Sponsor Message:
Non Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Will There Ever Be Honest Banks Again?  
User currently offlineCometII From United States of America, joined Dec 1999, 302 posts, RR: 0
Posted (1 year 5 months 4 days 15 hours ago) and read 1733 times:

Were there ever any?

In terms of the complex banking and financial activities of the "modern" economy (I use modern in quotations because given what we have seen in the USA, Asia, and now Europe in the last 10-15 years, one can hardly use modern as a synonym or definition for "better" or "improved"), I know next to nothing.

What I do know is that this banking crisis that started in 2008 (and really it began in the mid 1990s, first all over Asia, then in 1999-2002 in South America, then of course in 2008 in North America mainly the USA, and today Europe), just never seems to end. Every couple of months, a new country is embroiled.

Needless to point out, that absolutely no one has been made responsible or even charged with malfeasance. I guess the evidence of "the world economy has been on fire for almost a decade", is not sufficient legally.   

But there is also no evidence that banks have actually even changed their behavior (the only thing that has made them more cautious is just self-preservation, but there is nothing to suggest that come the next "bubble" of financial or asset innovations, they won't put everyone's savings yet again at risk by criminal behavior).

So, what to make of the global banking industry? Is it ever going to be an honest business?

41 replies: All unread, showing first 25:
 
User currently offlineBraniff747SP From United States of America, joined Oct 2008, 2972 posts, RR: 1
Reply 1, posted (1 year 5 months 4 days 15 hours ago) and read 1721 times:

Quoting CometII (Thread starter):

Were there ever any?

I'd argue that there are honest banks and always have been.

Saying that banks are inherently dishonest is a rather large and overbearing statement to make. Like in many industries, there have been banks which have acted dishonestly or have otherwise valued the bottom line above all else.

Remember, the majority of banks aren't the ones that are in the news for having gambled away a couple of billion or something of the sort; there are many shyster banks, but there are many others which are simple businesses which are of no large importance anyway.



The 747 will always be the TRUE queen of the skies!
User currently offlinejetblueguy22 From United States of America, joined Nov 2007, 2783 posts, RR: 4
Reply 2, posted (1 year 5 months 4 days 15 hours ago) and read 1707 times:
AIRLINERS.NET CREW
HEAD MODERATOR

Quoting CometII (Thread starter):
So, what to make of the global banking industry? Is it ever going to be an honest business?

I'm not so sure it is a dishonest business. Many banks have remained under fire since 2008 in the US, but they aren't all that way. The problem is when a trend starts and somebody starts to make money every one wants to hop on the train. The government has to find a way to make sure the shady practices of banks like Citi never happen again, and if they do, they alone are responsible. The leadership has to determine if their investments are too risky to take on. Lately it seems like banks are far more cautious when conducting business. Though it is still pretty simple to get a loan if you have decent credit.
Pat



You push down on that yoke, the houses get bigger, you pull back on the yoke, the houses get bigger- Ken Foltz
User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 3, posted (1 year 5 months 4 days 15 hours ago) and read 1705 times:

Quoting CometII (Thread starter):
In terms of the complex banking and financial activities of the "modern" economy (I use modern in quotations because given what we have seen in the USA, Asia, and now Europe in the last 10-15 years, one can hardly use modern as a synonym or definition for "better" or "improved"), I know next to nothing.

That's your problem. There is really not much dishonesty as much as there is a lack of understanding among the public about what the banks are selling you and what they are selling each other.

Quoting CometII (Thread starter):
Needless to point out, that absolutely no one has been made responsible or even charged with malfeasance.

Who specifically should be punished?

Quoting CometII (Thread starter):
the only thing that has made them more cautious is just self-preservation

Self preservation is practically the only reason why anyone in a capitalist economy would be cautious.

Quoting CometII (Thread starter):
they won't put everyone's savings yet again at risk by criminal behavior)

What specifically did banks do that was illegal?



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineImperialEagle From United States of America, joined Jan 2006, 2529 posts, RR: 22
Reply 4, posted (1 year 5 months 4 days 15 hours ago) and read 1704 times:
Support Airliners.net - become a First Class Member!

Quoting CometII (Thread starter):
Were there ever any?

like "honest" politicians. I have a Southern Baptist friend who is convinced none of 'em got to be where they are by 'livin at the foot of the cross.

Better to buy as much gold at melt value as you can. NEVER trust the government! Never!



"If everything seems under control, you're just not going fast enough!"
User currently offlineStarAC17 From Canada, joined Aug 2003, 3359 posts, RR: 9
Reply 5, posted (1 year 5 months 4 days 14 hours ago) and read 1697 times:

Quoting BMI727 (Reply 3):
What specifically did banks do that was illegal?

Sadly nothing but a lot of the things done were once illegal and things that should be made illegal.

The Glass-Steagall (repealed) act for example stated that commercial and investment banking should be separate businesses and when this law was removed banks began to sell mortgages (a commercial product) in the much higher risk investment market. Had the same housing crash happened there would have been problems with commercial banks taking some losses and perhaps a few bank failures (the FDIC would have taken away the panic) but it wouldn't have spread to every sector of the economy.

Also something has to be done about hedge funds where you can sell a security and then take out insurance on it making it a double win for the seller when it fails. I admit its a vague description but how is that legal and its very akin to insider trading which is illegal.



Engineers Rule The World!!!!!
User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 6, posted (1 year 5 months 4 days 14 hours ago) and read 1688 times:

Quoting StarAC17 (Reply 5):
nothing

Exactly.

Quoting StarAC17 (Reply 5):
when this law was removed banks began to sell mortgages (a commercial product) in the much higher risk investment market.

There's nothing fundamentally wrong with the securitization of mortgages. It is already done with other types of debt, after all. The flaw was largely in the belief that real estate was a completely safe investment and houses would never drop in value.

Then that led to other fallacies like buying houses people couldn't necessarily afford since the buyers would never totally pay for it but just sell at a profit or refinance later, exacerbated by the cultural significance placed on home ownership. People who had houses took out HELOCs because pundits told them that if they didn't they were leaving money on the table.

Banks were all too happy to lend the money: the market was only going to go up and therefore worrying about the ability of a homeowner to pay was not an issue. Going underwater wasn't a thought and even if it was they wouldn't care since the banks originating the loans would just package them up and sell them off to a market that was in a feeding frenzy. And the buyers of such securities only considered the positives of the market without questioning the stability of the underlying loans and as a result got left holding the bag in many cases when buyers defaulted.

Again I should emphasize that the securitization of debt is not the major problem, bad debt is. When mortgages default, somebody gets hurt.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinekingairta From United States of America, joined Feb 2009, 458 posts, RR: 0
Reply 7, posted (1 year 5 months 4 days 14 hours ago) and read 1684 times:

On a global scale I don't know. On a local scale I'd have to say credit unions are. Because the customers are the owners.

User currently offlineStarAC17 From Canada, joined Aug 2003, 3359 posts, RR: 9
Reply 8, posted (1 year 5 months 4 days 14 hours ago) and read 1672 times:

Quoting BMI727 (Reply 6):
Again I should emphasize that the securitization of debt is not the major problem, bad debt is. When mortgages default, somebody gets hurt.

It isn't but it should be somewhat regulated to prevent a disaster of one sector of the economy crashing (real-estate) to affect everything else which is exactly what happened in 2008.

These mortgage backed securities went bust and even though they were insured when everyone makes a claim an insurance company can't cover all of them and fails or in the case of AIG gets bailed out. Banks freak out and refuse to lend money at all and corporations such as GE can't finance their day to day operations and the economy stops. Reckless banks should be getting hurt but now they are too big to fail and no one in congress wants to regulate their size so they know they can take dumb risks and the taxpayer picks up the tab. Perhaps this happens again and the American public flips off the banks but I doubt it.

Putting up walls in different areas of the financial services industry is akin to having watertight doors in a ship. When one area's hull breaches then it is limited to spread everywhere else.



Engineers Rule The World!!!!!
User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 9, posted (1 year 5 months 4 days 13 hours ago) and read 1665 times:

Quoting StarAC17 (Reply 8):
It isn't but it should be somewhat regulated to prevent a disaster of one sector of the economy crashing (real-estate) to affect everything else which is exactly what happened in 2008.

But you're not going to stop that. Any sector going bad is going to have a huge ripple effect, especially with respect to banks who by definition are involved in all sorts of different businesses.

Quoting StarAC17 (Reply 8):
Perhaps this happens again and the American public flips off the banks but I doubt it.

That's exactly what should happen and banks need to be put on notice. Any future bailouts will be private ones.

Quoting StarAC17 (Reply 8):
Putting up walls in different areas of the financial services industry is akin to having watertight doors in a ship. When one area's hull breaches then it is limited to spread everywhere else.

Doing that will weigh down the system and also prevent money from flowing freely from one segment to another. There's going to be risk involved, just make sure the banks know it's their necks that are being stuck out on their investments.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 10, posted (1 year 5 months 4 days 9 hours ago) and read 1623 times:

Quoting StarAC17 (Reply 5):
The Glass-Steagall (repealed) act for example stated that commercial and investment banking should be separate businesses and when this law was removed banks began to sell mortgages (a commercial product) in the much higher risk investment market. Had the same housing crash happened there would have been problems with commercial banks taking some losses and perhaps a few bank failures (the FDIC would have taken away the panic) but it wouldn't have spread to every sector of the economy.

Glass-Steagall is a complete red herring. There is nothing about the removal of that act that meant people became alien to the risk/reward tradeoff.

The problem is not commercial banks it is central banks manipulating the money supply and interest rates. Commercial banks are now just proxies to central banks who have been implementing utterly reckless policies over the last decade and continue to do so.

The model of a bank used to be banks attracted depositors via the promise of interest rates, and lend out this money to the investments they deem best at a slightly higher interest rate - the bank profiting from the interest rate cut, but they were always restrained by the amount of money they could raise in deposits. The whole dynamics of what keeps banks stable is lost when banks get newly created cheap money from the central bank. Savers are no longer incentivised to save, banks are no longer interested in money only going to the best (sustainable) investments because the supply of money is so high. What happens, people don't save because there's no point, it makes much more sense to take on debt because it's cheap... not hard to make the connection to a housing bubble.

Now you could argue the banks were still reckless and they should have seen some investments would never pay off. However they were only given the means to be reckless by the central banks.


User currently offlineCometII From United States of America, joined Dec 1999, 302 posts, RR: 0
Reply 11, posted (1 year 5 months 4 days 5 hours ago) and read 1571 times:

Quoting BMI727 (Reply 3):
That's your problem. There is really not much dishonesty as much as there is a lack of understanding among the public about what the banks are selling you and what they are selling each other.

You are right, but you are also unrealistic. Do you honestly expect people to learn about finance to the level of a person that has gone to college for it (because that is truly the only way to know about modern banking and investing).

The same for healthcare. The same for automobiles, and the same for nutrition.

That is the problem. I am all for individual responsibility, but this is not 1900. I often read how some nostalgic folk complain how today people are not like our ancestors, who "were their own investors/doctors/and food growers". What they forget is that in 1900 or before, banking, nutrition, health, etc, were not even 1/100th the specialized areas they are today. So when some say "our great-grandparents did not have Social Security, had no doctors, and didn't have nutrition labels in their food, they took care of all that themselves, AND they built their own homes", they forget that's probably why life expectancy back then was 50 and buildings were not exactly 'safe' from disaster!! And for the most part, their investment tips amounted to "the mattress will nicely do".

This is 2013 and everything is ultra-specialized now, to expect people that have to work two jobs to keep up with everyone else to be financial analysts, modern doctors, expert nutritionists, engineers, construction workers, and auto-repair men (with the computerized cars of today), is simply not realistic.

So if that is so, then I guess things like 2008 will happen more often, as those that know take advantage of those that do not.

[Edited 2013-03-22 06:36:11]

User currently offlineGSPflyer From United States of America, joined Jul 2010, 369 posts, RR: 0
Reply 12, posted (1 year 5 months 4 days 4 hours ago) and read 1537 times:

I use a local bank (That has 4 branches, I can tell you where every branch is), because I don't want one of the major banks holding on to my money.

User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 13, posted (1 year 5 months 4 days 2 hours ago) and read 1512 times:

Quoting CometII (Reply 11):
You are right, but you are also unrealistic.

There's nothing unrealistic about making the effort to understand where your money is going, what your money will be doing and what you will be signing.

Quoting CometII (Reply 11):
Do you honestly expect people to learn about finance to the level of a person that has gone to college for it (because that is truly the only way to know about modern banking and investing).

You don't have to. I only took one economics class when I was a junior in high school yet I understand what went wrong in 2008.

When people say that 1) you have to own a house to have really made it in America, 2) said house would be an asset that will not go down in value so there's no need to fear going in debt to buy it 3) you can afford a house because the people trying to sell you a house say you can and 4) you don't to worry too much about the terms of the loan since it won't last long anyway and you'll just refinance it should raise red flags with potential home buyers.

And not to mention that the people at the banks buying securitized debt as fast as it could be made were professionals. Professionals who sat around telling each other that they were right and congratulating themselves on how smart they were without asking questions about their assumptions and predictions, but professionals none the less.

Quoting CometII (Reply 11):
were their own investors/doctors/and food growers

People don't need to do that. But I'll bet that you've gone for a second opinion or checked WebMD. And I bet you've read nutrition labels too.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineFlyPNS1 From United States of America, joined Nov 1999, 6603 posts, RR: 24
Reply 14, posted (1 year 5 months 3 days 23 hours ago) and read 1484 times:

Quoting BMI727 (Reply 13):
Professionals who sat around telling each other that they were right and congratulating themselves on how smart they were without asking questions about their assumptions and predictions, but professionals none the less.

Then they weren't professionals. If you never question your assumptions and predictions, you are not a professional.


User currently offlineRedd From Poland, joined Jan 2013, 96 posts, RR: 0
Reply 15, posted (1 year 5 months 3 days 23 hours ago) and read 1471 times:

Quoting Braniff747SP (Reply 1):
Saying that banks are inherently dishonest is a rather large and overbearing statement to make.

No it's not. The entire crisis that we have now is only the cause of greedy, dishonest, non-regulated lending. 50/50 regulation/lobby.... The crisis was created because loans were given to people that could never pay them back. There was, and there still is not any regulation to prevent this. Banks took every chance they had within the legal limit to lend, sell that debt, have it irrationally rated as triple A (AAA) and now billions of people around that world are paying the price.

And if you want to blame people for taking loans they could not pay back, give a dog a bone and he'll bite. Working class people are not lawyers and fine print is tricky. It's easy to entice people with the prospect of property ownership, regulation needs to be there to decide if people can afford it or not.


User currently offlineLMP737 From , joined Dec 1969, posts, RR:
Reply 16, posted (1 year 5 months 3 days 23 hours ago) and read 1471 times:

Quoting GSPflyer (Reply 12):
I use a local bank (That has 4 branches, I can tell you where every branch is), because I don't want one of the major banks holding on to my money.

I bank at a credit union for similiar reasons.


User currently offlineGeezer From United States of America, joined Aug 2010, 1479 posts, RR: 2
Reply 17, posted (1 year 5 months 3 days 22 hours ago) and read 1462 times:

I wonder if there are any bank executives who read this forum ? If there are, I'm guessing that the OP may be getting an angry letter in the mail; the way this thread is titled, anyone in the banking business would doubtless make the case that the OP is stating that ALL banks are dishonest. Often times when someone says something to that effect, someone else gets a lawyer, files a lawsuit, and off to court you go ! But don't worry; I'm dubious about a few banks myself; my favorite bank to despise is B.O.A. ( Notice I didn't mention any names ) They acted like real pricks when I dared to complain about my CC interest rate becoming hiked up to a ridiculous rate; guess who bailed me out of that mess? ( They've already been mentioned in this thread, BTW ) And they probably aren't a whole lot different from B.O.A., but they did talk much nicer to me, and I learned a very valuable lesson from them: "people who buy things with a credit card are shooting themselves in their own foot, with their own gun." So here's a question for you.......why do banks offer customers "credit cards", and then offer other customers "debit cards", when in reality, it's ALL the same little plastic card ? Why do they do that ? Does that mean that they are "crooks" ? Before you jump all over me, please be advised that I'm fully aware of the fact that some people have credit accounts, while some people have debit accounts; ( thanks to now being married to a retired lending officer, personal assistant to the President, and secretary to the Board of Directors of a very large Chicago Bank.) But that does't change the fact that the little plastic card I carry with me every place I go is a "credit card" to some businesses, and a "debit card" to others. ( it's always a choice I get to make.)

There already are, and always have been honest banks; anyone who thinks that ALL banks are dis-honest, doesn't know much about banking. ( That's not necessarily the same thing as saying that "all bankers are honest, BTW ); (we all know the answer to that); What you need to understand is, all businesses that deal with money always use lots of "numbers"; (note that I put little thingies around the word numbers.) Numbers tend to get many people all mixed up; companies know that; (that's why they always use lots of numbers in the first place) Once they get you mixed up, they can get you to do things that are to THEIR advantage, and to YOUR disadvantage, all without telling a single "fib". ( oh no, I did it again! ) Numbers are nice though, because unlike words, they ALWAYS mean the exact same thing; ( 2+2=4, 4x4=16, and so on )
But always remember the old proverb; "figures don't lie, but liars can sure figure"; that's kinda how it is with the business you SHOULD be asking about.......

Maybe you should be asking the same question about the life insurance companies.

Ninety nine people out of a hundred know absolutely nothing about how life insurance really "works"; ( other than what the person trying to sell it to them tells them. )

When most people decide that they want to buy something, especially something that is going to cost them hundreds, even thousands of dollars every year for as long as they live, they want to think they are getting a "good deal"; the problem is, people have no idea ( other than what the life insurance company tells them ), what a "good deal" consists of.

I can think of no other "business" or "industry" where all of the "players" in it have been telling it's customers all sorts of ridiculous things, much of which is complete nonsense, for over 200 years now, and are still in business. There are as many reasons for this as there are life insurance companies that are IN business.

Here's a question for you; is there anyone reading this who is paying for life insurance ? If there is, don't take my word for anything, but ask yourself a question; "is my life insurance a "good deal" ? If you think it IS a "good deal", ask yourself another question; "how am I going to know a "good dea" from a "bad deal" when I have absolutely no understanding of how this product is priced" ? What I mean by that is, if you bought a new Ford from Joe Blow Ford and paid $ 30,000 for it, and two days later your next door neighbor bought the exact same new Ford from Schlumky Ford and paid $ 20,000 for their Ford, you would probably think you got a "bad deal"; in this case, it's easy to differentiate "good" from "not so good"; with life insurance, it's almost impossible to do that. Because almost no one has any idea how life insurance is "priced"; and there isn't a life insurance company "out there" that is going to tell you !

But it gets even worse; how many know "who" regulates the life insurance industry ? We all know the securities industry is "supposedly" regulated by the S.E.C. ( a federal "commission" ), but exactly WHO keeps the life insurance companies "in line" ? In case you're wondering, let me know and I'll start a new thread and explain it.

So I'm just wondering........why aren't we seeing any new threads asking, " Will There Ever Be Honest Life Insurance Companies" ? You'll notice I didn't add "again"...........there probably haven't been "any" yet, to my knowledge, but it would be way beyond the scope of this reply to explain why I say that.

When you ask a question in public which infers that everyone IN that business is dishonest, many people who are IN that business are going to have their feathers ruffled, and are probably going to become upset, and possibly even "pissed off" !
( But then again, everyone knows, better "off" than "on"...................

Charley



Stupidity: Doing the same thing over and over and over again and expecting a different result; Albert Einstein
User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 18, posted (1 year 5 months 3 days 22 hours ago) and read 1439 times:

Quoting Redd (Reply 15):
The crisis was created because loans were given to people that could never pay them back.

And people took the money.

The crisis actually was created because everyone, from home buyers to bank executives, only listened to what they wanted to hear. Normal people believed that owning a home is what successful, happy Americans do, that they could afford it because some mortgage broker said they could, and furthermore that a house was an asset that didn't have a chance of depreciating. Banks believed that the loans would never be a problem for them since they were going to sell them anyway, and traders believed that the market would never go bad and the risk of large numbers of defaults was minuscule. AIG believed the same and, by extension, that insuring such loans was free money.

Quoting Redd (Reply 15):
There was, and there still is not any regulation to prevent this.

There doesn't need to be. Banks need to know that their existence is on the line. Self preservation is stronger and better than the strongest and best regulation.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineflipdewaf From United Kingdom, joined Jul 2006, 1568 posts, RR: 1
Reply 19, posted (1 year 5 months 3 days 21 hours ago) and read 1432 times:
Support Airliners.net - become a First Class Member!

Quoting BMI727 (Reply 3):
What specifically did banks do that was illegal?

I believe they didn't give the required duty of care and responsibility to both their savers and borrowers to assess the credit agencies assessment of the combination effect of packaged liabilities.

Quoting BMI727 (Reply 18):
everyone, from home buyers to bank executives, only listened to what they wanted to hear

That's The main issue, lots of people did things wrong, lots of people benefited and lots were left broke after, who was in each group is unfortunately down to more luck than judgement.

Quoting BMI727 (Reply 18):
There doesn't need to be. Banks need to know that their existence is on the line. Self preservation is stronger and better than the strongest and best regulation

Unfortunately citizens who have done nothing wrong could lose substantial savings if they go under and this is deemed immoral.

If anyone knew the answer they would probably ironically be very rich.

Fred


User currently offlineRedd From Poland, joined Jan 2013, 96 posts, RR: 0
Reply 20, posted (1 year 5 months 3 days 21 hours ago) and read 1427 times:

There doesn't need to be. Banks need to know that their existence is on the line. Self preservation is stronger and better than the strongest and best regulation.[/quote]

Ha, really? Jeweeeeeeeeeeeeezzzzzzzzzzzz man. Come live a week in Sweden, capitalism might not be your number one priority anymore....... It's so hard to explain this to the north Americans I once was a part of......


User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 21, posted (1 year 5 months 3 days 21 hours ago) and read 1421 times:

Quoting flipdewaf (Reply 19):
I believe they didn't give the required duty of care and responsibility to both their savers and borrowers to assess the credit agencies assessment of the combination effect of packaged liabilities.

That's a matter of being being bad at their jobs than being a scam.

Quoting flipdewaf (Reply 19):
That's The main issue, lots of people did things wrong, lots of people benefited and lots were left broke after, who was in each group is unfortunately down to more luck than judgement.

No, it's a matter of judgement. You can believe that there is a market bubble and make a killing by jumping at the right time. Getting in at the bottom of the market and getting out at the top isn't just luck.

Quoting flipdewaf (Reply 19):
Unfortunately citizens who have done nothing wrong could lose substantial savings if they go under and this is deemed immoral.

Hence the existence of the FDIC.

Quoting Redd (Reply 20):
Come live a week in Sweden, capitalism might not be your number one priority anymore.......

I'm pretty sure it would be. I want the highest ceiling, not the highest floor.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 22, posted (1 year 5 months 3 days 21 hours ago) and read 1412 times:

Quoting Redd (Reply 15):
No it's not. The entire crisis that we have now is only the cause of greedy, dishonest, non-regulated lending.

That was a symptom and not the cause. The cause was expansionary monetary policy that attempted to suppress the dotcom bubble.

See the big dip below.

There's should have been a recession in the early 2000s but it was averted by creating an artificial boom with cheap money, of course you can never avert a recession with such practise, you only delay it. This cheap money went into the housing market creating a self-perpetuating bubble which borrowers and lenders both fell for and when that bubble burst the whole pack of cards came tumbling down.

With sound money banks would never have had the resources to lend to people who could never repay in the first place.



User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 23, posted (1 year 5 months 3 days 20 hours ago) and read 1406 times:

Quoting flipdewaf (Reply 19):
Unfortunately citizens who have done nothing wrong could lose substantial savings if they go under and this is deemed immoral.

They shouldn't have put their money in the bank then. The reason you get paid interest (or you should do) on your savings is because they're being lent out and there's no guarantee you're getting them back. If it was risk free why would interest be paid?

Quoting BMI727 (Reply 21):
Hence the existence of the FDIC.

Which is a moral hazard that should not exist.

[Edited 2013-03-22 15:06:22]

User currently offlineflipdewaf From United Kingdom, joined Jul 2006, 1568 posts, RR: 1
Reply 24, posted (1 year 5 months 3 days 20 hours ago) and read 1390 times:
Support Airliners.net - become a First Class Member!

Quoting RomeoBravo (Reply 23):

fortunately most people don't think in the same way as romeo and want to live in an efficient well functioning society where realism takes the place of idealism with laws protecting average citizens being shafted by those wishing to take the moral low ground. I find it hard to believe that you advocate anarchy but that's how it often seems.

Quoting BMI727 (Reply 21):
That's a matter of being being bad at their jobs than being a scam.

No, there was law breaking going on. Misleading people, both knowingly and through negligence about the risks being taken. The investors had rights to know of the uses of their money.

Fred


User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 25, posted (1 year 5 months 3 days 19 hours ago) and read 1407 times:

Quoting flipdewaf (Reply 24):
fortunately most people don't think in the same way as romeo and want to live in an efficient well functioning society

I do want to live in an efficiency and functioning society and that's exactly why i propose a very small state - when people take responsibility for their own actions at an individual level, society becomes far more efficient collectively.

We don't have a functioning nor efficient society because government molests almost everything it touches.


User currently offlineKen777 From United States of America, joined Mar 2004, 8220 posts, RR: 8
Reply 26, posted (1 year 5 months 3 days 18 hours ago) and read 1382 times:

Quoting RomeoBravo (Reply 25):
I do want to live in an efficiency and functioning society and that's exactly why i propose a very small state - when people take responsibility for their own actions at an individual level, society becomes far more efficient collectively.

You're not going to find a small state in the US or UK. Maybe moving somewhere like Aruba will give you the life you want.

Quoting RomeoBravo (Reply 25):
We don't have a functioning nor efficient society because government molests almost everything it touches.

When you have hundreds of millions of people you will have governments at various levels. You will also have voters with opposite views, resulting in the "molesting" you hate.

Aruba is actually really nice - fantastic beaches an no horrible winters. And it should be small enough for you.


User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 27, posted (1 year 5 months 3 days 18 hours ago) and read 1383 times:

Quoting Ken777 (Reply 26):
You're not going to find a small state in the US or UK. Maybe moving somewhere like Aruba will give you the life you want.

The UK was actually responsible for what is considered the freest state today up until very recently.

Hong Kong, no land, no resources, all of the wealth. It's regional neighbours... all the resources, none of the wealth.

Quoting Ken777 (Reply 26):
You will also have voters with opposite views, resulting in the "molesting" you hate.

You don't hate it? You don't hate owing inconceivable amounts of debt that you did not authorise to take out, you don't hate that your savings are constantly being destroyed by inflation, you don't hate illegal wars, you don't hate the fact that you get taxed blind if you want to contribute positively to society, you don't hate the fact that you can't even legally smoke a bit of cannabis if you might want to?


User currently offlineflipdewaf From United Kingdom, joined Jul 2006, 1568 posts, RR: 1
Reply 28, posted (1 year 5 months 3 days 6 hours ago) and read 1317 times:
Support Airliners.net - become a First Class Member!

Quoting RomeoBravo (Reply 27):
You don't hate it? You don't hate owing inconceivable amounts of debt that you did not authorise to take out, you don't hate that your savings are constantly being destroyed by inflation, you don't hate illegal wars, you don't hate the fact that you get taxed blind if you want to contribute positively to society, you don't hate the fact that you can't even legally smoke a bit of cannabis if you might want to?

then why didn't you get out? By your logic you should be responsible for your choices to remain in the UK and part f the society that was performing such actions, you should have done the appropriate research and done what was best for you. Seems like a huge case of sour grapes to me, stop complaining and get on with doing what you want to do and complaining that its others choices dragging you down, that's what whingeing lefties do.

Fred


User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 29, posted (1 year 5 months 3 days 6 hours ago) and read 1314 times:

Quoting flipdewaf (Reply 28):
then why didn't you get out? By your logic you should be responsible for your choices to remain in the UK and part f the society that was performing such actions, you should have done the appropriate research and done what was best for you. Seems like a huge case of sour grapes to me, stop complaining and get on with doing what you want to do and complaining that its others choices dragging you down, that's what whingeing lefties do.

I am doing what i want and i've been very successfully doing it, no sour grapes here. Though i have been considering a move to Australia because the UK is going down the pan sadly.

However you implied that we live in an efficient and functioning society thanks to our government and that i wanted the opposite to those things because i want a very small government, so you now have to defend that illegal wars and huge unauthorised debts for our children amongst other things are synonymous with an efficient and functioning society.


User currently offlinerfields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 30, posted (1 year 5 months 3 days 5 hours ago) and read 1305 times:

Quoting CometII (Thread starter):
Is it ever going to be an honest business?

The death of 'honest banks' in the United States came in the 70s when banks were allowed to offer investment services such as Money Market accounts and other 'investment' grade types of ancillary accounts.

The honest local bank, or savings and loan, depended upon a person willing to save their money at 2% interest, to be able to loan that money to local home buyers at 6% interest and to ensue the savings would stay in the bank without being withdrawn for 20 or 30 years.

When people began to pull their money out of long term low interest savings accounts, the banks were forced to find ways to get the cash to pay their customers. And too much of the banks money was tied up on long term mortgages.

The entire model of banking from long term local investment to short term high income investments forced a huge revolution in the banking industry. It changed the very concept of a bank.

We are about 40 years into that massive change process, and maybe we are nearing a point of stabilization.

But the key comes back to the individual investor/ person with savings. They have to be willing to accept long term low return investments if you want a return to 'honest' banking.

If the individual demands high returns over the short term - then the banks have to respond and work in a similar mode.


User currently offlineQuokkas From , joined Dec 1969, posts, RR:
Reply 31, posted (1 year 5 months 3 days 4 hours ago) and read 1286 times:

Quoting RomeoBravo (Reply 23):
They shouldn't have put their money in the bank then.
Quoting RomeoBravo (Reply 29):
Though I have been considering a move to Australia

It may be different where you live at present but here in Australia any person who receives a regular payment or income from State or Federal agencies generally must have that money deposited into an approved financial institution. Many state-owned agencies (like the land registry office, electricity companies, etc., though it varies from State to State) no longer accept cash payments: they will only accept direct debits or credit card payments, for which it is necessary to have a bank account of some kind.

It is a condition of most employment contracts that salaries will also be paid into an account. Very few, if any, employees have the option of being paid in cash and cheques must generally be deposited, yes you guessed, into an approved financial institution. I suspect that when BHP Billiton or Rio Tinto receive payment for the iron ore fines that they ship, they don't get little brown envelopes in exchange. Of course it is almost impossible to conduct transactions over the internet using cash.

The benefits to the government are obvious: electronic transfer of funds is cheaper than sending out cheques and it is seen to reduce tax evasion. Of course the banks love it because they have a captive market and the competitive pressures to attract funds from depositors is reduced - hence the massive reduction in interest paid on deposits and the increase in fees levied. When ordinary people had the right to be paid in cash, the banks could actually offer no-fee accounts, pay interest and still make a profit.


User currently offlineRomeoBravo From , joined Dec 1969, posts, RR:
Reply 32, posted (1 year 5 months 3 days 4 hours ago) and read 1280 times:

Quoting Quokkas (Reply 31):
It is a condition of most employment contracts that salaries will also be paid into an account. Very few, if any, employees have the option of being paid in cash and cheques must generally be deposited, yes you guessed, into an approved financial institution.

That's alright, just withdraw it when you get paid. Most of my money is in gold now anyway, in a safe, in my house. You'd be mad to keep your savings in GBP right now.


User currently offlineltbewr From United States of America, joined Jan 2004, 13074 posts, RR: 12
Reply 33, posted (1 year 5 months 3 days 3 hours ago) and read 1272 times:

There is a dire need for international housecleaning of banking to make it work right, to prevent financial panics, to end their parts in criminal enterprises and tax dodging as well as more transparent to depositors and customers of all sizes.

A bank that is fair and honest in it's dealings can fail or forced to merge with another bank due to bad mortgages or business loans where a major depositor company goes bankrupt or just bad business judgment, that happened to a well respected 'thrift' bank I have some money in that had to write off 4-5% of the mortgages, hurting profits and take a huge loss and now is merging with a commercial bank to gain it's branches, it's good business side, some executives.

We have seen Swiss banks pilloried for their tax dodging, hiding of funds for corrupt despots, for decades hiding stolen monies from victims of the Holocaust and finally having to clean up. HSBC and other banks have faced penalties in the USA and other countries for being involved with laundering many billions of US$, Euros for drugs deals, processing payments for the trade of illegal goods or moving monies for shady investors. Look at the financial and banking disaster Cyprus is facing due to their corrupt banking business. Many banks in the USA and Europe had excessive financial or compensation incentives to those that made mortgage loans, those staffers did bad deals, helped people cheat on the applications, get inflated valuations, made housing in many places reach unsupportable price levels and when then 'bubble' burst, lost trillions which the USA government and taxpayers had to bail out. JP Morgan Chase had a situation where an investment 'whale' lost billions in a series of excessively dangerous trades. Bank of America bought a huge and badly run mortgage company (Countrywide) and has been paying a huge cost for that deal.

We must make it so one can trust banks again. Several things can and must happen in the USA and in most other countries. Put some top executives out of their jobs, face criminal and civil liability if they allow excessive risky and illegal businesses to take place. Put in international agreements and conventions to end tax dodging banking havens like Switzerland, Bermuda and others. Create ethical standards of compensation, including strict limits on bonuses and additional compensation for volumes of business. Tighten up investment sides of these banks so not just one or two people can make highly risky trades or can't do things like mortgage securlarization where you can't determine who actually owns the mortgage. Get the banks in the USA out of the investment banking side, as they were separate years ago. Limit mergers and acquisitions of banks within countries and internationally. Make banks take the hit on their worst mortages divisions and 'cram down' mortages to that value more connected with current and near future markets. Bring back real depositor interest rates, like 3% or more (in the USA) and stop annoying and excessive fees and penalties. Get out of being on the names of stadiums and arenas, cut back on ads, get rid of excessive branches, but pay line employees more reasonably.


User currently offlinePPVRA From Brazil, joined Nov 2004, 8957 posts, RR: 40
Reply 34, posted (1 year 5 months 2 days 23 hours ago) and read 1236 times:

Quoting Redd (Reply 15):
The crisis was created because loans were given to people that could never pay them back. There was, and there still is not any regulation to prevent this.

What incentive does a bank have to hand out money to people who will never be able to pay it back? It's a money losing proposition. Not exactly conducive to profit maximization.

This all happens, nonetheless, due to the nature of our banking system, enforced by laws and regulations, and not because of a lack of control on markets. This is why financial crisis occur all over the world, and it's not exactly a new occurance either.

Depositors don't give a rats ass about how safe their banks are, because the goverment insures their deposits for free. The banks don't give a rats ass about being very conservative with other people's money because they can count on ultra cheap government loans if they get into trouble. Governments print money to pay for their drunken sailor spending sprees to keep the votes in line, debasing currencies and thereby causing numerous economic distortions/bubbles. And we're to be surprised that we have a dysfunctional financial industry??? It's complete madness that people want to add few regulations, and think all of this will go away!



"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineBMI727 From United States of America, joined Feb 2009, 15731 posts, RR: 26
Reply 35, posted (1 year 5 months 2 days 22 hours ago) and read 1231 times:

Quoting rfields5421 (Reply 30):
The honest local bank, or savings and loan, depended upon a person willing to save their money at 2% interest,

Why would anyone sit around and let all their money collect 2%? Especially when you're talking about the 1970's when that wouldn't even come close to matching the inflation rate most of the time. I won't sit here and blast the monetary policy, but you can't blame people for eschewing savings accounts in favor of more exotic investments.

Quoting ltbewr (Reply 33):
There is a dire need for international housecleaning of banking to make it work right, to prevent financial panics, to end their parts in criminal enterprises and tax dodging as well as more transparent to depositors and customers of all sizes.

I don't think that the onus should be on banks to figure out where money is coming from and why. It's not their job and I detest legislation like FATCA.

Besides, let's not pretend that illegal activities can't play a major part of the legitimate economy. Miami was practically built with drug money.

Quoting ltbewr (Reply 33):
Put in international agreements and conventions to end tax dodging banking havens like Switzerland, Bermuda and others.

All you'll do is force them to stop doing business with Americans and force foreign money out of American banks.

Quoting PPVRA (Reply 34):
What incentive does a bank have to hand out money to people who will never be able to pay it back?

Plenty when they can package up the loan and sell it. Then the question becomes "why would anyone buy that?" and the answer is that they had some wrong beliefs about the market.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinerfields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 36, posted (1 year 5 months 2 days 22 hours ago) and read 1226 times:

Quoting BMI727 (Reply 35):
but you can't blame people for eschewing savings accounts in favor of more exotic investments.

No I don't.

But that was when the honest local "bank" died.

It just took 20 to 30 years for the slow death to occur in many cases. As traditional local banks fought to keep deposits and stay in business.

The OP asks will there ever be honest banks again - and the answer is no because that business model is no longer valid.

Quoting PPVRA (Reply 34):
What incentive does a bank have to hand out money to people who will never be able to pay it back? It's a money losing proposition. Not exactly conducive to profit maximization.

Back in the 70s, the banking world in the US changed. It simply became impossible for banks to tie up their capital in long term loans.

But we could not buy big ticket items without long term loans.

So the strategy changed to making long term loans, and then selling the loans to another institution. The bank or other institution originating the loan don't care about the ability to pay off the loan, only the ability to make the payments for th first few months or year. By that point, the bank intends the loan to be someone else's problem.

The 'business' became a shell game of moving the poor performing loans around, and hoping the house of cards did not collapse.

When it did, the goal was to not be the financial institution holding the loans.

In today's world, at least in the US - the definition of a bank is NOT an institution which takes depositor money, makes loans and pays interest to the depositors as the loan payments are received.

A bank today is a temporary holding place for money, before it can be moved to a high return investment by the bank. That bank tries to stay ahead of the depositor demands to withdraw their money.

A bank is just another investment house, with some of the money they hold insured by the FDIC. Banks simply cannot survive if they operate on the traditional model. They cannot be flexible enough to adapt if they tie up much of their money in long term loans that cannot be called in quickly to raise cash.


User currently offlineflipdewaf From United Kingdom, joined Jul 2006, 1568 posts, RR: 1
Reply 37, posted (1 year 5 months 2 days 21 hours ago) and read 1214 times:
Support Airliners.net - become a First Class Member!

Quoting BMI727 (Reply 35):
and the answer is that they had some wrong beliefs about the market

or they were lied to about the risk assessments done on the investments.

Fred


User currently offlineltbewr From United States of America, joined Jan 2004, 13074 posts, RR: 12
Reply 38, posted (1 year 5 months 2 days 18 hours ago) and read 1188 times:

Quoting flipdewaf (Reply 37):
Quoting BMI727 (Reply 35):and the answer is that they had some wrong beliefs about the market or they were lied to about the risk assessments done on the investments.

A critical problem was conflict of interest of the ratings companies as to debt papers (like Moody's), who knew if they did 'honest' assessments, they would lose business to another company so gave inflated ratings which were relied upon too much by buyers of those debts.


User currently onlineFlighty From United States of America, joined Apr 2007, 8475 posts, RR: 2
Reply 39, posted (1 year 5 months 2 days 1 hour ago) and read 1144 times:

Quoting ltbewr (Reply 38):
A critical problem was conflict of interest of the ratings companies as to debt papers (like Moody's), who knew if they did 'honest' assessments, they would lose business to another company so gave inflated ratings which were relied upon too much by buyers of those debts.

Not a huge problem as long as you know their ratings are totally inadequate and corrupt. But, people did not know that. Sounds like a trifle. But it was a vessel blockage in the brain of capitalism. Nearly killed the patient.

Maybe a prediction market type ratings system would work better. Let people issue ratings staked by their own money.


User currently offlineBraniff747SP From United States of America, joined Oct 2008, 2972 posts, RR: 1
Reply 40, posted (1 year 5 months 1 day 23 hours ago) and read 1135 times:

Quoting Redd (Reply 15):

No it's not. The entire crisis that we have now is only the cause of greedy, dishonest, non-regulated lending. 50/50 regulation/lobby.... The crisis was created because loans were given to people that could never pay them back. There was, and there still is not any regulation to prevent this. Banks took every chance they had within the legal limit to lend, sell that debt, have it irrationally rated as triple A (AAA) and now billions of people around that world are paying the price.

Greedy, dishonest, non-regulated lending was not done by *all* banks, for one; but that has nothing to do with the question at hand. Banks are not inherently dishonest institutions; they are businesses who are in the pursuit of making a profit, like everyone else. If some do so in a dishonest way, it is not merely because they are a bank; there are dishonest operators across all industries.



The 747 will always be the TRUE queen of the skies!
User currently offlinePPVRA From Brazil, joined Nov 2004, 8957 posts, RR: 40
Reply 41, posted (1 year 5 months 1 day 4 hours ago) and read 1081 times:

Quoting BMI727 (Reply 35):
Plenty when they can package up the loan and sell it. Then the question becomes "why would anyone buy that?" and the answer is that they had some wrong beliefs about the market.

And that's where Fannie and Freddie come in.

Quoting rfields5421 (Reply 36):
In today's world, at least in the US - the definition of a bank is NOT an institution which takes depositor money, makes loans and pays interest to the depositors as the loan payments are received.

A bank today is a temporary holding place for money, before it can be moved to a high return investment by the bank. That bank tries to stay ahead of the depositor demands to withdraw their money.

There is no difference between these two paragraphs. When a bank makes a loan to a business so that they can build a new airplane, that's an investment too. Same if you are building a new house or just mortgaging one.

Quoting rfields5421 (Reply 36):
A bank is just another investment house, with some of the money they hold insured by the FDIC. Banks simply cannot survive if they operate on the traditional model. They cannot be flexible enough to adapt if they tie up much of their money in long term loans that cannot be called in quickly to raise cash.

Current banks aren't flexible enough to return all depositors funds, either. Look at the numerous bank runs that have happened in the past 5 years around the world.



"If goods do not cross borders, soldiers will" - Frederic Bastiat
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
Will There Ever Be A Coloured Leader? posted Mon Jun 3 2002 01:18:27 by Arsenal@LHR
Will There Ever Be Peace Between Taiwan And China? posted Fri May 25 2001 06:31:50 by Tupolev154B2
Will Smith Ever Be President posted Mon Aug 23 2004 15:27:59 by TwinPioneer
Will We Ever Be At Code Blue Or Green? posted Tue Dec 30 2003 18:26:51 by N6376m
Will Gas Prices Ever Be Less Than $2.00/gal Again? posted Fri Jun 23 2006 06:41:15 by M&M
Will There Be A New Royal Yacht? posted Mon Dec 14 2009 19:31:16 by United Airline
Will There Be A Windows Vista Service Pack 3? posted Mon Oct 26 2009 18:23:43 by 1337Delta764
Will There Be A Saw 4 posted Thu Sep 13 2007 10:05:54 by Mal787
Will Nation-States Ever Be Abolished? posted Tue Nov 14 2006 21:48:33 by AerospaceFan
Will There Be Any More 9/11 Trials? posted Thu May 4 2006 01:06:53 by BristolFlyer