Fed to Wall Street: Drop Dead

Quote from: lucy on September 18, 2008, 08:38:31 AM

Transfer the Constitutional authority over our money to a private bankers' lovefest which takes our money and loans it back to us with interest payments due? Huh?

Ivan, have you ever heard of the Glass-Steagall Act and do you have any idea when and why it was repealed? Why this matters?

Okay, let me also ask. When the Fed says "bail-out" the banks for their losses, who actually gets the billions of dollars added to our debtload (in the trillions, now, I might add)?

This is what I gleaned about the Glass-Seagall Act. The Glass Steagall Act aimed to prevent commercial banks from selling securities in failing companies to cover debt owed the banks.

I don't know why it was repealed but Greenspan apparently had something to do with it. As to the failure of Lehman, it was an investment bank, not a commercial bank that small depositors would normally deal with.

I don't understand your reasoning behind "our money" unless you are speaking of the monetary system authorized by the Constitution. The money handled by the FRS is only partly our money as it is a fractional reserve system. I don't know the figure today but I am betting that 8/10 of the outstanding money has simply been created and has no real backing. This trait of the system is good in that it permits easy and rapid expansion and contraction of the money supply, and yet it is bad in that the capability can be abused.

I don't know who gets the bail out money. Maybe notoc can tell us. There are risks involved in loaning money, which is borne out by the failures of major banks, so that should be a clue as to why the money lent bears a higher interest rate than the interest the depositors receive.

Breaking it down to local level, a bank has a lot of overhead, as does any business organization with a large number of employees receiving decent pay and benefits. So a lot of the profit from lending is used to pay the the help, the utilities, the insurance, and the property taxes.

I am a small investor myself and I expect a nice return on my risk money. So the activities I help to finance by buying bonds from the borrowers have to pay more than just my interest costs. In saying this I am not trying to cover for some greedy robber barons but you do need to realize that money borrowed does not come for free.

And one more point to remember. My daughter, who is behind on her credit card payments and is living beyond her means seems to have a hard time realizing what I have just said. It comes from a failure to accept responsibility for their behavior and to make good on their debts. This seems to be a common trait of the "me" generation.

No one is forcing us to borrow the money at those rates for the reasons we do borrow.