Hey protesters: Look at what Europe just did to banks!

[dustup]

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Hey protesters: Look at what Europe just did to banks!
October 27, 2011 |  6:23 pm
 
 
Jean-Claude Trichet
The European Union's late-night deal to save Greece from defaulting on its bonds had two ugly elements for banks and other private investors in Greek debt. Those who resent the financial industry for recovering so much faster than anyone else from Wall Street's epic collapse may find some satisfaction in this development. For everyone else, it's a little troubling.

A centerpiece of Greece's rescue is a deal that EU leaders negotiated with representatives of private investors, led by a banking trade group called the Institute of International Finance. The deal calls for investors to voluntarily agree to write off 50% of the Greek debt they hold in exchange for a guarantee that they'll be repaid on the rest.

Although it's better than a 100% loss, a 50% haircut is still pretty bad, at least for those who paid face value for Greek bonds. What makes it worse, though, is the characterizing that the loss is voluntary. That appears to prevent holders of the debt from cashing in the credit default swaps they bought as insurance on the bonds.

To the extent that the average person knows anything about credit default swaps, he or she probably thinks they're exotic and risky financial instruments that amplified the impact of Lehman Bros.' demise. In fact, they can be a useful tool for hedging risk. And if investors can't hedge, they'll be less willing to take chances with their money, restricting the flow of capital. That's a bad thing for the economy.

Read More Here: http://opinion.latimes.com/opinionla/2011/10/hey-protesters-look-at-what-europe-just-did-to-banks.html

 [This is not a cure, it is a bandage. The worst is yet to come.] LA Times 2011 Oct 27 (Cached)The EU has temporarily put the Greek debt crisis at bay by requiring all banks and other private holders of Greek bonds to accept a 50% write-down in face value. That's a reasonable move, but not everyone is equal............ Governments and the UN's IMF who hold Greek bonds were allowed to maintain full face value............

[ivanm]

"The European Union's late-night deal to save Greece from defaulting on its bonds had two ugly elements for banks and other private investors in Greek debt. Those who resent the financial industry for recovering so much faster than anyone else from Wall Street's epic collapse may find some satisfaction in this development."

How many of us have really been hurt by bailing out the banks? A hell of a lot more would have  been hurt if these large firms had gone down.

In a large modern economy borrowed capital is the life blood of commerce, and when the banks either cannot or will  not lend money to the business community then we all hurt.  For example, I go into a dealership and want to finance a new car.  If the dealer cannot find a lender then the deal falls thru and we both get left out and some kid in the office or back in the shop may lose his or her job if this goes on for long. 

So if you want to get an economy back on its feet then it is imperitive that the banking system be put back on its feet because their money is needed for growth ventures and for everyday business expenses. 

[ivanm]

dusty, if the libertarian concept of money and banking is so superior then why hasn't it been implemented?  I have been hearing this same stuff since Ross Perot was a presidential candidate.  When are you guys gonna either shit or get off the pot?

Central banking and fractional reserves are very common traits of most banking systems.  Frankly I would rather have the FRS managing our money than the crooked and incompetent politicians and bureaucrats in WDC.

[dustup]

"The European Union's late-night deal to save Greece from defaulting on its bonds had two ugly elements for banks and other private investors in Greek debt. Those who resent the financial industry for recovering so much faster than anyone else from Wall Street's epic collapse may find some satisfaction in this development."

How many of us have really been hurt by bailing out the banks? A hell of a lot more would have  been hurt if these large firms had gone down.

In a large modern economy borrowed capital is the life blood of commerce, and when the banks either cannot or will  not lend money to the business community then we all hurt.  For example, I go into a dealership and want to finance a new car.  If the dealer cannot find a lender then the deal falls thru and we both get left out and some kid in the office or back in the shop may lose his or her job if this goes on for long. 

So if you want to get an economy back on its feet then it is imperitive that the banking system be put back on its feet because their money is needed for growth ventures and for everyday business expenses. 

B of A net profit for third qtr was $6.2 Billion.....why do you think they need a bailout When was the last time you went to buy a new car and was told by he dealer they couldn't find financing .....sounds like you are doing a lot of whining here for Pro-Bank bailout for without any reason........
Many people have lost their jobs in dealerships....due to the economy down turn....very few people are getting their cars serviced or are trading for new ones due to the economy.....not because the banks and auto industry didn't get bailed out.....which only benefited BIG BUSINESS....not the little guy that is struggling.......

Banks are in trouble due to their ignorant, greedy ventures into the Derivative market.......when they screw up they should pay.....not US!

[dustup]

dusty, if the libertarian concept of money and banking is so superioro then why hasn't it been implemented?  I have been hearing this same stuff since Ross Perot was a presidential candidate.  When are you guys gonna either shit or get off the pot?

Reminder....I am not a Libertarian....I am independent   

#1 is due to Congress and the POTUS lacking intestinal fortitude to make the hard correction.....

#2 Also, Because big corps have congress by their short curly's ..........feed the monster!

[ivanm]

B of A net profit for third qtr was $6.2 Billion.....why do you think they need a bailout When was the last time you went to buy a new car and was told by he dealer they couldn't find financing .....sounds like you are doing a lot of whining here for Pro-Bank bailout for without any reason........
Many people have lost their jobs in dealerships....due to the economy down turn....very few people are getting their cars serviced or are trading for new ones due to the economy.....not because the banks and auto industry didn't get bailed out.....which only benefited BIG BUSINESS....not the little guy that is struggling.......

Banks are in trouble due to their ignorant, greedy ventures into the Derivative market.......when they screw up they should pay.....not US!

For example, the GM dealers lost their financing from GMAC.  The last three times I have bought a car the dealer spoke of having to scrounge around to get suitable deals.

If GM had not been bailed it probably would have shut down, and guess what, no more GM cars.  The local dealership continues to set sales records so people are buying in this area. 

When a bank goes belly up then a lot of little people can get hurt, so it is not so much of bailing out the bank as it is to salvage the accounts of the little people.
 

[dustup]

For example, the GM dealers lost their financing from GMAC.  The last three times I have bought a car the dealer spoke of having to scrounge around to get suitable deals.

If GM had not been bailed it probably would have shut down, and guess what, no more GM cars.  The local dealership continues to set sales records so people are buying in this area. 

When a bank goes belly up then a lot of little people can get hurt, so it is not so much of bailing out the bank as it is to salvage the accounts of the little people.
 

Peoples money in Banks are protected under FDIC......how is bailing out Banks protecting little people if Government backs the FDIC?..........If a Bank fails the FDIC takes it over to protect the little people.....

[ivanm]

Peoples money in Banks are protected under FDIC......how is bailing out Banks protecting little people if Government backs the FDIC?..........If a Bank fails the FDIC takes it over to protect the little people.....

The FDIC can be overwhelmed and when  that happens the taxpayers  get to pick up the slack.   

Small investors are not protected by the FDIC but deal indirectly with large investment banks when they buy on margin.   

When a large bank is bailed out then the lines of credit stay open and the business community can borrow to make payrolls, buy feedstock, and keep employees on board.  Our economy is very dependent on borrowed money.

I don't like the bailouts either but people a lot smarter than I am must have thought it was the appropriate thing to do.  There were thousands of everday office workers who lost their jobs anyway but without the  bailout there would have been thousands more who would have lost their jobs.  The numbers are mind boggling, but when a mega bank lays off some 20,000 employees at a pop it leaves me to wonder what all those people do for the bank.

[dustup]

The FDIC can be overwhelmed and when  that happens the taxpayers  get to pick up the slack.   

Small investors are not protected by the FDIC but deal indirectly with large investment banks when they buy on margin.   

When a large bank is bailed out then the lines of credit stay open and the business community can borrow to make payrolls, buy feedstock, and keep employees on board.  Our economy is very dependent on borrowed money.

I don't like the bailouts either but people a lot smarter than I am must have thought it was the appropriate thing to do.  There were thousands of everday office workers who lost their jobs anyway but without the  bailout there would have been thousands more who would have lost their jobs.  The numbers are mind boggling, but when a mega bank lays off some 20,000 employees at a pop it leaves me to wonder what all those people do for the bank.

Businesses running on credit are not sound......one hiccup in the economy can be deviating..........I ran my own business and never borrowed a penny......I am sorry that people lost their jobs due to the poor choices management made.....but in no way should government be rewarding industry or Banks for bad choices by using bailouts......just like "separation of Church and State" there should be a "separation of business and State".......government should stay out of the finance business.......

The FDIC protects small peoples money in banks.......If small investors make bad choices in markets they should loose what they put at risk....derivatives are a good example......

[ivanm]

Businesses running on credit are not sound......one hiccup in the economy can be deviating..........I ran my own business and never borrowed a penny......I am sorry that people lost their jobs due to the poor choices management made.....but in no way should government be rewarding industry or Banks for bad choices by using bailouts......just like "separation of Church and State" there should be a "separation of business and State".......government should stay out of the finance business.......

The FDIC protects small peoples money in banks.......If small investors make bad choices in markets they should loose what they put at risk....derivatives are a good example......

Little businesses do need to be very careful about their borrowing, and the biggies should be careful, but at times they go nuts.  Corporations have an advantage over the small operation in that they can raise billions by issuing common stocke and have little to no obligation to repay it.  They can also issue a lot of corporate bonds, long term at that, and all they have to do is to pay the interest.

For example, I own a few GE bonds and don't care if they ever repay the loan as long as I get the interest every 6 months. To them it is an investment in that they can borrow from the market at say 5 percent and use the proceeds to make maybe 10 percent or more.  Why should they want to pay back the cheap money as long as things are going well?   

I think the banks went down because of some rather questionable investment mechanisms, but normally those big banks are a solid risk as long as they make prudent investment decisions.  We could never have the amazing standard of living we enjoy if companies did not borrow money and take risks, some being long term and some being short term.  It is a bit like a large farmer borrowing to plant his crop to be harvested next year.  Yes, he may go belly up but most farmers wouldn't even get to operate without borrowing large amounts of money.  It is a calculated risk, just as corp. borrowing is a calculated risk.  The farmer is in a very risky business but he can purchase hazard insurance to help weather a crop failure.

Once again, it is not a matter of rewarding banks for bad decisions or shaky business practices but a matter of trying to help the thousands of employees and customers who may get hurt by these questionable practices.  Don't take me wrong as I am no lover of banks.  They have a license to steal and the stingy bastards use my deposits for practically nothing to lend out at much higher rates of interest.  They do have their expenses but I see collusion between the FRS and the local bankers, who will gladly off you 0.2 percent or less on your savings while at the same time can charge what the traffic will bear for their finance money.

I have a checking account and a small amount of savings as a contingency fund, and i usually borrow to buy cars if the rates are less than what I can make in the stock market.
Once again, it is a calculated risk.