Financial News

[jasonxctf]

I agree. But the thing is, the bailout was actually designed to have banks merge. There was pressure on certain banks to take over some of the failures, and they were paid to do so. See Bank of America taking Merrill Lynch.

 

So the bailout, in it's nature, made this problem worse.

 

you're spot on. It's a double edged sword... we need the big banks now to help ease the pain of the smaller/mid sized ones going under.

At the same time, its pretty dangerous long term to have something like 60-65% of this country's deposits tied up in 4-5 institutions.

[Balta1701]

At the same time, its pretty dangerous long term to have something like 60-65% of this country's deposits tied up in 4-5 institutions.

Especially when those banks believe they have an implicit government guarantee that if every bet they make goes bad, they won't lose money. What would you do in Vegas if you were guaranteed you would only lose $1000 no matter how much you bet?

[Cknolls]

Yeah, today was interesting news-wise in the markets. Sales of existing homes dipped unexpectedly, but new and recurring unemployment claims dropped unexpectedly.

 

 

But, extended unemployment claims rose by a very large 80k. This means that continuing claims would have been 80k worse except those unemployed people's normal unemployment benefits ran out. They are now no longer counted as continuing claims. In addition the exhaustion rate hit a record 52%: 52% of those on unemployment completely ran out of benefits and are on their own. They are no longer counted as unemployed(except for U-6 unemployment rate, which is not what everyone looks at).

[kapkomet]

But, extended unemployment claims rose by a very large 80k. This means that continuing claims would have been 80k worse except those unemployed people's normal unemployment benefits ran out. They are now no longer counted as continuing claims. In addition the exhaustion rate hit a record 52%: 52% of those on unemployment completely ran out of benefits and are on their own. They are no longer counted as unemployed(except for U-6 unemployment rate, which is not what everyone looks at).

There's getting ready to be a s***load more of the 9.7% that come off. A s***load. So while we will only see marginal increases in the "9.7%" number that keeps getting spouted, the numbers in reality are MUCH higher because there's so many people that have exhausted benefits. That part is unprecedented. But the government can fix it.

 

[Rex Kickass]

There's getting ready to be a s***load more of the 9.7% that come off. A s***load. So while we will only see marginal increases in the "9.7%" number that keeps getting spouted, the numbers in reality are MUCH higher because there's so many people that have exhausted benefits. That part is unprecedented. But the government can fix it.

 

Actually its not unprecedented at all. The shallow 2001 recession had the same effect although to a lesser extent. When a lot of the jobs that are lost in a recession never come back (re: manufacturing), this should be expected no?

[kapkomet]

Actually its not unprecedented at all. The shallow 2001 recession had the same effect although to a lesser extent. When a lot of the jobs that are lost in a recession never come back (re: manufacturing), this should be expected no?

To a MUCH lesser extent. This is a whole different issue then the 2001 recession because it cuts across everything, except government of course, as it's the only solution.

[southsider2k5]

I agree. But the thing is, the bailout was actually designed to have banks merge. There was pressure on certain banks to take over some of the failures, and they were paid to do so. See Bank of America taking Merrill Lynch.

 

So the bailout, in it's nature, made this problem worse.

 

No it didn't. Because of the stupid accounting laws in this country, it pretty much saved the entire banking sector.

[southsider2k5]

Especially when those banks believe they have an implicit government guarantee that if every bet they make goes bad, they won't lose money. What would you do in Vegas if you were guaranteed you would only lose $1000 no matter how much you bet?

 

Become Fannie Mae?

[NorthSideSox72]

But, extended unemployment claims rose by a very large 80k. This means that continuing claims would have been 80k worse except those unemployed people's normal unemployment benefits ran out. They are now no longer counted as continuing claims. In addition the exhaustion rate hit a record 52%: 52% of those on unemployment completely ran out of benefits and are on their own. They are no longer counted as unemployed(except for U-6 unemployment rate, which is not what everyone looks at).

I think you are incorrect here. The US gov't extension of benefits kept them on, and even when adjusted for that, continuing claims still dropped. This is why the market was happy to begin the day, before the housing data showed up.

 

You are right on the unemployment RATE though, that number is going to be skewed as people drop out of it.

 

[mr_genius]

Actually its not unprecedented at all. The shallow 2001 recession had the same effect although to a lesser extent. When a lot of the jobs that are lost in a recession never come back (re: manufacturing), this should be expected no?

 

it's not a good trend. on the current scale, it's very bad. a u-6 rate of 20%, with a roster of people that lost jobs which are 'gone and not coming back' is a big deal. we have had negative job growth over a decade and I don't see that trend reversing.

Edited September 24, 2009 by mr_genius

[lostfan]

I could make a really convincing argument that it very well could have if nothing was done by the fed and Congress.

I thought Chase was one of the ones in more decent shape?

[southsider2k5]

I thought Chase was one of the ones in more decent shape?

 

They were probably in the best shape of all, but if this had been allowed to cascade, there wouldn't have been a bank in the country that would have technically survived. The big issue is that banks lend to each other more and more. When the weaker bigger banks would start to go under, that would mean more and more loans on the balance sheets of the "strong" banks would start to become worthless. The more times that happened, the more their debt to capital ratios would start to slip. Once they hit that magic 90% ratio, bang, the bank is insolvent. Every obligation they have to another bank technically becomes worthless, because that legal entity no longer exists in the eyes of the Federal Reserve banking system. Every time a bank would fail, that would also be one less potential bank that would be able to buy up assets, and entire sets of asset classes would also start to become worthless in the eyes of our mark to market accounting system, even if the underlying assets which backed the loans still had worth.

 

The cascade was already starting with Lehman, Bear, and Merrill. That's why the capital rush and the Fed rushing to try to get the big banks to take these failures over at any price.

[lostfan]

So what actually happens if the entire Western banking system collapses, like what it appears would have happened?

[southsider2k5]

So what actually happens if the entire Western banking system collapses, like what it appears would have happened?

 

What would have happened? I don't know that I could even imagine the societial impact of people's entire wealth disappearing in a nanosecond.

[lostfan]

What would have happened? I don't know that I could even imagine the societial impact of people's entire wealth disappearing in a nanosecond.

Yeah that's what I'm trying to do and I can't. Wouldn't we basically have to start everything over somehow?

[southsider2k5]

Yeah that's what I'm trying to do and I can't. Wouldn't we basically have to start everything over somehow?

 

I guess. But at the same time, I don't even see that as possible. In reality, the government had to throw all of that money at the problem early on, to prevent the problem from becoming a multiplier of what it was.

[mr_genius]

Yeah that's what I'm trying to do and I can't. Wouldn't we basically have to start everything over somehow?

 

There could have been other steps taken, rather than multi-trillion dollar abomination that we are paying for. The bailout was a complete failure when considering the amount of money; it has set us up for bigger more devastating crashes to come. There is this myth that the bailout, the way it was put together, was the only possible action to take. It's just not true.

Edited September 25, 2009 by mr_genius

[southsider2k5]

There could have been other steps taken, rather than multi-trillion dollar abomination that we are paying for. The bailout was a complete failure when considering the amount of money; it has set us up for bigger more devastating crashes to come. There is this myth that the bailout, the way it was put together, was the only possible action to take. It's just not true.

 

So, let's hear it.

[mr_genius]

So, let's hear it.

 

for starters, the minimum amount of funding to avoid a disaster. bailout funds would not go to bonuses, and all other business related portions of the company go bust if need be. these corporations do not belong in business. they failed. this is reality, this is not socialism where your failures are backed up with my money.

[southsider2k5]

for starters, the minimum amount of funding to avoid a disaster. bailout funds would not go to bonuses, and all other business related portions of the company go bust if need be. these corporations do not belong in business. they failed. this is reality, this is not socialism where your failures are backed up with my money.

 

The bonuses are a distraction. In reality that amount of money had very little effect on the bottom line, and zero effect on the value of a banks portfolio. The last two sentences would have meant no banking system, period.

[mr_genius]

The bonuses are a distraction. In reality that amount of money had very little effect on the bottom line, and zero effect on the value of a banks portfolio. The last two sentences would have meant no banking system, period.

 

i really don't think so. there could have been a much smaller bailout and kept the banking operations from completely failing. if the side wings of the business go bust competition picks up the business. the funds should have been the bare minimum to secure the banking industry, period. billions in bonuses are not distractions, and you know this judging by your complaints of a 2 billion dollar cash for clunkers deal .

 

but it's done and it's crap. i guess i'm just going to have to accept our bailout minded society. nobody is responsible for their own actions, large segments of the population wants the government to do everything for them; but i guess i'm going to have to accept it and stop posting in this thread.

Edited September 25, 2009 by mr_genius

[southsider2k5]

i really don't think so. there could have been a much smaller bailout and kept the banking operations from completely failing. if the side wings of the business go bust competition picks up the business. the funds should have been the bare minimum to secure the banking industry, period. billions in bonuses are not distractions, and you know this judging by your complaints of a 2 billion dollar cash for clunkers deal .

 

but it's done and it's crap. i guess i'm just going to have to accept our bailout minded society. nobody is responsible for their own actions, large segments of the population wants the government to do everything for them; but i guess i'm going to have to accept it and stop posting in this thread.

 

Yeah, cuz that's what I said. No one said the banking industry didn't cause its own mess. But at the sametime, if you think our society could function without a banking system, you might want to pull your head out of the sand and recognize that it hasn't been reality since, oh, about the crusades.

 

I am still waiting for you to explain what exact "bare minimum" plan we all neglected to recognize, and how it would have not only stopped the failures based on assets going to zero, but it would have also kept some semblence of lending going.

[mr_genius]

Yeah, cuz that's what I said. No one said the banking industry didn't cause its own mess. But at the sametime, if you think our society could function without a banking system, you might want to pull your head out of the sand and recognize that it hasn't been reality since

 

 

oh my. and yes, the entire system fails without 3 trillion!

 

keep telling yourself that to justify this bulls***.

[southsider2k5]

 

oh my. and yes, the entire system fails without 3 trillion!

 

keep telling yourself that to justify this bulls***.

 

Can you give something more than one-liners, or did Ron Paul not prepare you to be challenged at a fundamental level?

[mr_genius]

Can you give something more than one-liners, or did Ron Paul not prepare you to be challenged at a fundamental level?

 

No, I've already given you basics and I suggest you learn to use a search engine if you wish for a detailed plan. You can find plenty of respected economists writings on the bailout which will give you a different perspective. I have given you enough to go off of. Sorry, no bailout on this one for you.

Edited September 25, 2009 by mr_genius