US may spend up to two trillion to save banks: report

[Pepsi]

• Tweet

This bank mismanagement is getting rather expensive.   I see the need to keep the banks solvent (obviously), but I don't agree with this concept of bailing out shareholders in failed companies with public money. 

US may spend up to two trillion to save banks: report

The United States may spend up to two trillion dollars to bail out banks reeling from losses amid financial turmoil and a deepening recession, the Wall Street Journal reported Thursday.

The US Congress this month agreed to release the second half of a 700 billion dollar financial bailout fund, most of which have so far been used to shore up ailing banks, but the report said lawmakers might be asked to approve even more money for the purpose.

Government officials have discussed spending another one to two trillion dollars to help restore banks to health, the Journal said, quoting people familiar with the matter.

Some of the remaining 350 billion dollars from the Troubled Asset Relief Program (TARP) fund has already been earmarked for other efforts, including aid to auto makers and to homeowners facing foreclosure, the report said.

A planned "bad bank" to buy troubled bank assets could be seeded with 100 to 200 billion dollars from the TARP fund with the rest of the money -- as much as one to two trillion dollars -- raised by selling government-backed debt or borrowing from the Federal Reserve, according to the Journal.

The administration of President Barack Obama is also seeking more effective ways to pump money into banks, and considering buying common shares in the banks, it said.

http://rawstory.com/news/afp/US_may_spend_up_to_two_trillion_dlr_01292009.html

[Michael]

What is amazing is how companies even stay in business by giving out the immensely exorbitant salaries to some...while throwing the dog bisquits to others.

No doubt that those who have done the hard work and financial end of a college education should make the greater salaries.  But the extremes seem ridiculous. 

You could pay 10 - 20 people for what some make.  Even MORE for what others make. 

It appears that we are giving money to failed businesses to extend their life.   Until they fail AGAIN...after the money's gone?     What's up with THAT? 

[lucy]

Without oversight and transparency, the money might has well be thrown out to sea for the most part/

What is sad to me at the moment is how unwilling we are to forget our differences and look at how our lives are ultimately so interconnected for the most part...there is a reckoning down the road, from what I see. A little scary.

[Michael]

Day of reckoning is right. 

It must be rough to be unemployed right now.  Rough to be laid-off. 

Yet even those of us who ARE employed, are in a stress level much greater than it ever was.  We are in a minute-by-minute struggle to continuously prove our worth.  Some...just to survive from paycheck to paycheck.

Many (secretly or not), refuse to sway from the notion that individual and even social value is mainly determined by the bank account(s).   Historically...even much racial discrimination has been based upon that.

[Pepsi]

Without oversight and transparency, the money might has well be thrown out to sea for the most part/

I agree there needs to be much better transparency in the bank bailout with public money.   Obama has promised to make this better, and it can only be better than it was in the previous administration who wouldn't even be transparent with congress.   We shall see..

[Observer]

Let them fail.

[Michael]

It is the people who lose their jobs that I care about.  Not the big corporate wheels.  Not those who have stockpiled huge sums of money after the wash.

In some parts of the world, there is a great division between the "haves" and the "have nots". 

I feel bad for the young folks though.  They don't exactly know if their future is going to be that of a billionaire or a homeless person.  It can sometimes go either way.

[notoc]

Let them fail.

Do you not use banks, Observer? No savings, no investments... how about your creditors, do they use banks?

[Observer]

Do you not use banks, Observer? No savings, no investments... how about your creditors, do they use banks?

Sure, I use a bank. My deposits in it are Federally insured. It is a small, family owned bank that is quite solvent. I own a business that is very stable and is in fact, likely to grow considerably in periods of economic uncertainty. I have no creditors. There is not a person on this planet to whom I owe a dime.

I started my business without taking out a loan. The business has grown without ever taking out a loan. I purchased my land without taking out a loan and I will complete my house without taking out a loan.

It is a little thing called "fiscal responsibility". If you don't spend money you don't have, you don't have to worry about being crushed by debt. It is too bad the government can't bring itself to operate the same way.

[lucy]

Think how cheap everything would be if no one could take out a loan to pay for cars, houses, furniture, etc...

There would be a lot fewer banks as well...How would they ever make any money if they didn't have loans paying interest?

etc/

It would be an amazing society at that...all cash.

[Observer]

The problem is that we have become a society that wants gratification NOW.

[lucy]

I have to agree with you Observer, as well as the fact that we tend to want to show off for others for the sake of appearances. Some of the wealthiest people I have known in my lifetime have been some of the most unassuming and lived rather modestly...those who TRY to flaunt something indicate either a deep insecurity perhaps or a lot owed to the bank, so to speak....

One of the wealthiest men I knew in NYC many years ago wore overalls and cleaned his own buildings, often being mistaken for a janitor rather than a real estate mogul/:D He was delightful.

[notoc]

Sure, I use a bank. My deposits in it are Federally insured. It is a small, family owned bank that is quite solvent.

That's right, your deposits are Federally insured. If for any reason your bank becomes insolvent you will not suffer a loss and nor should you, because your taxes go towards paying for that Federal insurance. Unfortunately the thing with insurance is that it can't cover everyone, that's what makes it so relatively cheap.

If 'just' 25% of the total banking system were to fail there would be no more Federal insurance to cover the deposits within the remaining 75%. Every remaining depositor would panic and the whole system would collapse, taking every bank with it, even your family owned bank of choice.

I own a business that is very stable and is in fact, likely to grow considerably in periods of economic uncertainty. I have no creditors. There is not a person on this planet to whom I owe a dime.

Very wise, do you do all your business in cash?

I started my business without taking out a loan. The business has grown without ever taking out a loan. I purchased my land without taking out a loan and I will complete my house without taking out a loan.

Excellent, will it be the first house you have owned?

It is a little thing called "fiscal responsibility". If you don't spend money you don't have, you don't have to worry about being crushed by debt. It is too bad the government can't bring itself to operate the same way.

How about all your customers, do they live as you do? You do no work for companies, no government contracts?


The reason I'm asking these things is because the vast majority can not live as you do. I am not saying I disagree with your little thing called "fiscal responsibility" but, if everyone did as you do an economy would never expand, the industrial revolution would never have happened and everyone would still be ploughing with horses.

[Pepsi]

If 'just' 25% of the total banking system were to fail there would be no more Federal insurance to cover the deposits within the remaining 75%. Every remaining depositor would panic and the whole system would collapse, taking every bank with it, even your family owned bank of choice.

the resulting run on the banks, with depositors wanting to get the money out of their banks before their banks fail is really just a couple large bank failures away. 



a typical bank has what 1/37 of the deposits actually on hand?   House of cards, and these are big cards here which without government intervention would have failed.   Citibank?  Bank of America?  Can you imagine?

[lucy]

Better to not keep all your eggs in one basket these days...

I put just enough in our main account to cover basic expenses each month. Looking at the stock value, which is a bit down at the moment...

Really, no one knows what the future will bring, but God help us if we start looking like the above picture.