Capitol Hill Blue Forums Political Issues Finance, the economy & Economics Banks in trouble?

I have and it didn't.

Thanks Its,

Not easy to boil it down into a post on a board, thank you for at least clarifying things a bit for me!

If I understand you correctly, few 'mortgage' companies actually own the loan. They are really nothing more than collection agencies, taking their fee off the top, and sending the proceeds along to some wider net of 'investors'?

Stock market. I'm clueless as to how things really work, but please tell me if I'm somewhat on track here. Used to be folks bought stock in a company based on the financial soundness of that company, taking their profit from quarterly dividend checks based on profits. Nowdays, it 'seems' to me, that it's less about true profitability, but more about some inflated value of paper(stocks) buy,buy,buy, run the price up, then sell taking your profit as a lump, as opposed to a continuing dribble of money in the form of dividends. So, if I'm anywhere near accurate in my thinking(simpleminded as I am about all this!) the market 'value' is falsely inflated, just like energy prices. It's all investor driven, and not based on the 'real' value of a company's assets, long term business prospects, or 'real' profitability? I hear all the time about how a company makes decisions based on the demands of the 'Street', and as a small(very small!) business owner, I don't understand how on earth a company can make good, logical long term plans based on the demands of stockholders. It appears to me that these two sides would be at odds, the stock holders want instant gratification, which may not be in the best long term interests of the company they hold stock in. If I'm the least bit right in my thinking, then I'd say that the market 'trading level' is indeed fallacious, falsely inflated values based on total speculation, driven by the desire for instant profit, not based on any concrete net value? Kind of sounds like a great big pyramid scheme to me, and as we all know, those always collapse, leaving the guys on the bottom holding the empty bag

Thanks for being patient with a financial market dummy!!

Frazier...
Think you have it right... If that makes you a dummy,our world needs more dummies...

I don't pretend to know much about the market... what causes it to go up and down... and that's why my only stocks are those left over from a long ago profit sharing plan.

For the current period, my overriding thought is "Beware the Fed", and whenever you hear politicians and government officials explain that they are "helping the people"... it should be taken as a warning.

Update:

Interest rate freeze is fraud

I had a hunch that this whole thing really wasn't created to save the average Joe, but instead to bailout those mortgage companies/banks! This administration has not done one thing to help the average Joe. Why in the world would they ever start now?

Yeah, no kidding! When has the Bush Administration done anything nice, good, or beneficial for the average American citizen?

There are so many restrictions on who qualify - it's a joke. Besides, why aren't conservatives screaming and hollaring about government intrusion into contracts - specially between the lender and borrower?

Essentially, the government if forcing the lender into a new contract. Why aren't conservatives up-in-arms about that?

What is really sick about this whole scheme, and I use that term advisedly and fervently, is that we are using the "might" of the U.S. economy to help the very people who caused the crisis in the first place. This is so friggin' typical of this administration. Nothing, NOTHING, it has ever done has been for the benefit of the "average" person, but only to enrich the rich and bail out the irresponsible - which is pretty much what the President has been the recipient of his entire life. I can think of no policy, this one included, that actually helped anyone in the lower tax brackets (say, below $60,000 of income a year). I am, as always, open to counter examples. Good luck.

Sounds as if the bank deregulation done in the 80's may be the problem. When you don't have rules and regulation, especially in banking, you have wholesale greed. They are churning loans. Small banks will have difficulties as a result of participation loans. Business loans become problems when the companies need, really need, a loan and the interest rates are twice the prime. Maybe bank re-regulation would help. Obscene profits should be outlawed. Anything over 7% on a loan was considered usuery. Some credit cards are charging 3 times that. Paying for things with cash might be a good thing as well as paying off loans as fast as possible.

Those who forget history are doomed to relive it.

Greed has a way of re-inventing bad/losing activities.

After the Crash of '29, new laws were created to prevent that kind of depression from ever happening again. The Glass-Steagall Act (1933) was designed to cure the problem of banks getting over extended. While there were many other laws, this was probably the wisest, and most effective.

The Glass Steagall Act, in essence required Commercial Banks and Investment Banks to be kept separate, and because of the nature of risk... the Commercial banks had many regulations, requiring them to operate with restrictions on risk, on maintaining a percentage of liquid assets, and in general establishing a set of rules that would require them to operate safely, in the interests of the American Citizen.... In other words, to operate as what we used to know as a "Bank".

There were many attacks on the GS Act over the years, as vested interests tried to ease the risk laws and to allow the commercial banks to be involved in "risk" investments. Despite some small changes, the Federal Government resisted these attempts until 1999, when the banking industry lobbied successfully... the House and Senate rolled over, and allowed the Commercial banks to become gamblers.

And that's where we stand today. Victims of an unregulated market, and banking bets gone bad.

Remember... there are 48000 registered lobbyists. Nearly 90 lobbyists for every legislator in congress. They work for vested interests, and use the money from those vested interests, to pay for congressional votes. Anyone who does not understand or believe that, believes in the integrity of the US Government.