Reply #1: I am no expert [View All]

[Mojorabbit]

but I have been glued to bloomberg for the past week and the impression I get is if the banks will not float overnight loans to each other because they don't know who is solvent or not then everything falls apart.

For example if you get paid by your employer with a check from Chase bank and take it to your bank it will be cashed and they will get the money from Chase at the end of the day to settle accounts/books. If no loans are floated between banks to facilitate these transactions then you would only be able to cash your check at the bank it was written at, ie Chase. Credit cards work the same way and atms. I can see where this would freeze everything up.

It seems a big part of what needs to be done is to find out which banks are really insolvent instead of making insolvent banks solvent with taxpayer money. I think a lot of what is happening is psychological re the market and there is no confidence. I really don't want my tax money used to improve market confidence.

I am sure my understanding is to simplistic and I have no idea what will happen if it is not passed.