USA was 3 hrs away from Economic, Political Collapse... last Sept.

POSTED BY: pizmobeach
UPDATED: Tuesday, August 4, 2026 11:44
VIEWED: 42658
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WULFENSTAR

Thursday, February 12, 2009 8:59 PM

and Ron Paul was predicting this from WAAAAAAAYYY back.

In fact, when I talked to him he let me know that. (heheh, sorry to drop names)

HERO

Thursday, February 12, 2009 9:05 PM

Quote:
Originally posted by rue:
The entire banking system worldwide is precarious, and it's not a matter of one bank, or two - but of them all going down, like dominos.

You can't compare US banks to foriegn banks. Foriegn banks are much more centrally controlled in almost every other nation. That means that the failure of one is very often the failure of all.

US Banks have never had that level of control. They operate more or less independently. This means that if, for example, 5th 3rd Bank of Ohio collapsed, Keybank would be unaffected...in fact Keybank would be among the many other banks looking to buy 5th 3rd. Which is exactly what happened when CitiBank bought a chain of closed banks in the Columbus area and National City Bank did its merger.

Its the same diversification of economic assets that allows our market to fall by 30% while others fall 80-90% in the same period.

Unfortunately it is also the very thing that the Obama administration is seeking to undo with their banking policy.

H

HERO

Thursday, February 12, 2009 9:10 PM

Quote:
Originally posted by rue:
For those (Hero) who still think the problem is a merely few failed US banks:

It may be bigger, but if so there is massive accounting fraud.

We're giving a trillion dollars to prop up banks. Banks have NOT reported a trillion dollar missing from their bottom line. If they in fact need a trillion dollars and did not report it as required by law, that is illegal.

Also I visited that website. Not very helpful. If you want to know how many banks have failed...visit the FDIC.

H

RUE

Thursday, February 12, 2009 9:14 PM

But if CitiBank or Bank of America go - and they are both insolvent - then the entire US system does collapse. Additionally, US banks and foreign banks are tied to each other through massive investments. How ? Those foreign banks buy our bonds to generate money for our vaults.

Or, if that doesn't do it for you, try applying a little logic to the immediate reality. If it wasn't the case then US banking troubles wouldn't have spread overseas so quickly - it would have taken a US economic collapse to perturb those banks through trade collapse and then economic disruption of those foreign economies.

***************************************************************

Silence is consent.

RUE

Thursday, February 12, 2009 9:18 PM

No fraud Hero - banks only need a few percent 'capitalization' - actual money - to loan out 100% of the balance. The problem, as you may need some reminding, is when many people go to pull their money out. And which the banks - by law - are not required to have on hand. That is how banks fail.

***************************************************************

Silence is consent.

CITIZEN

Thursday, February 12, 2009 9:27 PM

Quote:
Originally posted by rue:
No fraud Hero - banks only need a few percent 'capitalization' - actual money - to loan out 100% of the balance. The problem, as you may need some reminding, is when many people go to pull their money out. And which the banks - by law - are not required to have on hand. That is how banks fail.

It's called leverage. Most banks work at a leverage of 30 times their worth. I believe Fannie Mae and Freddie Mac ran at around 70 times.

More insane ramblings by the people who brought you beeeer milkshakes!
No one can see their reflection in running water. It is only in still water that we can see.

FREMDFIRMA

Thursday, February 12, 2009 10:12 PM

I refer to that as the parking garage model.

Like someone has a parking garage and oversells it cause won't everyone be parkin there at the same time, but instead of being reasonable about it, oversells it hard, neglects to keep it up, and skims a little off the profit to set up an automated phone runaround and retain a lawyer to stifle complaints as the money rolls in and he funnels it into some dominican tax shelter or holding company...

And then when it finally looks like it's gonna come apart, sells it off to a bigger corp and runs like hell for a country where it's too much hassle to extradite him from.

You know, like America Online did - and got away with, initially setting the standard for companies like Tyco and Enron to follow.

If you knew half of what that company inspired by example, you'd want to see Steve Case at the end of a rope as bad as I do.

-Frem

It cannot be said enough, those who do not learn from history, are doomed to endlessly repeat it

JONGSSTRAW

Friday, February 13, 2009 4:56 PM

Quote:
Originally posted by rue:
banks only need a few percent 'capitalization' - actual money - to loan out 100% of the balance. The problem, as you may need some reminding, is when many people go to pull their money out. And which the banks - by law - are not required to have on hand. That is how banks fail.

That is a built-in guaranteed recipe for failure and chaos if ever I heard one. It's really nothing more than Madoff's ponzi scheme, except with a Federal Seal of Approval, and free toasters. A banking system based on the premise that everyone won't want to take their money out at the same time sounds utterly frightening to me. And now with banks paying a whopping 2% on CDs, they'll never get my money again.

Banks, Insurance Co's, Social Security, etc. etc. are all based on the same flawed principles, and when we need them the most, in a crisis, they fail. I guess the curriculum at Wharton & others taught these fine, upstanding financial leaders, with their meticulous suits and perfect executive hair to:

1. Rake in all the cash you can, anyway you can.
2. Pay out nothing, except the bare minimum needed to perpetuate the fraud.
3. When the castle starts to crumble, steal all of it for yourself, and then ask Bush & Obama for all that's been stolen back, and more.
4. Then buy several multi-million dollar homes as insurance against possible future prosecutorial financial ruin, and then top it off with a rousing celebration in the Bahamas over how filthy stinkin' rich you are, while laughing your ass off over all the millions of people you f'kd.

SIGNYM

Friday, February 13, 2009 5:20 PM

Quote:
I believe Fannie Mae and Freddie Mac ran at around 70 times.

Um, not really. They were better capitalized than banks because they were operating under a consent decree just about the time the subprime market REALLY took off. I can't find the exact figure, but I know it was better than 30:1. I'll try to post it later. BTW, US bank captalization requirements were set by USA policy at about 20:1. The Euro banks chose to follow Basel II capitalization requirements, which allowed them to leverage at 30:1.

But if you really want to gain some insight, you should ask yourself (1) What would happen if the banks only loaned the money they actually had on -hand? (instant collapse) and (2) What is it about the economic system that REQUIRES so much lending. (Hint: Its' all about the money supply.)

Jongstraw: I'm with ya there, man!

---------------------------------
It's the end of the world as we know it, and I feel fine.

CITIZEN

Friday, February 13, 2009 5:44 PM

Quote:
Originally posted by SignyM:
Um, not really. They were better capitalized than banks because they were operating under a consent decree just about the time the subprime market REALLY took off. I can't find the exact figure, but I know it was better than 30:1.

I'll have to look for the figures for Fannie, but Freddies clearly indicate otherwise.

Freddie Mac's figures:
http://www.freddiemac.com/investors/er/pdf/financial-statements_080608
.pdf

Total Liabilities = $865,964 Million
Stock Holders Equity = $12,948 Million

865,964 / 12,948 = ~66.8.

Quote:
I'll try to post it later. BTW, US bank captalization requirements were set by USA policy at about 20:1. The Euro banks chose to follow Basel II capitalization requirements, which allowed them to leverage at 30:1.

Average American Banks leverage at the end of 2008 was 25:1. Some were higher, some were lower.

EDIT:
Found some figures for Fannie Mae. They're harder to sift through, and I really can't be bothered to read through the whole thing, but these seem to be what we're looking for:

I used the "estimated fair value", page 59:
http://www.fanniemae.com/ir/pdf/earnings/2008/q22008.pdf

Total Liabilities: $892,378 Million
Shareholder Equity: $12,452 Million

892,378 / 12,452 = 71.6

The GAAP Carrying values from the same sheet paint a different picture though:
Total Liabilities: $885,918 Million
Shareholder Equity: $41,226 Million

885,918 / 41,226 = 21.4

More insane ramblings by the people who brought you beeeer milkshakes!
No one can see their reflection in running water. It is only in still water that we can see.

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