CM + IT = Disaster
A note of comparison might come in handy when thinking in big numbers.
The top 25 hedge fund managers made a record $25.3 billion dollars in 2009. And despite all those dramatic congressional hearings, average compensation of Wall Street bankers rose by 27 percent in 2009. Meanwhile, banks are hiding their debt with the same old balance sheet magic they’ve been deploying for years and posting record new trading revenues—
On the other side of humanity, more sobering numbers include a record 2.8 million properties in foreclosure for 2009, a 21 percent increase over 2008’s astonishingly high figure, with another 4.5 million foreclosures projected for 2010.
Banks are incentivized not to lend. When the Emergency Economic Stabilization Act (which included TARP) was passed in October 2008, it included some fine print allowing the Fed to pay banks interest on reserves (money, or capital, banks are obligated to park with the Fed to back their businesses), and on extra reserves (money they aren’t obligated to park). In September 2008, the top banks were required to keep $43 billion dollars in reserve at the Fed, and placed $59 billion in extra reserves. Today, banks are required to keep $63 billion in reserves, but parked an extra $1.2 trillion at the Fed.
(bolding mine)
Lifted from an e-mail, our Ken Houghton opines:
What that $1.1T isn’t doing is being invested internally in new equipment or processes.
Take that pile of cash, and then look at the cash on hand (excess reserves) at the banks. Ignoring my natural tendency to rant about the idiocy of paying interest on reserves–LET ALONE EXCESS RESERVES–that’s breaking the accounting identity (S=I) and the money multiplier.
As a ballpark, you should see that in GDP trending annually about $200-300B below the previous trend. ($1T in reserves => ca. $5T in relatively safe lending; ballpark a 5% return = $250B.)
阿彌陀佛 無相佈施
不要吃五辛(葷菜,在古代宗教指的是一些食用後會影響性情、慾望的植
物,主要有五種葷菜,合稱五葷,佛家與道家所指有異。
近代則訛稱含有動物性成分的餐飲食物為「葷菜」,事實上這在古代是稱
之為腥。所謂「葷腥」即這兩類的合稱。 葷菜
維基百科,自由的百科全書
(重定向自五辛) 佛家五葷
在佛家另稱為五辛,五種辛味之菜。根據《楞嚴經》記載,佛家五葷為大
蒜、小蒜、興渠、慈蔥、茖蔥;五葷生啖增恚,使人易怒;熟食發淫,令
人多慾。[1]
《本草備要》註解云:「慈蔥,冬蔥也;茖蔥,山蔥也;興渠,西域菜,云
即中國之荽。」
興渠另說為洋蔥。) 肉 蛋 奶?!
念楞嚴經 *∞窮盡相關 消去無關 證據 時效 念阿彌陀佛往生西方極樂世界
我想製造自己的行為反作用力
不婚 不生子女 生生世世不當老師
log 二0.3010 三0.47710.48 五0.6990 七0.8451 .85
root 二1.414 1.41 三1.732 1.73五 2.236 2.24七 2.646
=>十3.16 π∈Q’ 一點八1.34
Can’t give the damned stuff away.
Problem with the bailouts is that this money went to crippled banks, many are still crippled. The money and the bailout was structured for balance sheet repair, and that is the main priority of those banks – keep the balance sheet clean – borrow from the fed at a low rate and invest the rest in treasuries. This was the same thing that happened in the early 90’s on a smaller scale. Add to that bank hesitation to loan to high risk folks, and that is a recipe for not loaning.
Look at BoA’s recent earnings: The bank’s mortgage portfolio may continue to see losses increase, there will continue to be a drop home equity loans, credit cards and loans to companies classified as at risk. (though BoA did note note that credit was better than their expectations for the quarter).
Before it was so nicely re-titled and re-branded as TARP, it was known as the Wall Street Bail-Out bill. So what do you expect – it was never designed to bail out Main Street.
The most gauling aspect, and there are many, is that we are bailing out firms that were committing massive fraud. Why? I don’t really know.
“$5T in relatively safe lending; ballpark a 5% return = $250B.)”
Just to be sure that I understand that sentence correctly, are you saying that the money being “parked” with the Fed by the banks is earning 5%? If so that raises the question of why that same Fed is allowing those same banks to borrow money from it(the Fed) at nearly 0%. What’s up wioth that? Is there anyone out there who might lend me lots of money at 0% so that I can give it back to you at 5%? Or have I got the wrong understanding of what Dan is saying?
All true, but a key missing point, I think, is that there’s not much demand for lending — at least from real companies that produce valuable goods and services.
The “credit crunch” really is to a great extent a Wall Street myth promulgated…for obvious reasons. There are oceans of cash out there looking for truly productive investments, and that has been true throughout the “credit crisis.”
I think you have it, this is how they allow banks to “repair” their balance sheets.
Is that what is referred to as free market capitalsim. A bank goes into the market with money from the general public, gives most of it freely to its various executives and then gets money from the Fed to repair to go back to the market with free money which said bank can then lend to others, but instead keeps the free money as reserves and free capital and upon which the Fed now pays interest opn said free money.
And here I had been thinking that the free market was meant to imply free to compete within a market plalce. I didn’t realize it was freedom from restraint and competition that was the meaning of the phrase.
Free market or government market meddling via the Fed, TARP, TALF etc….