U.S. Banking System gets nationalized; any future benefits?

Lago PARANOIA · Post by **Lago PARANOIA** » Wed Oct 29, 2008 8:23 pm

Well?

Just as an aside, it always seems that when the fiscal conservatives get the nation to flirt with/suck the dick of right-wing economic policies and the US/UK gets bitch-slapped and forced to enact left-wing policies to save its bacon there's always a net gain in the end.

See: slavery, opposition to TVA, gold standard, Keynesian beating lasseiz-faire economics (only to be replaced with supply-side economics), Margaret Thatcher nationalizing the coal and gas industries, etc.

ckafrica · Post by **ckafrica** » Wed Oct 29, 2008 9:12 pm

Well US is the only country I can think of that has such a diffusion of regional banks with so few national ones. I'm not sure if it's good or bad but my experience in Canada was that we were not much more fucked than we were when we had smaller banks.

They're banks. They nickel and dime you until you're a serf

Surgo · Post by **Surgo** » Thu Oct 30, 2008 4:41 am

I don't know about benefits, but I certainly can see some downsides. "We're too big to be allowed to fail" isn't going to make you take the crazy risks like conservatives fear because there still are big-ass penalties for failure, but it's not exactly a healthy attitude either.

Josh_Kablack · Post by **Josh_Kablack** » Thu Oct 30, 2008 5:52 am

I seriously want to get just one box of the giant sized candy-bars for halloween, sit out on my front steps and tell everyone "sorry, all out", except for the oldest/biggest kid in each group - they one of the king sized bars, and I tell everyone "here, you're to big to fail".

But I'm worried the little commie punks might egg the house if I tried those sorts of sensible emergency measures.

Koumei · Post by **Koumei** » Thu Oct 30, 2008 8:32 am

I want to get a box of chocolate bars then sit outside my house, eating them on Halloween. If any kids dare come up to do the Trick or Treat routine, I'll shout "WHAT?! Fuck the Hell off, this isn't America you little shits!"

Because "A bit of Fry & Laurie" teaches us that this is the right thing to do. Actually, they throw the kids out the 8th story window, as a way of demonstrating the impact-absorbing capabilities of Tidyman's carpets... only to miss. But the point still stands.

Josh_Kablack · Post by **Josh_Kablack** » Thu Oct 30, 2008 5:09 pm

And the hits just keep on coming {Ok, religious hypocrisy}

TarkisFlux · Post by **TarkisFlux** » Thu Oct 30, 2008 5:34 pm

Well, the way the partial nationalization is supposed to work is they have to pay us annually on the super-preferred stocks we bought, and in a few years the amount they have to pay us jumps. They're also supposed to buy back the stock and thus get us out of the industry in a few years (before the rate jumps, that's there incentive). So as long as they don't give all the money away as bonuses/compensation/regular dividends or continue crappy business practices that don't leave them enough money to continue (much less pay us back), the US Treasury should see a profit on our investment. The only other long term future benefit would be instituted in any new laws or regulations.

I'm still skeptical, because there's still too many ways for a bank to fvck this up, and now that they're too big to fail we'll just keep bankrolling them. I'd much rather see a complete nationalization of the banking system a la Heinlein's suggestion in For Us the Living, but I'm a socialist on this issue.

SunTzuWarmaster · Post by **SunTzuWarmaster** » Sat Nov 01, 2008 5:43 pm

Tarkis, I get what you are saying. However, there is something about this situation that bothers me:

Banks: Help! Help! we have gots no monies left!
America: Here, we will give you some monies! But... you totally have to give it back when you are done. And more!
Banks: Um, yea, just give us the money...

I mean, we are offering a loan to the banks that made bad loans. What do you think the chances of them actually paying it back are? How can we punish them if they don't?

Lago PARANOIA · Post by **Lago PARANOIA** » Sun Nov 02, 2008 12:44 am

I mean, we are offering a loan to the banks that made bad loans. What do you think the chances of them actually paying it back are? How can we punish them if they don't?

That's why it's extremely important that Obama wins this election.

SunTzuWarmaster · Post by **SunTzuWarmaster** » Sun Nov 02, 2008 2:00 am

Care to explain?

Absentminded_Wizard · Post by **Absentminded_Wizard** » Sun Nov 02, 2008 3:59 am

I assume Lago figures that a Republican president won't make any effort to punish the banks for defaulting.

Username17 · Post by **Username17** » Sun Nov 02, 2008 8:36 am

The entire Federal Reserve system is about loaning money to banks and having them pay it back. That's what the prime rate is. And it's deeply unfair. The Feds loan money at interest to privately owned banks, who in turn lend that very money out to private individuals and corporations at higher interest rates. The government in essence is lending money to the citizenry just like it was a national bank already - it's just that we have an extra parasite layer of "capitalists" who take a percentage off the top of our government lending programs in exchange for calling the whole thing "private enterprise" instead of "socialism."

Student loans, for example, work like this: the government makes rules about who gets loans and how much and what kind of interest they pay. Then they physically give that money to private companies like Sallie Mae and then the private company loans the money out to students according to the government mandates. Then when you repay the loan, the company turns around and pays the government back for using its money in the first place, and then it keeps the rest. And get this: the loan is guaranteed by the government. If that loan fails, the government comes in and foots the bill and there's no harm.

So right now the US government is aking all the risk and providing all the capital. I honestly have no idea why we even have "private banks."

-Username17

JonSetanta · Post by **JonSetanta** » Sun Nov 02, 2008 8:45 am

FrankTrollman wrote: I honestly have no idea why we even have "private banks."

To keep the rich richer without regulation. I hope that was a joke on your part.

SunTzuWarmaster · Post by **SunTzuWarmaster** » Sun Nov 02, 2008 12:54 pm

Banks give out more than just student loans, and I do not recall them being regulated to the same point on housing/car/small business loans (hence why they made bad housing loans). The whole student loan thing is really fucked up anyways.

TarkisFlux · Post by **TarkisFlux** » Sun Nov 02, 2008 7:23 pm

Yeah Sun, that's my worry too. Once you're too big to fail, you're too big for the government to stop giving you money when you fvck up, and potentially too big to punish meaningfully for your mistakes. It'll be "fun" to see how this works out though :-/

FrankTrollman wrote:

[Stuff about the fed and guaranteed loans]

So right now the US government is taking all the risk and providing all the capital. I honestly have no idea why we even have "private banks."

-Username17

Yeah, private banks are a silly thing. It'd be quite a bit easier to just lend directly, and use the resulting capital from interest to subsidize tax revenue/straight pay for fed programs or even issue it back to the people as a freakin check. Part of me hopes that the banks keep screwing up, and we nationalize the whole lot of em; the rest of me is slightly terrified of how bad circumstances would have to get to make that happen.

Orion · Post by **Orion** » Tue Nov 04, 2008 1:17 pm

Frank -- I'll take your word that the current crop of bank managers are parasites, but it doesn't seem like this is *necessarily* the case. I mean, I'm all for governments programs, but

These banks, they are producing a certain degree of actual value, aren't they? I mean, they do actually administer the loans and send people angry letters if they don't pay and what-not. Presumably these duties would devolve to the government if the banks were nationalized, so we'd be paying for the administrators either way.

We wouldn't, of course, be paying for the "profits" of the bank owners, but theoretically this is countered by the fact that they will work to make the bank's as efficient as possible. If the capitalists are making off with huge santa sacks of profit, can't we just raise the rates on them? If we supply their funding and regulate their business, they already *are* a branch of the government, and we can totally reclaim as much of that money as we want without needing to abandon to pretense of "capitalism."

SunTzuWarmaster · Post by **SunTzuWarmaster** » Tue Nov 04, 2008 2:52 pm

Examples of how student loans are fvcked up:

A friend of mine took out the max amount of loan each semester. Interest on these loans does not begin to accrue until graduation. He puts this money into CDs. He makes all of the interest on ~30K in cash over 4 years.

My girl takes out student loans (interest starts 6 months after graduation, bank agrees to pay it until then). She uses the loans to pay for school. We pay off the loans in 12 months. The bank takes a loss on the loans because they were expecting a longer payback. Really, the bank takes a LOSS on loans that the federal government set the rate for, wtf?