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money owed, thats the problem, sure you are owed money but doesnt mean that they are going to get that money so calling that an assest is wrong. they are basing there decision to loan a person money based on previous borrowing habits, doesnt mean they are going to get that money. the person could just say i'm not going to pay and renig on their original deal. course their are consqueces to that, but that shouldn't be considered an asset till its in the bank.
So basically what you are saying is that every bank out there can back every dollar they have loaned with money that they have on hand, I call B.S. There isn't enough money printed and there certainly isnt enough gold in circulation.... our system is based on a mound of debt which you could call money out of thin air so don't sit there and tell me there isnt a huge amount of fluff in the system.
Yep. But they leverage a huge amount of loans out of their actual assets, do they not. Last I heard it was 80x their assets.
Extending credit is not done on a handshake, at least not anymore. Perhaps in the old days. Extending credit is much more fact-based and scientific than it was in decades past. Credit scores, cash flow analysis, collateral analysis, etc. all play a role.
No. Take a look at the Assets column. Then look at the Liabilities column. Subtract Liabilities from Assets, and you have the bank's Net Worth or "Equity". Basic accounting. Choose any bank you want. Pull up the balance sheet. Take a look.
Have you not heard of the sub-prime fiasco? Banks vigorously handing out loans to folks with a bad track record in the full knowledge the loans were unlikely to be repaid, knowing they'd still make a quick, fat profit by bundling said debts and selling them off to others as 'investments'?
On the back of said equity they are permitted to lend far far more than they hold. It's been that way for a long, long time.
Big difference between a Main Street bank and a Wall Street bank.
Take a look at the Comerica example above. They have far more Assets than Liabilities. Basic math, my friend.
There is simply no logic to your argument. I have stated that the banks are permitted to lend far more than their assets and you respond by supplying an example of a bank that has more assets than liabilities! You are still skirting the central issue entirely.
Another straw man. No-one put them in the same bracket. But we are discussing the entire system as there are fundamental systemic weaknesses, not least due to the repeall of the Glass-Steagall Act, one of whose consequences was that Main Street banks were no longer forbidden to speculate on the stock markets!
Give me a single example of a bank that has 80 times more liabilities than it does assets. Provide me proof.
Not at all. You can't mix apples and oranges. If you want to lump Goldman Sachs in with your local small town bank, go ahead. The two are not the same, my friend. Be specific about who you are leveling accusations before you paint these broad, sweeping generalizations.
The point is that the degree of leveraging means it is now so much easier for the banks to find themselves in a position where they cannot fulfill depositors' requests for withdrawals.
Regarding your bogus "80-1 liabilities to assets" claim, I again would ask you to show me one single bank that has this on their balance sheet. One bank. You can't - unless they are already out of business. It's a totally bogus statement that you should retract until you can provide concrete proof. Banks aren't leveraged 80-1.
There are several banks included in the study that:
have credit exposure to high sovereign risk nations including amounts to 762% and higher of the total tangible equity with the total non-performing and sub-standard (but performing) exposure standing at 96% of the tangible equity.
have Texas Ratios approaching nearly 100%
have NPAs growing nearly 500%
have leverage rations of over 80x
are trading at BV multiples that apparently ignore the potential credit contagion, etc.
Most retail bank branches only keep on deposit - in the form of hard currency cash - as to what the anticipated demand would be for any given day. Naturally, it has a lot more on deposit than it keeps in the retail branch at any given day.
I have yet to hear of anyone walking into a branch and having trouble getting a small deposit withdrawn.
This is taken from a study on banks with exposure in Eastern Europe: ...........have Texas Ratios approaching nearly 100% have NPAs growing nearly 500%
At the drop of a hat I have only found data relating to Western European banks. But the evidence is clear: this is the reality.
They LEND OUT far more than they receive. It's not just an issue of cash on hand!
Again you have responded without reading what was said carefully. Those are Western European banks with exposure in Eastern Europe.