You can pay us back - if you meet our conditions

Discussion in 'Politics, Religion, Social Issues' started by nbs2, Apr 20, 2009.

  1. nbs2 macrumors 68030

    nbs2

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    #1
    Don't see a current thread, what was related is probably buried.

    Now that Chase and other stronger banks are trying to repay TARP funds, it appears that they will only be permitted to do so if they meet the conditions imposed by the government.

    While I understand that you want to make sure that those that are trying to repay aren't going to get back in trouble again, FT indicates that there is some desire on the part of officials to maintain control of bank administration. If banks can operate efficiently and effectively without government intervention, why are we (anecdotal reports in various articles) forcing banks to accept TARP money and forcing them to keep it? Shouldn't the role of regulation be to ensure that the market operates fairly?

    All this does is support the key underpinning of the tea parties - which was quickly buried by every other tangental story - that the bailouts have been poorly handled ever since Congress and the Bush administation thought that tax "refunds" were a good idea.
     
  2. pseudobrit macrumors 68040

    pseudobrit

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    #2
    The role of "regulation" is more dynamic than that. At this point, some regulation needs to ensure long-term stability of the financial system.

    What we don't want is more of what we had – lax oversight of reduced regulation being enforced (read: ignored) by neutered agencies – that leads to short-term, on-paper profit while the institution sets itself up for future collapse.

    I really hope government gets the nerve to do what it must for the nation's banking system. If an institution is too big to fail, it is too big and must be made smaller.

    That's not just regulation, it's a public service.
     
  3. rhsgolfer33 macrumors 6502a

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    #3
    If they have the funds to pay the TARP money back they should be allowed to, it seems pretty simple to me. Some of the banks that are wanting to pay back TARP funds didn't even need them or really want them in the first place, ie Goldman Sachs. It doesn't really seem that TARPs goal of making credit available actually happened, it seems more likely that some of the banks that were doing ok just held on to the cash in their coffers and are now feel like giving it back.

    It will certainly cause some bad PR if the administration doesn't accept most of these capital returns.
     
  4. Desertrat macrumors newbie

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    #4
    Sorry, pseudobrit, it wasn't the lack of regulatory power that led to all this mess. It was planted and cultivated by Congress and the Fed, and some sort of similar results were forecast as far back as 2000.

    The obvious effort by the Administration, and borne out to some degree by their comments about what they want as change, is control over the investment banks, if not each and every other bank. It's a government takeover in stages. First, force the TARP money on the banks. Then, because federal money is involved, make rules under which banks with this federal money can operate.

    From the standpoint of the longterm good of the buying power of the US currency, Bush and Congress began a wrong-way effort with the first stimulus package and the bailout. Obama and the Congress are drastically compounding the errors with their "no change" policy. The financial entities which were failing should have been allowed to fail, do Chapter 11 and sell off the assets at a more proper market value so other people could start anew. That's capitalism. Trouble is, folks only like capitalism when it's all rosy and nice, and don't like the inherent risks which have always been part of the deal. As it is, your tax dollars are being used to support Obama/Emmanuel's buddies at the big financials. Payback for the campaign contributions...

    'Rat
     
  5. hulugu macrumors 68000

    hulugu

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    #5
    From the article:

    To turn it around, what if the administration is worried that the banks are more concerned with trying to scuttle out from government oversight and are not as healthy as they appear? I think some analysis is due before the TARP money is returned in order to assure that the banks will remain healthy.

    I still disagree with this. It's clear—to me at least—that the various financial entities also helped sow these particular fields and were only too happy to reap the benefits without regard to its consequences. While it's been in everyone's interest to pick a particular scapegoat, my reading of the situation is that nearly everyone, sans the family dog, had some hand in our current financial difficulty.

    True, but if the consequences were the failure of the entire financial system, you could see why some were unwilling to take their licks.

    They're not the only ones.
     
  6. mactastic macrumors 68040

    mactastic

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    #6
    Lack of regulatory power/ willingness to exercise regulatory power was a huge contributor to this mess. Anyone who denies this is simply unable to see beyond their partisan blinders.
     
  7. rhsgolfer33 macrumors 6502a

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    #7
    I agree with this, even as someone who is pretty libertarian leaning when it comes to financial and economic issues. If you fail to see that part of the problem was lack or regulation in derivatives, mortgage backed securites, etc, you're pretty blinded. Sure, has the penchant of Americans to overspend, take ARM and negative amortization 120% mortgages on homes they couldn't afford contributed to the problem? Yeah, it certainly has, but a large portion of the problem was with regulation and disclosure regarding securites backed by these mortgages. In fact, many of these loans should not have been given in the first place and were the product of a few lenders getting a little bit to greedy and speculative. I hesitate to use the term predatory lending because I don't think most of it was predatory (in regards to tricking the person taking out the loan; I think the lending, however, was greedy and too risky for the bank) and if people would take the time to have their attorney or accountant read the terms of the loan (IMO, something its worth a few hundered dollars to have done when its a large amount of money) they wouldn't be preyed upon. I'm an avid believer that you should read all of the fine print and that there is no excuse for not doing it.
     
  8. hulugu macrumors 68000

    hulugu

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    #8
    Yep, I'd argue that the Fed could be the iceberg that the Titanic ran into. However, the reason that hundreds died is because of another series of mistakes and design failures that culminated in this disaster. Had the Gramm-Leach-Bliley Act (1999) failed—a bill pushed for by many of the banks currently in trouble—the disaster might have been limited. The various derivatives, Credit Default Swaps, and a failure of the SEC helped drive this.


    In some cases, the loans were fraudulent or based on numbers created to fit the loan which helped further this problem. There were also loans were the terms were changed based on fine-print not well-understood by lenders or brokers. However, most people knew what they were getting into and did it because they saw the house of their dreams, or believed they could flip the loan, either through fix-it and forget-it or by changing the terms through a refinance.
    Some of these circumstances are certainly "predatory" but the lion's share were not, AFAIK.
     
  9. Eraserhead macrumors G4

    Eraserhead

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    #9
    Goldman also wants to payback, here is an argument why they shouldn't pay back yet.
     
  10. rhsgolfer33 macrumors 6502a

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    #10
    I tend to agree. IMO, it was kind of a perfect confluence of events involving regulation, lack of regulation, lax loaning practices, American's extreme dependence on credit, and a whole mess of other factors. That's what I think got us to the point we're at or were at a month or two ago at the bottom (so far). Its pretty interesting to think though, that what probably triggered a portion of the problem, was likely only a few traders somewhere asking what the hell was actually backing those securities and what exactly the terms of all the derivatives and swaps were.

    Here is a link to a pretty humorous (and fairly true) video about this whole mess that my finance professor showed us in class as a break from the enthralling calculations we do all class.

    I also agree with you on the predatory lending. There were definitely cases of it, but I don't think it was too prevalent. My personal opinion is that many times predatory lending is a situation that could easily be prevented by having your lawyer read the loan contract for a few hundred, having him or her explain it, and then signing in his or her presence, I certainly think its worth the few hundred it would cost.
     
  11. pseudobrit macrumors 68040

    pseudobrit

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    #11
    This is political play applied to an economic game. It's like trying to hit a curveball with a slapshot.

    The entire financial system was trashed. TARP and later Geithner came along and everyone jumped aboard the government bailout. Only recently has the market stopped pricing in another huge collapse and subsequent nationalization of the ruined companies of the U.S. banking industry. But this point has only been reached because everyone jumped aboard the bailout simultaneously.

    These corporations would not be where they are today without them joining in on TARP and other government plans. But because of their size, they are the first to see some rebound from the stabilization.

    Scores of other banks are still in trouble and cannot pay back TARP money just yet, but will with further, wider stabilization of the market. If those who can pay back now are allowed to run off and resume chasing fat margins to juice their bonuses and dividends, they will gain a competitive advantage the likes of which will sink those still under TARP and still being backstopped by the taxpayer. We will be bailing out these institutions, and the vultures who broke free of oversight will be picking up the remnants for pennies on the dollar. Our dollars, their pennies.

    Upshot: Wall Street reaps huge rewards at the direct expense of the U.S. taxpayer.

    Haven't we let these ****ers rip us off enough now?
     
  12. Desertrat macrumors newbie

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    #12
    My view is that everything has a starting point, and in this case the beginning was the CRA requirement that a percentage of home loans had to be made to low-credit people. The natural sequential step, then, is, "What to do with this high-risk paper?"

    As long as FRB interest rates were low and housing values rose, it wasn't all that much of a problem. We then had the changes in the law where the "no down payment" loans could be covered by--for examplle--AIG and then Fannie Mae and Freddie Mac could buy that paper. The growth of investment banks led to the well-publicized tranches and CDOs and derivatives. And "quantitative analysis" and computer programs to tell the investment banks how/what to do.

    Plenty of regulatory authority, but few of those doing the regulating or working under those regs really realized what was happening. Sure, greed existed; always has. But with the low Fed rates and the exponential growth in housing prices, everybody was quite happy: Banks, Congress, the Administration, the public. This was all part of the happy consumeritis societal package, including McMansions, SUVs and Starbucks.

    So, as usual, when folks quit making payments and the income to the leveraged bankers drops off, the dominoes starting falling. What might have been just an economic downturn wound up as a miserable mess. But, that's what happens when Fed/Gov policies defer hard landings in favor of soft landings--which has been policy since 1983.

    As far as corrections, Bush et al went wrong with the bailout stuff, and the present regime is continuing that failed policy. They're in over their heads. It's not unexpected; one need but look at the effect of Geithner's advice to the Indonesian government, which led to its economic collapse. The young lad hasn't learned from experience...

    This TARP deal oughta be renamed Trash Unit Ripoff Deal. The taxpayers are not even getting any KY. Changing preferred shares to common shares means government becoming part of management along with the already-failed VIPs in charge--which cannot improve anything as to rational operations.

    One of the reasons that loans aren't being made is that few are borrowing. Why would they, given the deep recession we're in? Further, consumeritis is withering, which means even more downturn as to business activity: Savers don't spend. The growing mess in commercial property bankruptcies is just another dot on the curve, and bodes ill as to further unemployment.
     
  13. pseudobrit macrumors 68040

    pseudobrit

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    #13
    You need to stop listening to AM radio. Seriously, the quantity of high-quality news and economy podcasts available make it inexcusable that anyone with an internet connection should be listening to AM radio to obtain information or analysis of anything.

    I almost went through your post line by line to argue individual points but frankly I'd be wasting my time.
     
  14. hulugu macrumors 68000

    hulugu

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    #14
    I disagree, the number of CRA loans that have defaulted is actually lower than the larger scope of loans. If anything, I'd take a look at the argument posted in this month's Harper's Magazine, which argues that the release of interest rate controls on loans like credit cards and payday loans did just as much damage to the economy as anything else because it helped guide financial instruments away from manufacturing and towards the financial bubble. A bubble on a bubble on the housing bubble, so to speak. No surprise that the whole thing popped.

    The CRA loans were but a small corner in this very big financial house, it's like complaining that the one cracked window in the living room made the garage collapse, all the while ignoring the huge water-leak in the basement.

    If, however, your thesis is correct doesn't this mean that bankers driven into risky loans did the perverse thing and started getting even riskier loans? Really? If this is true, then the entire financial system is run by idiots.
     

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