[ucodegen]

@bearishgirl
Actually, I think that is a Eleanore/Helleanor, not a Shelby GT-500. Not as collectible as a GT-500, but a whole lot more fun and actually considerably faster. It also makes a GT-500 look pedestrian.

http://www.hotrod.com/featuredvehicles/hrdp_0609_1968_ford_mustang_helleanor_fastback/viewall.html

The Eleanore ‘concept’ was originally used on the movie gone in 60seconds, where Eleanore was supposed to be a Shelby GT-500(in the second version of the movie, the first one was a more pedestrian 73 fastback). You can buy an ‘Eleanore’, there is a company licensed to make ‘licensed Eleanore clones’ (correction, they are no longer making them – though Carrol Shelby is making a ‘continuation’ model GT-500C – which really doesn’t look like the movie Eleanore – Carroll Shelby got sued when he tried.)

References:
http://www.67supersnake.com/
The original GT-500 supersnake:
http://jalopnik.com/347052/worlds-only-1967-gt500-super-snake-could-be-yours-for-3-million
http://www.youtube.com/watch?v=tFBkmTmjk6Y

NOTE: From my rememberence, the movie didn’t use a real GT-500. That is because real Shelby GT-500s don’t go for cheap and the life-span of movie cars is very short. The Dukes of Hazzard supposedly used up somewhere between 250 and 300 Dodge Chargers of 1968, 1969 vintage (now that is definitely a waste)

[ucodegen]

[quote davelj]First problem: the only reason a bank has to hold back a percentage of its assets as “reserves” (or, my preference, “liquidity”) is because those reserves are there to ensure adequate liquidity for depositors. In the example above, you assume no deposits, therefore no reserves would be necessary. So we’ve got a fundamental misunderstanding to rectify before moving forward.[/quote]
As I mentioned, I drastically simplified it.. maybe too much. As I was going down the path to try to describe why a bank would require more fed money than their ‘market cap’, I realized that if I threw a lot of stuff in, I loose the ‘banks are making a mint off the loan’ people, so I had to isolate the description to the bare minimum to show what would happen. The initial all ‘paid in capital’ could also be the starting/founding position for a bank before the doors open. – so at this point I’m done. I am not going to continue this game of yours. You have the floor, you can decide to show an accurate rendition that average people could follow, or continue to try to berate me on this public forum. What you decide to do probably reflects more on you than me.

[ucodegen]

[quote davelj]Forget about your last post. You’re putting the cart before the horse. There’s no point in discussing this further until you have the VERY basics down.[/quote]I wasn’t trying to get into a c**k fight here. I ‘yielded the floor’ to allow you to post the accurate rendition. This is ridiculous considering that you are taking me more to task than people who were claiming that the banks are making a mint off of the fed loans. I don’t know what your real point is here.. but here goes (unfortunately this posting interface doesn’t allow me to create tables.) REMEMBER: I did not say what those assets were from…

Cash & Equivalents = 100M(paid in capital, undivided earnings)
Securities
Loans
Other Assets

Total Assets = 100M

Deposits
Fed Borrowings
FHLB Borrowings
Other Liabilities

Total Liabilities
Common Equity = 100M

Followed by

Cash & Equivalents = 100M(paid in capital, undivided earnings) + 500M(proceeds from sale of issued bonds)
Securities
Loans
Other Assets

Total Assets = 600M

Deposits
Fed Borrowings
FHLB Borrowings
Other Liabilities = 500M(issued bonds)

Total Liabilities = 500M
Common Equity = 100M

NOTE: Bank bonds are often bought by.. pensions.

Of course I could have started with something like

Cash & Equivalents = 100M(paid in capital + deposits)
Securities
Loans
Other Assets

Total Assets = 100M

Deposits = 50M
Fed Borrowings
FHLB Borrowings
Other Liabilities

Total Liabilities = 50M
Common Equity = 50M

[ucodegen]

Check the water pressure within the house. Should max out at 60psi. You may need to take multiple readings. The street water pressure will sometimes change during the night as local reservoirs(tanks on the hills) are recharged. Getting a new pressure regulator may not help if the regulator is not set correctly.

[ucodegen]

Check the water pressure within the house. Should max out at 60psi. You may need to take multiple readings. The street water pressure will sometimes change during the night as local reservoirs(tanks on the hills) are recharged. Getting a new pressure regulator may not help if the regulator is not set correctly.

[ucodegen]

Check the water pressure within the house. Should max out at 60psi. You may need to take multiple readings. The street water pressure will sometimes change during the night as local reservoirs(tanks on the hills) are recharged. Getting a new pressure regulator may not help if the regulator is not set correctly.

[ucodegen]

Check the water pressure within the house. Should max out at 60psi. You may need to take multiple readings. The street water pressure will sometimes change during the night as local reservoirs(tanks on the hills) are recharged. Getting a new pressure regulator may not help if the regulator is not set correctly.

[ucodegen]

Check the water pressure within the house. Should max out at 60psi. You may need to take multiple readings. The street water pressure will sometimes change during the night as local reservoirs(tanks on the hills) are recharged. Getting a new pressure regulator may not help if the regulator is not set correctly.

[ucodegen]

[quote=davelj]
First of all, I have no dog in the Dem vs. Rep discussion here. Having said that… in the 5+ years I’ve been visiting this site I’ve seen some real whoppers of misunderstanding where banks, their balance sheets and reserves are concerned and… this has got to be the winner. You have absolutely no idea what you’re talking about here. I mean zero. Although I must admire the zeal and detail you provide in illuminating your misunderstanding of the topic.[/quote]

So how would you explain the reserve system and the risks it presents should the loans involved end up being ‘soured’ without going to 50 pages. It is a complex subject, particularly to non-accountant people. Remember that to non-accountant people, what gets considered as a credit vs debit can be very confusing and counter intuitive. I tried simplifying(see your second that you took from me w/ respect to rates – my first sentence was “I am just oversimplifying to..”).. maybe way too much, but I am open to your suggestion of how to explain it, demonstrate the risk and why it had to be ‘covered’.. but we don’t have 50 pages here..

[quote davelj]Anyhow, go back to the drawing board and begin with two important principles: (1) in a bank, equity is leveraged, NOT assets (leverage is applied to the right side of the balance sheet, not the left side), and (2) for a bank to leverage its equity it must have… drum roll please… deposits.[/quote] which I basically hinted at in “To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension..”. The deposits are not the ‘banks’ money, but they are custodians of it. Correct me if I am wrong, but isn’t equity the net of assets – liabilities.. and asset, liabilities are the two columns.. not equity?

[quote davelj]
Despite the craziness posted above, this is a salient point that I’ve pointed out before. Banks don’t own 30-year treasuries. They don’t even own 5-year treasuries for the most part. Most risk-free securities on banks’ balance sheets have a maturity of less than one year. So, after receiving 15 bps on these ST securities and then paying out 40 bps on the deposits (or borrowings) that fund them… there’s either a negative spread or no spread left. So, while the Fed is certainly providing liquidity – which is important, don’t get me wrong – the banks don’t actually make any money off of it. But it does help in keeping the doors open in times of crisis.[/quote]
The main point I was trying to address was that the money that was loaned to them from the fed is not making the banks millions/billions, and its primary purpose was to shore up the accounting and keeping the deposits safe as well as making the bank good on any interbank-loans. I was also trying to explain it outside of a pure S&L type of structure. There is a widely spread misconception that the banks are making a mint off the fed money. I tried to make it simple, maybe too simple.. and maybe ended up with foot-in-mouth(keyboard). I am very open to your description.

[ucodegen]

[quote=davelj]
First of all, I have no dog in the Dem vs. Rep discussion here. Having said that… in the 5+ years I’ve been visiting this site I’ve seen some real whoppers of misunderstanding where banks, their balance sheets and reserves are concerned and… this has got to be the winner. You have absolutely no idea what you’re talking about here. I mean zero. Although I must admire the zeal and detail you provide in illuminating your misunderstanding of the topic.[/quote]

So how would you explain the reserve system and the risks it presents should the loans involved end up being ‘soured’ without going to 50 pages. It is a complex subject, particularly to non-accountant people. Remember that to non-accountant people, what gets considered as a credit vs debit can be very confusing and counter intuitive. I tried simplifying(see your second that you took from me w/ respect to rates – my first sentence was “I am just oversimplifying to..”).. maybe way too much, but I am open to your suggestion of how to explain it, demonstrate the risk and why it had to be ‘covered’.. but we don’t have 50 pages here..

[quote davelj]Anyhow, go back to the drawing board and begin with two important principles: (1) in a bank, equity is leveraged, NOT assets (leverage is applied to the right side of the balance sheet, not the left side), and (2) for a bank to leverage its equity it must have… drum roll please… deposits.[/quote] which I basically hinted at in “To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension..”. The deposits are not the ‘banks’ money, but they are custodians of it. Correct me if I am wrong, but isn’t equity the net of assets – liabilities.. and asset, liabilities are the two columns.. not equity?

[quote davelj]
Despite the craziness posted above, this is a salient point that I’ve pointed out before. Banks don’t own 30-year treasuries. They don’t even own 5-year treasuries for the most part. Most risk-free securities on banks’ balance sheets have a maturity of less than one year. So, after receiving 15 bps on these ST securities and then paying out 40 bps on the deposits (or borrowings) that fund them… there’s either a negative spread or no spread left. So, while the Fed is certainly providing liquidity – which is important, don’t get me wrong – the banks don’t actually make any money off of it. But it does help in keeping the doors open in times of crisis.[/quote]
The main point I was trying to address was that the money that was loaned to them from the fed is not making the banks millions/billions, and its primary purpose was to shore up the accounting and keeping the deposits safe as well as making the bank good on any interbank-loans. I was also trying to explain it outside of a pure S&L type of structure. There is a widely spread misconception that the banks are making a mint off the fed money. I tried to make it simple, maybe too simple.. and maybe ended up with foot-in-mouth(keyboard). I am very open to your description.

[ucodegen]

[quote=davelj]
First of all, I have no dog in the Dem vs. Rep discussion here. Having said that… in the 5+ years I’ve been visiting this site I’ve seen some real whoppers of misunderstanding where banks, their balance sheets and reserves are concerned and… this has got to be the winner. You have absolutely no idea what you’re talking about here. I mean zero. Although I must admire the zeal and detail you provide in illuminating your misunderstanding of the topic.[/quote]

So how would you explain the reserve system and the risks it presents should the loans involved end up being ‘soured’ without going to 50 pages. It is a complex subject, particularly to non-accountant people. Remember that to non-accountant people, what gets considered as a credit vs debit can be very confusing and counter intuitive. I tried simplifying(see your second that you took from me w/ respect to rates – my first sentence was “I am just oversimplifying to..”).. maybe way too much, but I am open to your suggestion of how to explain it, demonstrate the risk and why it had to be ‘covered’.. but we don’t have 50 pages here..

[quote davelj]Anyhow, go back to the drawing board and begin with two important principles: (1) in a bank, equity is leveraged, NOT assets (leverage is applied to the right side of the balance sheet, not the left side), and (2) for a bank to leverage its equity it must have… drum roll please… deposits.[/quote] which I basically hinted at in “To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension..”. The deposits are not the ‘banks’ money, but they are custodians of it. Correct me if I am wrong, but isn’t equity the net of assets – liabilities.. and asset, liabilities are the two columns.. not equity?

[quote davelj]
Despite the craziness posted above, this is a salient point that I’ve pointed out before. Banks don’t own 30-year treasuries. They don’t even own 5-year treasuries for the most part. Most risk-free securities on banks’ balance sheets have a maturity of less than one year. So, after receiving 15 bps on these ST securities and then paying out 40 bps on the deposits (or borrowings) that fund them… there’s either a negative spread or no spread left. So, while the Fed is certainly providing liquidity – which is important, don’t get me wrong – the banks don’t actually make any money off of it. But it does help in keeping the doors open in times of crisis.[/quote]
The main point I was trying to address was that the money that was loaned to them from the fed is not making the banks millions/billions, and its primary purpose was to shore up the accounting and keeping the deposits safe as well as making the bank good on any interbank-loans. I was also trying to explain it outside of a pure S&L type of structure. There is a widely spread misconception that the banks are making a mint off the fed money. I tried to make it simple, maybe too simple.. and maybe ended up with foot-in-mouth(keyboard). I am very open to your description.

[ucodegen]

[quote=davelj]
First of all, I have no dog in the Dem vs. Rep discussion here. Having said that… in the 5+ years I’ve been visiting this site I’ve seen some real whoppers of misunderstanding where banks, their balance sheets and reserves are concerned and… this has got to be the winner. You have absolutely no idea what you’re talking about here. I mean zero. Although I must admire the zeal and detail you provide in illuminating your misunderstanding of the topic.[/quote]

So how would you explain the reserve system and the risks it presents should the loans involved end up being ‘soured’ without going to 50 pages. It is a complex subject, particularly to non-accountant people. Remember that to non-accountant people, what gets considered as a credit vs debit can be very confusing and counter intuitive. I tried simplifying(see your second that you took from me w/ respect to rates – my first sentence was “I am just oversimplifying to..”).. maybe way too much, but I am open to your suggestion of how to explain it, demonstrate the risk and why it had to be ‘covered’.. but we don’t have 50 pages here..

[quote davelj]Anyhow, go back to the drawing board and begin with two important principles: (1) in a bank, equity is leveraged, NOT assets (leverage is applied to the right side of the balance sheet, not the left side), and (2) for a bank to leverage its equity it must have… drum roll please… deposits.[/quote] which I basically hinted at in “To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension..”. The deposits are not the ‘banks’ money, but they are custodians of it. Correct me if I am wrong, but isn’t equity the net of assets – liabilities.. and asset, liabilities are the two columns.. not equity?

[quote davelj]
Despite the craziness posted above, this is a salient point that I’ve pointed out before. Banks don’t own 30-year treasuries. They don’t even own 5-year treasuries for the most part. Most risk-free securities on banks’ balance sheets have a maturity of less than one year. So, after receiving 15 bps on these ST securities and then paying out 40 bps on the deposits (or borrowings) that fund them… there’s either a negative spread or no spread left. So, while the Fed is certainly providing liquidity – which is important, don’t get me wrong – the banks don’t actually make any money off of it. But it does help in keeping the doors open in times of crisis.[/quote]
The main point I was trying to address was that the money that was loaned to them from the fed is not making the banks millions/billions, and its primary purpose was to shore up the accounting and keeping the deposits safe as well as making the bank good on any interbank-loans. I was also trying to explain it outside of a pure S&L type of structure. There is a widely spread misconception that the banks are making a mint off the fed money. I tried to make it simple, maybe too simple.. and maybe ended up with foot-in-mouth(keyboard). I am very open to your description.

[ucodegen]

[quote=davelj]
First of all, I have no dog in the Dem vs. Rep discussion here. Having said that… in the 5+ years I’ve been visiting this site I’ve seen some real whoppers of misunderstanding where banks, their balance sheets and reserves are concerned and… this has got to be the winner. You have absolutely no idea what you’re talking about here. I mean zero. Although I must admire the zeal and detail you provide in illuminating your misunderstanding of the topic.[/quote]

So how would you explain the reserve system and the risks it presents should the loans involved end up being ‘soured’ without going to 50 pages. It is a complex subject, particularly to non-accountant people. Remember that to non-accountant people, what gets considered as a credit vs debit can be very confusing and counter intuitive. I tried simplifying(see your second that you took from me w/ respect to rates – my first sentence was “I am just oversimplifying to..”).. maybe way too much, but I am open to your suggestion of how to explain it, demonstrate the risk and why it had to be ‘covered’.. but we don’t have 50 pages here..

[quote davelj]Anyhow, go back to the drawing board and begin with two important principles: (1) in a bank, equity is leveraged, NOT assets (leverage is applied to the right side of the balance sheet, not the left side), and (2) for a bank to leverage its equity it must have… drum roll please… deposits.[/quote] which I basically hinted at in “To not default on the banks creditors, which may be someones (possibly DomArigato’s) bank account or retirement or pension..”. The deposits are not the ‘banks’ money, but they are custodians of it. Correct me if I am wrong, but isn’t equity the net of assets – liabilities.. and asset, liabilities are the two columns.. not equity?

[quote davelj]
Despite the craziness posted above, this is a salient point that I’ve pointed out before. Banks don’t own 30-year treasuries. They don’t even own 5-year treasuries for the most part. Most risk-free securities on banks’ balance sheets have a maturity of less than one year. So, after receiving 15 bps on these ST securities and then paying out 40 bps on the deposits (or borrowings) that fund them… there’s either a negative spread or no spread left. So, while the Fed is certainly providing liquidity – which is important, don’t get me wrong – the banks don’t actually make any money off of it. But it does help in keeping the doors open in times of crisis.[/quote]
The main point I was trying to address was that the money that was loaned to them from the fed is not making the banks millions/billions, and its primary purpose was to shore up the accounting and keeping the deposits safe as well as making the bank good on any interbank-loans. I was also trying to explain it outside of a pure S&L type of structure. There is a widely spread misconception that the banks are making a mint off the fed money. I tried to make it simple, maybe too simple.. and maybe ended up with foot-in-mouth(keyboard). I am very open to your description.

[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.

[Author]

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