US Bank Collapse?

[Dan.Linehan]

Originally Posted by schola

Bump. The house of cards is beginning to crumble. These independent investment banks are just the beginning.

But... but...John McCain says the economy is strong! And John McCain never lies! Oh wait..


The AIG downgrade is big news. They need to raise $75B in capital to stay afloat.

[Still Growing]

Originally Posted by Brutha

In addition conservative isn't a party label but a label for certain political ideas.

Oh just take the compliment.

[Dan.Linehan]

AIG might be toast?

AIG Is Toast - Finance Blog - Felix Salmon - Market Movers - Portfolio.com


I guess we'll find out tomorrow.

[Dan.Linehan]

...And the Fed bails them out with tax money.

$85 Billion worth.


http://www.nytimes.com/2008/09/17/bu...hp&oref=slogin

[ThoughtAddict]

Possibly not. We'll see. The Fed was expected to bail Lehman. We'll see if it goes through. There's also talk about a bailout from Goldman Sachs and JPMorgan. We'll probably know in... oh... 13 hours or so.

Err... Nevermind. They've announced the deal. Might indicate that GS and JPM are too weak to bail out themselves... GS was shorted like mad today.

[tobyhede]

The government bailing out private corporations is really the end of the line.
Private profit, public losses.

The U.S. is going to be paying back this debt for generations.
Billions of dollars paid to prop a system that was based on nothing more than assumption that things would be good forever.

It is totally the end of an era.

[catalyst]

I have no sympathy for these investment bankers. Most of them are well connected and won't have any problems finding jobs, and most have already made a killing. The compensation for successful bankers dwarfs that of CEO's.

Rich get richer.

[velvet1]

It seems like Washington Mutual and AIG are going bankrupt.

[schola]

Originally Posted by ThoughtAddict

Possibly not. We'll see. The Fed was expected to bail Lehman. We'll see if it goes through. There's also talk about a bailout from Goldman Sachs and JPMorgan. We'll probably know in... oh... 13 hours or so.

Pretty much the same thing either way. Isn't JP Morgan-Chase one of the Federal Reserve owners?

[Apollia]

Originally Posted by velvet1

It seems like Washington Mutual and AIG are going bankrupt.

Wow! I hope no one is hurt by that, but, WaMu going bankrupt might actually be good for me.

WaMu owns Providian, one of the credit card companies which tries to charge me something like $70 per month in late fees+overlimit fees. Which almost made _me_ go bankrupt.

I wonder if this means my Providian credit card debt will be wiped out? If so, this might be fantastic news for me and anyone else with Providian credit card debt. If Capital One also goes bankrupt I might end up debt-free.

I'm guessing probably the people in charge of WaMu won't be personally affected much at all by this, they'll probably still have millions of dollars leeched from people far more honest and hardworking than they are, money which will probably be considered their personal property and won't be affected at all by their business's bankruptcy.

Still, I hope the people responsible for WaMu will have learned from this that they would have been much better off doing business in ways that are fair and genuinely helpful to society, instead of taking unfair advantage of people and bleeding people dry for their own short-term gain like merciless parasites. There's no way to keep profiting from customers that have been financially destroyed, or have been treated so badly that they simply refuse to pay one more cent.

If they had treated me and their other customers fairly, I would never have stopped paying them in the first place, and I would actually feel sorry for them now for going bankrupt. But, from what I know of Providian, they've hurt so many people (including me) that I'm just glad this will stop them.

I really hope they learned from this that engaging in loathsome, immoral, shortsighted, selfish, merciless, conscienceless business practices (such as deriving much too much revenue from unfair and huge late and overlimit credit card fees, instead of providing actual, genuine services to people, and building customer loyalty by being fair and kind instead of kicking honest, hard-working people when they're down and were already doing their very best to pay their debts) is ultimately self-destructive.

Thanks for the great news...

Best wishes,
Apollia

[Brutha]

I wonder if this means my Providian credit card debt will be wiped out? If so, this might be fantastic news for me and anyone else with Providian credit card debt. If Capital One also goes bankrupt I might end up debt-free.

I don't think so. Another company will probably be able to buy that obligation in the insolvency proceedings.

[escapee]

All these bail outs, trillion dollar debts and injection of funny money put United states on the path of 2nd WELMAR REPUBLIC. It's either you have the second great depression or Welmar like hyperinflation. The fed has chosen the latter. If they fail to "recapitalize" the market and restore the confidence, you have the second great depression ( ie, bank run, insurance run ). If they succeed, hyperinflation is next possible financial nuke.

YouTube - Hyperinflation - Germany 1923

[Apollia]

Originally Posted by Brutha

I don't think so. Another company will probably be able to buy that obligation in the insolvency proceedings.

Darn... I thought that might be the case. I guess I'll find out eventually. (Actually, for all I know, they might have "sold" my debt long ago because I defaulted over a year ago).

I won't mind, it will just be more of the same. In some ways, I like it when bill collectors call me, it means they're wasting time on me instead of harassing and frightening little old ladies, etc.

It is even more satisfying to me to not pay bill collectors than to not pay credit card companies, since as an industry, I regard debt collection as even lower than credit card companies, because at least credit cards do provide _some_ useful and convenient services (just not enough to make up for the damage they do, in my opinion).

Best wishes,
Apollia

[mercuryrising]

Originally Posted by Dan.Linehan

...And the Fed bails them out with tax money.

$85 Billion worth.


http://www.nytimes.com/2008/09/17/bu...hp&oref=slogin

You were wondering what policies might come into play here... from the article you linked:

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said Mr. Paulson and Mr. Bernanke had not requested any new legislative authority for the bailout at Tuesday night’s meeting. “The secretary and the chairman of the Fed, two Bush appointees, came down here and said, ‘We’re from the government, we’re here to help them,’ ” Mr. Frank said. “I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it.”

A question we might ask is, why did the US government allow a single corporation become so large that if it collapsed, it threatened the entire financial system on the planet?

[escapee]

2 words : PROTECT YOURSELF

The Crack Up Boom Part VIII - The Reflation Dam has burst / Ty Andros!

In conclusion, the demise of the dollar will take a huge leap forward as the US Government bailouts MUST materialize over the next 9 months as no one else will PLAY the FOOLS. Look no further than today's bankruptcy of Lehman and the sale of Merrill to Bank of America. Lehman's capital raises are TOAST and Merrill's is a disaster, but at least they get something for the retail business they have. Morally and fiscally Bankrupt G7 governments will just print the money to save the financial and banking systems as there is a diminishing source of it from investors. Globally, investors have the money but as the old adage goes, "fool me once, shame on you, fool me twice, shame on me." The money that is being used to adjust the portfolios of Middle Eastern interests will return to their previous trades after the political realities are addressed. The greatest reflations in history have just begun. Can the dollar rally further? Sure it can, there is a shortage of them in the G7 financial and banking systems to service the debts, so you can bet they will PRINT MORE OF THEM!

The Fed today has radically expanded the term lending facilities, both in size and eligible collateral, such as common stocks. Congress is frozen like a deer in the headlights by election considerations, a group of lawyers who know NOTHING about economics, cowards until they are secure for another term rather than the fiduciary stewards they claim to be. They don't think of the public's needs during trying times, rather they think of their own and do imitations of OSTRICHS! Short term rates (fed funds) WILL fall as predicted, possibly to almost ZERO. When Washington Mutual goes under so does the FDIC (the Federal Deposit Insurance Corporation only has $50 billion and Washington Mutual will be at least $40 Billion). A G7-wide banking sector BAILOUT needs to be commenced immediately. The system DOES not have enough capital, many of its components are INSOLVENT, and capital MUST BE injected by the central banks and their governments.

The money necessary to RECAPITALIZE the G7 financial and banking systems has disappeared due to the terms of the Fannie and Freddie bailout and the NO ACTION in the case of Lehman Brothers. The Fed and Treasury tried to halt the moral hazard by saying no to Lehman, but the time to do so was years ago, so instead it is the match that ignites the dynamite. Since the G7 banking systems have large parts of them which are insolvent, the governments and central banks will be forced to PRINT IT in one form or another. Creating trillions of new IOU's called G7 currencies in addition to those that have already been created. The G7 economies are in virtual collapse due to LACK OF FUNDING AND CREDIT, so expect the greatest REFLATION in history to EMERGE. The collapse in income outlined in the WOLFE wave is continuing, creating additional demand for the printing press. You name it: cities, states, auto and airline industry, the recapitalizations and bailouts have JUST BEGUN! It's inflate or die time...

[Still Growing]

Originally Posted by schola

Pretty much the same thing either way. Isn't JP Morgan-Chase one of the Federal Reserve owners?

This is the exact bull I've been arguing about in previous threads.

The Federal Reserve Board authorized the Privately held "Federal Reserve Bank of New York" to bail out another privately held AIG?! When the dust settles wait and see who will hold the shares. It will be the private owners of our New York Fed. And if they don't end up owning shares they will at least receive money on the interest loaned to AIG. OK if its our money then why don't we the tax payer get the interest?

These private bankers use public money like its their own piggy bank and you will see that some banks will be bailed out and some not. The private bankers will select which ones are worth saving. Translation: Ones that have assets and enough intrinsic value minus debt.

I'm so glad this is happening because it will start to shed light on our corrupt Federal Reserve system. The Federal Reserve Bank of NY is really the central bank and the Board is a joke as well as the other member banks.

People have actually debated with me that the Federal Reserve was not private simply because there exists an oversight board.
I've spoke about this subject until I'm blue in the face and nobody shares in my outrage. One day the public will look back and finally understand how we the tax payers were looted.

Lets also not forget that this privately owned Federal Reserve Bank of NY also has $75 billion in Iraqi oil money sitting in it right now. So they're flush with cash to buy up more companies. Nice.

[Apollia]

Originally Posted by Still Growing

I've spoke about this subject until I'm blue in the face and nobody shares in my outrage.

I do. I don't fully understand the economic system but it definitely appears crooked enough for me to outraged. (Though even if it didn't appear corrupt, the fact that the system works so poorly would be reason enough by itself for me to be outraged).

One of the things that most bothers me about this whole system is the government-enforced monopoly on the creation of currency, since if the people had viable alternative currencies they could easily adopt instead, the deflation of the dollar would be of no consequence.

I agree with Ron Paul that we'd be better off with free competition in currency.

I don't yet know much about the exact laws that forbid competition in currency and enforce a government monopoly, but, I've been wondering for a while now how it is that Second Life (an online multiplayer 3D virtual world game) can carry on having a virtual currency which can be sold for real money for some small, reasonable fees.

It makes me wonder if there's a legal loophole of some kind for virtual currencies, because otherwise, wouldn't Second Life's virtual currency have been shut down by now?

Maybe virtual currencies could be used somehow to avoid the disaster of inflation (or hyperinflation). The reason Second Life's currency couldn't be used for this purpose right now is because it seems to be consistently remaining at approximately the same exchange rate with U.S. dollars ($1 USD can buy L$264 Linden dollars). But there's no reason a virtual currency would have to remain in lockstep with the U. S. dollar, falling in value at the same rate as the U.S. dollar.

Any good web developer could probably come up with a virtual currency and currency exchange marketplace website similar to Second Life's (and a nice extra would be to also provide a place on the website for people to advertise products and services they're offering in exchange for virtual currency).

The main problems I can think of are: A) Security issues - having to guard against hacking, etc. B) Cultivating the trust of the public so that people will actually even use the virtual currency.

Probably a company like Google would be in a great position to start their own virtual currency, both because they would have the technical ability to implement it with proper security, a nice user interface, etc., and because they already have the trust of the public.

Google also has enough clout that the government probably wouldn't just come in and raid Google's offices and physically seize their assets, as the government apparently did to the Liberty Dollar private mint.

Besides, Google could give their virtual currency a cute name, like Google Moolah.

Creating a virtual currency and using that as a way to avoid inflation is a pretty far out, practically unheard of idea, but the fact that Second Life's virtual currency works so well and is so useful (even despite staying at the same value as the U.S. dollar) has convinced me that virtual currencies really can work. I think it's a possible solution worth experimenting with, at least.

Best wishes,
Apollia

[escapee]

Creating a virtual currency and using that as a way to avoid inflation is a pretty far out, practically unheard of idea, but the fact that Second Life's virtual currency works so well and is so useful

The "value" of the money depends on how many goods are produced in a system. in the case of virtual world, there is no limit on how many virtual goods can be produced as long as the founders keep adding more servers and memory for the purpose of expansion. So there will be no inflation in virtual world with the exception of very rare virtual super powerful items usually found in MMORPG.

In real world though, we have 6 billion people competing for limited amount of essential goods like food, metals, water & energy with almost unlimited amount of fictitious digital money ( created by CBs all over the world to fund deficit spending ). So the end result will always be rampant inflation unless we learn the magic to create food or energy out of THIN AIR.

[Apollia]

Though buying virtual objects is probably the primary use of Linden $, people do in fact use the Second Life's currency to pay people for things besides just virtual objects.

Many people use L$ to pay for actual real-world services such as programming, website development, writing, editing, translation, etc.

There are lots of classified ads within Second Life - I've even seen ads for people claiming to be real-world therapists, offering to counsel people within Second Life in exchange for L$.

A couple times I got some really cheap 10-minute psychic readings, for about $1 or $2 in real money. I took some cheap lessons on the programming language PHP (which were a really fantastic, useful introduction), and attended some lectures on astrology (if I recall correctly, I didn't _have_ to pay for those, but they encouraged donations).

Quite a while back, if I recall correctly, I encountered an auction website where people could apparently buy real-world objects for Linden dollars (though I'm not sure how trustworthy that website was and I didn't register).

I myself have used Second Life as an alternative to PayPal just to send money to people without incurring any of PayPal's fees. These days, I also always offer Second Life as a payment method for any services or real world objects I try to sell.

Originally Posted by escapee

The "value" of the money depends on how many goods are produced in a system. in the case of virtual world, there is no limit on how many virtual goods can be produced as long as the founders keep adding more servers and memory for the purpose of expansion. So there will be no inflation in virtual world with the exception of very rare virtual super powerful items usually found in MMORPG.

Actually, it appears that inflation is somehow a possibility in Second Life's economy, but, Second Life seems to control it effectively by taking L$ out of circulation in various ways, such as by charging L$ for services like classified ads, upload fees for images, sounds, etc.

One useful (though also dangerous) thing about a virtual currency is, unlike a real-world currency system, it's possible to have 100% accurate knowledge of exactly what the economic system is doing at any given time. All the numbers are in the system. I'm sure the company that runs Second Life could probably even find out anything they wanted about transactions between individual users, etc.

Meanwhile, real-world economic systems involve a lot more guesswork and estimation.

Come to think of it, a virtual currency could actually be a very bad, dangerous system in the hands of any tyrant who wanted to tax the living heck out of everyone and permit no financial privacy to anyone whatsoever, and easily seize the assets of people, create their own money out of thin air at will, surreptitiously fix the currency's exchange rate at a desired level instead of letting the market freely determine the price, etc. It might actually not be such a good idea.

But, perhaps it would be less dangerous if there were a wide variety of different providers instead of one major provider with a monopoly.

In real world though, we have 6 billion people competing for limited amount of essential goods like food, metals, water & energy with almost unlimited amount of fictitious digital money ( created by CBs all over the world to fund deficit spending ). So the end result will always be rampant inflation unless we learn the magic to create food or energy out of THIN AIR.

Hmm... well, I don't know. There must be _some_ good, realistic solution that simply hasn't been thought of yet. I hope...

Best wishes,
Apollia

[Still Growing]

We really shouldn't need another currency, its a shame we even have to discuss it. The question is "Who does the USD belong to as a currency?"

Does it belong to the people? Does it even belong to the US Gov't? If you look at the USD it saids Federal Reserve Note. This gives you the impression that its owned by the gov't since it says Federal. But does it?

Since our Federal Reserve banks are privately held does it stand to reason that they are actually backed by these private guys? The USD doesn't say "Federal Reserve Board of Directors Note" so therefore the USD isn't technically gov't backed.

We could argue symantics however if it walks like a duck, quacks like a duck and you see duck **** everywhere.... well...

[Brutha]

The USD doesn't say "Federal Reserve Board of Directors Note" so therefore the USD isn't technically gov't backed.

At least it's backed enough that those people will get the government to pay for it There good at getting the governement to back up things that it isn't used to backing up.

[tobyhede]

Some good introductions to the system:

Fiat Currency
Fractional Reserve Banking

Inflation is constructed to skim money off the top of the actual value creators in the economy - the people who make stuff, basically.

It is possible to have a monetary system that is not dependent on inflation.

[Apollia]

Originally Posted by tobyhede

Some good introductions to the system:

Fiat Currency
Fractional Reserve Banking

Thanks!

Inflation is constructed to skim money off the top of the actual value creators in the economy - the people who make stuff, basically.

I regard usury much the same way.

It is possible to have a monetary system that is not dependent on inflation.

I guess a virtual currency wouldn't have to have inflation either - there could just be a fixed, unchanging amount of virtual money in existence without any new money ever being created.

I think I myself might actually prefer a physical currency backed by (or actually made of) gold or something, but, one of the advantages of a virtual currency is that there's nothing physical like gold or silver that an oppressive government could easily confiscate to enforce a currency monopoly.

Best wishes,
Apollia

[Apollia]

Originally Posted by Still Growing

We really shouldn't need another currency, its a shame we even have to discuss it.

Yes. If human beings were all nice and trustworthy enough not to abuse power, and intelligent enough to know right off the bat the best way to design a system like a currency, then, I think monopolies in general wouldn't be quite as dangerous or harmful.

The question is "Who does the USD belong to as a currency?"

Does it belong to the people? Does it even belong to the US Gov't? If you look at the USD it saids Federal Reserve Note. This gives you the impression that its owned by the gov't since it says Federal. But does it?

Since our Federal Reserve banks are privately held does it stand to reason that they are actually backed by these private guys? The USD doesn't say "Federal Reserve Board of Directors Note" so therefore the USD isn't technically gov't backed.

Yes, it really does seem rather misleading of them to call it the "Federal" Reserve.

Since the Federal Reserve banks are apparently private corporations, maybe truth in advertising laws should apply, and they should be forced to adopt a more accurate name.

I wonder if them calling themselves "Federal" legally counts as as misrepresentation. It might be an interesting lawsuit for someone to pursue.

Best wishes,
Apollia

[Still Growing]

Apollia,
The private Federal Reserve Banks (specifically NY), have special rules that apply to them. They are not a gov't agency but they are also not a typical shareholding company. They aren't a public corp, they aren't a gov't entity, not a C corp, LLC or any other.

It seems that they have some special designation that gives them privacy. In addition they do not have to show their P&L to the Board nor to the public.

So they are supposedly regulated by the Board of Governors however they have a non compete agreement that has no expiration date I believe.

The Federal Reserve Act of 1913 gave them these privaledges. If you do research on it you'll find that there was market manipulation and some insider dealing when they got the contract. It was passed in Congress right before Christmas break when nobody was there.

Another interesting fact, over $75 billion of Iraq's oil money is sitting right now in the private bank of NY. Only recently did they start paying interest on it back to Iraq. Its interesting that the Fed bailed out AIG for $70 plus billion and the money they have in their account from Iraq is a similar amount. Its a coincidence however I find it ironic.

On the news you keep hearing "The Fed bailed out AIG" however who is the Fed? If you took a national poll on who the money came from I bet less than 1% would said it was from a private bank called The NY Fed. In history class in high school and college here in the US there was no education on the true system. My good friend has a bachelors in Economics, is working on his law degree and spent time as a congressional aid in DC and he was floored when he discovered this. It kind of shook his economic foundation that his belief system was based on as you can imagine.

Do you believe we are being intentionally deceived?

[mercuryrising]

Originally Posted by tobyhede

Some good introductions to the system:

Fiat Currency
Fractional Reserve Banking

Inflation is constructed to skim money off the top of the actual value creators in the economy - the people who make stuff, basically.

It is possible to have a monetary system that is not dependent on inflation.

I thought it was interest not inflation. It's a system based on usury.

Otherwise, you just described why I am not crying for these people and I look forward to the end of this economic system.

[Brutha]

I wonder if them calling themselves "Federal" legally counts as as misrepresentation.

There called that way by law.

Who exactly bailed out AIG? The Board of Directors, the Board of Governors or the NY Fed?

[Apollia]

Originally Posted by Brutha

There called that way by law.

Thanks for the answer. Sounds like a law that definitely ought to be changed. The USA would be a much better place if our money were emblazoned with the words "Not-So-Federal Reserve Note" at the top...

Just kidding...

Who exactly bailed out AIG? The Board of Directors, the Board of Governors or the NY Fed?

Based on what Still Growing said above, I think it was the NY Fed:

Originally Posted by Still Growing

On the news you keep hearing "The Fed bailed out AIG" however who is the Fed? If you took a national poll on who the money came from I bet less than 1% would said it was from a private bank called The NY Fed.

Best wishes,
Apollia

[Apollia]

Originally Posted by Still Growing

Apollia,
The private Federal Reserve Banks (specifically NY), have special rules that apply to them. They are not a gov't agency but they are also not a typical shareholding company. They aren't a public corp, they aren't a gov't entity, not a C corp, LLC or any other.

It seems that they have some special designation that gives them privacy.

Wow, I didn't know that. That definitely sounds very shady and unfair, and like some kind of trick to dodge existing laws and regulations for corporations and government entities.

In addition they do not have to show their P&L to the Board nor to the public.

That is shocking. I don't understand how the Board could properly oversee them if the Board is kept in the dark about even the profit and loss statement.

Also, I think the public itself really has a right to know this stuff. If I'm not mistaken, little to nothing that (for example) Congress does is secret. The activities of Congress are published on the web and also frequently televised by C-Span.

Even though the "Federal" Reserve is apparently not an official part of the government, it has so much power it practically is a part of the government. I can't think of any reason why they would require such secrecy unless they were doing things that would outrage the public if the public knew about them.

I think in a democracy, government ought to be as transparent as possible, since it's supposed to be "by the people, for the people", but if the people have no idea what is going on and no way (or supposedly no right) to find out, they can't participate as well in the democratic process due to lack of knowledge.

So they are supposedly regulated by the Board of Governors however they have a non compete agreement that has no expiration date I believe.

Terrible... so they can just keep on doing the lousy job they're doing and there's no way to vote them out of office or even nominate some other weirdly-designated quasi-private corporation to take over their job.

The Federal Reserve Act of 1913 gave them these privaledges.

For anyone interested, here's a link to the text of the Federal Reserve Act.

It's awfully long... but someday, I'll get around to reading it.

If you do research on it you'll find that there was market manipulation and some insider dealing when they got the contract.

Not surprising...

It was passed in Congress right before Christmas break when nobody was there.

That seems very sneaky of whoever was responsible for that, as well as irresponsible of Congress. Whenever Congress votes on anything, everyone should be there.

Another interesting fact, over $75 billion of Iraq's oil money is sitting right now in the private bank of NY. Only recently did they start paying interest on it back to Iraq. Its interesting that the Fed bailed out AIG for $70 plus billion and the money they have in their account from Iraq is a similar amount. Its a coincidence however I find it ironic.

I don't understand the situation well enough to understand the irony, but, I'll take your word for it.

On the news you keep hearing "The Fed bailed out AIG" however who is the Fed? If you took a national poll on who the money came from I bet less than 1% would said it was from a private bank called The NY Fed.

I wouldn't have known either. (Though I already had heard in the past that the Fed is private).

In history class in high school and college here in the US there was no education on the true system. My good friend has a bachelors in Economics, is working on his law degree and spent time as a congressional aid in DC and he was floored when he discovered this. It kind of shook his economic foundation that his belief system was based on as you can imagine.

Wow.

Do you believe we are being intentionally deceived?

I think we're probably at least being intentionally left in the dark/undereducated.

Also, I think in general the average person (including the average educator) just doesn't consider economic topics important, or regards them as so mysterious and baffling they'll never be able to understand them, so why even try, and best to leave it up to the "experts".

Thanks for all the fascinating info.

Best wishes,
Apollia

[Brutha]

It makes me wonder if there's a legal loophole of some kind for virtual currencies, because otherwise, wouldn't Second Life's virtual currency have been shut down by now?

The currency trades one to one with the real dollar, so it's not in competition with the dollar.

It's awfully long... but someday, I'll get around to reading it.

If you want to do so you need some explanation of the stuff first.
Simply reading the text of the law doesn't tell you what's hidden in there if you aren't already familiar with it.
It's not a law that written with the intent that it's easy to understand. Easy explanations of how it works are as a result often false.
The Wikipedia article gives a good overview as a first start.