Fed Gave Banks Eye-Popping Emergency Loans, Without Telling Congress 629
An anonymous reader writes with this excerpt: "The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed's below-market rates, Bloomberg Markets magazine reports in its January issue."
Is that all? (Score:5, Funny)
Indeed. Only 13 billion. (Score:5, Insightful)
You want bigger numbers?
Look at the bond sales... Quantitative Easing...
1. Treasury sells them.
2. Someone buys them.
3. Someone sells them on to the FED during POMO.
4. Profit.
Look, all filled in. No questions.
Guess who someone is.
Horray for the Fed! (Score:5, Insightful)
It seems that the Fed is the only organization in America that would rather solve problems than score political points. From all accounds, they saved the economy from a liquidity crisis that would have shut down every business in America. I say, horray for the Fed!
Re:Horray for the Fed! (Score:5, Insightful)
True. However, the principle for a central bank, when there is a liquidity crisis is: lend freely, but at punitive rates, wipe-out boards and shareholders. You can do that, because the boards have no choice, it is either that or they end broke.
By now, the FED should _own_ Wall st. and what a good occasion this would have been to put an end to the casino mentality over there. And the banks knew that, and they were desperately afraid it would happen -- so pulled every string they could to prevent it.
Unfortunately, they succeeded. The good news is, this crisis was caused because of their culture, so it will happen again, and perhaps this time, the legislator will get it right. What a waste, though.
The FED was created BY Wall Streed FOR Wall Street (Score:5, Insightful)
Just to put the actions of the FED into context.
It's purpose is to protect the banking sector, particularly a few Too Big To Fail banks. They did exactly what they were supposed to do.
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No, it was created to prevent panics and bank runs, as well as regulating the money supply. Bank runs were common and destructive -- however it was not a matter of too big to fail as bank failure was common at the time.
Simply it was found not to help anyone, and the absence of a central bank put the US at a disadvantage compared to the European states: their economies were much stabler.
Re:The FED was created BY Wall Street FOR Wall Str (Score:5, Informative)
No, it was created by Wall Street banks in order to save their asses when they screwed up and pump the leverage up too high. That's what it does.
The people who created the Federal Reserve were Wall Street:
http://en.wikipedia.org/wiki/Jekyll_Island#Planning_of_the_Federal_Reserve_System [wikipedia.org]
Paul Warburg - Kuhn, Loeb & Co. (Rothschild) - Lehman Brothers
Frank Vanderlip - National City Bank of New York - Citibank
Henry P. Davison - JP Morgan
Benjamin Strong - JP Morgan
Charles D. Norton - First National Bank of New York - Citibank
Bank runs and failures prevent banks from becoming Too Big To Fail, and taking down the entire world economy. Which they did just as soon as they were able to ramp up the leverage (backed by the FED) during the "roaring" 1920s (can you say Credit Bubble?) until the inevitable result ... The Great Depression, Hitler, World War II etc.
Banks are fundamentally unstable organisations, they operate through leverage so small negative changes cause catastrophic results, and central banks as lenders of last resort provide insurance, which allow banks to lend with higher leverage than they would if they had no insurance. The losses are obviously then socialised. This is highly desirable if you happen to be a Wall Street banker. Lucky they've got one then eh?
That is, central banks make the problem bigger. Tada, here we are again. Great Depression? Greater Depression? Greatest Depression? Are we going to see World War III as the results continue to roll round the world?
Re:Horray for the Fed! (Score:4, Insightful)
True. However, the principle for a central bank, when there is a liquidity crisis is: lend freely, but at punitive rates, wipe-out boards and shareholders. You can do that, because the boards have no choice, it is either that or they end broke.
Finally someone gets what's wrong with the scheme.
By now, the FED should _own_ Wall st.
No. They should stay out of the mudpit, it tends to get a little dirt on you. But they would have sent a very clear message to the banks that if you gamble and lose, you pay for your mistake, and dearly. Instead, the message that was sent is that someone else will pay for your mistake and you can go right on gambling.
Re:Horray for the Fed! (Score:5, Insightful)
Re:Horray for the Fed! (Score:5, Insightful)
Well, I guess it's just a matter of perspective. It is true that without intervention we would be on "our way to recovery" now, but that would be more like restoring some modicum of civilization, like functioning police, electricity and running water. As things stand now we are technically not on our way to recovery, but we are still way, way better off than what would have happened following financial armageddon.
Some people still haven't realized what was at stake back then.
Re:Horray for the Fed! (Score:5, Insightful)
Re:Horray for the Fed! (Score:4, Interesting)
The problem is that if the banks were allowed to fail on their own, not only would the investors of those banks be (rightly) wiped out, but the collateral damage would have been tragic.... Runs on ALL the banks, savings and investments wiped out, massive, depression-style unemployment.
That's the risk you run by doing business with banks known to run the fractional-reserve scam, simultaneously promising immediate access to deposits and lending them out to other customers. When a bank fails, not only is the bank (rightly) wiped out, but so are (rightly) those who deposited their funds into those banks knowing that they wouldn't be held in reserve, that they may not be there on demand in the event of a run on the bank, or perhaps ever if enough of those loans happen to default.
Those who knew better than to trust fractional-reserve banks with their money will be in a relatively good position to buy up foreclosed assets and businesses, extend loans at profitable rates, and, more generally, to begin the recovery process. I'm not saying that the failure is a good thing, but anyone able to overlook the growing risk of fractional reserves must be economically blind. This disaster has been a long time coming, and it's not because the banks were "too big to fail" or "not regulated enough", it's because they were legally permitted to commit outright fraud on a grand scale, aided and abetted by the Federal Reserve.
Re:Is that all? (Score:5, Informative)
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Between presidents (Score:5, Insightful)
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I said almost the same thing, the first time I read that they were raiding the Social Security funds. SS was doomed to become insolvent sooner or later, but with all the raids on SS, that insolvency is going to be much, much sooner.
Cue someone who fallaciously points out that SS actually makes money on those raids . . .
Re:Between presidents (Score:5, Insightful)
I will point out that SS wouldn't necessarily have ever become "doomed" without those raids. As long as your population is stable or growing you can fund that sort of thing indefinitely (so long as you create a sane and logical tax/benefit structure for it.).
Pre-raid SS didn't necessarily meet all those criteria but they had more than enough cash on hand to keep it together until Congress got its shit together and fixed the tax code, whenever that actually happens...
Re:Between presidents (Score:4, Insightful)
Isn't the federal reserve a different entity from the treasury? And isn't the federal reserve not part of the government? I'm pretty sure that's the case, it's essentially a private entity that can do whatever it wants with money it can create whenever it feels like it.
The only outrage here is that publically traded companies were lying about their health. To get angry about any other part of this means you have to question the Creature from Jekyll Island, and to do that you have to know a little more how this all works.
Huh? [Re:Is that all?] (Score:5, Informative)
And before you bemoan corporate cronyism, that isn't the only problem. We give 100% of federal revenue to the old and the poor these days
Huh?
Do you mean social security? Let me remind you, that's not a hand-out; it's paid for. And it's not "100% of federal revenue".
In any case, if you're looking at the US budget, Defense, not "the old and the poor," is the largest share. Here's the discretionary portion of the budget: http://oranges-world.com/the-federal-budget.html [oranges-world.com]
Re:Huh? [Re:Is that all?] (Score:4, Informative)
You're way off. Take a look at the link in my sig for the up-to-the-minute numbers. Also, I did say hand-out, I said money goven to the old and poor - the most favored political groups for spending, aside from corporations. Quick summary of the top 6 (as a percentage of revenue, spending is about 160% of revenue):
Don't know why people think we spend the most on defense, it's less than 20% of the budget.
Another myth is that the social security you get is what paid for. The system completely doesn't work that way - your taxes pay for your parents and grandparents. Your kids and grandkids pay for you. Any "getting out what you paid in" in a comforting illusion - it's not a 401k, no money is saved or invested any more, the government spends every cent instantly these days (and would you ever expect them to do otherwise?!).
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They think it is such a large portion because they look mostly at the discretionary budget (which the GP linked to). Defense is a huge portion of that... but that is only 38% of the total budget.
Same sort of budget games that allow people (congress critters looking to defame their opponents, mainly) to call increases in a budget "cuts", whenever the increase is less than what was originally proposed (doesn't even have to be less than inflation).
Also, OT: /. will never let you edit posts, but it would be n
Re:Huh? [Re:Is that all?] (Score:4, Interesting)
I'm a bit curious. Where do the prison systems fit in there? The nation which imprisons a greater percentage of it's population than any other nation has to budget for it somehow. Does that come under "Defense and wars", since it's mostly due to the "War on Drugs"? Or, would it come under "Social Security", since society is just taking care of a (huge) undesirable element (namely, dopeheads)? Or, maybe it comes under Federal Pensions. A guy can live a life of crime, then retire to prison, where the government will see to his needs as he ages.
Re:Huh? [Re:Is that all?] (Score:4, Informative)
Quick summary of the top 6 (as a percentage of revenue, spending is about 160% of revenue): [snip]
I'm not a mathematician, but your percentages total more than 100% and don't include any spending for salaries and wages and all the other stuff the government spends money on.
Try that again - is it more clear now?
The SSA does purchase treasuries from the government, just like most pension funds do.
The SSA only has IOUs with no economic value these days. The "securities" it has can't be sold, and are only bookkeeping entries to remind us how much new tax revenue (or borrowing) will be needed to meet our promises. (Really - they're these unique bonds that exist nowhere else but the SSA, and the SSA can't sell them).
It's exactly as if you've borrowed all the money from your 401K. There's a fincancial instrument left in your 401K - your loan to yourself - but is has no ecoomnic value: every penny for your retirement has already been spent, and you now have to put a dollar in in order to get a dollar out! Yes, that's the kind of bastards our politicians are; I'm sure you're shocked.
Re:Huh? [Re:Is that all?] (Score:4, Insightful)
Arguing statistics that were pulled out of his butt is silly. This is a poster with a mission that you're responding to, not one with referential, cited facts. Of course this is /., where they're unnecessary. Carry on.
Re:Huh? [Re:Is that all?] (Score:4, Insightful)
It's all subject to immense amounts of argumentativeness because the process is also NOT open. Every crackpot out there gets to deny reality, because reality is sooooo tough to discern. It's rife for abuse and politicking.
Like Sgt Friday used to say: Just the facts, ma'am.
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---Teach Peace. It's Cheaper Than War."
Love your sig.
Reminds me of what Pope Paul VI said: "If you want peace work for justice."
Re:Huh? [Re:Is that all?] (Score:4, Insightful)
"Don't they realize that if it really was that simple, then something would have been done a long time ago?"
Change your perspective, just a little, then take another stab at that. The statement, as it stands, assumes that someone, somewhere actually wants to do something good about the situation. In reality, the budget isn't quite as complicated as we are led to believe. Maybe a couple of pie charts aren't enough, but the problem is, those people who are in charge don't WANT us to understand. A goodly percentage of the world's wealth is transferred between corporations, and between friends and friends of friends, and the common man isn't meant to understand any of it. Politicians go to great lengths to use language that only confuses the issues.
As Baloroth stated above: "Same sort of budget games that allow people (congress critters looking to defame their opponents, mainly) to call increases in a budget "cuts", whenever the increase is less than what was originally proposed (doesn't even have to be less than inflation)."
Note that in common dialogue today, ending the tax break that the extremely wealthy currently enjoy translates into "higher taxes" on the wealthy.
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Note that in common dialogue today, ending the tax break that the extremely wealthy currently enjoy translates into "higher taxes" on the wealthy.
Today, the wealthy pay the lowest taxes than at any time in US history. Ending the so called tax cuts just sets the rate back to what it was when Bush took office, which was also the last time the US had a balanced budget. At that time, the wealthy paid the lowest taxes at any time in US history, too. The tax cuts passed under Bush lowered them further. Congress at the time knew it wasn't sustainable, which is why they had an expiration date.
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Let's see. Tax rate goes from 35% to 39%. Sounds like an increase to me.
The fallacy of the whole business is that the tax cuts were "temporary". They were "temporary" because the law required spending cuts to match tax cuts, and the only way that they could sell the tax cuts was to make them "temporary".
Of course, everyone involved knew that they were going t
Re:Huh? [Re:Is that all?] (Score:5, Insightful)
Speaking as an actual economist, you are incorrect in too many ways to discuss on slashdot.
Ahh, argument by assertion, that's a good one. You need to throw in a little more bluster if you want argument by intimidation, I fear. Argument from autority doesn't begin to work when you're anonymous (or, let's be honest, when you're an economist, since there'a always an equal and opposing economist on any topic).
That assumes that you think that revenues are where they should be. It is quite possible that the problem is not on the spending side of the equation, but the revenue side.
You seriously want to make that argument? Let's look at my deadbeat uncle, Sam.
You seriously want to argue that Sam's spending isn't the problem right here and now because is a just world he'd earn more? Because he plans to earn more? Because you'd like him to earn more? Really? Because right here, right now, he needs to live within his means, and if one glorious day he does earn more, then wonderful, then he can buy more stuff that you like.
Worse than that, would you loan this asshole money, if he were your brother-in-law? OK, maybe after. a 12-step program, but now?
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I'm finding it pretty hard to spot your actual argument in there. It seems like you decided to ignore your previous idea about "maybe it's revenue" and are now arguing "but that social speding is good, oh, and evil corparations something something". None of which makes it possible for Uncle Sam to keep spending 60% more than he makes.
Today's equivalent to the Jews are the poor
ROFL. Todays the "Jews" are the 1%, especially those evil CEOs of evil corporations, which you seem to drag into completely unrelated arguments - they've vilified everywher
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You numbers make no sense, your analogy does not work,
It's not an analogy, I just knocked 8 0s off the current federal numbers. Certainly they make no sense, but that doesn't mean they're innacurate!
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During the Carter years, when the top tax rate was 90%, the top 1% of taxpayers paid about 20% of all income taxes.
Now, with those evil, reviled Bush tax cuts for the evil and reviled rich (who clearly belong in concentration camps after we sieze their ill-gotten gains), the top 1% of yaxpayer pay about 40% of all income taxes.
Thats right, we've doubled the share that the 1% pay with those evil, reviled Republican tax cuts. Doubled it. And the size of the pie grew a lot when the incentive to hide/defer g
Re:Huh? [Re:Is that all?] (Score:5, Insightful)
And now the stupid fucks have show up comparing what percentage to income taxes is paid to what percentage of people pay them, two completely unrelated things.
Hey, asswipe. We don't tax people, you fucktard, we tax income. The reason the top 1% pay twice as much now is that they are making something like eight times the money, and taxes are lower.
You might also wonder why you appeared to be paying 100% of the property taxes on your house. That is because you are the owner of your house, and other people are not, and thus those others did not have to pay any taxes on it. Likewise, the top 1% are almost the only people making any fucking income above the poverty line, or even any money at all, so are, in fact, almost the only people paying income tax.
I know it's very strange and requires a basic concept of complicated ideas like 'Only people with things are required to pay taxes on those things. People do not have to pay taxes on imaginary things they don't have.', but maybe you can find someone to help you. Perhaps you could go to the library and explain you are one of the very stupid, and ask if they have programs to help you. Like a literacy program, but for your entire brain.
And there is more than enough if we'd put their rates back to where they were under Clinton, and stopped bailouts and war. As everyone knows [talkingpointsmemo.com].
Without the idiotic policies of constant war and constant tax cuts and constant bailouts, we'd have a slightly increasing debt right now, during the recession (Yes, even with the stimulus), and one that went away once the economy got better. (Which means we'd have been much better off going into the economic collapse.)
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People nearing retirement: it's too late to change the plan, and we can support people currently in the system on the current tax rates if we dont promise those benefits to anyone new (unlike Medicare, which is just impossible).
For people younger than 50 or so: the SS benefit pro-rates out the younger you are, and you get some of your SS and payroll taxes going into a federally-managed 401K (the government doesn't get to hold any of the money, just to manage the list of investment choices and force you to
Re:Huh? [Re:Is that all?] (Score:5, Insightful)
As to Social Security, it is a con not a deserved benefit. There's no investment of the funds that went in ("pay as you go"), something that a few generations of US voters were willing to ignore. Nor is there an obligation to pay out a particular level of benefit.
You are confusing two arguments.
I stated that Social Security is a benefit that is paid for. That is to say: I pay money to social security, and in return for this payment, social security pays me when I retire. Is that clear enough?
You state "There's no investment of the funds that went in." That assertion is irrelevant to my statement. If I were to pay some money to a private annuity, on the promise that they would pay me an annuity X years later, it makes no difference what they do with the money I pay them. What matters to me is that I have paid for a service (an annuity to be paid in X years). When I state "I paid for this service", a response from the annuity firm of "but we didn't invest your money" does not invalidate my statement "I paid for that."
You go on to state "Nor is there an obligation to pay out a particular level of benefit." This may be true-- congress reserves for itself the right to change the rules-- but it is still irrelevant to my statement. Yes, congress can, if they choose, renege on their obligations. That doesn't change the fact that social security is something that I paid for; it is merely a statement that congress can, if they chose to do so, decide not to give me a service even though I paid for it. True, not relevant. If it were a private annuity, basically you're saying that there's fine print in the contract saying that the elected board of directors of the annuity has the ability to change the payout schedule. Well, you may be right to say that I was not wise to put money into an annuity with a clause like this in the fine print. But, wise or not, while it may change whether I do get the service I paid for, it doesn't change the fact that I did pay for it.
You seem, basically, to be complaining about the way social security works. Your complaints may be true or false, but they don't address my point that social security is a benefit that is paid for.
Re:Huh? [Re:Is that all?] (Score:4, Informative)
I stated that Social Security is a benefit that is paid for. That is to say: I pay money to social security, and in return for this payment, social security pays me when I retire. Is that clear enough?
You do know that a federal judge has ruled the opposite, right? Social secuity is a tax, and no more than a tax - the government has no legal obligation to pay you anything in return. The program has always worked that way - it's not like a 401K (but IMO it should be, how can anyone still trust our thieving government to hold the money?!).
, but they don't address my point that social security is a benefit that is paid for.
Social security is a benifit where some people pay money to other people, it is not any kind of savings plan. On average, the old are more wealthy than the young - why is the money flowing that direction again?
Re:Huh? [Re:Is that all?] (Score:5, Informative)
Actually, that isn't the budget, just a pie chart representing broad expense categories.
Welcome to how the US government does budgets. It worries about how to spend the money, not about how to get it.
. For instance, if social security is bringing in 22% of the revenue and only expending 20%, then the 20% expense is not a problem. For the record, I do not know what social security brings in, but it supposedly "solvent" for another 20 years, so even if it is deficit spending, it isn't impacting what current tax dollars are being used for.
There is no concept of "solvency" for Social Security. The bonds it supposedly holds are an accounting fiction (and wouldn't come close to covering its future obligations as you admit). It has no assets to speak of. And it is running a deficit now.
Do you own your house outright, or do you have a mortgage. If you have a mortgage, then you, too, just like the SSA, are deficit spending, by using debt to offset current needs.
Don't get me wrong, there are serious problems with revenues and expenditures of the federal government, but actual deficit spending is not the problem, but a symptom. As an example, the government collects fuel taxes that it then distributes. When the economy tanked in 2009, the government spent more on highway funding than it brought in. Was that a problem, no, because it came from previous reserves, or unspent fuel taxes, from prior years. In that case, a deficit is exactly what you would expect -- accumulated reserves are used to cover current costs or deficit spending.
The problem is that the government does not have the political strength to accumulate excess reserves in good times, so instead, it uses funds from other restricted sources, such as the SSA and those organizations hold the debt of the government. Or they sell debt to other countries, like China. Personally, I would much rather the debt of the US to be owned by its citizens then the Chinese, but that's not my call.
The SSA is solvent if its current revenues plus reserves cover its current expenditures, even if those reserves are held by the rest of the government. At that point where it does not, then it isn't solvent. Currently, it is solvent. At some point in the future, without an increase in revenues or a decrease in expenditures, it will become insolvent. The fact that they are running a deficit has nothing to do with it.
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Compare the price of oil over time (with a functioning futures market and "speculators") to the price of onions, sometime. Onion prices are crazy without the speculators to even things out. Sounds like you're repeating stuff you heard, not doing the research.
The SSA doesn't have government securities in the normal sense - it has special IOUs that can't be sold. Back when it had real bonds, befor Reagan/Bush/Clinton spent it all, it was different. But what it has now have no real value.
But, if you want to cut medicare, that is in effect who you will be kicking off the roles.
It doens't matter
Re:Is that all? (Score:4, Informative)
We give 100% of federal revenue to the old and the poor these days.
Bullshit, all the cries of socialism and handouts for the lazy, criminal, and brown people are a charade to keep the crooks in power so they can continue to rob you while you blame socialism. A scheme that works quite well, apparently, so well that millions of people blame a guy who sleeps in an alley for their stolen wallet and take up arms to defend the billionaire who actually stole it, even sending more money to his campaign fund.
Welfare for the poor: $191 billion [ourdime.us]
Tax breaks and loopholes: $1 trillion [washingtonpost.com]
Welfare for millionaires: bailouts, corporate welfare, no-bid contracts, war profiteers: $trillions
So go on being so focused on boogeymen like socialism, sharia law, and global warming denial that you're oblivious to the real crimes, corruption and waste plaguing this shithole we absurdly proclaim "the greatest country on earth", you're following the script to a tee.
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We give 100% of federal revenue to the old and the poor these days.
Bullshit, all the cries of socialism and handouts for the lazy, criminal, and brown people are a charade to keep the crooks in power so
You're responding to an argument that only exists in your head - or at least its nowhere in my post. Check the link in my sig for numbers to the dollar and cites for everything. We give about 100% of federal revenue to the old and the poor, about 30% to defense, 9% to interest on the debt, and 20% or so to everything else. Those are just numbers, they have no political agenda.
You'll never see me arguing for a corporate bailout! But if we're not prepared to cut all spending by about half, we're going unde
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But these are generally (renewable) overnight loans so wouldn't you have to multiply by 365 to get the yearly rate we normally think of?
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Capitalism (Score:4, Insightful)
Re:Capitalism (Score:5, Insightful)
Re:Capitalism (Score:5, Insightful)
It's called Corporatism. The word "capitalism" doesn't belong anywhere in describing the concept.
Re:Capitalism (Score:5, Interesting)
You sort of beat me to it, but I think the best word for what we have is simply cronyism. That gets you down to one -ism that describes it all. It applies mostly to corporations, but if you use the word cronymism it covers union corruption too. Anybody who opposes cronyism should be just as upset about the way bondholders were screwed in favor of unions during the GM bankruptcy as they are about the way banks are profiting.
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Doesn't have to be corporatism. Could be "richguyism" or, as it's commonly known, Plutocracy. However, it just so happens all that money is in corporations in our current economic structure.
Oh, and it's an inevitable result of laissez faire policies when capitalism is allowed to run amok. money is power. letting it all accumulate in the hands of a few just hands the reigns of power over to them.
Re:Capitalism (Score:5, Insightful)
Oh, and it's an inevitable result of laissez faire policies when capitalism is allowed to run amok. money is power. letting it all accumulate in the hands of a few just hands the reigns of power over to them.
Wrong. Lending banks $1.2 trillion is not in the least a laissez faire policy. How could you miss this obvious rebuttal? The laissez faire policy would be to let these businesses fail hard.
More generally, I notice in this sort of situation, that the blame always goes to the same ideologies even though usually, there's usually no reason to. It's really tiresome.
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there is no such thing as true laissez faire. it's a smokescreen for exactly the kind of plundering we've seen. true laissez faire is basically anarchy, and it's the only thing that could possible be worse than what we have right now.
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Free Market Capitalism is a good thing for a tiny fraction of the population
FTFY.
just like communism... (Score:3)
It's interesting that some people used to say similar things about the Eastern Bloc, "They have stalinism; the word 'communism' doesn't belong anywhere near it!" The response to that statement would be that stalinist despotism leads inexorably from communism.
I hope the equivalent statement isn't true for linking crony capitalism and pure capitalism; I don't think the claim can be dismissed out of hand. (Speaking as a libertarian leaning moderate.)
Re:just like communism... (Score:5, Interesting)
Here is an interesting post on Reddit from someone inside the hedge fund industry about how the game is really rigged. It's an insiders view of how a segment of the corrupt economic system runs.
http://www.reddit.com/r/occupywallstreet/comments/muqzv/wall_of_text_i_work_in_wall_street_and_work_in [reddit.com]
Re:Capitalism (Score:5, Insightful)
That isn't capitalism, it's Crony Capitalism. Our political class has become so corrupt they can't even see the problem.
This isn't communism. It's Maoism. It's Stalinism. Get it? Theoretical ideals go out the window when they hit reality. Any ideology that denies reality is doomed to failure, not to mention embittering its adherents or resulting in significant cognitive dissonance and rationalization.
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No, ideological communism is very different from Stalinism. Marx wasn't envisioning mass executions and people in gulags.
Moreover, the question isn't how similar they are, it's whether one follows from the other. We've seen that trying communism usually leads to some type of despotism (Stalinism, Maoism, etc.) Does crony capitalism always follow from trying to do capitalism?
Re:Capitalism (Score:4, Insightful)
But capitalism IS possible. We had it in the US from the end of Reconstruction until 1913, and had a shadow of it for much longer than that.
Saying that corporatism follows capitalism is like saying that filth follows cleanliness, and taking that to mean that the best way to avoid becoming dirty is to never clean oneself. Just because some power hungry people conspire to gain power and money illegitimately under capitalism doesn't mean capitalism is evil. Those same people would conspire to gain power and money for themselves no matter WHAT system we lived under. The point is that REAL capitalism harnesses the exponential function of capital investment, and raises living standards for everyone in the system. The longer it is observed, the faster the the capital compounds, until you are able to do practically anything with practically nothing.
Re:Capitalism (Score:5, Insightful)
But capitalism IS possible. We had it in the US from the end of Reconstruction until 1913, and had a shadow of it for much longer than that.
Jeez, what kind of wacky history books have you been reading?
I guess Andrew Carnegie, JP Morgan, John Rockefeller, were just poor innocent capitalists who lobbied against the government to remove tariffs on steel, broke up their own trusts willingly, and didn't organize collective actions.
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No, they aren't. In communism, one takes from people according to their ability, and distributes according to their need. The only way to accomplish this is through violence
No, communism is possible. It just doesn't work at a state level. Most families would, I imagine, be communal in nature - the parents give according to their ability (their wages) and distribute according to the need (foods, clothes, education). Other organisations, like monasteries and communes, can function under the system as well.
The key for all those examples, though, is that the people who participate in them do so voluntarily. Parent choose to marry, and have kids. When kids don't want to participat
Re:Capitalism (Score:5, Insightful)
As I mentioned, Capitalism is like cleanliness. You don't have to be perfectly clean to live, but if you try to avoid getting dirty by refraining from cleaning yourself, you are in for a major infection and perhaps death before too long.
Re:Capitalism (Score:4, Insightful)
Capitalism: Good. "He who serves best profits most." You start a company, takes risks, provide a good product or service and the public rewards you with dollars of their own accord. Or you fail and don't cost anybody else anything. Profit is coupled to societal good.
Socialism: Bad. A large group of poor people use their votes to give political power to government agents who then take money from others to give it to the socialists and their friends. Profit is decoupled from societal good because people who didn't do anything to earn it are getting rewards, and because producers are expected to keep producing despite not getting greater rewards themselves.
Corporatism: Bad. A small group of wealthy individuals and corporations use their money to buy government agents who then modify the rules of the game to guarantee profits for their benefactors. Profit is decoupled from societal good because companies make money not because they serve the public, but because the government enforces their profitability.
I'm actually more opposed to corporatism than socialism. At least in socialism, poor SOBs are getting food and health care.
Capitalism may be the worst economic system ever, but it's better than all the others.
Re:Capitalism (Score:4, Insightful)
Dr. House looks at you and says: "You idiot."
So was the East India Company. But it had so many GOVERNMENT GRANTED monopolies and special privileges ( that part is important, read it again ), which meant it was de facto government entity.
Re:Capitalism (Score:5, Insightful)
Point taken.
Unfortunately, if you are an American over 18, you are part of the political class. That goes double if you've received a college education or learned enough about computers to be interested in Slashdot.
Vote, please, but recognize that American democracy has been corrupted by unlimited money for campaign advertising.
Further action is needed, and it will be an inconvenience. Fortunately for you and me, taking action requires far less effort and courage than that displayed by those in countries where protest is a life-threatening act. But it does require action.
Work to re-create a level playing field in politics -- work to ensure that every candidate gets public funding if they agree to give up private funding, work to make the public's airwaves free for political advertisers, so that media companies are forced to share the air as a condition of licensing, and work to prevent unlimited expenditures and their corrupting effect on our political system.
Slashdot libertarians might want to think a bit, and compare the statements of people like Ralph Nader over the past forty years with the statements made by those who have won office.
Re:Capitalism (Score:4, Insightful)
30 years of corporatism has largely eliminated upward mobility.
Re:Capitalism (Score:5, Insightful)
30 years of corporatism has largely eliminated upward mobility.
The easiest place to see this is not with income disparity.
Instead, look at the disparity between the growth in corporate profits and the growth in employee wages.
Companies have been making huge profits and *not* trickling it down to their workers in the form of higher salaries.
Re:Capitalism (Score:5, Insightful)
Real median income in the US peaked in 1973. That was back when you could get out of high school, get a job at the auto plant and make enough money to buy a house, two cars, and the spouse could stay home and take care of the kids. No longer. Now you need two people with masters degrees working and you still end up in debt.
There used to be an implied (or express) social contract between management and labor. "We're all in this together, guys! We'll make sure we're building and selling the right stuff, steering the ship, and you laborers work hard and we all profit together!" Instead, today it's "Work really hard, guys, so as soon as we're big enough for the economy of scale to work out, we can fire you all and move your jobs to China!"
Re: (Score:3)
Or their Social Security check from Uncle Sugar. You can't help fix the problem of corruption, if you don't understand what the bribes were.
Are they bribing me by skimming money of the top of my paycheck every month?
Capitalism privatises the losses too (Score:4, Interesting)
What you know, isn't capitalism. Hasn't been for quite a while.
Re:Capitalism privatises the losses too (Score:5, Insightful)
Capitalism isn't capitalism and will never be.
Capitalism inevitably results in a few monopolies destroying capitalism. It's not a self sustaining economic structure.
So we prop it up here and regulate it there to try and keep it under control and from over-merging and consolidating like the blog consuming our entire economy.
Then the libertarians claim that capitalism needs to be free of oversight so they scale back the watch guard every decade or so and the beast grows. Then it steps on something we all treasure and the public pushes back to shorten its leash. And so on and so forth.
If we had capitalism (which we never really have) then we would probably have a handful of mega-corporation that looks quite a bit like the government with a bunch of little niche organizations operating in their shadows.
Capitalism without corporations would just shift the corporatism to a plutocracy where a few wealthy individuals control large portions of the economy. So really corporatism is just a short sighted complaint about our current form of capitalism.
Functioning economies only really function when you use the useful parts and try and mitigate the problems through splicing in hybrid solutions. If raw capitalism results in massive income inequality and hardship for the majority then you splice in a little social security communism.
Capitalism was the economic foundation of a successful post-industrial economy. The age of the cheap widget. We were able in the 30s to temper most of its ills through infused socialism. Europe took it a step further in many respects.
But we're now leaving the hay day of capitalism and entering the information age. I don't think capitalism will function in this new era. I think within 100 years trying to fit capitalism to an information economy would be like trying to sell a spotify customer on the joys of FM radio.
Expect the composition of our economic philosophy to change dramatically. What will harm us probably more than anything will be a nostalgic ideological insistence to use solutions for problems we no longer face.
Re: (Score:3)
Capitalism inevitably results in a few monopolies destroying capitalism. It's not a self sustaining economic structure.
So we prop it up here and regulate it there to try and keep it under control and from over-merging and consolidating like the blog consuming our entire economy.
But this obviously doesn't work. Just look around. The regulators have been captured. They do nothing. The fundamental problems are not being addressed.
The behaviour you mention is a fundamental feature of banking. Specifically fractional reserve banking. By creating and providing credit to organisations, they are enabled to grow.
Libertarians tend to fall into one of two camps, both of which would limit the ability to create credit and therefore organisations to grow.
1. Free Banking. Reduced regulation of b
Re:Capitalism (Score:4, Insightful)
Re:Capitalism (Score:5, Informative)
For instance, if I need a loan to expand my business today, it's really, really hard to get, even with an 800+ credit score and good financials. Lending rates are way down. Banks aren't lending anybody money. Why? Prime is
Re:Capitalism (Score:5, Insightful)
The Fed was created by the 'progressives'. Central banks are one of the ten recommended measures for creating a communist state in the Communist Manifesto.
So don't blame capitalists for the inevitable failure of another stupid left-wing policy.
Right, a privately-run, for-profit bank with unelected members that controls the nation's money supply sounds so communist. /sarcasm
Or, like all major changes in this country, it was a compromise between two or more competing philosophies. Perhaps not an area where compromise works, but that's how it happened.
Re:Capitalism (Score:4, Insightful)
Full on communism, with no central authority and a self-governing collective was the last stage of things according to Karl Marx's Manifesto. In the mean time, a strong, central-authoritarian government was needed to push the people in the desired direction. A central bank was very much a part of his plan.
The idea is to get control of the money supply in the hands of the strong central authority so it could be distributed "appropriately".
How? (Score:3, Insightful)
Have you seen who Obama's advisors are? (Score:4, Interesting)
Seriously...
Do a little graph of where they previously worked. Highly interesting.
Old boy's club owns America. Oh and Greece, Italy, ECB etc etc.
Re:How? (Score:5, Funny)
Re: (Score:3, Insightful)
The system is corrupt. It's well past time to purge it.
World's dumbest loanshark (Score:5, Interesting)
Jon Stewart covered this topic quite well the other day [thedailyshow.com]. So essentially we (US Treasury) loaned the banks money at 0.01% and then they loaned us (US Treasury) the money back at a higher rate. WTF?
Re:World's dumbest loanshark (Score:4, Funny)
Re: (Score:3)
Re:World's dumbest loanshark (Score:5, Insightful)
Basic macroeconomics (Score:5, Insightful)
WTF is that the Fed wanted money pumped into the system, to compensate for all of the (virtual) money that was disappearing. They were afraid of a deflationary cycle, where too little money was chasing too many goods, causing prices to fall, fewer goods to be made, more workers fired, and even less money.
But the Fed doesn't have branch offices, so they can't make loans to companies or individuals. Instead, they hired the major banks to do it. The gave the money to the banks, who loaned it out a higher rate. The higher rate compensates them for the risks of the losses they were taking: they still owed the money back to the Fed whether the loan was repaid or not. It also pays them for all of the infrastructure they have to maintain to make and service those loans: employees, computers, etc.
None of that is figured into that estimate of "profit", which was based on the difference between the rates, without taking their costs into account. And it amounts to getting about 1% of the transaction cost.
The fact that this was done without supervision by Congress is noteworthy, and needs to be investigated. Monetary policy needs to be coordinated, while the goal is to create some space between the Fed and the government to reduce the influence of politics, the government is still supposed to supervise the Fed.
But as fiscal policy, this is reasonably orthodox. The banks were paid to do what the banks do: give loans so that the economy can expand. Getting somebody else to do the same job would have cost more. The numbers are proportional to what you'd expect of trying to manage a country with a $14 trillion GDP when it's in a crisis.
Re:Basic macroeconomics (Score:5, Interesting)
--soapbox--
I'm speaking strictly from personal experience with my small business (hardware store employing 30 people) and what I hear from other small business owners both locally and in the hardware industry around the country, but the banks don't appear to be loaning anyone anything lately. Even with the Fed pumping money into the system they still aren't willing to loan it out to small businesses or individuals. Money is going to money, and that's doing nothing to help the businesses and individuals that are struggling.
--end-soapbox--
Re: (Score:3)
--soapbox--
I'm speaking strictly from personal experience with my small business (hardware store employing 30 people) and what I hear from other small business owners both locally and in the hardware industry around the country, but the banks don't appear to be loaning anyone anything lately. Even with the Fed pumping money into the system they still aren't willing to loan it out to small businesses or individuals. Money is going to money, and that's doing nothing to help the businesses and individuals that are struggling.
--end-soapbox--
You speak from personal experience; I read the same thing in the news.
For 30 years the USA has been run as a cream-skimming operation for the far-less-than-1%. But the cream is running out, and the chickens are coming home to roost.
(Pardon the mixed metaphors.)
Arbitrage buys profit at the expense of trust (Score:5, Insightful)
The real issue here isn't that the Fed made money available, but the disparity of interest rates between that at which the money was available to select parties and that which the open market would bear: that let the banks borrow massive quantities at virtually no interest, only to lend it back out at much higher interest rates. Pure arbitrage between the "emergency" funds' near-zero interest rate on a restricted market and the open market's willingness to pay interest. It's not even clear that the banks taking the loans were unhealthy--they may have just recognized the profitability of free temporary money that could be loaned out for more than it cost (arbitrage). The Fed basically just shoveled profit to the banks. This isn't to say that the Fed didn't get all its loaned money back -- that's irrelevant. They knew full well that they were creating an artificial market for a select group of players and in direct opposition to the preexisting open market, and that they were creating a textbook case of arbitrage that could only profit the participants with access to the fed funds.
If someone doesn't go to jail for this, it'll be very hard not to listen to the anti-regulatory, anti-government fringe loonies. This is exactly what they've been squawking about for years. This is the kind of move that destroys the people's trust in the government's ability to regulate the markets: there's no way to see this except as blatant corruption and cronyism. That loss of trust, in the long run, is the most important fallout of this story. If this country is going to recover economically, there's going to have to be a sea change in ethics on both sides of the markets, both the money-making side and the regulatory side (and, yes, we still need both), and its going to have to be a credible change, not just a veneer, to restore confidence in the form of capitalism we claim we practice (and obviously no longer do).
Re: (Score:3, Insightful)
The alternative was banks start to go bust because they could not finance their day to day activities.
If private banks cannot finance their day to day activities, their mismanagement should not be financed by the public. That just privatizes profit while socializing loss. There's not just one alternative, as you describe, but two: either the banks need to be allowed to fail (the "let it all burn" position, which I think we both agree is probably very unwise) or the funds need to be given only on the condition that the banks surrender their right to mismanage themselves: there need to be strings attached t
Re: (Score:3)
In a better world we'd have smaller institutions that individually don't pose as much risk.
A republic can't afford private businesses that are too big to fail.
Unfortunately, too many Americans think their "right" to get rich no matter what it does to everyone else is more important than the citizens' right to good, stable government.
I'd borrow a trillion dollars at 0% interest too. (Score:3)
Well duh.
If only I could become a bank to borrow at the FED counter...
viewpoint of an investor (Score:4, Insightful)
The Fed actually did no wrong, they did exactly what they were supposed to do, HOWEVER: the CEOs of the banks on the receiving end of the loans should absolutely be investigated for defrauding investors, because going out in public and telling the public that your balance sheet is solid and can weather the storm, while simultaneously they are in need of taking on multibillion loans from the Fed just to stay afloat is fraud, plain and simple. Too bad the SEC is in the same bed so nothing is likely to ever happen.
Re:viewpoint of an investor (Score:4, Insightful)
I disagree. As a CEO, accepting huge below-price government loans with no strings attached is the correct response, not the incorrect one.
Even a healthy bank should accept such loans, since it would make money on the price differential alone. And not accepting the money would only make sure that its competitors (healthy or not) who did accept the money, would have an unfair advantage against it when loaning out that money on the open Market.
And the way our corporation by-laws are written, if such (an almost) free loan was offered by the government, and if the CEO had refused it on moral grounds, he would have been negligent to refuse it in the first place.
And when that happens, as a shareholder that's the only time I can really sue the CEO personally. Normally, he would be protected from personal liability by the Corporation and if that didn't work, he would be protected from personal liability by his Board & Officer's insurance, but if he was found negligent in this way, all bets would be off, I could go after his house, his car, his personal property, basically anything that wasn't already protected by the law of the State his personal property was already located in.
I don't blame this on a free market at all (Score:5, Insightful)
In fact this is exactly the OPPOSITE of the free market.
The emergency loans were uncapitalistic government interference that denied market forces the chance to punish these boys with failure like they deserved.
Especially since those same banks wouldn't have hesitated to foreclose on their own debtors.
Re: (Score:3)
In fact this is exactly the OPPOSITE of the free market.
The emergency loans were uncapitalistic government interference that denied market forces the chance to punish these boys with failure like they deserved.
Especially since those same banks wouldn't have hesitated to foreclose on their own debtors.
"free market" is just an appeal to magic to obfuscate what its proponents are really saying: "let us do whatever we want".
No business actually wants competition to exist and drive prices down. They're in business to make big piles of money. But they can't appeal to the unwashed masses by saying "that mean ole gummit is making us behave", so they peddle a religious economic myth, and then use the mantras to jerk the voters' chains when they want something.
How to elect Ron Paul: (Score:5, Insightful)
You know he'd shut that shit down. Clean up the Fed, slash military expenditures, get us out of the wars. I doubt anyone else would do it.
http://youtu.be/HawiHvxloms [youtu.be]
Re:Most do not know this but... (Score:5, Informative)
Not quite true, the Federal Reserve has both private and public components. http://en.wikipedia.org/wiki/Federal_Reserve_System [wikipedia.org]
Re:Most do not know this but... (Score:5, Insightful)
Re: (Score:3)
On the last Daily Show they said it was over 7T, and not 1.2T.
For some reason I trust the Daily Show for more accurate news then real news outlets...
It's 7.77 Trillion over the larger crisis time. 1.2 Trillion was on a single day.. Yes the Daily Show is better than many news outlets at this point.
Re: (Score:3)
Re:Occupy The Fed! (Score:5, Insightful)
They are thieves. Don't stigmatize them for being rich, stigmatize them for being thieves. Many people become rich, some fabulously so, by legitimate means, and in so doing do a great service to the rest of humanity. Don't conflate them with these "people".
Re: (Score:3)