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1. Banks have assets - receivables in the form of loan assets, liquid cash assets, investments, ownership in real estate, and fixed assets such as computers, equipment, etc.
My guess is that these Eastern European banks got caught holding bundles of investments in toxic sub-prime real estate loans that went bust. That, or they had very lax lending standards when investing in their own backyard.
(By the way, the Glass-Steagall Act applied only to American banks, not European.)
None of these are hard assets, they are all liquid assets, all nothing more than promises to pay. The computers and actual real estate are minuscule compared to the liabilities.
Loans on real estate will require considerable legal action, which is extremely costly, and under this last downturn, will result in large losses.
Not facing the reality is as ridiculous as claiming the banks were forced to take the loans. They took the money gladly until restrictions in exec bonuses were added.
I repeat: these are Western European banks.
This is taken from a study on banks with exposure in Eastern Europe:
Yet it was the repeal of that US law that opened the door to the irresponsible lending practices which in turn led to American toxic assets being sold on around the world. This meant the US sub-prime fiasco seriously weakened banks in several other countries, with some requiring massive government intervention just to survive.
Originally posted by CookieMonster09
The madness started when the politicians decided that anyone and everyone was entitled to the American dream of owning one's own house. The pressure was put on the banks to lessen lending standards - Hence the madness of sub-prime loans, interest only loans, no down payment loans, and all the rest. This has stopped now for some time, and it's much more difficult to obtain a loan without the proper documentation and a 20% down payment. We have swung in the other direction - where lending is so tight that it is crippling the economy.
True, however the availability of free to low interest credit by the Federal Reserve gives banks the incentive to loan such money out. Think banks were truly against such legislation? Why would they if they were guaranteed bail by public funds and a Fed that can print bailout money and distribute when needed and without prior warning to Congress?
Originally posted by Misoir
That's exactly why I always watch MSNBC. Ratigan is not an Obama lapdog, he is very strongly against corporations and if that means being against Obama he will expose it if he can.
Great find, S/F
Does this mean this corporation will get in serious trouble?
Originally posted by hawkiye
Originally posted by mryanbrown
MSM was in on it.
Ever seen Prestige? The Tesla / Magic movie.
The elaborate trick has been performed. But their EGO is having them tell us the magic trick."See how we fooled you."
Informing us, is the setup for the next trick. "See how we let you think you took back government? The guys in power who were on your side and against us, were working for us!"
I was thinking perhaps they are ready to collapse the system and introduce thier new plan to save us all and this is why they are now allowing it to be exposed because nothing gets on mainstream news that isn't planned since they own media also.
I don't have to change GAAP, they already categorize different types of assets differently. A promisary note is considered different from hard assets like property. Look it up if you don't want to believe me.
Banking's recent success is primarily due to poorly written laws under republican leadership that has lead to widespread white collar crime.
TARP was repaid by borrowing money from other sources at a higher interest rate.
NO, I said they are not hard assets, they are liquid assets, and yes they are treated differently in accounting. Banks have very little capital assets, like other types of businesses like retail or manufacturing.
None of these are hard assets, they are all liquid assets, all nothing more than promises to pay.
Yes, I do know where they got the money to pay back TARP, it was reported in the news.
When banks are the most profitable of businesses, something is wrong, that is a clear clear sign that something is very wrong.
Banks currently aren't doing very well, but they are still paying out those huge bonuses, and they just finished going through a period of high success, followed by this collapse, where the execs are made out like the bandits they are.
The assets held by banks not not considered capital assets, which means their values are not backed by hard assets. There is a clear difference.
You cite your sources that the TARP loans were forced on these banks, and I will cite my sources that prove you wrong, since you made the claim first.
When the people connecting the investment funds to the entrepreneur are making more money than the people carrying out the enterprise, that is a big problem.
Eventually, all the money is going to provide investment money, and none of the money is going to actually create anything.
“I personally believe that the government acted bravely and boldly in a very difficult environment,” he said.
But Mr. Dimon also argued that the TARP has since morphed into something more “painful.”
The TARP comes with limits on executive compensation, which have many banks already angling to exit the program. Indeed, because it took part in the TARP, JPMorgan has to give its shareholders a nonbinding vote Tuesday on executive pay.
Last week was a milestone for US treasury secretary Tim Geithner. He finally got to play the hero. The morning of June 9, Treasury notified 10 financial institutions, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, US Bancorp, and Capital One Financial, that they were "eligible to complete the repayment process" for the capital they received under the Troubled Assets Recovery Program (TARP). In other words, they would be allowed to pay back $68.3 billion. Even though they really owe $229.7 billion. That we know of. But Geithner didn't mention that last bit. Instead, he professed that "these repayments are an encouraging sign of financial repair," with the caveat that "we still have work to do."
The "we" he refers to is himself and Wall Street, both of whom are getting a good deal out of this fractional payback scheme. The agreement frees the banks from restrictions on executive pay or, worse, their general practices, but it still allows them to keep the cash they've received through non-TARP venues like the FDIC Temporary Liquidity Guarantee Program- or the massive sums the banks recovered from AIG (thanks to its own federal bailout) to cover their losses on credit derivatives. Not to mention any cash provided by the mother of all cheap loan programs-the Federal Reserve.
Geithner, for his part, gets to convey the message that things are looking up. "These repayments follow a period in which many banks have successfully raised equity capital from private investors," stated the press release. "Also, for the first time in many months, these banks have issued long-term debt that is not guaranteed by the government."
Well, of course certain banks have raised some money on their own: Firms have a tendency to look a whole lot better when they're backed by government capital and have cheap federal loans sitting on their books. Private investors notice that sort of thing. But more troubling than the misplaced praise is the fine print that accompanied the announcement: "These repayments," the department noted, "help to reduce Treasury's borrowing and national debt. The repayments also increase Treasury's cushion to respond to any future financial instability that might otherwise jeopardize economic recovery."
This statement belies some accounting sleight of hand.
Paying Back TARP: Good for Banks, Bad for Investors?
Read more: www.time.com...