1912 Cartoon

[leegs]

Re: 1912 Cartoon

Maybe a pedestrian, "beginner's" question, but is the problem with the Fed a problem with Central Banking per se? Much of the "end the fed" argument seems to suggest that the market should set the price of credit and that any effort to "game" this function, for whatever reason, will end up creating opportunities for fraud and create so many unintended consequences that, in the end, even the most laudatory goals will end up being completely subverted.

I think your very good question gets to a bigger and broader point - that the goodness or badness of a policy or idealogy can only be considered in the context of the times. I doubt that any ideology - capitalism, libertarianism, progressivism, etc - is perfect and appropriate for all time. This could probably be said about the establishment of the FED, the New Deal, and various government regulation efforts, for example. That these things might have had positive effects for a long time, does not mean that eventually they don't either outlive their usefulness or become victims of their own success.

[oddlots]

Re: 1912 Cartoon

Llloyd, is that you?

Text me later, k?

Jamie.

[mmr]

Re: 1912 Cartoon

I'm a bit confused at to how you estimated the large losses for the Fed through its collateralized lending programs. The Fed claimed that it did not take a principal loss on any of its loans to banks or investment banks through these programs, although the ultimate losses or gains on the assets that it acquired from AIG and Bear Stearns (the "Maiden Lane" programs, which are still being unwound) are uncertain.

The Fed may be overstating its profits from these programs if it is simply treating all interest income received from those loans as income without considering the .25% interest expense that it's paying on excess reserves (effectively, its marginal borrowing cost). However, unless there were massive losses on these secured short-term loans that have not been publicly disclosed, I don't see how they could have lost $200+ billion. What am I missing?

[ProdigyofZen]

Re: 1912 Cartoon

Oh come on! I posted this already hahaha. Don I want credit for this dang it!

[Raz]

Re: 1912 Cartoon

I think your very good question gets to a bigger and broader point - that the goodness or badness of a policy or idealogy can only be considered in the context of the times. I doubt that any ideology - capitalism, libertarianism, progressivism, etc - is perfect and appropriate for all time. This could probably be said about the establishment of the FED, the New Deal, and various government regulation efforts, for example. That these things might have had positive effects for a long time, does not mean that eventually they don't either outlive their usefulness or become victims of their own success.

There seems to be more than a few 'Reagan Haters' on iTulip, but I believe the old man made at least one statement that gives the appearance of being infallibly true:

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear.
Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

[lektrode]

Re: 1912 Cartoon

There seems to be more than a few 'Reagan Haters' on iTulip, but I believe the old man made at least one statement that gives the appearance of being infallibly true:

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear.
Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

it would appear that the one time (or one of the times) this statement didnt prove true was - TADA! - the elimination of glass-steagall - which also appears to be the ultimate cause of the failure of the fed to keep the bus on the road (while all the 'passengers' were gettin schnockered in the back...)

and - nears i can tell - it was the dems of lower manhattan that we can 'thank' for that (rubin, summers, citi, GS, et al - along with ole billy boy fer signin onto it)

[don]

Re: 1912 Cartoon

Oh come on! I posted this already hahaha. Don I want credit for this dang it!

Most humbly, you got it! (where did you post it?)

[ProdigyofZen]

Re: 1912 Cartoon

Haha, its a good post. I never posted it as a stand alone post. I posted it within another post to make a point about something.

That picture was on zerohedge something like 7 months ago I believe. At least that is where I got it.

[EJ]

Re: 1912 Cartoon

I'm a bit confused at to how you estimated the large losses for the Fed through its collateralized lending programs. The Fed claimed that it did not take a principal loss on any of its loans to banks or investment banks through these programs, although the ultimate losses or gains on the assets that it acquired from AIG and Bear Stearns (the "Maiden Lane" programs, which are still being unwound) are uncertain.

The Fed may be overstating its profits from these programs if it is simply treating all interest income received from those loans as income without considering the .25% interest expense that it's paying on excess reserves (effectively, its marginal borrowing cost). However, unless there were massive losses on these secured short-term loans that have not been publicly disclosed, I don't see how they could have lost $200+ billion. What am I missing?

The charts were created from a spreadsheet produced by Bloomberg from Fed data titled "Estimated Money Made From Fed Loans Based on Net Interest Margins" with the following nine column headings:

• Rank
  
• Ticker
• Company Name
• Net Income Estimate
  
• Net Income Actual
• Aggregate Fed Balances During Periods With Available Net Interest Margin Data
  
• Total Aggregate Fed Balances from Aug. 1, 2007 to April 30, 2010
• Percent of Fed Borrowing Analyzed
• Country

We sorted the data by Net Income Actual and charted Net Income Actual versus Net Income Estimate. We created two charts, one titled Losers that shows all of the net income actual losers and another titled Winners that shows all of the net income actual gainers.

Thank you for your help on the Treasury bond annual gain calculations, by the way.

[Raz]

Re: 1912 Cartoon

The Banking Act of 1933 (written by Carter Glass and Henry Steagall) was regulatory legislation - not a "program" to fight poverty or redistribute income, or build new weapons systems for the "empire", etc. It should be viewed the same way as laws against embezzlement, kidnapping, etc. The act was a TOTAL of 37 pages; contrast that with Dodd-Frank - it's likely a book.

Repealing it was itself a crime - no different than removing laws prohibiting certain conflicts-of-interest or collusion. It did require additional personel to monitor banks and brokers, but when you legislate more acts as criminal you will have to hire more police.

I don't see the connection with Reagan's complaint against an ever expanding bureaucracy and continuation of government departments to "end poverty" or "fix education" where the is little to no evidence they have done so.

[Verrocchio]

Re: 1912 Cartoon

it would appear that the one time (or one of the times) this statement didnt prove true was - TADA! - the elimination of glass-steagall - which also appears to be the ultimate cause of the failure of the fed to keep the bus on the road (while all the 'passengers' were gettin schnockered in the back...)

and - nears i can tell - it was the dems of lower manhattan that we can 'thank' for that (rubin, summers, citi, GS, et al - along with ole billy boy fer signin onto it)

You are correct to indicate that Bill Clinton signed the repeal into law, but the legislation was passed by a Republican majority at the behest of the banking industry.

1933 Glass-Steagall Act
Sponsors were:

Carter Glass, Democrat from Virginia
Henry Steagall, Democrat from Alabama

1999 Gramm-Leach-Bliley Act
Sponsors were:

Phil Gramm, Republican from Texas
Jim Leach, Republican from Iowa
Tom Bliley, Republican from Virginia

[Raz]

Re: 1912 Cartoon

You are correct to indicate that Bill Clinton signed the repeal into law, but the legislation was passed by a Republican majority at the behest of the banking industry.

1933 Glass-Steagall Act
Sponsors were:

Carter Glass, Democrat from Virginia
Henry Steagall, Democrat from Alabama

1999 Gramm-Leach-Bliley Act
Sponsors were:

Phil Gramm, Republican from Texas
Jim Leach, Republican from Iowa
Tom Bliley, Republican from Virginia

AND at the behest of Rubin and Summers.

On this one I'd assign the blame 60%Repukelican, 40%Demonrat.

[Thailandnotes]

Re: 1912 Cartoon

Not all of them were losers. It's just that if you net out the winners and losers you come up with a $43 billion loss.

Editorial in today's Washington Post....

WALL STREET IS recovering from the Great Recession, but the U.S. financial sector might not exist at all if Congress had not enacted a $700 billion bailout, the Troubled Assets Relief Program (TARP), on Oct. 3, 2008. In President Obama’s view, the financial industry owes the American taxpayer not only a debt of gratitude — but a debt, period. His fiscal 2013 budget proposal includes a plan to charge large banks $61 billion over the next decade, to recoup the expected net cost of the TARP program.

What could be fairer? As the budget notes, Wall Street firms “contributed to the financial crisis through the risks they took,” and “benefited enormously” from the bailout. The TARP law itself requires the president to submit a plan for recovering any shortfalls from the financial industry, so that TARP “does not add to the deficit or national debt.”

But Congress doesn’t have to approve it — and it shouldn’t. Whatever the banks’ sins, and they are legion, ripping off taxpayers via TARP is not one of them. The Treasury Department turned a $13 billion profit on its $245 billion bank capital injection. In other words, the banks paid the money back, with interest. If Treasury faces paper losses on TARP now, it is due in large part to the bailouts of insurance giant AIG, General Motors and General Motors’ erstwhile finance unit, now known as Ally Bank.

Treasury spent $51 billion for a majority stake in GM, $4.4 billion of which has already been written off and $23.2 billion of which has been recovered in a sale of stock to the public. That leaves $23.4 billion. If the government sold its remaining 500 million shares at current prices, it would receive roughly $12.5 billion, for a loss of $10.9 billion. The government got out of its investment in Chrysler at a net loss of $1.3 billion.

Why should “the banks” be on the hook for that? The Obama administration cites the TARP statute, but it’s not clear that Congress intended the financial industry to pay for an auto bailout, since it took creative interpretation of the TARP law (during the waning days of the Bush administration) to permit its use for the Detroit rescue in the first place.

TARP was the price the country paid for a public good — financial stability — that the country needed. It’s inconsistent for the president to hail the bailout of one private industry — autos — while playing politics with the bailout of another — banking — that was and is no less necessary to a modern economy. It compounds the inconsistency to demand that the latter pay for the former.

The notion that the banks would “pay” is phony anyway, since any new federal charge on them will simply get passed along in the form of higher consumer fees, tighter credit, or some combination thereof. TARP benefited the American people as a whole. The honest, transparent way to pay for it is to impose higher taxes, reduce spending, or both, for the American people as a whole.

[dcarrigg]

Re: 1912 Cartoon

There seems to be more than a few 'Reagan Haters' on iTulip, but I believe the old man made at least one statement that gives the appearance of being infallibly true:

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear.
Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

Metalman's avatar (Oscar Wilde) perhaps put it more eloquently:

"Bureaucracy expands to meet the needs of the expanding bureaucracy."

[ProdigyofZen]

Re: 1912 Cartoon

Well if you remember correctly US History, you would know that after the 1964 Civil Rights Act the "democrats" who populated the south switched to being republicans.

So carter glass and steagall would most likely be republicans in todays world.