Financial News

[Balta1701]

That is incredibly vague, and I hope the language in the bill is more explicit in defining that usage, what constitutes viable liquid non-cash collateral, and who are pure hedgers.

Don't you realize that's exactly the point? You want to introduce new regulation so that it looks like you're doing something and you can say "It's not my fault!" when the current investment bubble bursts and we find ourselves in an even deeper hole, but at the same time you can't piss off any of the banks because they flat out own the government and even long-serving Reps can't afford to be on their bad side.

[lostfan]

Going back a couple of pages ago when you were talking about overdraft fees, I wish someone would lay the smack down on banks who think they're slick by holding onto several small pending charges when you start getting close to zero, then authorizing a larger one that came after the smaller ones first so they can give you overdraft charges on all of them when you really should only be getting one, for the large one. Suntrust does this to my wife all the time, although generally the conversation ends because I tell her "quit complaining to me without doing anything about it, either change banks or STFU."

[Balta1701]

LOL, changing banks won't do anything, they all do that.

[lostfan]

I tell her to change banks because of her general whining, about pretty much everything her bank does. She hates it so much but is too lazy to bother opening a new account with USAA or somebody and fill out some new direct deposit forms at her job. This is the same woman who always pays the 5 dollar pay-by-phone fee to pay bills because she doesn't feel like figuring out websites.

[NorthSideSox72]

Going back a couple of pages ago when you were talking about overdraft fees, I wish someone would lay the smack down on banks who think they're slick by holding onto several small pending charges when you start getting close to zero, then authorizing a larger one that came after the smaller ones first so they can give you overdraft charges on all of them when you really should only be getting one, for the large one. Suntrust does this to my wife all the time, although generally the conversation ends because I tell her "quit complaining to me without doing anything about it, either change banks or STFU."

I believe there is legislation pending that would force banks to clear charges in time order, instead of by amount or something arbitrary.

 

 

[Balta1701]

I believe there is legislation pending that would force banks to clear charges in time order, instead of by amount or something arbitrary.

That would be part of that overdraft reform bill that we discussed a couple pages ago. I'm pretty sure we were told how bad of an idea reforming that process to make it less like outright theft would be at the time.

[lostfan]

I believe there is legislation pending that would force banks to clear charges in time order, instead of by amount or something arbitrary.

Good. The way they do it now is total horses***.

[Rex Kickass]

That would be part of that overdraft reform bill that we discussed a couple pages ago. I'm pretty sure we were told how bad of an idea reforming that process to make it less like outright theft would be at the time.

 

Was listening to the Diane Rehm show last week and there was two consumer advocates and the president of a banking association that was lobbying against overdraft reform and the idea of consolidating oversight over banking and her answer to every customer experience, about crazy overdraft charges, holding deposits for nearly a week and changing terms arbitrarily is always - "There are over 8,000 banks in the US, maybe you should change yours." Like its as easy as going to a different supermarket or flying a different airline.

 

It's so difficult to unwind from where you bank, that it's easy for banks to screw customers. Because going somewhere else usually takes a long time and a lot of effort. With automatic charges and waiting for checks to clear, etc... it can often take months, and any mistakes in transition can be extremely costly.

[lostfan]

My wife doesn't do any automatic withdrawals (like I said, she is mentally lazy), only direct deposit. All she'd have to do is take 3-4 minutes to fill out an online form and then change the account number at her job. She won't do it.

[NorthSideSox72]

That would be part of that overdraft reform bill that we discussed a couple pages ago. I'm pretty sure we were told how bad of an idea reforming that process to make it less like outright theft would be at the time.

I can tell you without even looking back, that I was against certain parts of it, but was fine with letting restrictions forcing banks to inform customers what they are getting into.

 

I don't think I spoke specifically about the check order provision, but I'd be OK with that as well.

 

[NorthSideSox72]

CNNFN ran this article today, about GS's $3B profit for the quarter. Give it a read, and see what you think.

 

To me, the whole article is really inciting an irrational, and dare I say mildly socialist, point of view. It basically is telling us that "people" are upset that GS is making big bucks at our expense.

 

This is patently false. The "expense" of money we sent to GS, was all not only paid back in a very short period, but was paid back at a substantial rate of interest. It was a loan, and one that GS paid in full and paid off early. And now, they are making a big profit. This is exactly what we should WANT the recipients of these bailouts to do. It is utterly bizarre to me that GS is getting s*** for this, when other banks have lost tons of money and are still in the pocket of taxpayers are getting less flack then GS is. This makes no sense to me.

 

Here are some kickers:

 

More than a million Americans have filed for bankruptcy this year, according to the American Bankruptcy Institute. A September survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments faced a collective $168 billion budget shortfall for fiscal 2010.

 

Goldman, by contrast, is sitting on $167 billion in cash, in the name of making sure it can withstand another market meltdown if that day comes.

 

Here, the writer tries to make GS look bad for being responsible. Seriously, think about that for a second.

 

And another one:

 

While Goldman churned out $3 billion in profits in the third quarter, the economy shed 768,000 jobs, and home foreclosures set a new record.

 

Guilt trip much? Note the disconnected attempt at a parallel there. He didn't say GS made $3B and laid people off - it said GS made $3B, and a bunch of other companies laid people off. This is an absurd stab here.

 

I don't usually side with the tea bagging, Obama-is-a-socialist/communist crowd, because I think they have taken things way too far. But here, I agree with the thought that there is too much of a sense of entitlement prevading in society right now.

 

[Balta1701]

And once again I'll reply to your defense of G.S. that whether or not they repaid back the TARP money specifically they're still the beneficiaries of hundreds of billions of dollars worth of government largesse from the Fed, the destruction of Lehman brothers, the bailout of AIG, and the implicit guarantee that comes from them being too big to fail, amongst other things. They're still at the casino with a big chunk of your money knowing that if they lose big time, they won't have to pay it back.

[NorthSideSox72]

And once again I'll reply to your defense of G.S. that whether or not they repaid back the TARP money specifically they're still the beneficiaries of hundreds of billions of dollars worth of government largesse from the Fed, the destruction of Lehman brothers, the bailout of AIG, and the implicit guarantee that comes from them being too big to fail, amongst other things. They're still at the casino with a big chunk of your money knowing that if they lose big time, they won't have to pay it back.

And yet, they didn't lose big time, even in the biggest financial crisis since 1929. Because they are good at what they do, and don't take risks that they cannot absorb.

 

In the case of many other institutions, I agree with you. I just disagree on GS, as well as Northern Trust, Allstate and some other big financials who had enough sense to steer clear of risk they couldn't handle. I prefer not to villify the entire industry, for the sins of only some.

 

[lostfan]

Wasn't GS one of the first to pay back its bailout money? On purpose?

[NorthSideSox72]

Wasn't GS one of the first to pay back its bailout money? On purpose?

Yes.

 

[southsider2k5]

Wasn't GS one of the first to pay back its bailout money? On purpose?

 

So that they couldn't have the terms of their business dictated to them, yes.

[NorthSideSox72]

So that they couldn't have the terms of their business dictated to them, yes.

That and that they had the capital to do OK without it at that point. I'm sure others still into the pocket of the government would like to be freed up to, but they can't do it realistically, yet.

 

[southsider2k5]

That and that they had the capital to do OK without it at that point. I'm sure others still into the pocket of the government would like to be freed up to, but they can't do it realistically, yet.

 

They had the capital before that, as long as the government didn't allow the entire system to cascade apart, which was there was no way was going to actually happen.

[NorthSideSox72]

They had the capital before that, as long as the government didn't allow the entire system to cascade apart, which was there was no way was going to actually happen.

Sort of. Its not that black and white, which I am sure you know.

 

[Balta1701]

Sort of. Its not that black and white, which I am sure you know.

As long as they could issue corporate bonds backed by the full faith and credit of the U.S. government, which they can quite literally do, then of course they have the capital.

[Balta1701]

But the decline of certain institutions, along with the outright collapse of once-vigorous competitors like Lehman Brothers, has consolidated the nation’s financial power in fewer hands. The strong are now able to wring more profits from the financial markets and charge higher fees for a wide range of banking services.

 

“They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them,” said Douglas J. Elliott of the Brookings Institution.

 

A year after the crisis struck, many of the industry’s behemoths — those institutions deemed too big to fail — are, in fact, getting bigger, not smaller. For many of them, it is business as usual. Over the last decade the financial sector was the fastest-growing part of the economy, with two-thirds of growth in gross domestic product attributable to incomes of workers in finance.

 

Now, the industry has new tools at its disposal, courtesy of the government.

 

With interest rates so low, banks can borrow money cheaply and put those funds to work in lucrative ways, whether using the money to make loans to companies at higher rates, or to speculate in the markets. Fixed-income trading — an area that includes bonds and currencies — has been particularly profitable.

 

...

Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them.

 

Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing.

....

 

A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.

Link

[southsider2k5]

Link

 

If only we had some sort of agency responsible for banks that could prevent these sort of problems...

[Balta1701]

If only we had some sort of agency responsible for banks that could prevent these sort of problems...

I believe G.S. bought them out about 3 years ago.

[StrangeSox]

Frontline is showing an interesting piece on the regulation (or completely lack thereof) of the derivatives market and why everyone ignored/ shouted down Brooksley Born.

[NorthSideSox72]

Frontline is showing an interesting piece on the regulation (or completely lack thereof) of the OTC derivatives market and why everyone ignored/ shouted down Brooksley Born.

Fixed for ya.

 

The exchange-traded derivatives market, the one much more commonly used, is highly regulated, and wasn't a contributor to the meltdown.