities, ie treasuries. The other approach is to use that 100mil as reserve and borrow 500mil to loan out. The 100mil becomes the reserve. The problem is that when things turn upside down, you are on heavy leverage. You now have 100mil in liquid assets in hand, 500mil in liabilities, but those loans are now sour and are worth lets say 250mil (probably less).

Your previous position was 100mil(reserve) +500mil(on held loans) – 500mil(obligations in the form of loans where you as a bank borrowed( for a net total of 100mil => meeting your reserve requirement of 20%.

Your current net position is 100mil(reserve) + 250mil(in held soured loans) – 500mil(obligations where you as a bank borrowed), for a net total of negative 150mil and not able to meet your reserve requirements. The net reserve you had, vaporized with the collapse of the housing ponzi.

To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension.. something has to offset the diff and re-establish balance and reserve. 250mil has to come from somewhere. Remember that previously their net worth was 100mil. This is how the loans from the fed end up being bigger than the previous market cap which is ‘net’ related. The ‘re-established’ reserve HAS to be held in safe securities, ie treasuries or cash (looking at the current gold rush, might have been better to be in gold than treasuries – though unwinding a gold commodities position of that size could be problematic).

PS: The situation is even nastier than I showed above.. I am just oversimplifying to make it easier to diagram/explain. By the way, the only treasuries that are currently yielding 3% or more are 20 and 30 year. There is a risk in holding such treasuries when rates go back up. Current yields are 1Mo=0%, 3Mo=0.01%, 6Mo=0.02%, 1Yr=0.09%, 2Yr=0.20%, 3Yr=0.33%, 5Yr=0.94%, 7Yr=1.52%, 10Yr=2.19%, 20Yr=3.13%, 30Yr=3.54%

What also has to be remembered is that banks are having to deal with the state and fed meddling in established loan contracts.. ie. the foreclosure forbearance and changing terms for when a bank can foreclose. Additionally, there is a potential for bankruptcies to yet again change the terms. So as a bank, it may be safer to not loan the money out.

It seems that people want to borrow, but when things get tough, they want the banks to eat it. Unfortunately these people ignore that the money the banks lend out actually belongs to someone else.. maybe even the pension of the person borrowing the money.

[ucodegen]

[quote=DomoArigato]I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.[/quote]
And you don’t belong to one or another of those two parties? We currently have a two party system here.. so there is not much choice beyond the two parties. I do wish the Independent party would field someone reasonable.

You also forgot “reserve” in “fractional reserve” banking. Imagine if you are a bank and have 100mil in assets, you have to hold back a percentage.. ie 20% and can loan 80% (20% reserve). One way to do this is loan out the 80mil holding 20mil in safe securities, ie treasuries. The other approach is to use that 100mil as reserve and borrow 500mil to loan out. The 100mil becomes the reserve. The problem is that when things turn upside down, you are on heavy leverage. You now have 100mil in liquid assets in hand, 500mil in liabilities, but those loans are now sour and are worth lets say 250mil (probably less).

Your previous position was 100mil(reserve) +500mil(on held loans) – 500mil(obligations in the form of loans where you as a bank borrowed( for a net total of 100mil => meeting your reserve requirement of 20%.

Your current net position is 100mil(reserve) + 250mil(in held soured loans) – 500mil(obligations where you as a bank borrowed), for a net total of negative 150mil and not able to meet your reserve requirements. The net reserve you had, vaporized with the collapse of the housing ponzi.

To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension.. something has to offset the diff and re-establish balance and reserve. 250mil has to come from somewhere. Remember that previously their net worth was 100mil. This is how the loans from the fed end up being bigger than the previous market cap which is ‘net’ related. The ‘re-established’ reserve HAS to be held in safe securities, ie treasuries or cash (looking at the current gold rush, might have been better to be in gold than treasuries – though unwinding a gold commodities position of that size could be problematic).

PS: The situation is even nastier than I showed above.. I am just oversimplifying to make it easier to diagram/explain. By the way, the only treasuries that are currently yielding 3% or more are 20 and 30 year. There is a risk in holding such treasuries when rates go back up. Current yields are 1Mo=0%, 3Mo=0.01%, 6Mo=0.02%, 1Yr=0.09%, 2Yr=0.20%, 3Yr=0.33%, 5Yr=0.94%, 7Yr=1.52%, 10Yr=2.19%, 20Yr=3.13%, 30Yr=3.54%

What also has to be remembered is that banks are having to deal with the state and fed meddling in established loan contracts.. ie. the foreclosure forbearance and changing terms for when a bank can foreclose. Additionally, there is a potential for bankruptcies to yet again change the terms. So as a bank, it may be safer to not loan the money out.

It seems that people want to borrow, but when things get tough, they want the banks to eat it. Unfortunately these people ignore that the money the banks lend out actually belongs to someone else.. maybe even the pension of the person borrowing the money.

[ucodegen]

[quote=DomoArigato]I’m not surprised that you are a supporter of one of the two major parties (Republican), because you are clearly clueless. JPM didn’t lend out that $390 billion. They just turned around and put it in Treasuries risk-free. Fractional-reserve lending has nothing to do with the massive bailouts the criminal banksters received.[/quote]
And you don’t belong to one or another of those two parties? We currently have a two party system here.. so there is not much choice beyond the two parties. I do wish the Independent party would field someone reasonable.

You also forgot “reserve” in “fractional reserve” banking. Imagine if you are a bank and have 100mil in assets, you have to hold back a percentage.. ie 20% and can loan 80% (20% reserve). One way to do this is loan out the 80mil holding 20mil in safe securities, ie treasuries. The other approach is to use that 100mil as reserve and borrow 500mil to loan out. The 100mil becomes the reserve. The problem is that when things turn upside down, you are on heavy leverage. You now have 100mil in liquid assets in hand, 500mil in liabilities, but those loans are now sour and are worth lets say 250mil (probably less).

Your previous position was 100mil(reserve) +500mil(on held loans) – 500mil(obligations in the form of loans where you as a bank borrowed( for a net total of 100mil => meeting your reserve requirement of 20%.

Your current net position is 100mil(reserve) + 250mil(in held soured loans) – 500mil(obligations where you as a bank borrowed), for a net total of negative 150mil and not able to meet your reserve requirements. The net reserve you had, vaporized with the collapse of the housing ponzi.

To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension.. something has to offset the diff and re-establish balance and reserve. 250mil has to come from somewhere. Remember that previously their net worth was 100mil. This is how the loans from the fed end up being bigger than the previous market cap which is ‘net’ related. The ‘re-established’ reserve HAS to be held in safe securities, ie treasuries or cash (looking at the current gold rush, might have been better to be in gold than treasuries – though unwinding a gold commodities position of that size could be problematic).

PS: The situation is even nastier than I showed above.. I am just oversimplifying to make it easier to diagram/explain. By the way, the only treasuries that are currently yielding 3% or more are 20 and 30 year. There is a risk in holding such treasuries when rates go back up. Current yields are 1Mo=0%, 3Mo=0.01%, 6Mo=0.02%, 1Yr=0.09%, 2Yr=0.20%, 3Yr=0.33%, 5Yr=0.94%, 7Yr=1.52%, 10Yr=2.19%, 20Yr=3.13%, 30Yr=3.54%

What also has to be remembered is that banks are having to deal with the state and fed meddling in established loan contracts.. ie. the foreclosure forbearance and changing terms for when a bank can foreclose. Additionally, there is a potential for bankruptcies to yet again change the terms. So as a bank, it may be safer to not loan the money out.

It seems that people want to borrow, but when things get tough, they want the banks to eat it. Unfortunately these people ignore that the money the banks lend out actually belongs to someone else.. maybe even the pension of the person borrowing the money.

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