... I've got an appointment so let's make this real simple.
Let's assume you're entirely correct on every point.
Let's give you the benefit of all reasonable doubts. Though I disagree with you, we will assume for the sake of argument that you are correct in all things here:1.) That a Loan is not the same as a Loan guarantee;
2.) That Deposit Insurance under the FDIC is a loan guarantee.
Let's say, to error in your favor, that
"only" 1.2 Trillion are actual loans and the rest of it is Loan Guarentees which are somehow different from loans. Let's assume that.
A.) That's still $1.2 Trillion in loans. This is an enormous number you can't ignore: a significant chunk of GNP.
B.) If deposit insurance is a loan guarentee, then that would mean you'd be looking at it like this.
i.) YOU the everyday consumer with a bank account are the creditor/lender making a loan to the bank.
ii.) The bank is the one borrowing money from you and that's why they pay you interest.
iii.) The government is the guarantor, which guarantees that you the lender to the bank (by virtue of your savings account on deposit) will not lose your investment (your savings) if the bank tanks. This is because the government as guarantor will pay you the money in your savings account up to $250K if the bank fails.
[Note, again, this ignores all differences between the FDIC and a loan guarantee in federal law].
Your article said,
The Fed would have given out $7.7 trillion to banks only in the unlikely scenario that the banks asked for the maximum possible loans and that every one of them subsequently defaulted.
I've said it before, "UNLIKELY?"
Because, that's, never happened recently. This attitude of invincibility, needs to end, now....
Too big to fail...? That means you're so big that you can fail but if you do, then you take the whole economy with you.
That means,
the government gets stuck with the bill if the banks fail. That means us....
No one cares about the technicalities even if you are correct on them, because if the banks fail which is NOT unlikely, especially during the financial crisis when several failed, then the government is stuck with the bill. Loan, Loan Guarantee, the government pays if they screw up.
Even under your assumptions, this is what a cosigner is.... If I co sign for you on a car loan and you don't make the payments, then that means I make them. Simple.
People object to, even under your scenario:I.) The special treatment for banks even though they screw us.
II.) "Only" $1.2 Trillion in below market loans is "still" huge.
III.) Even if the loan amount was "only" $1,200,000,000,000, they made $13 Billion off a loan they took out for their own benefit.... They got interest for taking out a loan, we pay it for ours.
IV.)
This is exactly like Credit Default Swaps, which were another form of this "loan protection," and it could never fail. It did. Hence the housing/sub-prime mortgage crisis. That was never gonna happen, right? V.) We have to keep bailing these idiots out. You can't say, "O no, we need to throw tons of money at the banks in a
bailout because if we don't the system will collapse and then say, "well it's unlikely that the system will collapse (that the banks will default). Pick one and stick to it, because it can't be both.
We are sick of being the last one out in their dine and dash and being stuck with the check. We don't care HOW we get stuck with the check, we care THAT we get stuck with the check.
Keep in mind, this argument gives you the benefit of every doubt. It assumes you are correct. Even then, what's your point?
O, a loan isn't the same as a loan guarantee but the government gets stuck with the bill if the banks screw up? Loan, Loan Guarantee, you know what I heard, "government stuck with the bill if the banks screw up." They do that all the time.
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Topic: Occupying Wallstreet (Read 288733 times)