tag:blogger.com,1999:blog-7163441833245663827.post3680863903611945826..comments2024-03-28T10:49:14.510-05:00Comments on Horizons: The Story We've Told Ourselves About "Too Big to Fail" is FalseNancy LeTourneauhttp://www.blogger.com/profile/12614317154146836694noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-7163441833245663827.post-12481712062938750972015-05-30T01:52:54.786-05:002015-05-30T01:52:54.786-05:00Nancy, the biggest banks didn't fail because t...Nancy, the biggest banks didn't fail because they got bailed out. The numbers below range from 2 to 25 BILLION (echos of Carl Sagan here)<br /><br />10/28/2008 Wells Fargo & Co. San Francisco Calif. $25,000,000,000<br />10/28/2008 State Street Corp. Boston Mass. $2,000,000,000<br />10/28/2008 Bank of America Corp.1 Charlotte N.C. $15,000,000,000<br />10/28/2008 JPMorgan Chase & Co. New York N.Y. $25,000,000,000<br />10/28/2008 Citigroup Inc. New York N.Y. $25,000,000,000<br />10/28/2008 Morgan Stanley New York N.Y. $10,000,000,000<br />10/28/2008 Goldman Sachs Group Inc. New York N.Y. $10,000,000,000<br /><br />And note below, the reason other banks could buy up the failed ones was because the government guaranteed to protect them from losses - see below:<br />EDERAL RESERVE RESCUE EFFORTS<br />Financial rescue plan aimed at restoring liquidity to the financial markets.<br />Program Committed Invested Description<br />Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility Unlimited $0 million Financing to banks for purchases of three-month asset-backed commercial paper from money market mutual funds to promote money market liquidity.<br /><br />Bank of America loan-loss backstop $97 billion $0 Funds set aside to insure against bank's potential losses from Merrill Lynch merger.<br /><br />Bear Stearns bailout $29 billion $26.3 billion Program to guarantee potential losses on Bear Stearns' portfolio; smoothed the way for JPMorgan Chase to buy the failed investment bank. JPMorgan scoops up Bear<br /><br />Citigroup loan-loss backstop $220.4 billion $0 Funds set aside to insure against bank's potential losses from mortgage-backed securities investments.<br /><br />Commercial Paper Funding Facility $1.8 trillion $14.3 billion Purchases of short-term corporate debt aimed at boosting the struggling market and providing critical three-month financing to businesses.<br /><br />Foreign exchange dollar swaps Unlimited $29.1 billion Exchange of dollars to 13 foreign central banks for collateral. Aim is to provide liquidity to foreign financial institutions.<br /><br /> Fed pumps out more dollars<br /><br />GSE debt purchases $200 billion $149.7 billion Program to buy debt issued by Fannie Mae and Freddie Mac. Aim is to reduce rates on home loans.<br /><br />GSE mortgage-backed securities purchases $1.25 trillion $775.6 billion Program to buy mortgage-backed securities held by Fannie Mae and Freddie Mac. Aim is to reduce rates on home loans.<br /><br />Money Market Investor Funding Facility $600 billion $0 Programs to help money market funds by lending to funds directly.<br />Primary Dealer Credit Facility n/a $0 Long-time lending facility for commercial banks that was opened to investment banks for first time in March 2008.<br />Term Asset-backed securities Loan Facility $1 trillion $43.8 billion Program to buy consumer loan-backed securities. Aim is to revive the securitization market for consumer loans like credit cards and auto loans.<br /><br /> To TALF, or not to TALF<br /><br />Term Auction Facility $500 billion $109.5 billion Lending program that allows commercial banks to unload hard-to-sell assets, including mortgage-backed securities: Fed takes assets as collateral and banks get cash.<br /><br /> Why bailout might not work<br /><br />Term Securities Lending Facility $250 billion $0 billion Federal Reserve facility that loans Treasurys to banks against hard-to-sell collateral like mortgage-backed securities.<br />U.S. government bond purchases $300 billion $295.3 billion Federal Reserve will buy up to $300 billion of U.S. debt to support Treasury market and help keep interest rates down for consumer loans.<br />Fed total $6.4 trillion $1.5 trillion <br />KonaKeokihttps://www.blogger.com/profile/10695210034663379610noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-54471801910069675132015-05-29T23:05:34.706-05:002015-05-29T23:05:34.706-05:00Deregulation is the culprit and big banks lobbied ...Deregulation is the culprit and big banks lobbied hard to get it:<br /><br />https://rortybomb.wordpress.com/2010/08/30/government-regulation-and-the-financial-crisis/Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-3756003162248406372015-05-29T13:50:35.364-05:002015-05-29T13:50:35.364-05:00Wait... That's not even close to the worst of ...Wait... That's not even close to the worst of it. What was the problem with the massively under-regulated shadow banking sector? Too much regulation is what caused the lack of regulation. As absurd as it sounds, that's Grunwald's actual claim. <br /><br />"In retrospect, America’s pre-crisis regulations for commercial banks like JP Morgan and Citi were clearly too weak. But they were strong enough to drive trillions of dollars worth of risky assets into the less regulated “shadow banking system”—investment banks like Bear and Lehman, government-sponsored enterprises like Fannie and Freddie, and insurers like AIG, not to mention off-balance-sheet vehicles that commercial banks like Citi used to dodge their regulatory constraints."Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-23396751361667846532015-05-29T13:42:58.164-05:002015-05-29T13:42:58.164-05:00Actually, the more I read of Grunwald's piece,...Actually, the more I read of Grunwald's piece, the angrier I get. <br /><br />His source for info about Community Banks? Former FDIC chair Shelia Behr? No, Congressman Brad (female staff beware) Sherman. <br /><br />And this sentence is simply plagiarized from Phil Graham circa 1998:<br />"Unilaterally enforcing size limits on domestic banks would put the U.S. at a real competitive disadvantage in financial services."<br /><br />A. What would it mean if our banks were at a competitive disadvantage? Well, that was the situation until Graham, Greenspan and Clinton repealed Glass Stegall. In other words: the best engine of expanding middle class well being that Earth has ever seen. <br />B. Says who?Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-22958153523936199892015-05-29T13:33:15.657-05:002015-05-29T13:33:15.657-05:00There are a couple dots you are failing to connect...There are a couple dots you are failing to connect, motivated (I speculate) by your desire to debunk the CW. <br /><br />Why do banks take risks? That's their job. What kinds of things increase the risks banks take:<br />1. Being too big to fail means that the stockholders (ie, the executives) will not suffer if the risks go bad. <br />2. The housing bubble had many causes, but let's call it the securitization of sub-prime loans which separated lenders from the risk of default. Why did this situation exist? At least partially because big banks have big power and caused the lack of regulation. Community banks did not fuel the bubble. Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-10147483148489221532015-05-29T12:17:44.074-05:002015-05-29T12:17:44.074-05:00I believe the word you are grasping for to explain...I believe the word you are grasping for to explain the crash is "fraud".<br />Lots and lots of fraud perpetrated by bankers and Wall Street. <br />Fun fact: Fraud is considered a felony punishable by prison time when perpetrated by the poor and minorities.Roberthttps://www.blogger.com/profile/00363187757246791754noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-51093851800965762372015-05-29T07:25:41.889-05:002015-05-29T07:25:41.889-05:00This comment has been removed by the author.Another Scotthttps://www.blogger.com/profile/08112505434295395748noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-3107244663271335822015-05-29T07:25:25.895-05:002015-05-29T07:25:25.895-05:00Dean Baker would be disappointed that you didn'...Dean Baker would be disappointed that you didn't mention the housing bubble anywhere in this post. ;-)<br /><br />Seriously, the underlying cause of the crash was the housing bubble. The failure of Lehman, TBTF, etc., etc., was tied up with that, but it was secondary.<br /><br />E.g. http://www.cepr.net/documents/publications/housing_fact_2005_07.pdf (from 2005).<br /><br />Cheers,<br />Scott.Another Scotthttps://www.blogger.com/profile/08112505434295395748noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-89674260364851460722015-05-28T17:05:39.245-05:002015-05-28T17:05:39.245-05:00Michael Grunwald wrote a book about how profoundly...Michael Grunwald wrote a book about how profoundly progressive President Obama's stimulus was:<br /><br />http://www.michaelgrunwald.com/Anonymoushttps://www.blogger.com/profile/08141640791663745884noreply@blogger.comtag:blogger.com,1999:blog-7163441833245663827.post-15676072866856585292015-05-28T11:03:00.277-05:002015-05-28T11:03:00.277-05:00I've thought for a while that bigness is a sec...I've thought for a while that bigness is a secondary problem in this case: bigness carries its own serious risks, but the bigger problem was poor regulation and the wild speculation that enabled. That's what needed to be addressed first.Linnaeushttps://www.blogger.com/profile/02257807789941705353noreply@blogger.com