posted on Oct, 14 2008 @ 02:52 AM
Essentially banks make their money by borrowing from the government (the Federal Reserve) at wholesale (2%), or from foreign banks that the USdollar
is stronger than, and retailing that money as loans to business and as home loans, car loans and credit cards at higher interest .
They justify the higher interest by saying that they the banks are the ones taking the risk if these retail loan buyers don't pay.
Now we have a situation where the Bush executive government - a Republican administration - has stepped in with taxpayer dollars to the tune of about
1 trillion ($1,000,000,000,000) - the largest single act of socialism in the history of mankind - to buy the failed part of that risk that the banks
insist they have been taking.
There is a problem here.
Not so much IMO that it adds a trillion to the bill that taxpayers and their grandchildren's grandchildren will have to pay - though that is bad
The problem is it sets a precedent. They will do it again, it's structural, and they know that the government will again step in and taxpayers will
flip for the bill. Next time, they won't be so cautious. Next time, it will be even bigger. Next time, they will want the treasury to step in
earlier to prevent financial stocks from lead ballooning.
Banks justify retailing money on the basis of risk. Their executive calculates the risk is acceptable. They - the owners of the bank - take the fall
if the loan turns bad.
Now there's no risk, what need is there of banks? If they're to be rescued by the taxpayer when they fail, why not save the taxpayer trillions over
generations, and simply make federal reserve funds available to the ordinary citizen, small business or company?
Everyone; homeowners, entreprenuers, small business, credit card, car loans... to re-finance their debts through the Fed at a wholesale price of 2%
[edit on 14-10-2008 by undermind]