Too big to fail...

[disappoint]

What a bunch of bullshit that was...

No they aren't too big to fail, they failed BECAUSE they're too big.
Everyone (except flying pig) knows this.

Remember when this country used to stop monopolies rather than cater to them by handing them money on a silver platter after they failed?

 

[LegendKiller]

The lessons from the 1930s was that sitting by the wayside didn't do much, and, in fact, hurt a lot more.

Unfortunately, the limitations placed upon the banks by Glass Steagall were ones foreign banks didn't have, thus, they could compete with domestic banks in ways that the domestic banks were helpless. This caused intense pressure on Congress to repeal G-S, which they finally started rolling back in the 1990s and fully eliminated in the late 90s. Combine this with the commodities modernization act, gives you the current situation.

On the face of it, this looks pretty bad. We'll have to wait for the official investigation and evidence to be put into the public realm.

That being said, had the banks not been bailed out (keep in mind, they pay a *lot* in taxes, so, in reality, they were bailing themselves out), the situation would be far worse than it is today. It's easy to judge this stuff from a distance but many people forget about every day companies that need the banks and the debt/equity markets to keep their own operations going.

I know of one company that cut 33% of their staff in a single month because they couldn't get access to the capital markets. That alone caused more than 10,000 people to be unemployed. This was repeated everywhere.

As I said, it's easy to sit back and think the banks should have failed. However, without knowing what's going on in the background, you can't make informed decisions.

Another example, look at what happened to Avis Budget, Dollar Thrifty, and Hertz. Because they couldn't access the securitization term and conduit market, they almost went bankrupt. Avis Budget's stock price went down to .34 from the teens, Dollar Thrifty down to just over a buck, Hertz saw a similar decline. If those 3 companies hadn't gotten securitization access through the government's bazooka (TALF, which they didn't use but was the first crack in the doorway to get let in), they would absolutely be in bankruptcy court right now.

Which, bankruptcy court wouldn't have mattered since the company's main business asset, the cars, are isolated from the business in bankruptcy (courts couldn't have done much to affect the cars). Thus, creditors would seize the cars and begin to liquidate them in the secondary market to get repaid. Imagine then what would have happened since nobody was getting car loans. Used car prices would plummet and more companies would be in trouble.

You see, it's pretty simple to rage on about "too big to fail" without any knowledge of how companies work.

That being said, the aftermath of this debacle needs to absolutely be smaller banks. Not sure the best way to accomplish that. Obviously the cap on deposits failed, perhaps by total assets. That or they need to raise the capital requirements and put a cap on leverage ratios, as well as limiting Level3 assets.

However, the time to prevent a future crisis isn't in crisis, it is after the crisis is resolved so that future crises do not occur.

 

[Skitzer]

And you are referring to ....... ?

 

[alkemyst]

the problem is american is too big a pussy to let anyone fail today. Everyone gets to win/a handout.

I say if an entire school gets an "F" level, fuck them...all those teachers and the failing students are out. if they can't afford to live, deport them to the country of their choice, one way ticket.

cheap and effective.

 

[dguy6789]

the problem is american is too big a pussy to let anyone fail today. Everyone gets to win/a handout.

I say if an entire school gets an "F" level, fuck them...all those teachers and the failing students are out. if they can't afford to live, deport them to the country of their choice, one way ticket.

cheap and effective.

You want to punish students for not having access to decent schools/teachers?

 

[brencat]

The lessons from the 1930s was that sitting by the wayside didn't do much, and, in fact, hurt a lot more.

You see, it's pretty simple to rage on about "too big to fail" without any knowledge of how companies work.

LK, working in the financial industry myself, everything you illustrated is true -- letting it "burn itself out" would be much worse...in the short term. However, I'd argue we would emerge much stronger long term. Here's why...politicians don't do anything until a crisis emerges and then only do enough to get them through the next election.

The problem we have now is massive debts and massive spending. It would be okay if we actually had the courage to cut spending or raise taxes (I prefer the former thank you). But nothing is ever done correctly. The left will use the new spending as a baseline for future entitlement related expenditures (healthcare plan, extension of unemployment comp), while the right will argue endlessly for tax cuts and trickle down while not cutting spending either.

Something has to give. We can't keep privatizing profits and socializing costs. The true cost of living beyond our means MUST be felt...hence the argument for burning it all down becomes more appealing. Sure it will hurt...a lot. But what do we have now? Are we going to "grow our way out of debt". Hell No! The politicians will take any recovery dollars and find a way to spend it on more bullshit instead of paying down the debt. We have 50% of the country not paying any Federal taxes at all so the burden is already disproportionately being felt by the "rich" ($200k-$250k in high costs areas like NJ and NYC is a joke).

I'm torn by this reality. But if we don't have leaders with courage (neither party) to do the right thing, then I'm ready to try something new that doesn't involve a bailout or excess liquidity from the Fed everytime there is a recession.

 

[Tristicus]

You want to punish students for not having access to decent schools/teachers?

Because it is entirely the teacher's faults that these students fail everything.

 

[TheBDB]

What a bunch of bullshit that was...

No they aren't too big to fail, they failed BECAUSE they're too big.
Everyone (except flying pig) knows this.

Remember when this country used to stop monopolies rather than cater to them by handing them money on a silver platter after they failed?

No I don't.

 

[Tristicus]

No I don't.

Railroad/oil tycoons?

 

[Jhhnn]

Something has to give. We can't keep privatizing profits and socializing costs. The true cost of living beyond our means MUST be felt...hence the argument for burning it all down becomes more appealing. Sure it will hurt...a lot. But what do we have now? Are we going to "grow our way out of debt". Hell No! The politicians will take any recovery dollars and find a way to spend it on more bullshit instead of paying down the debt. We have 50% of the country not paying any Federal taxes at all so the burden is already disproportionately being felt by the "rich" ($200k-$250k in high costs areas like NJ and NYC is a joke).

I think there's a larger point you're missing because of too narrow a focus, and because of the common misconceptions as to who's rich and who's not.

Increasingly, over the last 30 years, it's been the investor class who's reaped the benefits of our society. Changes to the tax structure, offshoring, financial "innovation", and the purposeful weakening of Labor have shifted income to the tippy-top, and have shifted the source of income from work to investment.

Offshored manufacturing increases profits and reduces jobs. Quashing Labor reduces wages at the same time. To hold consumption high, to support the investor class, various mechanisms have been employed that ultimately amount to socialism for the rich. Capital gains taxes are slashed, to encourage investment, and those who have the money to invest do so, in China and in govt securities necessary to pay for deficits created from slashing upper income taxes. Net investment in this country's productive enterprise actually decreases. In order to do more of the same, EIC is created, which supports consumption and quells labor unrest. More govt debt, which supports the investor class.

The margin is better for them, obviously, in offshored production and low taxes plus investment in govt securities than it was pre-Reagan, otherwise the changes wouldn't have been made, and would not continue.

People who really are rich laugh at middle class notions of who's rich, as well, and exploit it ruthlessly. Most of the people in the top 1% of incomes aren't rich, certainly not by the standards of the top .01%. The income distribution graph of the top 1% is nearly the same in appearance as the graph for all working Americans.

The notion that those at the top are over-taxed is laughable, because most of their income is derived from investment, which is taxed at a much lower rate than earned income. In 2007, the top 400 filers paid 17% on incomes that averaged $345M, iirc, and these guys only pay 15% on enormous incomes derived from risking other people's money, not their own-

http://www.nytimes.com/2010/04/01/business/01hedge.html?th&emc=th

US tax structure is *not* progressive at the top, not at all, and the presence of too much money in the hands of too few people encourages risky behavior, simply because huge losses by them that affect the whole economy affects their personal lifestyles not in the slightest...

Edit for accuracy-

http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument

 

[alkemyst]

You want to punish students for not having access to decent schools/teachers?

It's a combination of all of them including the parents.

Same with big business...you don't make a profit, someone doesn't get the bonus or pay. In the past CEO's just skipped a year or two of compensation benefits....today they reward themselves with bonuses based on less losses than projected.

Someone has to take the bullet.

 

[disappoint]

Railroad/oil tycoons?

Also Ma Bell ---> baby bells. (phone company)

 

[bfdd]

I think there's a larger point you're missing because of too narrow a focus, and because of the common misconceptions as to who's rich and who's not.

Increasingly, over the last 30 years, it's been the investor class who's reaped the benefits of our society. Changes to the tax structure, offshoring, financial "innovation", and the purposeful weakening of Labor have shifted income to the tippy-top, and have shifted the source of income from work to investment.

Offshored manufacturing increases profits and reduces jobs. Quashing Labor reduces wages at the same time. To hold consumption high, to support the investor class, various mechanisms have been employed that ultimately amount to socialism for the rich. Capital gains taxes are slashed, to encourage investment, and those who have the money to invest do so, in China and in govt securities necessary to pay for deficits created from slashing upper income taxes. Net investment in this country's productive enterprise actually decreases. In order to do more of the same, EIC is created, which supports consumption and quells labor unrest. More govt debt, which supports the investor class.

The margin is better for them, obviously, in offshored production and low taxes plus investment in govt securities than it was pre-Reagan, otherwise the changes wouldn't have been made, and would not continue.

People who really are rich laugh at middle class notions of who's rich, as well, and exploit it ruthlessly. Most of the people in the top 1% of incomes aren't rich, certainly not by the standards of the top .01%. The income distribution graph of the top 1% is nearly the same in appearance as the graph for all working Americans.

The notion that those at the top are over-taxed is laughable, because most of their income is derived from investment, which is taxed at a much lower rate than earned income. In 2007, the top 400 filers paid 17% on incomes that averaged $163M, iirc, and these guys only pay 15% on enormous incomes derived from risking other people's money, not their own-

http://www.nytimes.com/2010/04/01/business/01hedge.html?th&emc=th

US tax structure is *not* progressive at the top, not at all, and the presence of too much money in the hands of too few people encourages risky behavior, simply because huge losses by them that affect the whole economy affects their personal lifestyles not in the slightest...

according to this we have the most progressive tax system

http://www.taxfoundation.org/blog/show/23856.html

 

[Zorba]

Also Ma Bell ---> baby bells ---> Ma Bell rebirth. (phone company)

fixed

 

[Jhhnn]

according to this we have the most progressive tax system

It is progressive, until it reaches the top, where it's strongly regressive. The top, of course, is where the truly wealthy reside, despite efforts to obfuscate their very favorable tax treatment. they can hide effectively in the top 1%, so citing the top 10% is even more effective...

 

[CycloWizard]

according to this we have the most progressive tax system

http://www.taxfoundation.org/blog/show/23856.html

Pfffffffffffft. Those are just facts - they have no bearing on a P&N discussion about how certain members feel that the rich are too rich.

 

[Jhhnn]

Pfffffffffffft. Those are just facts - they have no bearing on a P&N discussion about how certain members feel that the rich are too rich.

Neither you nor bfdd have ever used "facts" in a deliberately deceptive fashion, right?

If what's been offered were a significant truth, then we'd find that the rest of the top 10% would be paying lower taxes than the 17% rate paid by the top 400 in 2007... but that's not true, is it?

What I offered and what bfdd offered aren't incompatible in the slightest, unless you're trying to convince people to believe in something that's not true...

 

[CycloWizard]

Neither you nor bfdd have ever used "facts" in a deliberately deceptive fashion, right?

If what's been offered were a significant truth, then we'd find that the rest of the top 10% would be paying lower taxes than the 17% rate paid by the top 400 in 2007... but that's not true, is it?

What I offered and what bfdd offered aren't incompatible in the slightest, unless you're trying to convince people to believe in something that's not true...

Did I quote your post?

 

[Jhhnn]

Did I quote your post?

Do I care? Bfdd did so, and you seconded the motion, so it's six of one, half a dozen of the other...

 

[alkemyst]

It is progressive, until it reaches the top, where it's strongly regressive. The top, of course, is where the truly wealthy reside, despite efforts to obfuscate their very favorable tax treatment. they can hide effectively in the top 1%, so citing the top 10% is even more effective...

One thing this kind of measurement doesn't take into account is how far ahead those at the top 10%+ are...

Once you pass that required income level to survive, and the average one to live nice, etc....that gravy is good.

Unfortunately I don't think America can do a Version 2.0 with it's steadfast infrastructure in place.

My money is on in the next 50-100 years we are no longer going to be a superpower mostly due to our own's greed.

You can see these kinds of things just in searching those that raped Costco's warranties and the like.

We have become the fat and lazy that we revolted from.

 

[CycloWizard]

Do I care? Bfdd did so, and you seconded the motion, so it's six of one, half a dozen of the other...

I don't think you know what "it's six of one, half a dozen of the other," means. That could explain a lot.

 

[Jhhnn]

I don't think you know what "it's six of one, half a dozen of the other," means. That could explain a lot.

/sigh. Replying to either you or bfdd was *the same thing*, because you both said *the same thing*.

http://www.goenglish.com/SixOfOneAHalfDozenOfTheOther.asp

Anything to add, other than denial, obfuscation, personal attack, nit-picking?

 

[ProfJohn]

What a bunch of bullshit that was...

No they aren't too big to fail, they failed BECAUSE they're too big.
Everyone (except flying pig) knows this.

Remember when this country used to stop monopolies rather than cater to them by handing them money on a silver platter after they failed?

I do believe that most of the money given to the banks has been paid back, correct me if I am wrong about this.

 

[disappoint]

Right some of you have gotten the idea that I meant banks, when I didn't. I did mention 'too big to fail' which was also attributed to banks by the media so I see where you might get that idea, but I didn't mention banks specifically.

What I meant was investment firms, aka con artists, aka crooks, aka fraudsters such as Lehman Bros., Goldman Sachs, AIG, ...etc. etc.

 

[disappoint]

Originally Posted by disappoint
Also Ma Bell ---> baby bells ---> Ma Bell rebirth. (phone company)

fixed

True, which is exactly my point, our govt. used to break monopolies apart to prevent this kind of thing, now our govt. bows down before them like a bunch of peon, peasant, spineless, chickenshit servants. Was that too harsh?