Real cost of US bank bailout: $7.7 TRILLION

[Mise]

This thread is great for separating the people who understand how money works from people who don't. It makes it really easy to figure out who to ignore in the future.

Moderator Action: Please keep it civil everyone, thanks

 

[Defiant47]

This thread is great for separating the people who understand how money works from people who don't. It makes it really easy to figure out who to ignore in the future.

Hey Mise, could you please lend me a dollar? I promise I'll give it back to you.

Thanks. Now here's the dollar back. Now could you lend it to me again?

Thanks. Let's do this a million times. (you can keep the dollar at the end)

You see folks, Mise has given me a bailout of 1 million dollars.

 

[kochman]

You're still hung up on the "dollar amount"?
I don't think anyone is really beating that horse anymore, it's dead.

 

[Theige]

Still nitpicking on the term balance sheet?
The point was, which somehow you are still missing despite it being completely obvious... they weren't forthcoming with information, and resisted Congress trying to investigate it, until forced to provide the information by the SC.
I really don't see how you think that is ok.

I'm not "nitpicking" on the term "balance sheet," I'm correcting your egregious errors. You claimed the Fed was forced to release its "balance sheet" by the SC, when in fact the Fed publishes its balance sheet every week.

The information that people wanted the Fed to release was an entirely new policy enacted by Dodd-Frank, effective going forward but not retroactive to 2008 - 2009. It had never been required before, and the Fed, along with the banks that borrowed from it, thought it would be a bad idea to release the info because in the future, even in times of extreme crisis, banks might hesitate to tap the Fed for cash, even if they really needed it, thus prolonging and intensifying futures crises.

I'm actually not taking a stance on whether or not releasing the info was a good or bad idea, because I don't have a strong conviction either way. I'm not an expert, far from it, and (from my limited understanding) there were very respectable and knowledgeable people on both sides of the disagreement. To resolve this disagreement, over a pretty important issue, the two sides argued their case in our highest court. This is how good government works.

I think that if banks really need to tap the Fed in the future, they'll do so. But then again, Jaime Dimon, CEO of JP Morgan, said he will never again use the discount window because of this new policy. (Personally I think he's bluffing)

 

[kochman]

I'm actually not taking a stance on whether or not releasing the info was a good or bad idea, because I don't have a strong conviction either way.

I'm not an expert, far from it, and (from my limited understanding) there were very respectable and knowledgeable people on both sides of the disagreement. I think that if banks really need to tap the Fed in the future, they'll do so.

But then again, Jaime Dimon, CEO of JP Morgan, said he will never again use the discount window because of this new policy. (Personally I think he's bluffing)

I agree, I hope that banks do take such loans, if needed... but I am glad that there is now oversight to it, so that it isn't abused. I mean, this was precisely the reason for the Fed.

Should we now put into place regulations to prevent investment banks (etc) from being "too bank to fail"?

Dimon is obviously way smarter on this stuff than anyone on this board, but ethical? I don't know.

I honestly think these CEOs of these big investors KNEW that the mortgage bundles they purchased were going to fail, and didn't care because they were told 1) Fannie Mae/Freddie Mac would be backed up, 2) They were making their money in the short term.

These people didn't get to those positions through altruistic endeavors, but for being good with money and perhaps unethical. People (Peter Schiff for example), had been pointing it out... did no one listen? Or did they just blow it off for greed's sake? I think it is the latter, generally. If someone tells you that a large portion of your investments are going to be defaulted on (mortgage bundles), wouldn't you at least look into it at that point?

 

[Cutlass]

I honestly think these CEOs of these big investors KNEW that the mortgage bundles they purchased were going to fail, and didn't care because they were told 1) Fannie Mae/Freddie Mac would be backed up, 2) They were making their money in the short term.

Part 1 is wrong there. Fannie and Freddie simply had nothing to do with it. At no point were people making decisions based on the idea that the government would bail them out when it all went south. At first, F&F simply were in no way involved in the problems. Their own regulations required them to only insure and hold the very safest of mortgages. Only in the last couple years of the bubbles did F&Fs aggressive lobbying and regulation changes allow them to get into less safe mortgages at all.

F&F used all of their political muscle, and they had tons of it, to get in on the tail end of the housing bubble, because they were annoyed at all the market share that they had lost to the subprime and alt-A markets. But it was the tail end that they got into just as the smarter players were looking for the exit.

In essence, by lobbying to be allowed a bigger share of the pie, F&F opened themselves up to be dumping grounds for everything that happened before they ever got involved. The private markets were not expecting that. And had no plans for it. But they took advantage of it as soon as it opened up.