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Thread: Zombie Banks vs. A Free Market

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    Banned Eric Stoner's Avatar
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    Default Zombie Banks vs. A Free Market

    Does anyone have any idea WHEN free market capitalism will return to the banking sector ?
    Will the Feds use the tools provided by Dodd- Frank to force AIG into receivership ? Tools that the Feds said they lacked two years ago. Apparently not. No one wants to force AIG bondholders to take a loss. Somehow they are better placed than GM and Chrysler bondholders.

    How can Michael Carpenter , the CEO of Ally Capital ( formerly known as GMAC) seriously claim his company is worth $30 billion ? In a conference call with securities analysts he extrapolated that since GM paid $3.5 billion for sub-prime auto lender AmeriCredit, Ally should be worth almost ten times as much. Really ?
    First of all, where did GM get the $3.5 billion ? Secondly, the U.S. taxpayer owns 56% of Ally in exchange for a $17 billion bail out. GM still owns almost 7% btw. Ally has already been bailed out THREE times ! And he is seriously licking his chops at doing an IPO ???

    Home prices continue to be propped up by the Treasury supporting Fannie and Freddie. The Treasury's enabler is of course the Fed and its easy money policy. Two years after the Feds took them over there is not even anything resembling a plan to wind them down. It's worse than that. As I laid out in other threads, Fannie and Freddie have not even started revising and reforming their lending standards and guidelines. They are still guaranteeing shitty loans with no plans to reinstitute sensible underwriting. Anyone still have any doubts about what Federal bureaucrats are willing and able to do with OPM ?

    While huge banks like BOA and JPMorgan Chase have repaid their TARP funds with interest, most small banks that got TARP have not. Hundreds of small banks remain grossly undercapitalized, as does Citigroup btw. Yet they continue to operate as though they were hale and hearty. Why ? Partly because the FDIC has neither the money nor staff to seize and close as many banks as it ought to.

    So when I hear that : "The recession is over" I say : "So what ? ". We are not even close to being out of the woods.

    The above, and other nonsense, is why I, and some others opposed, ALL bail-outs. It's bad enough that billions in tax dollars ( Haha ! Well most of it was really borrowed by Uncle Sam - how ridiculous , borrowing to lend to someone else ) went to AIG, banks, Fannie, Freddie and two car companies. The fact is that except for the big banks, nobody has paid it back and in the case of Fannie and Freddie they are sinkholes ready and waiting to absorb hundreds of billions MORE in taxpayer funds.

    Angry enough yet ? While I'm not a big one for class warfare schtick, what some of these guys running these vampire type operations are paying themselves is sickening to outrageous. Especially at Fannie and Freddie. If a new Congress does nothing else, how about mandating that any company getting Federal funds cannot pay anyobody more than what a GS-18 gets i.e. about $175,000 a year ?

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    Default Re: Zombie Banks vs. A Free Market

    were you aware that Fannie has just (re) started subprime mortgage lending ? Probably not if you only rely on US financial news media, who for some strange reason have chosen not to report on this new development ...

    (snip)"Zero Down Mortgages Restarted by the Biggest Subprime Lender in Town - Fannie

    Good news folks... the "no skin in the game" mortgage is back. You know the game right? It's a one sided bet where the buyer can only win. If the house goes up, you pocket that and hopefully get that granite countertop you so deserve with the home equity. If it doesn't go up.... you walk - but only after living in the home rent free for at least 18-22 months as you strategically default your way to a mountain of savings while waiting for the sheriff to show up. If you are smart you can save at least $30K during this time. There are no losers here (except the U.S. taxpayer). "(snip)

    (snip)"“This is subprime lending done right,” said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. “If they had done subprime this way in the first place, we wouldn’t have these problems.” (yeh! Wait, I thought people who could not even save 3% down used to be called renters? Nevermind - that's old school)

    The loans are 30-year fixed mortgages, with mandatory homeownership counseling, available to people with credit scores of 680 and above (720 in Massachusetts). The buyers have to put in $1,000 and must live in the homes. After six months, there are no delinquencies so far, said Kate Venne, a spokeswoman for the agency. (whew, made it through 6 months.... coast is clear)
    The agencies buy the loans from lenders, then sell them as securities to Fannie Mae. Because the government now owns 80 percent of Fannie Mae, taxpayers are on the hook if the loans go bad."(snip)

    from


    On the matter of Ally Bank, you can rest assured that the timing of the recent 'new' moratorium on delinquent mortgage foreclosures in 23 states, as well as a similar de-facto moratorium on repos of delinquent auto loans, has absolutely nothing whatsoever to do with the election being 6 weeks away !

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    Banned Melonie's Avatar
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    Default Re: Zombie Banks vs. A Free Market

    as to 'class warfare' ...

    (snip)"Payments to individuals--a budget category that includes all federal benefit programs plus retirement benefits for federal workers--will cost $2.4 trillion this year, up 79%, adjusted for inflation, from a decade earlier when the economy was stronger. That represents 64.3% of all federal outlays, the highest percentage in the 70 years the government has been measuring it. The figure was 46.7% in 1990 and 26.2% in 1960."(snip)

    (snip)"This is how the State buys off its citizens with bread and circuses.

    It's also how the majority--those drawing shares of State bread/swag--come to exercise political tyranny over the much smaller class of those paying taxes to fund the State swag:

    According to the Congressional Budget Office (CBO), the top 20% paid 86.3% of all Federal income taxes, 43.6% of Social Security, 87.8% of corporate taxes and 34.1% of Federal excise taxes. After including earned-income tax credits, the bottom 60% of households paid less than 1% of all Federal income taxes, and the households between 60% and 80% paid 13%.

    The top 20% paid 68.7% of all Federal taxes: Income taxes, Social Security and Medicare, excise and corporate taxes. The top 10% of households paid fully 72.7% of all Federal income tax, the top 5% paid 60.7%, and the top 1% paid 38.8%.

    No wonder voters love State swag--80% of the citizenry pay little to no income taxes--and the 7.5% Social Security tax deducted from their paychecks is a modest burden compared to those routinely handing over 40+% of their earnings to the Federal and state governments.

    3. There are two classes of citizens paying taxes: those with earned income and a much smaller but wealthier class with vast unearned income. The truly pernicious fact revealed by effective tax rates is that those earning significant incomes from their own labor/enterprises pay most of the taxes, while the tiny slice of citizens who own most of the productive assets of the nation pay a much smaller percentage of their income because unearned income gets the big tax breaks.

    This is not coincidental. If you control $100 million (to take a round number), a mere $100,000 "invested" in campaign contributions will "earn" you a specially devised tax break worth millions every year--especially if you join up with a few cronies and distribute several million dollars to craven politicos desperate for your millions to help them keep their place at the overflowing trough of State/Empire power and wealth. "(snip)

    (snip)"In a classic "divide and conquer" tactic, the State's Power Elites have sold a slew of new taxes to fund the guaranteed-to-implode "healthcare reform" (a.k.a. increased funding of sickcare cartels) on those earning $250,000 or more.

    Everyone earning 10%-20% of that sum loudly applauds "sticking it to the rich" (the Tyranny of the Majority in full flower) while failing to note that the truly wealthy--the ones who don't have any earned income because they don't work in salaried jobs, the ones who own roughly half the nation's productive assets--pay nothing but a slice of their unearned income--much of which is protected by various specially crafted tax breaks.

    4. The net result of this rising inequality is a high concentration of political power which flows from (and protects) the unearned income streams derived from the highly concentrated wealth."(snip)

    (snip)"The Political Class, the super-wealthy with vast unearned income and those drawing entitlements are all satisfied with this arrangement. Cash and cash equivalents paid to individuals by the Central State have ballooned up 80% above inflation, taxes on the super-wealthy are modest, and the difference--the $1.5 trillion annually needed to keep the swag flowing to the concentrated wealth/power holders (the Plutocracy) at the top and the complicit bottom (standard-issue welfare)--is borrowed from the Federal Reserve and global mercantilist sources of excess dollars accumulated from monumental trade imbalances.

    Since the political class of "conservatives" and progressives" are equally dependent on and beholden to the holders of concentrated wealth for their political power, then their protests against the deficits, welfare, corporate power, etc. all ring hollow.

    Citizens who decry the deficits while defending the programs which benefit them as untouchable are equally complicit.

    You see where this is going in terms of class warfare. The political status quo is perfectly happy to keep the deficit-welfare state-Empire going: the super-wealthy contributors (whose wealth flows from lightly taxed unearned income) who enable their grip on power are happy enough with the status quo, as are the bottom 60% collecting State-issued benefits and checks.

    The only class which is unhappy with the status quo are the citizens who earn substantial incomes from their labor and/or enterprises. They pay most of the taxes, and are taxed at much higher effective rates than the super-wealthy. As this class shrinks to a minority, the Plutocracy and the lower 60% thus share the same goal: saddle this class with whatever higher taxes become necessary to maintain the Empire and Welfare State status quo.

    That sets up a three-way class war. The status quo will be defended by those benefitting from it: the top 1% and the bottom 60%, and the political class. The 20% who pays most of the taxes and receives relatively fewer benefits will be squeezed from both ends of the inequality spectrum."(snip)

    (snip)"The 20% who earn the most and pay the most taxes have one basic choice against the Tyranny of the Majority and the concentration of wealth and political power: they can opt out. Quit the high-paying corporate gig, sell the business or close it down, cut their hours, move overseas, buy land and move to rural states, etc.

    When the high-earners bail out, the status quo will truly be in trouble, because the top 1% has no desire to pay higher taxes, and the bottom 60% have little enough ability to pay more taxes. That's when the entire bloated, top-heavy Empire/Welfare State implodes, and the checks stop coming. "(snip)

    from

    ~
    Last edited by Melonie; 09-21-2010 at 02:56 PM.

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    Default Re: Zombie Banks vs. A Free Market

    Eric, I hate to say it, but Japan has been propping up their zombie banks for two decades now. Our bankers are so deeply in bed with the Democratic party and especially the Obama administration it's not funny. So don't plan on any free market capitalism soon. And, if you thank the GOP is any better, only a little, and only because the bankers are not giving them big campaign contributions.

    XOXO
    Z

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    Default Re: Zombie Banks vs. A Free Market

    Question to any of you who have already posted in this thread: How does the current U.S. debt to China affect our banking/financial system in the U.S. as of right now? Thank you!

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    Default Re: Zombie Banks vs. A Free Market

    Quote Originally Posted by PhaedrusZ View Post
    Question to any of you who have already posted in this thread: How does the current U.S. debt to China affect our banking/financial system in the U.S. as of right now? Thank you!
    There are connections between the two but your question is incredibly broad. Could you be more specific ?

    Does the massive amount of our debt that China holds give them unwarranted power over us ? Not really. Assuming they want to be paid back, it gives them incentive to keep us afloat.

    Could they "dump our debt" ? Yeah but it would be bought up. China is not even the largest holder of U.S. governement debt. What would China gain from causing the value of T-Bills, notes and bonds to plunge ? China chose to buy the debt because they thought it was safer or otherwise more attractive than other investments.

    Of more concern is the artificially low yuan . Unless and until China establishes a fair and proper value for its currency there will be gross trade distortions as a result.

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    Default Re: Zombie Banks vs. A Free Market

    Quote Originally Posted by Melonie View Post
    were you aware that Fannie has just (re) started subprime mortgage lending ? Probably not if you only rely on US financial news media, who for some strange reason have chosen not to report on this new development ...

    (snip)"Zero Down Mortgages Restarted by the Biggest Subprime Lender in Town - Fannie

    Good news folks... the "no skin in the game" mortgage is back. You know the game right? It's a one sided bet where the buyer can only win. If the house goes up, you pocket that and hopefully get that granite countertop you so deserve with the home equity. If it doesn't go up.... you walk - but only after living in the home rent free for at least 18-22 months as you strategically default your way to a mountain of savings while waiting for the sheriff to show up. If you are smart you can save at least $30K during this time. There are no losers here (except the U.S. taxpayer). "(snip)

    (snip)"“This is subprime lending done right,” said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. “If they had done subprime this way in the first place, we wouldn’t have these problems.” (yeh! Wait, I thought people who could not even save 3% down used to be called renters? Nevermind - that's old school)

    The loans are 30-year fixed mortgages, with mandatory homeownership counseling, available to people with credit scores of 680 and above (720 in Massachusetts). The buyers have to put in $1,000 and must live in the homes. After six months, there are no delinquencies so far, said Kate Venne, a spokeswoman for the agency. (whew, made it through 6 months.... coast is clear)
    The agencies buy the loans from lenders, then sell them as securities to Fannie Mae. Because the government now owns 80 percent of Fannie Mae, taxpayers are on the hook if the loans go bad."(snip)

    from http://www.marketoracle.co.uk/Article22620.html


    On the matter of Ally Bank, you can rest assured that the timing of the recent 'new' moratorium on delinquent mortgage foreclosures in 23 states, as well as a similar de-facto moratorium on repos of delinquent auto loans, has absolutely nothing whatsoever to do with the election being 6 weeks away !
    I hit the highlights on this in my "Another Sub-Prime Crisis" thread.

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    Default Re: Zombie Banks vs. A Free Market

    arguably, the 'gold foil hat' crowd would tell you that China's recent actions re the Yuan will have a PROFOUND effect on the future of the US banking/financial system, but not in the way you are probably thinking. While China has been intervening in world currency markets to maintain a 'soft peg' exchange rate to the US dollar for purposes of 'subsidizing' Chinese exporters, China has also been opening up currency swap lines for the Yuan versus several 'up and coming' currencies ( Brazil, Vietnam, Argentina, South Korea, and a host of others ), which allow for these countries to, for example, trade Brazilian sugar for Chinese electronics WITHOUT the former necessity of converting to US dollars in the middle. As a result, the US financial houses that have traditionally 'scalped' fees and percentages for clearing such international trades via a US dollar 'reserve currency' intermediate transaction increasingly find that China and her trading partners have 'cut out the middle-man' !

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    Default Re: Zombie Banks vs. A Free Market

    Quote Originally Posted by Melonie View Post
    arguably, the 'gold foil hat' crowd would tell you that China's recent actions re the Yuan will have a PROFOUND effect on the future of the US banking/financial system, but not in the way you are probably thinking. While China has been intervening in world currency markets to maintain a 'soft peg' exchange rate to the US dollar for purposes of 'subsidizing' Chinese exporters, China has also been opening up currency swap lines for the Yuan versus several 'up and coming' currencies ( Brazil, Vietnam, Argentina, South Korea, and a host of others ), which allow for these countries to, for example, trade Brazilian sugar for Chinese electronics WITHOUT the former necessity of converting to US dollars in the middle. As a result, the US financial houses that have traditionally 'scalped' fees and percentages for clearing such international trades via a US dollar 'reserve currency' intermediate transaction increasingly find that China and her trading partners have 'cut out the middle-man' !
    Number 1 there is nothing new in China and other countries making bulk exchanges of goods. Cuba has done it for decades with sugar; Russia and Venezuela with oil. Secondly, it lowers prices. Third, it places either or both sides at a potential disadvantage depending on world commodity prices which can fluctuate just as the dollar does.

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    Default Re: Zombie Banks vs. A Free Market

    ^^^ yes it lowers prices, in part by eliminating US bank profits associated with exchanging Brazilian Reals to US dollars first, and then from US dollars to Chinese Yuan.

    And yes what is new is that the Yuan swaps set up with Brazil et al allow reciprocal sales and purchases of ANY sort of Brazilian or Chinese merchandise by both the private sector and public sector. The bulk exchanges you speak of have indeed been around for a while, but they were almost exclusively gov't to gov't transactions.

    On the subject of Japanese zombie banks being kept afloat by the Japanese gov't, this is undoubtedly true. However there is one huge difference in that Japanese citizens' own savings were the source of the money used to keep the banks afloat. In contrast, every dollar of TARP and other bailout money being used to keep US banks afloat is borrowed from foreign lenders.

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