Posted: under News, Prophecy, Society and Culture.
Tags: bank run, depression, government, great depression, public trust, recession
The U.S. Govt says they are trying to avoid a bank run. Don’t they think we know, we are already having one?
Today’s depositors who can withdraw all their money and thus cause a classic bank run are not John Q Public. We are insured by FDIC. We take money out of the bottom of a system, like from the tap of a koolaid cooler at a church picnic.
The insurance companies, financial institutions, pension funds, investment banks, and world banks who make deposits into our financial system by making LOANS to our system are the ones who pour koolaide into the top of the jug. These guys have already withdrawn their money. They pulled the plug. The run is on because the money was pulled out of the top of the system instead of the bottom. They are not providing any more money. This means the wheels of commerce grind to a halt. NOW.
The most interesting part is that in the Great Depression, when we were a nation of SAVERS, cash ran out as the public lost confidence in the banking system and withdrew actual deposits. The difference is that today’s bank run happens as a nation of BORROWERS finds there is no money to borrow. Money has stopped flowing in at the top of the system.
Same basic outcome…. There is no cash. The run is already underway.
This is why our Govt wants to railroad a bill through Congress…. The washington power base seems to feel that if we print money fast enough, maybe John Q Public won’t find out that there is no cash!
A curse on Greed. A Blessing on Wisdom.
May those who hear the voice of God listen, and calm the waters of this storm.
Posted: under News, Prophecy, Society and Culture, Teaching.
Tags: banks, economy, Finance, government, prayer, U.S.
Prayer Call: Ask God to cause our leaders in Washington start doing something for the people instead of for the banks who caused this mess.
You can read the following report from CNN any way you like.
Here is how I took it: In the latest financial market bailout news from Washington - U.S. Govt wants to bail out the banks who misbehaved so badly as to risk going under - even buy their bad debts so banks can clear their books and LOOK good again. This won’t fix the mismanagement that caused the problem, and won’t make them stronger than they are. It will just make them LOOK stronger. THIS IS NOT A SOLUTION!
- What about the people who counted on the American dream?
- What about the horrible loss being felt all over America as our houses plunge in value?
- What about our retirement?
- What about our kids in college?
- What about the young people who cannot even afford a decent place to live?
- What about their parents whose net worth has dwindled until they cannot help the kids with college or a place to live?
- What about the house in foreclosure next door, dragging my net worth down by $50,000.
I did not do anything wrong - but I am left holding the tab and hanging in the wind, broke, while Uncle Sam bails out the very people who caused this mess and makes their balance sheets look good?
God has a better plan. Let’s all pray for wisdom in Washington. Our leaders need to serve the needs of the people, not the greed of the banks.
NEW YORK (CNNMoney.com) — The federal government, in what will be its most far-reaching attempt yet to contain the financial crisis, is poised to establish a program to let banks get rid of mortgage-related assets that have been hard to value and harder to trade.
Leaders from the House and the Senate were briefed on Thursday evening by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.
“The root cause of distress in capital markets is the real estate correction and what’s going on in terms of the price declines in real estate,” Paulson said at a press briefing after the meeting. “So we’re coming together to work for an expeditious solution aimed right at the heart of this problem, which is illiquid assets on financial institutions’ balance sheets.”
Many details of the plan remained unclear, but it is likely the government would take on tens of billions of dollars in mortgage assets - if not more.
House Speaker Nancy Pelosi, D-Calif., said late Thursday night that lawmakers expected to get the proposal from Treasury in a matter of hours.
“We hope to move very quickly - time is of the essence,” Pelosi said.
Paulson, Bernanke and other officials expect to work through the weekend with congressional leaders to finalize a plan, said Brookly McLaughlin, a Treasury spokeswoman.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said he believes legislation could be acted on next week.
The announcement is the latest stunning turn in an extraordinary six days that have rocked Wall Street. A widening banking crisis has toppled two major firms - Lehman Brothers and Merrill Lynch - and prompted an $85 billion government loan to stem the sudden collapse of insurance giant American International Group.
Meanwhile, mainstay financial institutions are scrambling to raise cash or find merger partners - because of a freeze-up in lending and sinking investor confidence stemming from a collapse of the home mortgage market.
Talk of plan energizes markets
Speculation that the Bush administration was developing a comprehensive plan jolted Wall Street on Thursday and sent stocks higher. The Dow ended 410 points higher.
The Treasury has been talking about the concept of an agency to take on bad debts of financial institutions “for several months,” a source with knowledge of discussions on the issue told CNN.
There’s precedent for the federal government taking on troubled assets from the private sector. In the 1930s, the Home Owners Loan Corp. was set up to issue bonds to refinance borrowers. Then during the S&L crisis Congress set up the Resolution Trust Corp. to sell assets of failed banks.
One way the agency under discussion could work is by setting up bulk auctions to buy mortgage assets from financial institutions. The auctions would be for set dollar amount purchases. Companies that want to offload the hard-to-sell assets from their balance sheets bid to sell to the government at a huge discount. The company willing to sell at the lowest price wins.
The government would then be able to sell the assets back into the market when it wanted.
According to policy research firm the Stanford Group, such a setup would allow the government to refinance borrowers in the loans owned by the government, thereby lowering the risk of their defaulting and eventually boosting the price of the mortgage security in which those loans are packaged.
The agency and auction facility is one that House Financial Services Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd have supported.
Jaret Seiberg, a financial services analyst at the Stanford Group, said he believes there is bipartisan support for allowing the Bush administration to take short-term action to “get us through the immediate crisis.”
The expectation is that whatever program is decided on would only last through the presidential inauguration. “You don’t want a program that will last for several years because that would limit what the next administration could do,” Seiberg said.
Candidates to weigh in
On Friday, both presidential nominees are expected to detail their own plans to address the crisis.
Not everyone supports the idea that the government should buy up assets that the market currently can’t value and isn’t trading.
Sen. Charles Schumer, D-N.Y., on Thursday proposed his own plan that would involve the government providing a cash infusion to financial institutions in exchange for stock in the companies and let the institutions offload their mortgage investments.
Banking consultant Bert Ely is skeptical about the government getting involved at all. If the government chooses to “prop up the institutions or allows the institutions to offload asset onto a government entity, who’s going to take the losses? It’s financial insanity. The markets have to clear. Our fundamental problem: an oversupply of housing.”
CNN senior correspondent Alan Chernoff, CNN White House correspondent Elaine Quijano and Washington producer Deirdre Walsh contributed to this report.