Bailouts

1. The bailouts were to stop contagion and to increase liquidity. It was a systemic risk that they wanted to reduce- it was not to help a private business. That kind of explains why they tried to hold back on conditions too, although some might argue they didn't hold back.

2. No. It was to offset their bad assets, increase liquidity, etc.

3. This is an important question right now. The government has to say the answer is no, but when a situation comes around no might not be the answer depending on how the system and market are at that given time.

Banks are part of the Federal Reserve System, which is an independent, quasi-legislative, quasi-judicial regulatory agency established by Congress with jurisdiction over banking entities. An insolvent bank is not "bailed out," but taken over and put into receivership by the FDIC that guarantees depositor accounts of member banks.

Nemo said:

An insolvent bank is not "bailed out," but taken over and put into receivership by the FDIC that guarantees depositor accounts of member banks.

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Going off the OP's past posts, I am pretty sure he was referring to the investment banks and the recent crisis in this post (hence why I geared my response to that too).

The problem with banks is that they have been allowed to speculate on the financial markets with immunity. The banks lobbied Congress to immunize trading in derivatives, which was codified in the provisions of the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. This allowed the wholesale marketing of securitized mortgages traded over the counter as collateralized debt obligations (CDO’s) and carried off balance sheet, which precipitated the market crash in 2008, a rash of bank failures, and current economic recession. Congress should repeal the "safe harbor" provisions for derivatives because, unlike their holding companies (e.g., Washington Mutual, Inc. vs. Washington Mutual Bank), banks are ineligible for bankruptcy reorganization. 11 U.S.C. § 109(b)(2). As I pointed out previously, an insolvent bank gets taken over by the FDIC, which puts the risk of loss on the government and, ultimately, the taxpayer. The exemption for derivative contracts acts like a government subsidy that favors big banks at greater risk and higher potential for damage and loss. The question is whether this is a good thing. It is not, as the market crash and bailout attest, as well as the recent losses sustained by J.P. Morgan Chase, and the bankruptcy case of MF Global Funding. There needs to be a clear dividing line between banking that is federally insured, and market trading that is not. (This was the purpose of the Volcker Rule against proprietary trading by banking entities enacted as part of Dodd-Frank.)


In his opening statement before the Financial Institutions Subcommittee of the Senate Committee on Banking, Housing and Urban Affairs last May, FDIC Director Thomas M. Hoenig recommended that the bankruptcy law be amended to change the automatic stay exemption for mortgage-related repurchase agreements. See FDIC News Events at:
http://www.fdic.gov/news/news/speeches/chairman/spmay0912.html


That’s not enough. All the "safe harbor" provisions for financial derivative contracts in the Bankruptcy Code should be repealed. (I would add to the list the like provisions that immunize leveraged buyouts - the "Mitt Romney Special" - as these transactions have a high potential for fraud and abuse and consequential damage to the economy.)

Actually the reserves that banks lost is already belong to the people. That's why they have put the money backt to it's place, basically. Also only targeting the banks is not an entirely correct perspective, goverment has a lot economic policy tools on the banks like required reserve ratios, the allowed amount of consumer loans, outbid foreign currency and it goes on...

But the Banks are just scapegoat in the eyes of people

No, that is not correct. The money you deposit in a bank is not in the bank, and it’s not your money. When you open a bank account and make a deposit, you surrender legal title to the money deposited. The money deposited becomes an asset of the bank, and the depositor’s account is held as a liability of the bank. At best, the depositor has an unsecured contract claim against the bank for the funds deposited. Hence the need for insured deposits to maintain stability and confidence in the banking system.

Banks are using participation shares of various funds for various investment such as term deposit, insurance funds etc also for credits. Here banks even begun to take the golds. But investments sometimes do not match the estimated rates, especially in economic downturns. That's why I said that state putting the people's money back.

loureed4,

Banks make all the activities within legal limits as well as government has other economic tools to change their work limits periodically for the country's current outlook. And ı said banks are not the only one to blame but people do it.

See Post#5, supra.

Banks are in business to make money, not to help people gain money. The reason why they needed bailouts was because they loaned money to people who couldn't afford to party it back. It is arguable as to why they did that. But they do not loan money to help people out. The title holder of the property which is being financed must be paid for the product they produce or the resource they own. if they can't get banks to finance their houses they don't build, when they don't build no houses for people.

Either banks were put under government duress to loan money to incapable debters or they were betting on the wrong horse. The only person who would have been untouched by letting the banks die would people who live by only cash and have no debt and finance no colarataral. if the banks have no money to your account holdings are only myth.

Banks don't produce money they only exchange it.

The money loaned by the bank is loanable because they hold secure accounts it isn't just magic. When they operate in the negative your money is tied up. That is what caused the banks to collapse during the great depression. People withdrew cash from banks and they ran out before everyone got their money out because it was tied up in loans.

If they had been left to twist in the wind some people would have been completely broke houses still would have been foreclosed on and a second depression would have been inevitable.

It was done to stop every one who finances things to be able to finance things. Like farms and ranches businesses and such.

loureed4 said:

Thanks for your reply. I still feel my question is unanswered, for I´d like to know who were the main actors in this crisis. What is the root? . Not saying names, because I know a lot of names: Lehman, Goldam.... I mean, the REAL causes.

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Ever-growing volume of non-real-time financial transactions is always a handicap and creates a domino effect on markets.And it causes a disconnection between financial times (present-future). Even small personal loans can cause bigger problems in this system as clax mentioned.


For the main actor, maybe you did not think on this name that Adam Smith is the main guy here. joking apart, this is a (for sure just seen in pratice)feature of the free market theory, there is a continuous crisis at specific intervals.



I just can't define what is the root at all with a single sentence as I said, maybe liberal economic philosophy is the root and more or less we all have a role in these econmic events.

reader said:

Ever-growing volume of non-real-time financial transactions is always a handicap and creates a domino effect on markets.And it causes a disconnection between financial times (present-future). Even small personal loans can cause bigger problems in this system as clax mentioned.


For the main actor, maybe you did not think on this name that Adam Smith is the main guy here. joking apart, this is a (for sure just seen in pratice)feature of the free market theory, there is a continuous crisis at specific intervals.



I just can't define what is the root at all with a single sentence as I said, maybe liberal economic philosophy is the root and more or less we all have a role in these econmic events.

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That last statement was profound. It shouldn't be but in the modern selfish times it is. economy is the people, government should stay the hell out of it. Minor regulation is alright. But they want to control everything. Everything that USA is is its people, not the clowns in suits. Sitting in the houses of ivory. But the more people that become subjects of the government, through hand out dependence, the more control they have.

The bailouts were a failure and a great theft of the taxpayer's money.

loureed4 said:

Some very well-known facts:

1. Banks are bailed out with the tax payer money.
2. Once they are bailed out, they still don´t lend money so that the people can pay off the mortgages, put up new businesses or not to shut down their current businesses.

Questions:
1.Why does then the government bail out the banks, without conditions?
2.Shouldn´t it be a condition that the bank that receive the money lent money again to people? If not, how do they use the money the people gives them? it is just a gift from the people to the banks?
3.If the banks fail again, will they be bailed out over and over again by the government, therfore, by the tax payer?

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They should have followed the Icelandic government policy and let the banks go under. It is an absolute disgrace that a private debt was made into a public debt and that taxpayer paid for it.

Honestly, how would it have been better if the banks were left to collapse. Most Americans keep their money in a bank, if that money is being occupied by lending you can't have it if you chose to withdraw it from the bank, it wouldn't be there, that happened in the great depression, that is why fdr made all the laws regarding banks.

I really don't see what you could do to fix the problem, letting them die wouldn't have been good at all.

People create the economy not banks not governments not any entity of the government I lots of people lost their assets those people would have less faith in the economy, there fore it would function poorly without them.

Bailing out the banks did suck but letting them die would have been worse.

clax said:

Honestly, how would it have been better if the banks were left to collapse. Most Americans keep their money in a bank, if that money is being occupied by lending you can't have it if you chose to withdraw it from the bank, it wouldn't be there, that happened in the great depression, that is why fdr made all the laws regarding banks.

I really don't see what you could do to fix the problem, letting them die wouldn't have been good at all.

People create the economy not banks not governments not any entity of the government I lots of people lost their assets those people would have less faith in the economy, there fore it would function poorly without them.

Bailing out the banks did suck but letting them die would have been worse.

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It worked for Iceland and their economy has recovered better than states that bailed out their banks.

Giap said:

It worked for Iceland and their economy has recovered better than states that bailed out their banks.

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good for iceland, it wouldnt have worked here, the us has more experience in this.

You just trashed all amaricans on another thread, your opiion on our country is not relavant. So continue typing and acting like a clown. Sell your bigotry and stupidity to someone who cares.

Your words are just noise