more lawless bankers. tis the season

FWIW, Australia has govt guaranteed bank deposits, and a heavily regulated banking system. It's not a competitive environment (the large banks utterly dominate the scene and treat customers with contempt) but it is a secure and stable environment, largely escaping the various financial crisises of the last decade.

21 hours ago, Maddus Mattus wrote

@AndyC:

I'd much rather have the choice of where to put my lifesavings. Then me and me alone would be responsible for finding a place for my money, with either a) high risk, high yield or b) low risk, low yield bank.

Except you don't really have that choice, you only have the illusion of that choice, because the banks weren't strictly regulated enough. So you may put all your money in the low risk, low yield account only to have the bank go bust because a different arm was taking more risk than it should.

The only way to get what you want is regulations along the lines of Glass-Steagall. Then you can allow those high risk banks to go bust and argue the investers knew what they were getting into. And, at worse, you'd only ever have to worry about bailing out the low risk banks (which are far, far less likely to ever get into a similar situation anyway)

@AndyC: Good example!

It clearly demonstrates the lack of needs for bills like the one you describe.

A bank which has both an investment bank and a banking arm, is then not a safe place to put your money. So you would be damned to run such a high risk, for such a small yield.

If you want safety, you should search for a bank that only has a banking arm and does not have an investment arm. If you and many others like you do this, it would create demand for such banks and they would appear.

It might take some time, some 'market failures', but eventually the system will evolve into being. Government will never get this system right, because it simply lacks the self correcting mechanism.

2 days ago, evildictait​or wrote

The bank is a PLC. You can't sue the directors unless their mismanagement was negligent or malicious.

Even if all banks are PLC's, it's the responsibility of the employees, stockholders and customers to keep the bank away from harm. Everyone should have an equal voice, right now they don't. Employees are sock puppets, stockholders rule and are only interested in making profit with their shares and the customers don't care they are protected by government. As long as you keep this way of doing business in place, nothing will ever change, regardless of the amount of regulations you put in place.

People should be held responsible and accountable for their actions, as long as you cover their behind they will act irresponsible.

What on earth makes you think that CEOs do anything based on moral obligation?

See above.

They wouldn't tell you, so you wouldn't know.

And that's why we need to have free press. They can do all this kinds of investigate reporting stuff and blow the cover on this vermin!

Imagine the headlines; "Goldman Sachs CEO doesn't trust his own company!". PR nightmare, aaaarrrgghhhh!

I presume that based on this knowledge of how unsafe banks are, that you store all of your money in cash under your bed.

Actually, I built my investment around my bed, it keeps me dry when it rains and warm when it's cold.

Yeah, that's right. Let's set the police on the grannies protesting outside parliament for complaining that the banks made off with all of her savings and pension. What a socialist she is for expecting her savings and pension to not be stolen by our wonderful capitalist bankers.

As heartbreaking as that may sound, the grannies are barking up the wrong tree. A government should provide courts of law to deal with these things. The grannies should not protest against parliament, but sue the banks!

Right now capitalist bankers (all bankers are capitalists, nothing wrong with greed or capitalism) get away with almost anything, because government steps in and protects them at my expense.

If the grannies want a freebee from government at my expense, government should say no.

If you continue this line of thought, you end up with the system we have today. Customers not caring about which pension they have, government will pick up the tab. Banks don't care how reckless they invest, government will pick up the tab. Stockholders don't care about the wellbeing of their bank, government will pick up the tab. And a bankrupt government, because it has to pay for all the mistakes. How social is that?!

2 days ago, magicalclick wrote

@Maddus Mattus:

I am confused. Are you telling me that , with our current high speed access to banks, somehow government no longer need to bailout to stop the panic? How does that even work? I just click transfer button before you do? I am confused.

It's governments responsibility to provide the banks with cash, because the banks can't print that. It's not the governments responsibility to bail them out.

As we do less and less with cash and more and more with internet banking, nearly all money is virtual. It becomes more and more difficult for banks to manage panic, I don't think government can do anything about these types of bank runs. Bankers could turn of their internet, like the stockbrokers sometimes hide in the toilet,...

1 hour ago, Maddus Mattus wrote

@AndyC: Good example!

If you want safety, you should search for a bank that only has a banking arm and does not have an investment arm. If you and many others like you do this, it would create demand for such banks and they would appear.

It might take some time, some 'market failures', but eventually the system will evolve into being. Government will never get this system right, because it simply lacks the self correcting mechanism.

And in the mean time? Do you honestly expect people to keep their savings under the mattress and insist on being paid in cash?

What you are suggesting is simply impractical. And even if you did find such a bank, what's to stop them getting involved in some high risk activities some time later without your knowledge?

54 minutes ago, AndyC wrote

And in the mean time? Do you honestly expect people to keep their savings under the mattress and insist on being paid in cash?

That's an excellent question. I really don't know, all I do know is, that continuing down the current path will only get us into bigger trouble. Covering bad debt, with even more debt, cannot be upheld, so much is clear.

First thing we need to do, is to get government spending under control. Then we need to look at how we can get rid of competition limiting regulations. I think the solution is moving to a more free society, with a small government and more responsibilities for citizens.

What you are suggesting is simply impractical. And even if you did find such a bank, what's to stop them getting involved in some high risk activities some time later without your knowledge?

They would be prevented to undertake such risky activities because their customers would be on them like hawks.

There have been banks that required no bailouts from government, because they invested their money wisely. I wish I was free to move my pension and my savings to one of these more safe banks, but the system I'm in now prevents me, due to regulations.

@Maddus Mattus: Your suggested solution requires that everybody regularly spends time tracking what their current bank is doing and knows enough to evaluate any legal or economic consequences of their actions. This is the sort of thing that most people will happily ask someone else to do on their behalf and will be willing to pay for it -- like paying taxes for a government to make rules so that we can get on with our lives without having to worry about the details of the individual workers looking after our money.  I don't want to have to take my rubbish to the tip every week, I don't want to have to collect my own post from a depot and I don't want to have to become a legal and economic expert to understand what the bank is doing;  I'm willing to pay taxes to have someone else do all those things for me, otherwise I'd never get any time off.

Herbie

@Dr Herbie:

No, you can hire a guy to do all the things you mention for you.

I can guarantee you;

1. He will do a better job
2. Do it more cheaply

And if you don't agree with your guy, you have the option to say: 'no'.

This is why we have bakers, software companies, etc. etc. you benefit, the guy benefits, everybody happy!

The critical error in your thinking is that it may benefit you, but it might not benefit someone else. If you arrange these things by law, the someone else cannot opt out, it's the law.

(Cbea will say I sound like a broken record) This force you use to make others comply is where things get very scary, very fast.

So when you put programs like the ones you mention into place, some benefit at the expense of others, and this I am fundamentally against.

20 minutes ago, Maddus Mattus wrote

@Dr Herbie:

No, you can hire a guy to do all the things you mention for you.

I can guarantee you;

1. He will do a better job
2. Do it more cheaply

And if you don't agree with your guy, you have the option to say: 'no'.

[/quote]

In my experience:

1. No, he will be pushing the products he gets the biggest commission on, not the best products for me.  Given that he has specialist knowledge that I don't have, it is often difficult to tell that this is the case, but I have found it to be the case with financial advisers in the past; my wife and I both have university educations, including statistics and maths, and it took us a lot of thought to realise we should ignore one particular adviser.  I don't see how anyone with less numerical acumen would cope.

2. No, he will charge "what the market will support" and not the cheapest possible price.  I have often found that 'private sector' works out more expensive that government run; the 'free market' doesn't work unless everyone is open about costs and profits, in many cases all the competitors are gaining unrealistic profits because they don't want to undercut the competition to too much because they all want to keep their prices high in an implicit, unspoken price-rigging scheme.

And I do indeed have the option to say 'no', but then that would mean I was wasting my time if I knew better than the experts.

Herbie

In my experience:

1. No, he will be pushing the products he gets the biggest commission on, not the best products for me.  Given that he has specialist knowledge that I don't have, it is often difficult to tell that this is the case, but I have found it to be the case with financial advisers in the past; my wife and I both have university educations, including statistics and maths, and it took us a lot of thought to realise we should ignore one particular adviser.  I don't see how anyone with less numerical acumen would cope.

2. No, he will charge "what the market will support" and not the cheapest possible price.  I have often found that 'private sector' works out more expensive that government run; the 'free market' doesn't work unless everyone is open about costs and profits, in many cases all the competitors are gaining unrealistic profits because they don't want to undercut the competition to too much because they all want to keep their prices high in an implicit, unspoken price-rigging scheme.

And I do indeed have the option to say 'no', but then that would mean I was wasting my time if I knew better than the experts.

Herbie

1. This breaks the; "When two people do business and it effects a third non participant, there is a role for government to play." rule. He is intentionally misleading you in order to get a better deal with someone else, this is at your expense and should be illegal.

You will always have bad apples, but I am not willing to surrender the liberties of others in order to hunt down some bad apples. You just have to weed them out.

2. If government does it more cheaply it means that someone else is paying the bill. There is no such thing as a free lunch.

The problem with these financial products is, that you don't have the option to move them around freely (at least, I don't). My current mortgage is your situation 1, which I didn't do the math, but trusted the expert. Now I know better and have made alternative arrangements, but the current system prohibits me to get out of the contract. Also I've joined with other consumers and the insurer has come up with a compensation plan, no government intervention was required.

34 minutes ago, Maddus Mattus wrote

*snip*

1. This breaks the; "When two people do business and it effects a third non participant, there is a role for government to play." rule. He is intentionally misleading you in order to get a better deal with someone else, this is at your expense and should be illegal.

You will always have bad apples, but I am not willing to surrender the liberties of others in order to hunt down some bad apples. You just have to weed them out.

Which is exactly the same argument that can be put forward with the actions of the banks -- banks collude to make more money from each other -- therefore government regulation is required to stop them harming the people who save and invest with them.  You're just moving the focus from banks to financial advisers.

34 minutes ago, Maddus Mattus wrote

*snip*

2. If government does it more cheaply it means that someone else is paying the bill. There is no such thing as a free lunch.

No, I completely disagree -- if the government is doing more cheaply it means that the private business are price gouging because they're doing it purely for profit.

You don't trust government, I don't trust private companies. There is no middle-ground, so there's no point in continuing yet another in a long list of pointless threads here. 

Herbie

4 minutes ago, Dr Herbie wrote

Which is exactly the same argument that can be put forward with the actions of the banks -- banks collude to make more money from each other -- therefore government regulation is required to stop them harming the people who save and invest with them.  You're just moving the focus from banks to financial advisers.

If they gang up, government should step in, I completely agree. But for the rest, they should be free to compete and innovate the way they want to.

You brought up financial advisors, not me.

No, I completely disagree -- if the government is doing more cheaply it means that the private business are price gouging because they're doing it purely for profit.

You don't trust government, I don't trust private companies. There is no middle-ground, so there's no point in continuing yet another in a long list of pointless threads here. 

Herbie

Let's assume a service has the labor costs of $10.000,- (100 hours * $100/hour) to provide a service to you. Let's look at he two options; 

The private market costs $15.000,-, the guy has to eat so there is a $5.000,- take in it for him. It's your responsibility and the guy's to make sure the work gets done to your satisfaction. 

Let's say the government provides the same service. It first has to asses if you qualify for getting the service, it has to setup the specifications for the service, then it has to take the money through taxes, that system costs money, then it has to transfer the money out of the pile of tax money and have that audited, that system costs money, then it has to provide the $10.000,- worth of raw costs of the service, then it has to check if the $10.000,- was spent the way it should have been spent and finally another guy has to check if the work was done according to specifications,..

You can clearly see it will costs us more then $15.000,- to provide the initial service. Hell, even if the guy made a 100% profit, he would still provide a cheaper service. So if a government can do it more cheaply then the markets, someone else is paying,.. heavily,..

You are absolutely correct that I don't trust governments to provide me with a service or a product. That's not their primary concern. Their primary concern is to get reelected. So they are in a game of politics, they want to win votes, they do this by providing favors at the expense of others. I've seldom met a politician that does not want to get reelected.

I don't think it's pointless, threads like these make me discover where I need to fine tune my position and I discover new things constantly.

3 hours ago, Maddus Mattus wrote

*snip*

They would be prevented to undertake such risky activities because their customers would be on them like hawks.

So I am the banking regulator? Really? Your solutions are nonsensical. I have to admonish you now. <admonish>Maddus</admonish>

You try really hard, though, I will acknowledge that...

@JohnAskew: Not just you and me, all their customers. Right now, we are cattle, powerless, voiceless. We are basically taken out of the equation, because they have the law on their side.

And you know, the funny thing is, the only solution that works is a free market. Check the history books. We will get there eventually, you cannot plan people, they will do whatever they think is right, if there is a law or not, everyone has their own moral compass.

You try really hard, though, I will acknowledge that...

Thanks! I really want what's best for you guys

Trust me, I am from the internets.

@Maddus Mattus:

Government's responsibility to provide the banks with cash when banks didn't have savings in government? And that is not bailout? Wuut? I am really confused. 

2 hours ago, Maddus Mattus wrote

@JohnAskew: Not just you and me, all their customers. Right now, we are cattle, powerless, voiceless. We are basically taken out of the equation, because they have the law on their side.

And you know, the funny thing is, the only solution that works is a free market. Check the history books. We will get there eventually, you cannot plan people, they will do whatever they think is right, if there is a law or not, everyone has their own moral compass.

Let me correct you: I get to vote, so I'm not cattle or powerless or voiceless, I am in the equation, I have the law on my side (and jurors if necessary, imho).

Now let me tell you that your panacea of "free market" is only viable when building nations and infrastructure. Once wealth is accumulated, naturally is becomes concentrated in few hands (this is human nature at work which no one can change), then the "free market" is no longer free.

Anti-Trust law is supposed to be how the "free market" shakes off the special interest of a tycoon mogul billionaire type. Unfortunately the "free market" proponents fail to prohibit laws designed for profit and instead take the mogul's contributions. The Justice Department doesn't attempt to enforce the laws on the books addressing Anti-Trust entities, I would imagine for the same reason: profit. Somehow they are drawn into the billionaires' strategy though the US government Justice Department is supposedly constructed to prevent this type of influence.

So at the end of the day, we deal with OLIGARCHIES. Maddus, that is not a "free market". I know that neither Maddus nor anyone else can take our current economy and restore is as a "free market". If you could, you would have already started.

I challange proponents of "free market" to lay out the map to take us there. I say it is not feasible. The rich would not let you finish your ideas anyway because it's not in their interest. This leaves working with the current system as the only option. Pining for "free market" is a red herring.

People, people... I see a whole lot of argument going with nary an idea on how the current banking problem has come about.

Those of us who subscribe to the Austrian school of economics, have predicted this (Ron Paul, Peter schiff, etcetra). 

In fact, in 2001 ( that's right...not a misprint), Ron Paul gave his excellent predictions in his address to the US Congress. In that speech, he predicted the coming trajectory of interest rates, housing prices, derivatives, commodities, GSEs, etcetra.   All of speeches on the house floor are part of the congressional record and can be accessed on www.house.gov.

By the way, his speeches are not some vague utterances that other economically challenged pundits ( Krugman and other such assorteds) make from time to time. But rather, his speeches are detailed logical explanations of how and why of things.