OK, following all this talk of gold and such, in the car this morning, I'm talking to my son and telling him about the gold standard. And that chat ends with the way dollars get into the economy now, federal reserve having a discount rate and banks borrowing the money and then relending it.
So my son gets all perceptive and asks me, how do they determine who is a banker? He was wondering if he could head on down to the federal reserve and tell them he wanted to start a bank. Got me there, I don't know how they decide who they will give money to.
This is probably the basis of the whole thing right? I'm thinking it is pretty much some kind of good old boy thing. And if you are in that small crowd, you can be one of the guys where the gov says, here you go, take a few billion and spread the wealth around.
Anybody know what I should tell my son about this?
Quote:Anybody know what I should tell my son about this?
I don't know what regulatory hoops have to be overcome.
But.....tell your son that you don't have to have much common sense or good judgement to be a banker.
Ha ha, You're probably right about that.
I've met lots of straight arrow bankers though. I'm sure they must be beside themselves.
Channel 8 interviewed a banker in Greenville a few days ago, his stance was, he never felt bad to turn someone down, because if they were not qualified for the loan, they couldn't afford it, it was better for everyone if they didn't get it. So there is some gatekeeper role there that got broken down somehow in this mess.
Quote:I've met lots of straight arrow bankers though. I'm sure they must be beside themselves.
I have done implementations at some regional and national banks, all have been straight arrows and my contacts left there were the first to give me a heads up that things were coming to a head. They had no idea that those Wall Street quasi bank/investment houses would hose their own people that way, but they knew their credit with eachother was a shell game and someone was going to be left holding the bag (Lehman in the end). Now, they feel on a larger scale like I do about buying a house with a real down payment, doing a fixed interest loan and following the fundamentals, screwed over.
In the end, the grasshopper jumps in his sports car and vacation in Florida and the ant gets stepped on.
Quote:In the end, the grasshopper jumps in his sports car and vacation in Florida and the ant gets stepped on.
Sad but true.
Then when grasshopper phuks up, Uncle Sam comes to the rescue using ants $$$.
There ought to be riots in the streets around the Captiol Building.
Better yet.....billions of African (ones that have immigrated to the US) red fire ants ought to attack each member of the executive and legislative branches our our government, and then every grasshopper too. NO MERCY!!!
Well yeah, that ant would actually be better off having been stepped on rather than having the grasshopper fleece (i.e. con with false positive ratings to draw your retirement investments) the ant for his hard earned dough, then turn around and get his hands on the ants tax dollars. Now the ant has a much rather dismal financial future.
Wow. Good work if you can get it.
A Primer On Fractional Reserve Banking
First published in the British humour magazine "Punch" on April 3, 1957:
Q: What are banks for?
A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesn't bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to
reserves of $249,000,000,000 or thereabouts. That is the money they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that
too?
A: Not exactly. That is the money they use to make money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they haven't got it?
A: No.
Q: Then how is it Assets?
A: They maintain that it would be if they got it back.
Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.
Q: But if they've got it, how can they be liable for it?
A: Because it isn't theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people was Assets?
A: Yes.
Q: Then Assets and Liabilities must be the same thing?
A: You can't really say that.
Q: But you've just said it! If I put $100 into my account the bank is liable to have to pay it
back, so it's Liabilities. But they go and lend it to someone else, and he is liable to have to
pay it back, so it's Assets. It's the same $100 isn't it?
A: Yes, but....
Q: Then it cancels out. It means, doesn't it, that banks haven't really any money at all?
A: Theoretically......
Q: Never mind theoretically! And if they haven't any money, where do they get their
Reserves of $249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.
Q: How?
A: Well, when they lend your $100 to someone they charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That's their profit.
Q: Why isn't it my profit? Isn't it my money?
A: It's the theory of banking practice that.........
Q: When I lend them my $100 why don't I charge them interest?
A: You do.
Q: You don't say. How much?
A: It depends on the Bank Rate. Say a half percent.
Q: Grasping of me, rather?
A: But that's only if you're not going to draw the money out again.
Q: But of course I'm going to draw the money out again! If I hadn't wanted to draw it out
again I could have buried it in the garden!
A: They wouldn't like you to draw it out again.
Q: Why not? If I keep it there you say it's a Liability. Wouldn't they be glad if I reduced
their Liabilities by removing it?
A: No. Because if you remove it they can't lend it to anyone else.
Q: But if I wanted to remove it they'd have to let me?
A: Certainly.
Q: But suppose they've already lent it to another customer?
A: Then they'll let you have some other customers money.
Q: But suppose he wants his too....and they've already let me have it?
A: You're being purposely obtuse.
Q: I think I'm being acute. What if everyone wanted their money all at once?
A: It's the theory of banking practice that they never would.
Q: So what banks bank on, is not having to meet their commitments?
A: I wouldn't say that.
Q: Naturally. Well, if there's nothing else you think you can tell me....?
A: Quite so. Now you can go off and open a banking account!
Q: Just one last question.
A: Of course.
Q: Wouldn't I do better to go off and open up a bank
Quote:So there is some gatekeeper role there that got broken down somehow in this mess.
When the gatekeeper gets paid a commission for everyone that passes the through the gate, he does not care if they are qualified or not.
