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Author Topic: You have got to be kidding....
SeekingFreedom
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Obama to Propose Fee on High-Flying U.S. Banks

President Obama will propose fees of 15 basis points on so-called high-risk transactions of big banks and financial institutions who derive profits from trades in derivatives and other complex financial instruments.

A senior administration official said Obama's proposal is designed to take affect June 30 and run for at least ten years, and possibly longer if the fees do not cover unpaid sums from the Troubled Asset Relief Program.

Obama will call the new levy the "financial crisis responsibility fee."

The administration, through current Treasury Department accounting, estimates TARP is running a deficit $117 billion. Officials said that amount may shrink by billions and, even if the new transaction fees recoup all of the TARP-derived deficit, the administration intends to keep them on the books as a means to reduce the deficit and punish big-dollar firms.

Significantly, the administration will exempt GM, Chrsyler, Fannie Mae and Freddie Mac from the fees even though most of the current TARP deficit is linked to taxpayer bailouts of these firms.



http://www.foxnews.com/politics/2010/01/14/obama-propose-fees-high-flying-banks/ ?test=latestnews

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SeekingFreedom
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http://money.cnn.com/2010/01/14/news/economy/bailout_tax/index.htm?cnn=yes

Firms targeted by the fee

Firms subject to the fee would have to have more than $50 billion in assets and must be a bank holding company, a thrift holding company, an insurer or a broker-dealer. Small firms and community banks would not be affected, the official said.

The administration estimates that roughly 50 companies will have to pay the fee, of which 20 to 27 would be banking institutions, according to the official. Roughly 35 would be U.S. companies and the rest would be the U.S. subsidiaries of foreign companies.

Firms could be subject to the fee even if they never took TARP funds or if they took TARP funds but repaid them. That's because all major financial institutions benefited directly and indirectly from the efforts to stabilize the financial system, the official said.

"It's just beyond the pale to suggest they were islands unto themselves and not benefiting from the extraordinary policies taken," the official said.

The administration considers the fee the minimum required of the largest financial players to meet the letter and spirit of the law, he added.

But some major beneficiaries of the financial bailout will not be subject to the fee - namely, mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and automakers GM and Chrysler.

In those cases, the administration didn't think the fee would be workable both because of the structure of those companies' assets and because of their current condition, the official said.



Absolutely incredible... [Frown]

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glassman
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what exactly upsets you here?

you want our deficits paid off right?

these co's weren't bailed out to save them, they were bailed out to save our whole economy, remeber? too big to fail, means too big to fail because the rest of us will fail if they do.

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SeekingFreedom
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What exactly upsets me?

Are you serious? Where to start...

Firms could be subject to the fee even if they never took TARP funds

So, if they actually ran their businesses correctly\responsibly, they are now going to have to help their competitors repay their debts AND keep paying because the government can't control it's spending habits.

But some major beneficiaries of the financial bailout will not be subject to the fee - namely, mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and automakers GM and Chrysler.

So, if the Government already owns you, you don't have to pay. But your competitors...they have to pay through the nose for your debts.

How's that for a start for what upsets me about this, Glass? Here's one more...

Out of that 50 or so companies that will end up paying? 15 aren't even U.S. companies. Just watch when reciprocity abroad begins...that surely won't help us.

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glassman
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OK, that i can explain.

the TARP funds were used to pay off the CDSes, and other derivative, alot maybe every single one, of the companies that didn't take TARP still benefited from it because they got paid on risky investemtns they should not have made in "buying" the CDses to begin with.

they would have lost too, becuase they bought too much "junk" that should not have been able to pay out, and got paid anyway.

does that make sense? in a perfect world we would have let them all collapse and then rebuilt from scratch, however, Russia and China would have been our new bosses. No to mention all the "regular" people that would have lost their jobs and everything else.


this is why the bailout was needed. it would not have stopped tipping the dominoes, and they all participated in excessively risky behaviour.

sure, in a perfect world, we would have let them all collapse. well

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The Bigfoot
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The timing of the announcement seems indicative that Obama wasn't aware of the hidden CDS payouts the NY Fed worked out with AIG until the news surfaced last week.

Looks like that was the last nail in the coffin he needed to come to the same conclusion that CDS exacerbated the inherit weaknesses in our banking sector and contributed heavily to the economic recession.

Is the fee fair....I don't know that it is. However I don't think the Pres can tell the Fed to regulate CDS's so I'd guess he is doing what he can to register his disapproval and put heat on the major players of the market he thinks hurt America.

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SeekingFreedom
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Ok, I really need to know if there is a balance to my disapproval on two key points...

Do either or you (or anyone else) think it's ok for the Gov to step in and make the banking industry pay down the Deficit even after the TARP funds are repaid in full?

And...

Why is it that only the Quasi-Governmental bodies listed in both articles (which recieved huge amounts of said TARP funding) aren't paying a dime of this new tax?

Really, what is the arguement to justify either of these points?

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glassman
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the specifics were hidden but we knew that the CDSes were what killed AIG, and we knew they needed to pay them or the whole system would collpase.

the only thing hidden was exactly who were the recipients.

the CDSes are the reason that so many people made bad loans. they made a bad loan and didn't "worry" because they bought insurance (CDS) to cover the losses.

i am not even sure fanniie or Freddie did CDSes.. do you know if they did bigfoot?

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bullitt49
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But some major beneficiaries of the financial bailout will not be subject to the fee - namely, mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and automakers GM and Chrysler.

This is the only part that bothers me. Fannie Mae and Freddie Mac are the main reason for the collapse. They were bloating the appraisals on houses, giving out huge mortgages to people with no income verification on houses that they couldn't afford. They have been on the gov't teet since this happened and are still collecting money from the gov't. And Obama's administration is loaded with ex employees of Fannie and Freddie. That's the problem I have with them not being responsible for paying anything back.

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glassman
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quote:
Originally posted by SeekingFreedom:
Ok, I really need to know if there is a balance to my disapproval on two key points...

Do either or you (or anyone else) think it's ok for the Gov to step in and make the banking industry pay down the Deficit even after the TARP funds are repaid in full?

And...

Why is it that only the Quasi-Governmental bodies listed in both articles (which recieved huge amounts of said TARP funding) aren't paying a dime of this new tax?

Really, what is the arguement to justify either of these points?

LOL, sorry, i don't know that the TARP funds were paid in full, and yes, i think they should be punished severely for forcing US into a position where we had to bail them out.

here's what's hilarious to me, people who told me we shouldn't bail out anybody are now pissing and moaning because we are punishing the bailout recipients for forcing us to do something none of us really wanted to do.

as far as i'm concerned? anybody who took TARP money should be forced to spinout most of their businesses and downsize to the point where if they fail? a bailout won't be needed.

but people will say that's the govt being overbearing.

as for wanting to know why Fannie and Freddie should get special privileges? i know for a fact that without them? the idea of the average person in the US owning their own home will disappear.

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Don't envy the happiness of those who live in a fool's paradise.

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bullitt49
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I hate to sound smug but maybe everyone in the US doesn't deserve to own a home. Some people are just terrible risks. Most of these people wouldn't even get accepted for a car loan but they have these huge houses that they could never afford. On top of it, no income verification and they give 100% loans. Ridiculous. They should be the ones paying the most, not some poor *******s who kept their books in order and didn't get ahead of themselves. I agree most should pay some but to give exceptions is a load of crap. And don't even get me started on Chrysler and GM. Ford picked themselves up very nicely without the gov't and now they pay but Chrysler and GM don't. There's no way in the world that sounds fair.

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It is better to be humbled than ruined

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The Bigfoot
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I'd say you have a right to your disapproval on the first point. We'd have to look back at other fees in other sectors to see if there is precedent for the action.

I'd guess same as glass that the exempted industries did not partake in CDS but I am not certain of that. I haven't heard of it if they had. I'll do some checking as time allows to see if anything pops up.

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bullitt49
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I read the posts on here occasionally and you guys seem to be very intelligent and put your points together very well. I'm not trying to stir it up here at all, but this is what's happening with the country. People are taking sides on the issues and it's really dividing the country. We're all entitled to our opinions, I think that's great, and nobody's really wrong or right, but everyone just has different ideas on how this should be handled. Glassman, I respect your position but I just wanted to get another side out there. Seeking Freedom made some great points and I just wanted to show some support. Have a great weekend.

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glassman
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quote:
Originally posted by bullitt49:
I hate to sound smug but maybe everyone in the US doesn't deserve to own a home. Some people are just terrible risks. Most of these people wouldn't even get accepted for a car loan but they have these huge houses that they could never afford. On top of it, no income verification and they give 100% loans. Ridiculous. They should be the ones paying the most, not some poor *******s who kept their books in order and didn't get ahead of themselves. I agree most should pay some but to give exceptions is a load of crap. And don't even get me started on Chrysler and GM. Ford picked themselves up very nicely without the gov't and now they pay but Chrysler and GM don't. There's no way in the world that sounds fair.

i've always bought Fords, i used to dirt track them when i would be the only Ford at the track.

it didn't make me feel smug to see Ford succeed in this one tho...

i'm not suggesting that everyone should own a home, i just know for a fact that Fannie and Freddie are critical to maintain homeownership for the average American.

i absolutely agree that money lenders were lending money to people they shouldn't have.

BUT!

the people WITH the money are the ones that are supposed to be responsible with THEIR money.

that's my conservative view. the people with monay to lend are to blame if they lend money to people that we all know can't pay it back.

we had no choice but to save the economy from total collapse, but there should be penalties, harsh ones, or they will do this again.

how did America become Great after the W2? the GI Bill and the VA loan helped alot [Wink]

a strong middle class means a strong America.

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Don't envy the happiness of those who live in a fool's paradise.

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bullitt49
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I couldn't agree more Glass, good points.

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T e x
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just a reminder:

http://www.rollingstone.com/politics/story/28816321/inside_the_great_american_bu bble_machine/print

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Nashoba Holba Chepulechi
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The Bigfoot
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bullit, Ford was from the very beginning seen as the most viable of the three entities and was able to get independant financing by mortgaging out pretty much everything they owned. GM and especially Chrysler attempted to do the same but few to nobody bellied up to the barrel. So....do we give up on two thirds of our auto industry? To be completely honest I think Chrysler is doomed to a slow death, but the GM brand should be able to make a turn around if they really put their nose to the grindstone.

I don't like TARP. Never have. If you look back to when Bush first announced the program you will see me as one of the harshest lambasters here. Glass helped me connect the dots to see just how necessary it was but I still am outraged that our private sector giants bet the baby with the bath water and brought the whole system down. I was pro-regulation prior to the fall and everything I have seen since has only increased my belief that Capital One needs just as many eyes on their balance sheets as Capitol Hill needs on theirs.

PS...bullit, feel free to post whenever you like. SF could use some backup. Sometimes it gets to be 'beat up on the conservative' around here. I don't mind that when posters like Property Manager come in with arrogant posturing and a closed mind...but it gets hard to have a decent debate when everybody is saying the same thing. We need a few more like SF around here even if he is terribly wrong headed most the time. [Smile]

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jordanreed
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funny stuff

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jordan

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SeekingFreedom
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quote:
as far as i'm concerned? anybody who took TARP money should be forced to spinout most of their businesses and downsize to the point where if they fail? a bailout won't be needed.
So, let's say we agree on this point, which I think most here do. We're not just talking about punishing those that took TARP money, this is a huge hit to ANYONE that is Big, Rich, and in the Banking industry. This has nothing to do with recovering TARP money. This is everything to do with taking from the Rich to subsidize the Governments uncontrollable spending habits.

From the CNN version..

If the fee ends up raising more money than is needed to fully repay the bailout money, the additional funds would be used to help improve the U.S. fiscal position, which was worsened by the crisis, the senior administration official said.

A group representing 100 financial services companies wasted no time in blasting the proposal.

"Two-thirds of the TARP investment from banks has already been repaid with a large profit to the taxpayer," said Steve Bartlett, president of the Financial Roundtable. "This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs."

Obama bluntly said that banks should tap their bonus pools to pay the fee.

"I'd urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives," he said.


Once again, if you make alot of money, it is something to be ashamed of and ridiculed...bah!

They fully KNOW that this will raise more money than TARP spent. They KNOW that this is a way to TAKE money from private citizens\companies to fund their spending programs. And if they really think that this won't be passed on to consumers, I have some ocean front property in Arizona to sell them.

quote:
as for wanting to know why Fannie and Freddie should get special privileges? i know for a fact that without them? the idea of the average person in the US owning their own home will disappear.
I'm 100% with Bullit here, too many people got loans for homes they couldn't dream of affording all in the name of Equal Housing Oportunty. If you can't realistically afford the house, banks shouldn't have been pressured to give the loan to you. If banks made bad loans out of greed, LET THEM FAIL. Others will buy up the forclosed properties and economic darwinism should prevail to ensure that bad practices aren't encouraged or repeated.
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glassman
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Once again, if you make alot of money, it is something to be ashamed of and ridiculed...bah!

hardly. i'd say it's abuot HOW you make money. which is fair game.

They fully KNOW that this will raise more money than TARP spent. They KNOW that this is a way to TAKE money from private citizens\companies to fund their spending programs. And if they really think that this won't be passed on to consumers, I have some ocean front property in Arizona to sell them.

so what if it raises more than TARP spent.

i think a balanced budget is agood idea.

furthermore, how much other money has been lost by the government because of the crisis that required the TARP?

you think a 10% unemployment rate doesn't cost the Govt money? it damn sure does.

I'm 100% with Bullit here, too many people got loans for homes they couldn't dream of affording all in the name of Equal Housing Oportunty.

uh, prove it. i want exact figures on how many people got a home they cannot afford because of EHO.

you cannot because nobody knows how many people lost their homes due to unforeseen circumatances. in fact, the whole housing crisis was unforeseen by the whole banking community. Jamie Dimon admitted in Congress that he never ran stress tests based on dropping home prices.


If banks made bad loans out of greed, LET THEM FAIL.

there's this thing called the FDIC that we taxpayers would have to pay if we let them all fail.. and they would have.

how would you like the Chinese govt to be your landlord? that's what you are asking for. You don't know what the impact of real financial Darwinisn is. And don't think that because you have a good job you would have been safe if they had let the system fail. The damage would have driven down wages across the country because of the 25% plus unemployment rates.

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T e x
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I'm 100% with Bullit here, too many people got loans for homes they couldn't dream of affording all in the name of Equal Housing Oportunty.

uhhh, sorry to say, the reality is, too many people got bonuses for talking peeps into those loans.

It was the equivalent of credit-card companies making promises to college kids.

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SeekingFreedom
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I'm still looking through the sources on this article, but here is some food for thought for this part of the discussion, Glass.

http://isteve.bl ogspot.com/2009/01/we-finally-have-first-admittedly-small.html

Finally, Subprime Foreclosure Rates by Race

Two economists at the Federal Reserve Bank of Boston, Kristopher S. Gerardi and Paul S. Willen, have published an important paper, "Subprime Mortgages, Foreclosures, and Urban Neighborhoods," which provides a solid indication. For the state of Massachusetts, they laboriously matched up federal Home Mortgage Disclosure Act data (which includes ethnicity but not foreclosures) with county registrar office data, which can tell them if the property wound up in foreclosure but doesn't list ethnicity. By collating the two disparate databases, they wound up with foreclosure rates by race for Massachusetts.

Here's their abstract:

This paper analyzes the impact of the subprime crisis on urban neighborhoods in Massachusetts. The topic is explored using a dataset that matches race and income information from HMDA with property‐level, transaction data from Massachusetts registry of deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies.

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SeekingFreedom
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quote:
uhhh, sorry to say, the reality is, too many people got bonuses for talking peeps into those loans.

It was the equivalent of credit-card companies making promises to college kids.

Tex, if the banks were pressured into making these risky loans, the bonuses are irrelevant.

Big Gov says to banks, make these loans

Banks say to their loan officers, make these loans.

The officers make the loans, then they get rewarded for doing what they were told.

What is immoral or unethical about the bonuses?

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glassman
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if the banks were pressured into making these risky loans

here's the "thing". most of the first round of failures were subprime loans, but thay were also ARMS which reset. They reset because oil went so high and triggered inflation. Oil went so high because there was a minor shortage on the world market. I say minor because it was a manufactured shortage, not a real shortage. There were never any lines for oil or gasoline except to UNLOAD the oil off the ships to be refined.
In China they were building for the olympics and paid any price. These things all contributed to rising oil prices which in turn ran the inflation motor a little hotter than they wanted. The Fed raised rates, and hte ARMS reset much higher than anybody anticipated. We as INVESTORS NEED a certain number of subprime people in the market to make RE investing or any other investing profitable. No! we didn't wnat or need nearly as much as we had, we only only want a samll amount at any given time.

Bush did push sub prime lending hard. He needed it to stimulate the economy to pay for his wars while cutting taxes.

forget the old rule about cuttin' taxes and raisng revenues. It Is Not a Stand Alone rule. There has to be many other positive factors to increase revenues.

Economics is a very complicated art. It's all connected, and there are very few real fixes to make for economic growth increase. There's alot more ways to destroy it with the good intentions.

remeber that you can only cut taxes so many times before they are so low that you cannot cut them anymore to "stimulate growth". Then you still have the debt you incurred cutting them. Then somebody is stuck raising them. Thats the real political game here, GOP's cut taxes to look good, the Dems come in and raise them to BALANCE the budget and look bad. Somebody has to pay the damn bill. GOP's actually have policy of deficit spending, just look at any chart.

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SeekingFreedom
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Glass, I'm not denying nor defending the Borrow and Spend practices of the Republicans. I'm not even saying that it's in any way better than the Tax and Spend policies of the Democrats. What I'm saying is that they ALL need to stop spending more than they bring in. Force a reduction in spending to less than the projected tax revenue minus (X).

Then, and ONLY THEN, talk about raising taxes to pay down the National Debt. Until they(whoever is in power) can show me\us that they are serious about debt reduction, I am against any Tax\Fee\Whatever Euphamism that is in vogue that claims to be for paying off our bonds.

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CashCowMoo
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Up next: Per toilet flush taxes"


"The Obama administration in an effort to save the planet from global warming disaster is imposing MORE taxes, this time on how many flushes you do per day"

White House:

"I think this is a great idea to give the money back to the people by the government collecting it through taxes...just like health care and banks because big water is getting too big and we need to curb our water consumption blah blah blah"

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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glassman
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OK, we agree on that point, we should halt spending increases and go back to the 2007 levels of deficits this year, (but we won't)

then we should go to a balanced budget ASAP and stay there.

however, this will be a "drag" on the economy because deficit spending is actually an economic stimulus. it's the same as not charging taxes, we borrow the money instead of making people pay the tax, the loans are the "safest" investemtns (historically) for people that want safe investments, and they will still want that.

the banks? do you realise that they lend money they don't even have?

take the margin in your borkerage account, the borkers don't have it. They are loaning people money that they don't have. The banks are even worse.

Fannie and Freddie? They have a captial/asset ratio of 3%

To be adequately capitalized under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 capital ratio of at least 4%, a combined Tier 1 and Tier 2 capital ratio of at least 8%, and a leverage ratio of at least 4%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. To be well-capitalized under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 capital ratio of at least 6%, a combined Tier 1 and Tier 2 capital ratio of at least 10%, and a leverage ratio of at least 5%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. These capital ratios are reported quarterly on the Call Report or Thrift Financial Report. Although Tier 1 capital has traditionally been emphasized, in the Late-2000s recession regulators and investors began to focus on tangible common equity, which is different from Tier 1 capital in that it excludes preferred equity

http://en.wikipedia.org/wiki/Capital_requirement

leverage is used everywhere, it's important for a healthy economy, but too much is, well you have seen what too much does (again and again)

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Posts: 36378 | From: USA | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
The Bigfoot
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I tend to think the outrage regarding this fee is overrated.

Why do we have a high tax on liquor? Because it is a good that society wants but which adds risk and expense into the community.

Why do we have a high tax on cigarettes? It is a desired good that adds risk and expense to the community.

This fee that Obama wants instituted is on derivatives and only derivatives and only if it is a large institution that can have a significant effect on the community economy. Derivatives are a poorly regulated financial instrument that have been proven to add risk and expense to the community. If people want them then fine....but lets add cost to the instrument so that there is redeeming value to the added risk.

Seems logical to me. In fact I would say get rid of the qualifiers and exemptions and add the fee to any derivative transaction.

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No longer eligible for government service due to lack of tax issues.

Posts: 5178 | From: Up North | Registered: Dec 2005  |  IP: Logged | Report this post to a Moderator
   

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