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75 Comments
- michaelpinto, on 01/26/2009, -1/+32What always made me angry was that in England the deal was that they supply credit to customers in exchange for being on the government dole. The real point of TARP should be to keep the banks lending — not to save the damn banks themselves. I hope Obama cleans up this mess and gives some badly needed transparency to the situation.
- AnotherDiggGuy, on 01/26/2009, -2/+30It's a proven fact that $200 Billion would have made every house payment current in the US back in July (delinquent or not). Another $250 Billion would have totally paid off every defaulted mortgage.
$200 Billion would average $1,600 per housing loan to make the loan current (85% of the population pay their loans on time, the other 15% average 2.4 months behind).
$250 Billion would average $80,000 towards each foreclosed home, which in many areas of America is much more than a house sells for.
In short, if this problem started with the housing collapse, $450 Billion could have solved it back in July.
We're being lied to. Trillions of dollars are going to the uber rich. This economic problem was not caused by the housing collapse, the housing collapse only triggered the rest of massively larger dominoes to start falling.
And when I say massive dominoes, I really do mean mega dominoes. Did you know there is $81 trillion in market derivatives?
http://en.wikipedia.org/wiki/Derivatives_market
Where is all th at money coming from/going to go?
I think it's about time we Americans stand up to the corruption bringing us all down. Same to Diggers in Europe, your in the same corruption we are. - badqat, on 01/26/2009, -0/+18Well, the unfortunate thing is, congress demanded NO transparency of TARP. It was Paulson's money to do with as he pleased...and he did.
- Hillsfar, on 01/27/2009, -3/+17I'm totally against bail-outs for banks like Citi and I'm against bail-outs for homeowners who bought into overpriced houses.
Hey, some of us don't own homes. We didn't want to lie to get into a home and we didn't want to buy overpriced homes. Why should my tax dollars go towards Joe Schmoe who signed a liar loan, withdrew equity, and blew it on blow jobs and Hummers?
Those who want a housing bail-out so bad should fund it themselves out of their own pockets. - AnotherDiggGuy, on 01/26/2009, -1/+12Scratch that $81 trillion figure.
It's actually much higher, in the range of $500 trillion.
A lot more than worldwide GDP if I'm not mistaken. - Berkana, on 01/27/2009, -1/+11Banks have historically coordinated their constrictions in lending. They are not lending out money they have; they practice fractional reserve banking, which authorizes them to lend out new money that didn't exist before. It's not as if they are putting their assets at risk. However, if they do not lend money out, it causes a monetary contraction as presently circulating money gets un-made through debt repayments:
http://digg.com/educational/A_History_of_Fractiona ... - Haoie, on 01/27/2009, -0/+10It's confidence: Would you borrow or lend to a failure?
- rpfinley, on 01/26/2009, -4/+14The problem is that the last time banks started handing out money to everyone, that is what got us into this mess (no income verified loans). If you force banks to lend out money to everyone you will just repeat the process. They are in a catch 22.
- borez, on 01/27/2009, -2/+11There is absolutely no point in bailing out people who can't pay their mortgages, only for them to be in exactly the same position six months down the line.
- Thinbev, on 01/27/2009, -0/+8We got in this mess because banks lent out way too much cheap money. All that artificially cheap money that the Federal Reserve and banks created and lent, caused all the home prices to rise exponentially and caused the mal-investment we have today.
So how do our politicians want to fix the problem? By doing the same exact thing that got us in this mess... It's not going to work.
We need to save our money and spend the money we have, and stop borrowing, printing, and going into more debt. - Hillsfar, on 01/27/2009, -1/+9Many more soldiers in Iraq. More contractors being paid ungodly sums. More money being spent fighting and dying. Afghanistan was relatively quiet for a long while.
- chanop, on 01/27/2009, -0/+7Show your friend that he can delete comments too
- BESTenemy, on 01/27/2009, -0/+5All the same ratos that had allowed the issuers of synthetic (unbacked) credit to go to extreme leverages (from 25:1 for institutions such as Bank of America and Citygroup and up to 99:1 for Fannie and Freddie) are now working in reverse, evaporating credit much faster that it could be replenished. The money supply could double or tripple, yet it would still account only for a small portion of the value depreciation in real estate, bond markets and other sectors. The net of all the money and credit generation against evaporation is still a negative, which means deflation.
For every real dollar that gets wiped out, the bank has to track all of the fictional dollars it lent out and either call in the loans, or write off the losses. Reserve requirements that used to be fulfilled with highly liquid class 1 and class 2 assets (real estate) are now getting clobbered as banks refusing to admit losses, move the assets into hidden class 3 (where they supposedly hold the investment while it is appreciating in value). All banks are inherintly insolvent. Get this through your heads, people - all of them. Every single one. The last Swiss bank that was advertized as "non-leveraged" gave into temptation of credit expansion in 2006 to preserve its market share and competitiveness. After that point there was not a single solvent bank left in the world. None of them can honor their obligations and all of them would fail.
No organization in the US deserves the status of "too big to fail". If the synthetic steroid credit wasn't pumping up our economy, there wouldn't be any "too big to fail" bubble organizations.
Now our junky is looking for a quick fix - another hit of the bailout. Well, it ain't cure - it's more of the same disease that got us to where we are. Debts have 3 paths - they can be honored, written off (admitted as losses) or a combination of both (as a result of bankruptcy filing). There is more debt than there is money, so we know we only have options 2 and 3 left. Not everyone can be saved, and not everyone will be. Those that chose to expand modestly without relying on credit don't need rescuing, yet they're being punished the most through bailout money extortion. - ericdano, on 01/27/2009, -1/+6It is unthinkable that we gave nearly a trillion dollars to the banks, and now they are going to ask for more.
Change? Ha! The man who is partly responsible for this whole mess is now the Tres Sec. Great. He didn't pay his back taxes until he got vetted. Why should I?
I think I'm going to move to Canada. - davebg8r, on 01/27/2009, -2/+7Keeping hoping for the change. You aint getting any. Especially with a tax evader now in charge. Cant handle his own taxes when turbo taxes tells you what you did wrong and somehow he is supposed to inspire confidence in me that he can handle the country's finances? Fat chance.
- chanop, on 01/27/2009, -1/+5You'd be suprised. There is still predatory lending going on. I'm currently buying a house and their are some sheisty banks trying to offer me some extra sheisty loans.
- DirtyVicar, on 01/27/2009, -0/+4Well, they say it's expensive to be poor.
- TheSwashbuckler, on 01/27/2009, -0/+4FTA: "It has failed," said Campbell Harvey, a finance professor at Duke University's business school. "Basically we have dropped a huge amount of money ... and we have nothing to show for what we actually wanted to happen."
Perhaps. Or perhaps lending would have been much lower without the TARP. - KimmyGibbler, on 01/26/2009, -4/+8They problem isn't that they aren't lending to everyone, it's that they aren't lending to anyone, even those with good credit. This is because the government is requiring them to have large capital reserves before they can lend, and obviously the banks are very short on capital. They need more capital to lend, but they can only get capital from lending (or raping the taxpayers via TARP). So yes, they are in a Catch-22, but not the one that you pointed out
- herojon, on 01/27/2009, -1/+4All a bail-out is, is taking from the responsible, and giving it to the irresponsible. In this case it is sort of like reverse Robin Hood syndrome, In every case, bail-outs defy logic and reason.
- AnotherDiggGuy, on 01/27/2009, -0/+3You're buying into the *****.
Losing $3 trillion of theoretical money in housing values isn't the same as losing $3 Trillion in delinquent loans. - Hillsfar, on 01/27/2009, -1/+4What are you talking about?!? I got a loan just this month!
Banks are loaning. It's just that banks have tightened standards, which makes sense. If people with credit scores of 670 to 700 are defaulting in droves, obviously standards have to be raised. - m8ymerc1, on 01/27/2009, -0/+3The amount of loans not being given is expected and should be no surprise.
With the amount of job loses since the meltdown started, there are less qualified people. It doesn't make sense to make loans to those that can't afford to pay it back.
Am I wrong? - BESTenemy, on 01/28/2009, -0/+2@enzo
Correct. They complain about the lack of trust in the financial system, yet what do they expect? There are equity markets. If I believed companies like the Automakers could survive and were worth investing into, I'd put the money into them myself. If I don't, I sure as hell don't expect my government to do it for me.
The situation is even worse when it comes to government bonds sold to foreigners. They have 2 distinct options - whether to invest into the economy or into the government itself. If the foreigners choose to buy treasuries, they imply that they trust the government with their money more than they trust the private sector. Yet when the very same government goes out and uses the money to arrange bailouts of what were supposedly private companies (using some unconstitutional authority), then the foreigners get pissed. Again, if they wanted to bail out our Automakers or banks they would've done it themselves.
Our government is playing with fire and with every arrogant mistake risks having its external lines of credit cut off. We still get invested into because we don't have it as bad as EU, or Australia, but we take out status for granted.
The government shouldn't lend to unworthy banks or customers. It has no business lending at all. It does not produce anything. People up there seem to forget that serving the public is a privilege that can be revoked at any time. We - the public, are able to take down the government if it doesn't serve our interest and does not perform its duties. - BXRWXR, on 01/27/2009, -0/+2Gosh, I never would have thought that...
- BESTenemy, on 01/27/2009, -0/+2Sorry to break your bubble - Canada's no different. Well, it is different, as it is still in denial, while everyone else has reached the point of acceptance. They're lagging about half a year behind the US in the economic cycle, so it takes a tiny bit of time for them to catch up. Their banks are as insolvent and just as leveraged. I don't buy the government BS about them being different one bit.
Canada says they've had no sub prime. Lies! The no-downpayment sub-prime housing market was launched in 2006. In 2 years of its existence, the sub-prime caterogy of loans rose from 0 to 33% and when the economy tanked, in Oct 2008 the program got killed.
Canadian West Coast had the real estate bubble bigger than that of California, LA and San Fran. The median housing prices there went up by as much over the course of 7 bubble years as in the US counterparts, yet incomes rose by 20% less in comparison. And supposedly there was no sub-prime to drive the "authentic" demand. *****!
Toronto market? Don't even get me stated!
Canada is in the same boat as everybody else. It gambled and gambled heavily. It's about to get a reality check.
Another reason to get your hopes about Canada is government spending. In the US, during the hight of the boom the government sector made up 20% of all employment. In more social-program oriented Canada the ratio was 30%. What does that mean? That means when the American government goes broke it has to cut 2 public sector employees for every 3 that Canada is going to lay off.
The simple analogy to this crisis is a race where the start and the finish lines got swapped half through the race and all of the participants had to change the direction. Those that benefited the most during the inflationary boom are the ones that going to suffer the most through the deflationary recession. If you still don't think we're in a recession, let's hear your arguments. Bring it on! - enzomedici, on 01/28/2009, -0/+2
If the bank won't lend to unworthy customers, why should the government lend to unworthy banks? It is the same thing. - MrBabyManSTFU, on 01/27/2009, -0/+2@forcedfx
Not to be cynical about it but they always tell you that. The truth is unless you've applied and secured a promissory note from the lender they can can promise you the world but can't guarantee you anything.
Now, that being said, assuming you have credit 700-730 or higher you should still be able to get a loan assuming you have steady income and your debt to income ratio isn't 40% or more. - PhantomRogue, on 01/27/2009, -1/+3Ok folks. Stop all this, "I got preapproved for a Mortgage" "I just got a loan last month" jazz. You were never the problem. You would ALWAYS get those loans. (Going on assumptions, that you do infact have Jobs and steady credit if you are on the interwebs and know what digg is)
The Banks are no longer able to sell the *****-tastic loans they gave out like candy. THATS the issue here. As mentioned above, Banks need Capital to loan money. I think its like banks need 8% of total outstanding loans in Capital. But with houses in foreclosure, companies value dropping, their Capital dropped as well. Banks can still lend, and still do, but they have to tone back the 'risky' loans, because they can't sell them to gullible investors anymore.
And its up to John Q Taxpayer to be the gullible investor according to Obama, Bush and the rest fo our piss-poor Government. - BESTenemy, on 01/27/2009, -0/+2Exactly. The banks know the worst is still ahead. They say: "We still are willing to lend to the worthy customers." They know the "worthy" customers either are the type that don't need money (that's what makes them worthy), or they are smart enough not to take on debt in these troubled times. Whom do the banks lend to then? Surely not to the unemployed or those about to get laid off. Not to those trying to open up discretionary spending business. Not to those already living off revolving credit lines. In addition, the banks are dealing with their own asset value deterioration that is undermining their reserve regulation compliance. They have no money to land actually. They didn't have the money to lend even before that. They just assumed the borrowers would honor their debts sufficiently enough for them to be profitable. Now there are defaults looming in every sector. The banks obligations exceed their reserves. The only thing to do for them is to hide and hope the whole thing just blows over - that another asset bubble forms before they have to declare insolvency. They are all insolvent. Some can no longer pretend that the are solvent. Others have given up.
- kahnspiracy, on 01/27/2009, -0/+2Part of the problem is the government forced banks like Wells Fargo to participate in the "voluntary program"
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2 ... From the link:
Wells Fargo was one of nine major institutions that agreed to participate in the voluntary program before it was unveiled in October, but according to the Wall Street Journal it only did so reluctantly after being pressured by the government.
http://online.wsj.com/article/SB122398468353632299 ... From the link:
While the program is voluntary, Treasury essentially forced nine major U.S. banks to agree to take $125 billion from the federal government.
So instead of lending $25 Billion Wells bought another bank, Wachovia. Can't say I blame them. They were/are doing fine because they lent to people that could actually repay loans; go figure. - BESTenemy, on 01/27/2009, -0/+2They're trying to convince the public that it's possible to patch a busted dam with water. The sad reality is that most people either buy it or are too lazy to oppose government initiatives. Sad that the people are willing to wait till they're broke and homeless before they intend to take action.
- inactive, on 01/27/2009, -2/+4Why don't you post a comment slightly critical of Obama or his policies and get burried into the sub-basement, to really show how digg works?
- josejimenez, on 01/27/2009, -0/+2In the UK, banks were given bail-out funds on the condition that they use the money to loan to consumers. In the US, banks were given bail-out funds to shore up their balance sheets. While Paulson and Bernanke publicly chastised banks for not using the bail-out funds to loan to consumers, behind the scenes, other US Fed officials were encouraging banks to *NOT* loan the money to consumers.
- pintomp3, on 01/27/2009, -0/+2Payday loans are also on the rise.
- fancypantscz, on 01/27/2009, -0/+2A loan on one end is an investment on the other.
Perhaps bankers no longer think America's future is a good investment.
That would be a bummer.
Watch the price of US treasuries and bonds to see if the world thinks America is going to pull itself up by its bootstraps...
or default on its debt.
Unthinkable you say...
Think about it... - BlatheringIdiot, on 01/27/2009, -0/+2Dugg for 'sheisty'
- BESTenemy, on 01/27/2009, -0/+2Excessive spending got us into the mess and more excessive spending cannot be the way out. You can't make TARP work in any shape or form. The economy should purge itself of the long-bankrupt overleveraged institutions before it can begin recovering. We're pumping blood into a body that's got all legs and the head chopped off, and we're draining the good donor's blood until they themselves become too weak to function and collapse under the weight of government over-regulation. TARP did absolutely nothing. There was absolutely nothing it could've done. You were played, if you thought mose spending what the solution out of overspending.
- BotchaMcCoola, on 01/28/2009, -0/+1After the next couple of trillion dollar give aways fail, we will likely be forced to spend money or have it confiscated. Am I way out of line with that?
- reeds1999, on 01/29/2009, -0/+1"Banks argue prudent lending takes time" Hello....anybody in Washington listening???
- enzomedici, on 01/28/2009, -0/+1
That's because you have a bunch of smart bankers vs. a bunch of dumb ***** senators & congressmen. That was an easy win for the bankers. - munkyxtc, on 01/28/2009, -0/+1who's your lender?
- chupavacas, on 01/28/2009, -0/+1Pushing on a string... Government injections of money will not work in the current climate. The only thing it will do is prop up business that should be allowed to fail. Allowing them to go bankrupt will allow them to liquidate the few remaining assets that actually are worth something, like Bear Stearn's NY office building and it'll wipe out the toxic debt through bankruptcy protection. Instead what we've got is a huge money pit that we keep pouring billions of dollars into. We're the suckers and we're the ones who are ultimately bankrolling this disaster.
- shig, on 01/27/2009, -0/+1$500t is conservative, but to be honest, isn't that what the banks are valuing those at? I'd imagine the crisis is because the real value is drastically less than that.
- tgc1, on 01/27/2009, -1/+2Without adequate access to lending, many businesses are going to close up shop and go elsewhere (India, China etc) to stay in business or close down all together. You people are missing the point of credit markets and why it was, initially, important to keep them as open as possible. I say this because many of you people who are commenting have jobs tied to companies that rely on credit. If the credit market tightens up, and the business you're at can't get access to credit, guess what. You're not going to have a job.
It's sick that the ***** they dole out to us is being gobbled up. The reason the bailouts were given was FOR JUST THIS VERY ***** REASON to keep credit markets open and accessible. And now it's closed up tighter than a virgins *****? What the hell? I make no exaggeration when I suggest that the money that was given to these corporations was simply a money grab. The government is in on it. They're taking money from the masses and just shoveling it into the richest hands. Absolutely disgusting.
It's theft. Plain and simple. - Lspook62, on 02/18/2009, -0/+1It really ticks me off that we bail out these banks and they turn around and give out huge salries and bonuses to their execs while sponsering sports teams and arenas and CUTTING lending to consumers. It's like their just hording it and sitting on that money while American families are struggling. Even families with good credit can't buy homes because they can't get loans!
I say we need to stop flooding these banks with money until they can show us they can be responsible lending institutions. - deema1, on 01/27/2009, -0/+1Lending drops. Bailout fails.
- Amnesia10, on 01/27/2009, -0/+1The real problem is that the big US banks are all insolvent and by bailing them out things will drag on badly for years. I am beginning to think that the real solution is to pull all the government money from Wall Street, effectively crashing all the banks, wiping out the shareholders, then buying the banks for a $1 and then pumping as much money in as needed to rebuild the capital base. Recover all the bonuses and use that for rebuilding the banks as well.
Then re-impose Glass-Steagall and break the banks up and create investment banks again. In fact the new investment banks could be sold off very quickly, as they could buy the names of the business and then recruit the staff that they need.
The commercial banks will then be banned from such trading and will be restricted to simple lending. Ultimately the government will privatise them once they have paid sufficient taxes and profits to effectively reimburse the tax payer. And while they are in government control pay and bonuses will be regulated. - BotchaMcCoola, on 01/28/2009, -0/+1Two reasons. Take it away and give it to someone who will spend it. Stubborn middle class types might secretly try to save it and build up their power again..
- ryrocker, on 01/27/2009, -0/+1omgawd im gonna use "sheisty" in everyday speech from now on!!!
"dayum! them be some sheisty mothafukkas!"
hyperboles are awesome! -
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