OT Banks and bootstraps!

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My granddaughter that in college tells me that many students use their gov loans to purchase clothing, and vehicles after tuition is paid and the residual put on their account. Students can use the funds for certain expenditures but not to purchase cars and use the money to party on.
I mean when they use it for a down payment on a car that's co-signed imagine what they really end up paying for after the loans paid.
 
Who knew that “saving the economy” from inflation could crush the economy if massive interest rate hikes are implemented too stridently?

I’m just an internet geek, but shouldn’t there be economists who can foresee these things?
 
e_blazer said:
Who knew that “saving the economy” from inflation could crush the economy if massive interest rate hikes are implemented too stridently?

I’m just an internet geek, but shouldn’t there be economists who can foresee these things?
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Interest rates have to come up. Inflation is bound to happen. We have lived since the 90s with artificially low inflation (thanks to Russia fire-selling USSR surplus) and artificially low prices (from China), and since 2008 with artificially low interest rates trying to keep the economy going as Russia stocks ran low and Chinese labor prices exploded. But there is no way we know of to outrun Boomers retiring and pulling their money out of the market.

We'll have more work than we know what to do with, and we'll build out our manufacturing base like we've never seen before. That will cause inflation. But there is a TON of money to be made. Economists know all of this.

I don't think there was any way to slow inflation without raising interest rates like they did.
 
Phatguysrule said:
Interest rates have to come up. Inflation is bound to happen. We have lived since the 90s with artificially low inflation (thanks to Russia fire-selling USSR surplus) and artificially low prices (from China), and since 2008 with artificially low interest rates trying to keep the economy going as Russia stocks ran low and Chinese labor prices exploded. But there is no way we know of to outrun Boomers retiring and pulling their money out of the market.

We'll have more work than we know what to do with, and we'll build out our manufacturing base like we've never seen before. That will cause inflation. But there is a TON of money to be made. Economists know all of this.

I don't think there was any way to slow inflation without raising interest rates like they did.
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I wasn’t disagreeing with the notion that interest rates had to rise, just how quickly they were doing it. No time for adjustments without major ramifications.
 
e_blazer said:
I wasn’t disagreeing with the notion that interest rates had to rise, just how quickly they were doing it. No time for adjustments without major ramifications.
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I don't think this had all that much to do with interest rates going up.
It's not a problem with the economy per se, it's a problem with fools (SVB management) and assholes (Peter Thiel et al).

barfo
 
barfo said:
I don't think this had all that much to do with interest rates going up.
It's not a problem with the economy per se, it's a problem with fools (SVB management) and assholes (Peter Thiel et al).

barfo
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It's mostly do to the interest rates. SVB bought a lot of 10-year treasuries as collateral to hold onto. When the interest rates rise, the value of those treasuries tank. It's not a huge deal if they hold it until maturity... but when people started the bank run, they had to sell the treasuries at a massive loss making the problem worse
 
CJ_is_Gone said:
It's mostly do to the interest rates. SVB bought a lot of 10-year treasuries as collateral to hold onto. When the interest rates rise, the value of those treasuries tank. It's not a huge deal if they hold it until maturity... but when people started the bank run, they had to sell the treasuries at a massive loss making the problem worse
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Exactly. Here’s a good summary from this morning’s NYT newsletter:

“Because the federal government has always paid its bills, U.S. bonds are widely considered the safest investment. SVB’s experience shows there are moments when even these safe investments may not pay off. The details get technical, but they’re worth unpacking to understand what went wrong.

Bonds are effectively money that the government borrows from buyers — the public — before paying them back later, with interest. Market conditions and the Federal Reserve, America’s central bank, help determine that interest rate.

When SVB bought bonds, interest rates were very low. Since then, the Federal Reserve, which sets certain influential rates, increased those to combat rising prices. Now, new bonds can carry interest multiple times higher than those SVB bought.

Imagine, then, that you want to buy bonds today. You would want the newer bonds because they have a higher payout. So when SVB needed to sell bonds, to raise cash that it could use for its customers’ withdrawals, it could do so only for a discount, taking a loss.

The bank failed to follow basic financial advice: Diversify your portfolio. “It’s not fraud,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics. “But it’s an extremely risky, and obviously risky, strategy.”

In the past few weeks, venture capitalists and other wealthy customers on social media and in private chats started discussing concerns that SVB could no longer pay its depositors. Some began to move their money out of the bank, and the situation spiraled quickly. “Once you start asking, ‘Are we having a bank run?,’ it’s too late,” my colleague David Enrich, a business editor, said.”
 
You guys are getting it all wrong. According to my conservative Facebook friends, this happened as a result of liberal wokeness run amuck into industries. The bank was in Silicon Valley, what other evidence do you need?
 
Secret Fed Bailout Pumps Billions Into Banks

 
donkiez said:
You guys are getting it all wrong. According to my conservative Facebook friends, this happened as a result of liberal wokeness run amuck into industries. The bank was in Silicon Valley, what other evidence do you need?
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Definite proof…that there’s too much “bubba” in Florida water.
 
Apparently the board of directors was too diverse. Had they all been white men the bank would not have failed.
 
CJ_is_Gone said:
It's mostly do to the interest rates. SVB bought a lot of 10-year treasuries as collateral to hold onto. When the interest rates rise, the value of those treasuries tank. It's not a huge deal if they hold it until maturity... but when people started the bank run, they had to sell the treasuries at a massive loss making the problem worse
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Yes, but it's a bit like saying a car driving off a cliff is mostly about the cliff.

Gotta also consider the condition of the guardrails, the condition of the brakes, and the skill of the driver.

barfo
 
Gallego Says Lobbyists 'Bought Sinema's Vote' That Resulted in Bank Collapse

"When bank lobbyists asked me to weaken bank regulations, I said no. When they asked Sen. Sinema, she asked how much—and voted yes," said the Democratic Arizona congressman, who is running for Sinema's Senate seat.

https://www.commondreams.org/news/ruben-gallego-sinema
 
Warren and Porter Lead SVB Act to Repeal Trump-Era Bank Deregulation Law

Sen. Elizabeth Warren said a 2018 law backed by Republicans and dozens of Democrats allowed banks to "load up on risk to boost their profits," endangering "our entire economy."

https://www.commondreams.org/news/warren-porter-trump-bank-deregulation

Notably absent from the list of co-sponsors were the Democrats who helped Republicans usher the bill through Congress in 2018, often misleadingly arguing that the measure was chiefly about providing relief for "community banks."

In the Senate, 16 Democrats and Sen. Angus King (I-Maine) supported the bill, giving Republicans the votes they needed to overcome the chamber's legislative filibuster.

One of the Democratic supporters, Mark Warner of Virginia, defended the 2018 law over the weekend, tellingABC News that he believes it "put in place an appropriate level of regulation on mid-sized banks" and that "these mid-sized banks needed some regulatory relief."
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16 democrats sided with Trump and the republicans in this deregulation. Therefore, this was in fact, bipartisan deregulation. So blaming just Trump or the republicans is simply... wrong. Democrats had a hand in this too.
 
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It might be a good time to raise the $250,000 FDIC threshold as well... They will of course pay out over that amount already, but they should probably get it in writing because people are stupid during bank runs.
 
Shaboid said:
It might be a good time to raise the $250,000 FDIC threshold as well... They will of course pay out over that amount already, but they should probably get it in writing because people are stupid during bank runs.
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It is easy to protect more then $250K if you know what you are doing. A family of 4 can easily have a couple million FDIC protected. It goes by ownership . So if you take a family of four if each parent has an account with just their name on it, each account is protected for $250K. Then if each parent has an account with their spouse and kids as beneficiaries they are protected $250K per beneficiaries. So that would be $750K per parent. Then you could have an account with just the parents on it jointly, which would be another $250K per account holder. Then an account with the parents as owners and 2 kids as beneficiaries which would be $250K per bene per account holder, another million protected. So a family of 4 could have 3.5 million FDIC insured. I was working in the banks during the last set of crashes and learned a lot about FDIC.
 
twobullz said:
It is easy to protect more then $250K if you know what you are doing. A family of 4 can easily have a couple million FDIC protected. It goes by ownership . So if you take a family of four if each parent has an account with just their name on it, each account is protected for $250K. Then if each parent has an account with their spouse and kids as beneficiaries they are protected $250K per beneficiaries. So that would be $750K per parent. Then you could have an account with just the parents on it jointly, which would be another $250K per account holder. Then an account with the parents as owners and 2 kids as beneficiaries which would be $250K per bene per account holder, another million protected. So a family of 4 could have 3.5 million FDIC insured. I was working in the banks during the last set of crashes and learned a lot about FDIC.
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Oh I totally get that. All I meant was that people don't act rationally when it comes to banks and their money. Giving people more "protection" even if it's just to ease their fears might be a good idea.
 
I am not a family of four....

There actually are atheists in foxholes but there are no libertarians when it's their ass in a sling. All these Silicon Valley laissez faire capitalists, hated regulations, hated government assistance. Loved that Reagan joke that the scariest words are I'm from the government and I 'm here to help you.

Until hurricane hits their state. Until train details in their town. Until the bank holding their assets goes under. Then they are all New Deal loving welfare state socialists,. But only for themselves! Everyone else has to pull themselves up by bootstraps.
 
crandc said:
I am not a family of four....

There actually are atheists in foxholes but there are no libertarians when it's their ass in a sling. All these Silicon Valley laissez faire capitalists, hated regulations, hated government assistance. Loved that Reagan joke that the scariest words are I'm from the government and I 'm here to help you.

Until hurricane hits their state. Until train details in their town. Until the bank holding their assets goes under. Then they are all New Deal loving welfare state socialists,. But only for themselves! Everyone else has to pull themselves up by bootstraps.
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Beneficiaries can be anyone, siblings, parents, nieces/nephews. Once you get further out then immediate family members, it starts limiting it though.
 
crandc said:
I am not a family of four....
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CDARS, then. It spreads your cash out among different banks, $250k in each. And pays interest.

barfo
 
Road Ratt said:
Gallego Says Lobbyists 'Bought Sinema's Vote' That Resulted in Bank Collapse

"When bank lobbyists asked me to weaken bank regulations, I said no. When they asked Sen. Sinema, she asked how much—and voted yes," said the Democratic Arizona congressman, who is running for Sinema's Senate seat.

https://www.commondreams.org/news/ruben-gallego-sinema
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Finally agree with you on something, hope Gallego runs roughshod over her in the primary. Not sure who I disdain more, Sinema or Tulsi Gabbard.
 
crandc said:
My life savings, such as they are, are in Schwab accounts. For reasons with which I will not bore you, in two accounts. I got an email from my financial advisor on security of my accounts.

I congratulated him on using assure, ensure, and insure correctly in a single message.
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I wanna read this email now to see such an achievement.
 
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