when I was living in Chicago I wanted to get a loan to buy a business. the loan advisor who was hispanic, told me I needed 20 % dn. though he said if I was a minority I would only be required to put 5% dn. he did not agree with this law, but it was the law. I never blamed him or anyone. I just looked at how I could over come this obstacle. I had more resentment 20 years later looking back, but at the time I just did not think about it. the feeling of being a victim, or the system being against me never entered my mind, though I dont know why. it was just my state of mind at that time. though that attitude served me well over the years. it taught me to live like my grandparents did.

 

Trucking, refuge of the underemployed, LOL.

 

I thought that it was really strange at the time I experienced it. I didn't consider myself a victim, either. I just went on and built a business without the help of the government. In fact, I have built several businesses over the years and never gotten assistance from any government entity. If we are going to have true equality in this country, then we need to have the same rules and guidelines for everyone. You cannot have preferential treatment for ANY group nor should you discriminate against any group. When you give preferential treatment to one group you are discriminating against another. I don't think most white people consider themselves to be victims even they have been discriminated against in the last several decades. It seems to be more the minorities who consider themselves to be victims. It is ironic since there are so many programs that give priority to those who are in a minority status. I think our country would be much better off if none received help from the government. We should make our own futures.

 

I think our country would be much better off if none received help from the government. We should make our own futures.[/QUOTE]

Very well said. I lived in maine for several years and i was amazed at how many people chose to "live off the government" rather than make their own way. I was one of the few dairy farmers who did not take the dairy subsidy, rather i sold some of my milk locally and shipped the excess to the cooperative. I actually made more money that way than i would have with the subsidy money. I think people will often do better if they use some common sense and ingenuity rather than always looking for a bailout.

 

Living off the government has made our country weaker. It was rare for people to take money from the government until the 1960's and Lindon Johnson's "New Deal." The only other time was during the depression of 1929. Even then, people worked for the check they received from the government. Working for what we have builds self confidence and character.

 

No_Worries,

Andrew Jackson abolished the central bank during his time. There is quite a story behind it and would make a good movie. All of the same problems were in play then that are in play now. However Andrew Jackson made a mistake when he allowed the national banks to continue to use fractional reserve banking. This is what caused the boom and bust cycles, and the runs on the banks that everyone was so afraid of, not the gold standard itself, but the uncontrolled creation of money in the form of debt. As long as the banks were allowed to create money by issuing debt there was no way there would ever be enough deposits of real money(ie gold) in the banks to cover the outstanding paper money that had been created. You have a formula for disaster with a system like this. These boom and bust cycles continued and instead of neutering the banks and demanding full reserve and tightly controlling the money in circulation they continued to allow this behavior. This behavior had to be reigned in or the system spins out of control with more risky behavior, unregulated lending, and all the evils that we all can see plainly even today without the money reserves to meet the needs of the people.

Now the bankers decided that the anchor around their neck was the gold standard, because it didn't allow them to expand the money supply at will and sadly the fractional reserve "Real Bills Doctrine" was wholly incompatible with the gold standard. Somehow Congress wasn't wise enough to see how the game was being played and along comes the Great Depression. It was irrational exuberance, debt, and out of control growth of the pretend money supply that set this bust into motion. The Fed argued that it was the gold standard that made things worse and prolonged the agony. Funny how they deflected and never talked about the uncontrolled growth and the money problems they created, but blamed the gold standard. The gold standard and full reserve banking would have prohibited the conditions of the great depression, and we wouldn't have seen the wild swings in the economy due to erratic money flows and artificial conditions created by the banks themselves. The gold standard and full reserve banking would take away the wildly profitable massive leverage schemes. So when it became too obvious that the funny money scheme was out of control and there was no way there was enough gold in the coffers to cover all the paper money they repealed the gold standard, and wisely told everyone that the gold standard made the depression worse. It is like blaming the fireman for the fire. Really convenient if your the arsonist!

So I think we have really covered the past. And if any of the BS bedtime stories you were told by the bankers were true then the many boom and bust business cycles we have had since the Great Depression would have hardly been a footnote. As with all arsonist stories they weren't true. The momentum just continued to build as more and more debt and unregulated ways of creating even more money out of thin air have been devised. Before long you have such a massive amount of debt we are calling money(financial obligations, not money) in the system that there is no way that much money could ever be printed and have anyone still believe anything the arsonists told you. The off balance sheet transactions, derivatives, swaps, and the many other "interesting" ways of creating money have turned into a train wreck and there isn't enough money in the world to pay off the bad bets. Here we are staring down the barrel of a 500-700 trillion dollar pile of non-performing creativity that is going down like a house of cards. Who do you think the arsonists will blame this time? There is no good old reliable gold standard to kick around. Oh, I get it, it is the evil Americans and their greed buying houses they couldn't afford.... yeah, thats the ticket we will blame the Americans. And WOW, why didn't they think of this sooner! We can now tell everyone the real issue is that we don't have a global currency with the proper controls and that if we will only put the arsonists in control of the new sound(maybe even promising to have a gold/silver/precious metals backing) currency that we will avoid this from ever happening again. You see we just need to centralize the management of this mess, that will fix it! You see the arsonists told us the same thing when the Federal Reserve was created about the end of the boom/bust cycles, and the bank runs. Well it just isn't so.

You see our congress, treasury, and the Fed don't know the meaning of discipline, balanced budgets, and responsibility. For some of them it is about making a buck, and as long as they have the incentive to make a buck they will continue to loan us money until there is no more money to be made. Then start all over again creating money out of thin air and the game begins again once we are bankrupt. It sounds all nice and pleasant doesn't it? But the rest of the story is that most of us who have worked all our lives and tried to save a little and maybe plan on retiring one day are getting the shaft. You see with the Keynes brand of economics if you can keep growing the money supply gradually most people won't notice the theft. But that is the trick now isn't it? Making sure that you can keep the ascent of the funny money system under control. But when the arsonists lose control due to their own greed we see the trick for what it is. Will we see it this time for what it is? Will we have the good sense to recognize we have been listening to the arsonists? Was it really the evil Americans alone that did this? Or was it the guys that were willing to take the outrageous risks and lend to anyone with a heart beat and can fog a mirror? Will we recognize they are the threat to the financial system, not the guy that dared to dream that he/she might to be able to afford a home too?

I can only hope that one day the evil Americans will wake up and realize that the $14 trillion dollar mortgage market alone didn't sink the hundreds of trillions of dollars in creative debt that is out there. That one day they will realize they were being played and that the house held all the cards. Will the American people wake up and realize the guy standing there telling the local news station that he just happened to come along and notice the building was on fire, dialed 911, ran in and saved a dog, an old lady, and a lawn mower is in fact the arsonist who set the fire... Will it happen? I can only hope.


So the question is what are we going to do about this? Continue to allow the arsonists to blame everyone for the problems of an unstable fractional reserve "Real Bills Doctrine" system? Or are we going to wise up and realize that you cannot allow the banks to us debt and creative finance, and ever increasing leverage to expand the money supply without restraint? Where is the Fed in all of this? Isn't it their job to know what the member banks are doing? Monitor, regulate, and control the money supply? So what are they going to do now? Allow the hundreds of trillions of dollars to default? To let their too big to fail members take it on the chin? To watch this collapsing house of cards tumble to the ground? Fat chance, they will try to print it. There is no way that they can print this kind of money without monetizing most of it, and without destroy most of us financially in the process.

I am not going to get into the specifics of the deregulation portion of Glass Steagal at this point, but I would encourage you to do some digging on the precusor events with Citibank and then ask yourself why they are in the mess they are in. There is a lot of evidence at this point that collusion, manipulation, questionable activities have resulted as a consequence of the repeal of Glass Steagal and have added greatly to this massive problem. Congress passing things like the Community Reinvestment Act just gave the bankers even more creative ways to lend money, and GLB was just the keys to pandoras box. CRA was just gas for an already raging bonfire.

I will agree with you that the chief arsonist Uncle Alan couldn't wait to find new more "modern" ways to let the bankers go crazy. I largely hold him responsible for the biggest run up of this bubble. I don't like Volcker, but he had guts to do what was needed to push us back from the edge. It will take more tough love like that to get this under control. Sadly it won't happen. Helicopter Ben believes the problem of the Great Depression was that they didn't print money like it was going out of style. So the Fed fantasy is wipe out enough of that creative debt/financing to save the system. Never mind it was this creative finance that put most of the banks in this mess in the first place, but the answer according to whirlybird Ben is the printing press. They will have done nothing to fix the problems that caused this mess, but you can be assured they won't be taking the blame. It is just too darn profitable.

If at this point you cannot see the connection to bank, profits, and their out of control power over DC and Wall Street I really don't think I can help you. If you cannot connect the dots between the behavior of the Fed and the banks I surely won't be able to illustrate it in a forum like this just how dangerous this game is with the Fed. They are the problem, not the solution.


Longsnowsm

 

The old Building and Loan or Savings and Loan companies used to loan money on their deposits. They were usually locally owned and operated. Unfortunately, most of them either went out of business or were gobbled up by the major banks. Rates were lower than the big banks and they only loaned on their deposits. That is the way it should be with lenders. The bank where I have done most of my corporate business in recent years assured me that they only loaned money on their deposits around the time of the bust. A short time after telling me this I found out that it wasn't true and that they received 7 billion dollars of bailout money. Banks did much better when they were small and knew those with whom they did business. It was also better for the consumer. I think that it is much better for most consumers to do business with smaller, locally owned banks or credit unions.

 

Ohhhh, you've been instructing me? You'll forgive my confusion.

All you've done this whole time is throw together a hodgepodge of commentary dredged from whatever blogs you happen to be perusing that day. What you end up with is a disjointed mix of poorly conceived arguments that barely relate to one another, let alone support one another. What you've offered is your opinion interlaced with various internet commentaries to tell a rather long and repetitive story. Where are your facts and figures, your sources of such, and your citations? Where is the economic analysis supporting your assertions? $500-$700 Trillion? Where does that number come from? If you have any grasp of the subject your purporting to "help" me with, you would realize just how ludicrous that number is. You want to blame fractional-reserve banking? If you're going to have full-reserve banking, why have banks at all? There's a reason that full-reserve is purely theoretical and has never actually been put into practice...anywhere.

The dots to connect between the Fed and banks is a simple straight line. However, if you start listening to conspiracy theorists and those with an agenda, the picture starts to become convoluted until you're chasing your tail trying to explain things that aren't nearly as complicated as you'd like to make them.

I'm not trying to convince you of anything. I've met several people that preach the same things you do and I know better than to try and change their views. I simply amuse myself by countering the claims made. Now, if you really want to try your hand at a logical argument, by all means do so. But if you're not going to buttress it with facts, figures, and analysis, let's just put this thread out of its misery, LOL.

 

No_Worries,

Hmmm, Where to begin... Generally in a conversation there is a two way street as far as communication. Frankly I have enjoyed this exchange and I am sorry you somehow feel that I am somehow talking down to you or "instructing". I was hoping to illustrate in whatever manner is possible in a forum like this that there are a lot of people who have a very different view than that espoused by the banks, and the Fed, and our corrupt government who seem bent to finish the job of collapsing our economy so that they can just "reset it" to whatever image they hope to remake us. You see spin is bad, freedom, free markets, and the framework the US Constitution provides is good.

Now I don't know if you just cannot think of a way to defend the criminal fractional reserve banking system, or just don't understand what banks were suppose to do in the first place. Maybe we are all just victims of the times we have lived in and not really ever had the opportunity to see and imagine a world that isn't controlled by for profit banking interests that love to create emergencies or fund both sides of wars just for the sake of profits and to increase control... or to salvage their sinking monetary system. Frankly if you can defend 30 and 40 to 1 lending practices by the banks knock yourself out. If you can defend the Fed loaning our money to foreign central banks to stabilize their funny money systems go for it.

The list goes on and on of the things that are wrong with the existing financial system. A system that knows that the banks are unstable and need a central bank to be the lender of last resort. A system that even with that backdrop decided they needed to add insurance in the form of FDIC to insure accounts. There is layer after layer of a complex web of safety nets all because this thing is a stable as a one legged pony. This is the system that we have today that requires more and more programs, acts, and "systems" just to make sure that when the wheels fall off that it doesn't take the whole thing down.

There are always guys looking for the angle, for the scam, for the way to beat the system... You know I bet there is money to made in there somewhere! LOL

So you honestly don't know what the job of a bank is? If they don't use leverage and ponzi schemes you don't know what a bank is suppose to do??? Really? Look at the terms warehousing and lending. You can still do that in a full reserve bank. Really it can be done... Earning money offering services and safety, what a concept.

But enough of that, you know how much I just love a conspiracy. It is a conspiracy how banks make money. It is a conspiracy how the Fed is suppose to be the lender of last resort to make sure if the banks find themselves in a hole that they have someone to bail them out. It is a conspiracy how this whole game is played and just how many fail safes this thing has built in and still adding on just to make sure it doesn't meltdown. I guess we could outline the various safety nets and programs to stabilize your one legged pony, but we can save that for another time. We have some ever better conspiracy stuff to talk about.

If I had a financial institution and had a brochure and I had to explain the myriad of systems, how my lending policies worked, what I actually have in actual cash, and the many creative uses of contracts, leverage, methods for managing my books just to ensure that I have the funds to keep running and keep lending there is no way people would invest with me or save their money with me. Those are the facts. This isn't a conspiracy, this is just the truth. If people understood how the banking system works they wouldn't trust a penny with them. The same is true with the Fed. They are the backdrop to this theater. So try as you might more an more people are waking up to the fraud and the risky behavior of these banks and their practices. So maybe instead of spending so much time on the Fed's web site you should actually ask more about what is on your banks balance sheet.

Since I just troll blogs and spew garbage I really thought I should share this with you. Your right! I found this really great little web site that posts some of the best conspiracy oriented stuff you can possibly imagine. I thought I would just share a little bit from their Q4 report 2008. It was the last one I read and haven't had the chance to get the latest numbers... Since you obviously think I am full of it then lets just crawl into some numbers for us all to chew on:

OCC: OCC's Quarterly Report on Bank Derivatives Activities

In the OCC’s Quarterly Report on Bank Trading and Derivatives Activities Fourth Quarter 2008 from the the Comptroller of the Currency Administrator of National Banks. Let's just look at what they had to say about some of these "treasured" financial institutions.

Let's take the 5 top banks:
Total Credit Exposure to Risk Based Capital (%)
JPMORGAN CHASE 382%
BANK OF AMERICA 179%
CITIBANK 278%
GOLDMAN 1,056%
HSBC 550%
Avg % (Top 5 Banks)
489 %

Total derivatives exposure in the top 5 banks in Q4 2008: $191.498 trillion dollars

It breaks out as follows(numbers are in billions):
Futures & Fwrds 19,877
Swaps 127,101
Options 28,991
Credit Derivatives 15,529
TOTAL 191,498

Notional numbers listing assets and derivatives exposure for the top 5 banks... they listed 25, but the top 5 will do(numbers reflected in millions):

Rank Bank Total Assets Total Derivatives
1 JPMORGAN CHASE BANK NA, $1,746,242, $87,362,672
2 BANK OF AMERICA NA, $1,471,631, $38,304,564
3 CITIBANK NATIONAL ASSN, $1,231,154, $31,887,869
4 GOLDMAN SACHS BANK USA, $162,474, $30,229,614
5 HSBC BANK USA NATIONAL ASSN, $181,620, $3,713,075


Oh, there is a lot of good info out there, charge off's, break down into the various creative instruments. It really gives a guy a warm and fuzzy feeling knowing that our banks are SOOO WELL FUNDED. So there is a lot more data where that came from, but if that isn't an eye opener for anyone who is still reading this thread please feel free to enlighten me how this is suppose to work again... I am all ears.

Oh, maybe we should go through the Fed's numbers... Oh that's right they only give us what they decide to give us. It is for our own good after all. If you knew what was going on the entire financial system would collapse!!!! You gotta be kidding me! If people just read the data out of the Treasury and they understood how bad this was the entire financial system would collapse... There would be runs on the banks like you wouldn't believe if people understood these numbers.

So while I enjoy our little exchange don't even pretend to lecture me about conspiracy theories.... Why has this information not made the headlines? Why hasn't the financial status of our banks really been reported? Could it be a conspiracy??? Remember those bank STRESS TESTS!!!!! ROFL

Oh, and even though I despise the man due to the fact he is nothing more than a Wall Street cheer leader, Larry Kudlow was on the talking heads on CNBC one afternoon admitting that ONLY 30% of these derivatives are under water(non-performing)... He said something to the effect it is just insane to offer the banks nothing(pennies on the dollar) in the market place in mark to market for these contracts and that the street has it all wrong... Well depending on who's math you use 30% of numbers this big is a heck of a lot more than Uncle Sugar has printed so far.... If you dig around in the Treasury report they say the number of contracts with a positive value is roughly 6 out of 10. Looks like 40% losers according to the Treasury.

You think the Fed is just going to let these banks eat this???? No way baby... We gotta get a warp drive installed on those printing presses! Worse yet if the banks are forced to liquidate assets to cover the loses they take even more loses. It is literally a house of cards.

Oh and you want to know the range of $500-700 trillion... well just like statisticians it seems that the numbers seem to vary depending on the source of the news. So rather than give you a specific number from yet another moron in the press or from a source that you will just decide to rip to shreds since there seems to be a great deal of variation in the figures that get reported it just seemed easier to report the range of figures reported rather than a defined source. I am sure you can understand where I am coming from there... Unless of course you want me to throw some specific numbers out there for more discussion.

Frankly I trust any of the numbers out there including these I just posted from the Treasury suspect... Let's just say when the news is this bad I am suddenly from MO and you need to show me...

Ok, let's consider my figures buttressed and let's see where this baby goes. I want to hear your theory on the glamorous fractional reserve system and how the Fed in it's role as the lender of last resort could possibly ever manage to bail out the banks with this kind of balance sheet. I know you understand the role of the central bank, and you obviously believe they are doing a good job or you wouldn't be such an avid defender of this behavior. So tell me how the watchdog Fed somehow missed this disaster coming and explain to me just how that is suppose to work. I really genuinely want to know. I have tried, honestly tried to figure out just how we got into this mess and how this is going to play out without a flat out total global collapse and or paper money so deep that we will all be billionaires.

The headlines coming in even now is that the banks haven't learned anything from this experience and are still pouring more and more risky leverage into the system.

So let there be dialog... I don't know a lot, but I am always willing to learn more. Which makes me wonder why there are a few guys here on this forum that obviously come from the world of finance and why you chose to come drive a truck?

Anybody want to still bank with any of these top 5 banks? Good luck.

Longsnowsm

 

Alright, I'll humor you for awhile longer.

It's interesting that you've chosen to use the figures from Q4 '08 when the next two quarters are available. Perhaps it's because that was the peak of the crisis and the numbers are significantly better now.

You perfectly illustrate one of the problems with the media and its reporting of this issue. $191+ trillion in derivatives exposure. That just sounds horrendous given the fact that everybody knows derivatives are such a disaster. As it turns out, derivatives are not necessarily the evil machination they're made out to be. Are there some bad examples, of course. Mostly in asset backed classes and only a subsection of those. However, 85% of all derivatives contracts are interest rate products which are relatively simple and straightforward. That doesn't mean they are without risk, but the risk is easily understood. They are a simple hedging tool. If you'll notice, all of those REALLY BIG numbers are notional values. If you understand what that means as it relates to derivative contracts, then you tend not to be alarmed when hundreds of trillions of dollars are cited as exposure. It's simply not an accurate characterization of the situation.

Net Current Credit Exposure is the most important number to draw on from this report. It is the number that the OCC weights the heaviest in assessing risk. In your Q4 report that number is $800 billion, certainly nothing to sneeze at. However, it can mostly be attributed to the precipitous drop in interest rates and wide credit spreads during the quarter. As it so happens, the NCCE at the end of Q2 '09, just two quarters later, is $555 billion. That's a 31% decline in risk in just 6 months time. Is it still too much risk exposure? Probably so. But whatever severity one describes to the conditions at the end of 2008, it has to be agreed that the situation is much less dire today. These numbers would seem to indicate that we are moving away from the brink, not toward it.

The big scary numbers are meaningless without the proper context and an understanding of notional value. Derivatives themselves are not inherently "bad" or even overly risky. There certainly are some products that fit this description but they make up a tiny portion of the overall market. The derivatives market is larger today than it was at the end of 2008 yet significant profits were made. That market will continue to grow even as banks continue to cut back their risk exposure. What DOES need to happen is tighter regulation of the derivatives market. There is no central clearing house, most are traded otc. This is where the Feds dropped the ball, exempting these instruments from oversight. I don't look for that situation to continue for long.

Kudlow was not talking about 30% of all derivatives. He was referring to a specific subset, either CDS or MBS, which together make up a small portion of the market.

I bank with one of the big 5 banks and am not worried in the least. Your odds of bank failure are much greater with a community or regional bank given their significantly larger exposure to residential and especially commercial real estate. That's not to say there aren't plenty of safe banks out there, you just have to do your homework. In any case, even in the event of failure you're protected. Unless you buy the stories that the FDIC is nearly out of money and won't be able to insure you. There's always your mattress, I suppose.

I never defended leverage ratios being as high as they were. Once again, you misread, misinterpret, or misrepresent. Banks were way too leveraged leading up to the credit freeze last year. They have admitted it and their leverage ratios have shrunk dramatically. You can find those numbers in any of the SEC filings. Why did that situation occur? Lack of oversight on the part of the Fed. Which they too have acknowledged. And you're right, there hasn't been much in the way of legislation to address the issue. Will there be? Watch what happens after health care finally goes away.

Why should I have to defend the fractional reserve system? It's all there has ever been. There has never been an example of a functioning full-reserve system. If there's no realistic alternative, there's no reason to defend the status quo. I know exactly what your notion of banking in a full-reserve system is. Banks as nothing more than a depository making money on for-fee services. Good luck with that. Why pay someone to watch your money? Especially if you get your other pipe-dream of the gold standard. Shoot, in that scenario I'd just keep everything in gold coins and bury them in my backyard. Why pay a bank for that service? The fact is, banks have ALWAYS made money by lending out their deposits. In order to make a profit without that income would require such exorbitant fees for the few services they could offer that nobody would take advantage. Your only remaining alternative would be a de facto non-profit or (gasp!) government bank. Explain to me why there has never been a full-reserve bank system when there should have been and maybe I'll lend the idea a little more credence.

If banks had a brochure explaining all the aspects of their business, it wouldn't much matter because most people wouldn't understand most of it anyway. Which is exactly why so much of the info that is out there today is errant. When something bad happens, people tend to blame the things they don't understand. It's been that way since the beginning of time and today is no different. The banks are certainly not without fault. But much if the blame is being misdirected.

As for thinking you were "talking down" to me, no need to worry. That would require questionable confidence in my own understanding of the issues. I drive a truck because I rather enjoy the lifestyle. I enjoyed education, never much relished the idea of working 100 hour weeks. I much prefer calling my own shots and my current 8-day a month schedule suits me perfectly. It's not the being out on the road that I enjoy, it's the abundance of time it leaves me to do the things I DO enjoy. If one day it stops paying enough to lead the lifestyle I want, maybe I'll return to my previous career path...which wasn't finance.