A government bank

[Bozo Erectus]

Wazaap everybody, long time no type. Im back because while watching the global economic meltdown on CNBC I had an idea.

Instead of handing out trillions of $ to failed institutions in the hope of stimulating lending, why not let the bad banks fail, and instead use all of that money to create a government backed lending institution that would fill the void. It would be a government agency dedicated to loaning money directly to inidividuals and small businesses, eliminating the inept middle men/ institutions that got us into this mess in the first place.

 

[Abaddon]

Since when was the government free of inept middle-men and institutions crippled by bureaucracy? I thought that was the goverment?

 

[Bill3000]

We already have a federal bank...

 

[kronic]

Buiter's idea is similar: http://blogs.ft.com/maverecon/2009/01/the-good-bank-solution/

 

[Colonel]

It would be good in theory but image the cost of putting a bank like this in every town across America, the price would be astronomical. Unless you could somehow incorporate it with already existing federal buildings. Perhaps enlarge post offices and have them double up as branches of said bank. After all you would only need a small vault for it to take in money, all the lending itself would be electronically. More importantly if you were to incorporate this into a branch of the IRS it would ensure that the loan was paid back, as they could just hold back any tax refunds come the individuals who do not pay. Assuming that adding vaults to whatever building they put this in would not cost too much it sounds like a fairly good idea.

 

[Princeps]

Wazaap everybody, long time no type. Im back because while watching the global economic meltdown on CNBC I had an idea.

Instead of handing out trillions of $ to failed institutions in the hope of stimulating lending, why not let the bad banks fail, and instead use all of that money to create a government backed lending institution that would fill the void. It would be a government agency dedicated to loaning money directly to inidividuals and small businesses, eliminating the inept middle men/ institutions that got us into this mess in the first place.

There is such an institution already. It's called the Fed. If all the banks disappeared and ATMs wouldn't work anymore, the Fed would be, most likely, giving and loaning money itself. In the meanwhile, as private banks still exist, why not support them (with bailouts, partial nationalizations etc) instead of propping up another banking infrastructure.

 

[warpus]

Screw the government, let Google run your banks.

 

[Mark1031]

Wazaap everybody, long time no type. Im back because while watching the global economic meltdown on CNBC I had an idea.

Instead of handing out trillions of $ to failed institutions in the hope of stimulating lending, why not let the bad banks fail, and instead use all of that money to create a government backed lending institution that would fill the void. It would be a government agency dedicated to loaning money directly to inidividuals and small businesses, eliminating the inept middle men/ institutions that got us into this mess in the first place.

One doesn't have to do that. The US banks are bankrupt, really bankrupt. Citi, BoA owe more than they have. We should just nationalize them. That way you leave everything in place but can go about sorting out the mess and renegotiating loans and lending again. The banks themselves are too afraid to do that because when they start properly valuing their assets and loans the results will be staggering.

I am really pissed at Obama for not having more sense. The only reason not to nationalize is because of ideological embarrassment. They should be smarter than that and do what is necessary before it is too late.

 

[Bozo Erectus]

Kronic, Im glad Im not the only one thinking along these lines. If a private bank has shown itself to be unable to survive on its own, then it should be allowed to fail. If so many banks are failing at once that its having a negative effect on the economy (because lending has ground to a halt) then it seems to me that it makes more sense for the governement to provide capital to the private sector, directly, rather than filter the capital through already failed, zombie 'private' banks. Since this is taxpayer money being used, the government should have complete control on how it is used. If its used stupidly, the government at least can be voted out of office, but not 'zombie' bankers.

 

[EnglishEdward]

Kronic, Im glad Im not the only one thinking along these lines. If a private bank has shown itself to be unable to survive on its own, then it should be allowed to fail. If so many banks are failing at once that its having a negative effect on the economy (because lending has ground to a halt) then it seems to me that it makes more sense for the governement to provide capital to the private sector, directly, rather than filter the capital through already failed, zombie 'private' banks. Since this is taxpayer money being used, the government should have complete control on how it is used. If its used stupidly, the government at least can be voted out of office, but not 'zombie' bankers.

And the government can publish on the Internet precisely how much it has lent to who and under what terms, thereby ensuring full transparency.

 

[Neomega]

Most importantly, we as taxpayers could demand serious salary and bonus caps.

 

[I'm Cleo!]

As Mark1031 said, just buy the existing banks. It'll achieve what you want to do, and youcan just use the existing employees (tellers and stuff, not bankers, obviously) and infrastructure.

Cleo

 

[sonorakitch]

My favorite line:

The government cannot even run a whorehouse (see Mustang Ranch), how would they operate a bank?

Needless to say, I'll stick with my privately owned bank whos management didn't give millions to people with no money.

~Chris

 

[Bill3000]

My favorite line:

The government cannot even run a whorehouse (see Mustang Ranch), how would they operate a bank?

Are you sure they ran it? Wiki just said that it auctioned off the property once they confiscated it for tax fraud. That seems like normal procedure.

 

[Mark1031]

As Mark1031 said, just buy the existing banks. It'll achieve what you want to do, and youcan just use the existing employees (tellers and stuff, not bankers, obviously) and infrastructure.

Cleo

Hey you can even keep the fools who are responsible for this mess because they are probably smart people who were only acting logically within the constraints and reward system that was in place. Now it has collapsed and they are frozen with fear and uncertainty and dumping another 300 Billion into the system will not change that fundemental problem. A new board of directors (ie some sort of resolution trust board of treasury/fed officials) giving new marching orders and unwinding the mess with government backing will do that.

 

[Mark1031]

My favorite line:

The government cannot even run a whorehouse (see Mustang Ranch), how would they operate a bank?

Needless to say, I'll stick with my privately owned bank whos management didn't give millions to people with no money.

~Chris

This government bashing is just crazy. What bank are you talking about because the biggest private banks in the US (world?) are bankrupt. And if you think some little local bank would be just fine if the governments of the world hadn;t stepped in I'd like to know what you are smoking. Letting the free market work (ie Lehaman bankruptcy) was a disaster. Just can the ideology and fix the freaking problem.

 

[I'm Cleo!]

Hey you can even keep the fools who are responsible for this mess because they are probably smart people who were only acting logically within the constraints and reward system that was in place. Now it has collapsed and they are frozen with fear and uncertainty and dumping another 300 Billion into the system will not change that fundemental problem. A new board of directors (ie some sort of resolution trust board of treasury/fed officials) giving new marching orders and unwinding the mess with government backing will do that.

But you know as well as I that the "board of treasury/fed officials" is going to be made up of the exact same people who were working on Wall St. when they blew it all up. Seriously: once you get to a certain level, you cannot possibly fail spectacularly enough to make yourself unemployable in finance. It's like being a neoconservative.

Cleo

 

[Mark1031]

But you know as well as I that the "board of treasury/fed officials" is going to be made up of the exact same people who were working on Wall St. when they blew it all up. Seriously: once you get to a certain level, you cannot possibly fail spectacularly enough to make yourself unemployable in finance. It's like being a neoconservative.

Cleo

I know I know. OK How about Krugman for banking Czar.. Seriously, I think these people know what needs to be done and what it is is to take the losses. That means stock holders go to $0, bond holders take a hit, government softens it a bit as buyer of last resort and restructure loans that can be saved and book the losses of those that can't. I still haven't figured out what credit default swaps are so let's just say they go to 0$ as well.

 

[Theige]

This is exaggerated because the US banking system was not as consolidated then, the continuing bailout, and I'm sure for other reasons as well, but you get the picture

 

[sonorakitch]

Letting the free market work (ie Lehaman bankruptcy) was a disaster. Just can the ideology and fix the freaking problem.

Hahahahaha...a working and viable system for 75+ years and this hiccup and you want to trash the whole idea?

The free market works fine with limited government intervention. It is why we don't have to muddle through horse feces in our streets and it is how we can communicate this way today.

I don't "bash" the government; I just realize that the government isn't the best organization for running a for-profit entity.

Are you sure they ran it? Wiki just said that it auctioned off the property once they confiscated it for tax fraud. That seems like normal procedure.

By law the feds must seize and operate a company which is sought and convicted for tax evasion prior to auction. The government ran it for a few months before getting rid of it and in that time the whorehouse revenues plummeted. I mean....how in the hell does that happen?

~Chris