Does anyone else see confusion and contradictions coming from economists, policymakers, and politicians?

[Dari]

They want banks to be better run, but they're angry when banks start decreasing lending, increase fees, and becoming more strict in giving out money. Giving more money to banks won't help unless the banks have good reason to lend.

They want consumers to be smarter with their money. But they want Americans to spend more (to get out of the recession) and save more (to pay down their debt) at the same time. This makes no sense. Considering America's saving's rate has been (near) zero for years, there's only one way it can go.

 

[StageLeft]

Yes, there seem to be few people maintaining a constant vein of thought. Most appear to be running around like a chicken with its head cut off. I suppose I'm one of them Thank God nobody is asking me to fix it, though. I surely would have no idea how.

 

[Dari]

Originally posted by: Skoorb
Yes, there seem to be few people maintaining a constant vein of thought. Most appear to be running around like a chicken with its head cut off. I suppose I'm one of them Thank God nobody is asking me to fix it, though. I surely would have no idea how.

The true answer is something people don't want to hear/happen. IMHO, excess liquidity and lax regulation led to high asset prices. This correction needs to happen naturally, which could take years, if not a decade or more (considering the expansion took that length of time). But the government doesn't want that. They want things to stay the same. This is impossible. The problem is everyone, government included, likes to stay high. Nobody likes to be down.

 

[GTKeeper]

Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

 

[Budmantom]

They are pissed about the AIG bonuses that they signed off on and now they want more oversight because of their stupidity.

They want execs to work for less but are more than happy to deminize the AIG exec that is working for $1.

 

[Dari]

Originally posted by: GTKeeper
Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

I'm not sure why you'd put words into my mouth like that. I never gave specific reasons why they are lending less.

 

[retrospooty]

Originally posted by: GTKeeper

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

Yup... Bottom line that is what happened. Lobbyists pay off congress (D and R house and Senate) and they passed laws that are "friendly" to them.

The point we are now, there is no easy answer. We can either let it correct itself naturally, leading to depression, like Dari said "which could take years, if not a decade or more"... Or we pump massive amounts of money into the system, which is obviously what Both Bush and Obama admins did. Either way we are screwed. Screwed now or screwed later. At least if its later, we have a chance to correct the budget shortfalls and slowly pay off the deficit. Something tells me that wont happen until it becomes a crisis, because we dont ever act on anything until its a crisis. Then we act, and act fast - too fast, making too many mistakes.

 

[Dari]

Originally posted by: Budmantom
They are pissed about the AIG bonuses that they signed off on and now they want more oversight because of their stupidity.

They want execs to work for less but are more than happy to deminize the AIG exec that is working for $1.

Notice also that politicians are screaming at Wall Street but aren't also blaming themselves.

 

[fskimospy]

Originally posted by: Dari

Originally posted by: GTKeeper
Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

I'm not sure why you'd put words into my mouth like that. I never gave specific reasons why they are lending less.

But you certainly implied the banks didn't have a good reason to lend, which GTKeeper's post directly refuted. So no, I don't see any particular contradiction in the government's position either.

 

[Dari]

Originally posted by: eskimospy

Originally posted by: Dari

Originally posted by: GTKeeper
Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

I'm not sure why you'd put words into my mouth like that. I never gave specific reasons why they are lending less.

But you certainly implied the banks didn't have a good reason to lend, which GTKeeper's post directly refuted. So no, I don't see any particular contradiction in the government's position either.

Actually, I think he contradicted himself. I mean, if you're a bank and are looking at all the bad loans you made in the past, do you really want to do things the same way? Of course not. Don't get me wrong, there are good borrowers out there. But finding them requires being more conservative in your lending practices. Oh, and they will have to pay for your mistakes as well.

 

[Genx87]

This is what happens when politics gets intermixed with our economy. Politicians live in a fantasy world where you can have everything and get made when it doesnt happen.

The problem that started all of this is bad lending practices. So the govt naturally works on bills to start this practice again. Makes sense right?

 

[dullard]

Originally posted by: Dari
They want banks to be better run, but they're angry when banks start decreasing lending, increase fees, and becoming more strict in giving out money. Giving more money to banks won't help unless the banks have good reason to lend.

They want consumers to be smarter with their money. But they want Americans to spend more (to get out of the recession) and save more (to pay down their debt) at the same time. This makes no sense. Considering America's saving's rate has been (near) zero for years, there's only one way it can go.

Dari, the point that you are missing is the speed and scale of the changes. When riding an airplane, you want a gradual 30 minute decent from 30000 ft to the airport. You don't want that decent to happen in 30 seconds.

Everyone knows that a 0% (or even below) savings rate for consumers was impossible and highly dangerous to maintain. Thus, we want to encourage people to spend a bit less and save a bit more. However, it seemed like just about everyone did that simultaneously. And they didn't cut back a little, they cut back a lot. Our economy can't handle that sudden change in reduced spending. Economists and policymakers want a gradual shift. If people gradually spent less (over a period of a couple of years), then companies can gradually reduce their costs through natural worker attrition. But instead, this overnight plunge in spending meant forced layoffs which makes spending cuts worse, which means more forced layoffs, etc. The speed and severity of the change threw us into a vicious downward spiral.

Same goes with bank lending. They wanted increases in standards and more responsible lending. Sure, banks did that. But they also virtually ended lending to small businesses (meaning layoffs). They virtually ended car loans (meaning the Big 3 are going down). They did what was wanted, but they way over-reacted and swung the pendulum even farther to the wrong side. We needed a dampened response of the pendulum back to neutral, not a wild swing to the other side.

 

[fskimospy]

Originally posted by: Dari

Originally posted by: eskimospy

Originally posted by: Dari

Originally posted by: GTKeeper
Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

I'm not sure why you'd put words into my mouth like that. I never gave specific reasons why they are lending less.

But you certainly implied the banks didn't have a good reason to lend, which GTKeeper's post directly refuted. So no, I don't see any particular contradiction in the government's position either.

Actually, I think he contradicted himself. I mean, if you're a bank and are looking at all the bad loans you made in the past, do you really want to do things the same way? Of course not. Don't get me wrong, there are good borrowers out there. But finding them requires being more conservative in your lending practices. Oh, and they will have to pay for your mistakes as well.

But the complaints aren't coming about banks not issuing no money down, no proof of income, subprime loans, etc. It was banks being unwilling to lend to each other, to well qualified buyers, etc. Ie: specifically NOT the people that got them into this trouble and NOT in the manner in which they got into trouble. So again, I'm not really seeing the contradiction.

 

[zephyrprime]

Originally posted by: Dari
Actually, I think he contradicted himself. I mean, if you're a bank and are looking at all the bad loans you made in the past, do you really want to do things the same way? Of course not. Don't get me wrong, there are good borrowers out there. But finding them requires being more conservative in your lending practices. Oh, and they will have to pay for your mistakes as well.

It's not a lack of good borrowers as gtkeeper has already said. Since the banks are sitting on so much in losses, they cannot afford to make any more loans. They lost their money to lend. Yes, lending requirements are more strict now but even qualified borrowers cannot get loans.

 

[zinfamous]

Originally posted by: Dari
They want banks to be better run, but they're angry when banks start decreasing lending, increase fees, and becoming more strict in giving out money. Giving more money to banks won't help unless the banks have good reason to lend.

They want consumers to be smarter with their money. But they want Americans to spend more (to get out of the recession) and save more (to pay down their debt) at the same time. This makes no sense. Considering America's saving's rate has been (near) zero for years, there's only one way it can go.

the lending is mostly related to them needing the banks to lend to each other. That's the big lending problem right now. Banks don't trust each other like they used to.

While a gov't rescue of a bank is generally "bad" in the prevailing theory of free market economics, you also create the situation where if big banks see that the Feds will just let some of you collapse, then they'll let all of you collapse.

short answer: it's all a big clusterfuck until we can have some real confidence injected into the system.

 

[Dari]

Originally posted by: eskimospy

Originally posted by: Dari

Originally posted by: eskimospy

Originally posted by: Dari

Originally posted by: GTKeeper
Dari,

Things are a bit more complicated than that. Banks are lending less not because there aren't enough credit worthy borrowers out there. They are lending less because they are SCARED SHITLESS about the impending wave of defaults that is about to hit their books.

Wall St. paid off lobyists to break-down the regulations that would have prevented this crap from happening. Instead, they get uncle sugar to bail them out.

I'm not sure why you'd put words into my mouth like that. I never gave specific reasons why they are lending less.

But you certainly implied the banks didn't have a good reason to lend, which GTKeeper's post directly refuted. So no, I don't see any particular contradiction in the government's position either.

Actually, I think he contradicted himself. I mean, if you're a bank and are looking at all the bad loans you made in the past, do you really want to do things the same way? Of course not. Don't get me wrong, there are good borrowers out there. But finding them requires being more conservative in your lending practices. Oh, and they will have to pay for your mistakes as well.

But the complaints aren't coming about banks not issuing no money down, no proof of income, subprime loans, etc. It was banks being unwilling to lend to each other, to well qualified buyers, etc. Ie: specifically NOT the people that got them into this trouble and NOT in the manner in which they got into trouble. So again, I'm not really seeing the contradiction.

I understand all that. The problem is comprehensive, that's why I left it vague in the OP. There is a credibility shortage in the financial system and a fiat economic sytem is heavily reliant on trust.

 

[BoberFett]

Originally posted by: Dari
They want banks to be better run, but they're angry when banks start decreasing lending, increase fees, and becoming more strict in giving out money. Giving more money to banks won't help unless the banks have good reason to lend.

They want consumers to be smarter with their money. But they want Americans to spend more (to get out of the recession) and save more (to pay down their debt) at the same time. This makes no sense. Considering America's saving's rate has been (near) zero for years, there's only one way it can go.

I've noticed, and it's why I have no faith in government. I'm a proud LOLbertarian if only because everybody else has proven incompetent rather than only speculatively incompetent.

 

[BoberFett]

Where did the idea come from that nobody can get a loan no matter how good their credit? Hearsay? Sound bites?

I think I'll start a poll.

 

[Dari]

Originally posted by: Genx87
This is what happens when politics gets intermixed with our economy. Politicians live in a fantasy world where you can have everything and get made when it doesnt happen.

The problem that started all of this is bad lending practices. So the govt naturally works on bills to start this practice again. Makes sense right?

There's a belief amongst some economists that a more advanced a society becomes the more debt people should take on. I think it's an exceptional theory, meaning that it can only apply to certain nations in certain states. Unfortunately, policymakers and politicians have come to believe this theory as well. That's why, IMHO, it is so easy to lower taxes but so difficult to raise them. If consumers and businesses aren't spending then government is. It's like a game of tag where one actor indulges in spending and everyone is afraid to stop because they don't want to know what'll happen when they stop. We've literally become addicted to debt.

 

[fskimospy]

Originally posted by: BoberFett
Where did the idea come from that nobody can get a loan no matter how good their credit? Hearsay? Sound bites?

I think I'll start a poll.

It's coming from reality. In the fall, LIBOR was nearly 7%, a rate so high that it literally destroyed the international financial markets. No bank could get a loan, period.

 

[dullard]

Originally posted by: BoberFett
Where did the idea come from that nobody can get a loan no matter how good their credit? Hearsay? Sound bites?

How about raw data and cold hard facts? Of course, the way you phrased your post, only you could be correct. We aren't saying that "nobody can get a loan". Of course people can get loans. The problem is that it is very difficult for people and businesses with good credit to get loans. Sure, some can and some will get loans. And it isn't just people, the bigger problem is businesses that can't get loans (ie they have to fire people instead). That link's hard data:

[*]Total number of small business loans are down by more than 55%.
[*]The value of those loans are down by 45% in a year and 50% from two years ago.
[*]Four of the top lenders to small businesses have stopped loaning or almost ended loaning. Only 6% of the top lenders are expected to increase lending, the rest are expected to cut lending or pause lending.

Those aren't minor cuts to the worst businesses. Those are big cuts to quite viable businesses.

 

[BoberFett]

Originally posted by: dullard

Originally posted by: BoberFett
Where did the idea come from that nobody can get a loan no matter how good their credit? Hearsay? Sound bites?

How about raw data and cold hard facts? Of course, the way you phrased your post, only you could be correct. We aren't saying that "nobody can get a loan". Of course people can get loans. The problem is that it is very difficult for people and businesses with good credit to get loans. Sure, some can and some will get loans. And it isn't just people, the bigger problem is businesses that can't get loans (ie they have to fire people instead). That link's hard data:

[*]Total number of small business loans are down by more than 55%.
[*]The value of those loans are down by 45% in a year and 50% from two years ago.
[*]Four of the top lenders to small businesses have stopped loaning or almost ended loaning. Only 6% of the top lenders are expected to increase lending, the rest are expected to cut lending or pause lending.

Those aren't minor cuts to the worst businesses. Those are big cuts to quite viable businesses.

Need proof of the bolded.

I have no doubt that the figures you stated above are correct, but without context the number is meaningless.