Skip to main content

Why do we need banks? Why would the government not loan money directly to the people at the rate it loans it to the banks? Banks do not manufacture anything they are really only a middleman making money for something that is totally unnecessary? All this money going to the banks could be going to the people.

Original Post

Replies sorted oldest to newest

Originally Posted by Gingee:

Why do we need banks? Why would the government not loan money directly to the people at the rate it loans it to the banks? Banks do not manufacture anything they are really only a middleman making money for something that is totally unnecessary? All this money going to the banks could be going to the people.



The banks were kept after the Federal Reserve became the state bank so that the concept of moral hazard could be maintained as part of the financial sector.  But, with the current state of banking regulations, there is no moral hazard and no need for commercial banks any longer.  Plus, all of the investment banks converted to commercial banks so be eligible for TARP funds

The Fed has made money available to any bank at interest rates approaching zero, at least less than 1/2%, and in almost any amount.  Some banks had to take on loans to meet their federally mandated reserve requirements that they had failed to maintain for years, because they knew they were too big to be allowed to fail.

What a country!

Originally Posted by interventor1212:

So, the US is to takeover the banks.  Then, we're stuck with another massive bureaucracy with the soul of the IRS.  And, the good financial sense of Fannie/Freddie. With politicians able to directly influence financial policy. What could possibly go wrong!


That is the current situation.

Pay attention. 

Only a part of Glass-Steagall was repealed.   And, for about the 12th time I've asked this question, "How did this cause the recession?"  So far, no reasonable answer.  None of the depositor's funds were mixed with investment funds, as that would be fraud.

 

Many of the banks have since renamed the investment portion of their operations. While using the same facilities and personnel.   

Government interference in the market place was first and foremost, the reason for the recession.  Banks were encouraged to make loans to almost anyone who walked in and asked for a home loan.  That was the government's doing.  Banks wouldn't have breached their sa***uards unless encouraged to do so.  The loans were transferred to the investment side, who bundled them for sale to bring in more cash so more loans could be made.

 

Fannie/Freddie bought the loans to the tune of one trillion dollars.  Then, converted them to derivatives backed by the bundled mortgages.  Without government interference, few bad loans would have been made, nor would housing prices skyrocketed out of sight.

Add Reply

Post

Untitled Document
×
×
×
×
Link copied to your clipboard.
×