Posted on 04/17/2008 7:36:55 AM PDT by underground
With all the reserves backed by the Fed, I almost feel like they've quietly nationalized the banking system by providing loans that can't reasonably be paid back.
I dunno, its interesting and significant but I'm not totally sure what it means yet. I got a lotta traffic on the topic but not much insight from any comments. I'd love to hear what some Freepers think!
Like the old saying goes:
If you owe the bank $100,000 the bank owns you.
If you owe the bank $100,000,000 you own the bank.
I saw negative numbers early last week.
Well let’s see, the banks owe the Fed some $150 B and the Fed is basically using our money.
But! We don’t have any direct democratic influence on the Fed. So... who owns what?
Yeah this chart is from the March publication. April’s numbers are even worse (you can see the non-graphical balance sheet at the link).
Normally, since the banks are bankrupt I’d advice strongly against investing in any financials. On the other hand, the Federal Reserve seems to be willing to spend as much as it takes to keep them afloat, so its becoming a government-backed asset. Weird stuff.
What will eventually happen is World War 3 or 4 or whatever number is next on the list. That war will kill a billion people or so and those left will then pick up the pieces.
Bank of NY Mellon seems to be okay. Not quite the expected profit last quarter but still doing well.
It looks like to me that the Fed own the banks and then the Fed owns those loans, and from there, they own us.
But I’m just a stay at home mom, no financial training at all. I would be interested in any informed Freepers opinions as well. That chart looks like a heap of trouble is coming our country’s way.
Kind of.. a few differences like the chart refers to the aggregate of the U.S. banking system, not one bank. Also, since the Fed keeps putting loans into the banks’ reserves, there’s enough liquidity to prevent an all-out bank run.
But its like, if you go to your ATM and withdraw a $20, that $20 is on loan from the Federal Reserve to your bank. I don’t know how the banks get out from under this. I guess that’s why they get paid billions each year - they figured out how to put all tax payers & dollar holders on the hook.
What the graph shows is that most of our banks are BK. Puffed rice, crispy critters and crunch, crunch, crunch.
Well, may be they should go back to paying interest on peoples deposited savings. Getting rich quick by draining the barrel dry was alot of fun, but it’s time to get back to working with real money.
April's figures are indeed impressive. They got to get a -200 grid-line added real quick. I would imagine the banks had negative reserves during the great depression too.
Not if the bank can print money. The banks may owe the Federal Reserve $50 billion, but it doesn’t matter what happens to them, the Fed will never go bankrupt (though technically it may become insolvent—I’m not quite sure how its balance sheet works).
No, because the banks still have positive balance sheets, so most (probably all) of them will survive and pay back the Fed.
Phase two should be begin soon.
Ping
Where are you getting numbers for individual banks?
These days, money(liquidity) can be created instantly and it has no limit. It is potentially the only infinite(non-scarce) resources in the domestic economy.
On the other hand, it will debase the dollar and all imports would become prohibitively expensive in the long run. The only way out is to debase other currencies as well, which may not work. Other countries may not feel obliged to follow U.S., and have leverages to resist U.S. push. They may believe that they could weather the fallout of U.S. economy going down, survive, and become the top dog of the world.
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