Is this the soultion to our banking problems?

Where does the problems with our banking system hurt us?  Well it hurts when businesses and people cannot borrow money to keep the economy going.  The problem is that banks are not lending enough money.  So give them the money to lend out.  But put it on deposit with healthy banks.  That raises their reserve requirements and allows the banks to lend more money.  In fact they can lend out more money than we deposit with them.  The taxpayers will not be on the hook for the money because we can simply withdraw it any time ... unlike if we just give them more capital or take up a stake in their business. 

Tags

  1. banking
  2. solutions

Comments


Seth says
MR 2009-03-20 12:33:30 11665
Maybe, but I think the attempt to get equity in the banks & control over their behavior will complicate the situation. Then there is still the question of the toxic loans & what to do with them.

Well watch your wording.  Depositing money in a bank does not give you equity or control over that bank.  That is precisely my point. 

As to the toxic assets, I don't think that healthy banks are holding many of those; but that is a fact that needs to be verified.  Let those banks who hold these assets drown in them - they took the risk - they should suffer the consequences.  Why should normal lending be held hostage to those bad loans and clearing them up is not in the best interest of the healthy economy.  If the Fed deposits money in healthy banks then they should be able to lend out $30 to every dollar deposited and they will because they need to put that money to work because they need to pay interest on it. 

Mark de LA says
seth 2009-03-20 14:49:46 11665
MR 2009-03-20 12:33:30 11665
Maybe, but I think the attempt to get equity in the banks & control over their behavior will complicate the situation. Then there is still the question of the toxic loans & what to do with them.

Well watch your wording.  Depositing money in a bank does not give you equity or control over that bank.  That is precisely my point. 

As to the toxic assets, I don't think that healthy banks are holding many of those; but that is a fact that needs to be verified.  Let those banks who hold these assets drown in them - they took the risk - they should suffer the consequences.  Why should normal lending be held hostage to those bad loans and clearing them up is not in the best interest of the healthy economy.  If the Fed deposits money in healthy banks then they should be able to lend out $30 to every dollar deposited and they will because they need to put that money to work because they need to pay interest on it. 
Well someone was talking about equity in banks through the bailouts. How much has been done & to whom isn't in my research yet. The problems are not just in banks. They are in lots of other kinds of financial institutions. The question in 11649 from Elliott Spitzer, former governor of NY still remain. Why not let AIG fail, who gets hurt, specifically ?



Seth says
source: MR asks
Why not let AIG fail, who gets hurt, specifically ?
Good question!

Mark de LA says
seth 2009-03-21 10:38:09 11665
source: MR asks
Why not let AIG fail, who gets hurt, specifically ?
Good question!
A corollary question is then let AIG fail & make whole those who were innocent of wrongdoing (discretion required). It makes more sense than pissing more dollar$$$ down the throat of AIG to piss away & yet still face bankruptcy later.

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