Assuming most of us still have jobs, will we actually be able to get paid? "Banks hoarding money."

[bushmeister0]

Any experts out there who can explain this? Seems kind of worrying.

NYT:

" . . . The anxiety gripping the credit markets refused to abate. Banks continued to hoard cash, clogging crucial financial arteries that keep money flowing to businesses and consumers for car loans, credit cards and payroll payments . . .

The Libor rate, a benchmark gauge that measures how much banks are charging one another for overnight loans, jumped the most in one day in nearly a decade. . .

The moves in the credit market, if sustained over time, could have ripple effects on a wide swath of the economy. Many businesses depend on short-term loans to finance their day-to-day operations, like utilities and payroll."

http://www.nytimes.com/2008/09/26/business/26markets.html?_r=1&hp&oref=slogin

Banks don't trust each other enough to loan money, like from you boss' bank to the one you cash your paycheck at. So the Fed is doing it for them. How long can this last?

The WaPo:

"(Peter R. Orszag, director of the Congressional Budget Office) said that the Treasury was acting as a go-between in short-term lending between banks. Instead of Bank A lending directly to Bank B, as is customary, Bank A no longer had confidence that Bank B could repay the loan.

So Bank A would give the money to the Treasury, which issued a security that was put into the Federal Reserve, which then issued the cash to Bank B.

If the government is forced to intermediate such ordinary transactions, commerce slows, credit confidence remains low, and operational strain is placed on the Treasury and the Fed."

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092402799_2.html?hpid=topnews&sid=ST2008092403541&s_pos=

Strain on the Treasury? That's an understatement. $700 bil. for Wall Street, $412 Bil. for GM, $10 Bil. a week for Iraq, and then there's the FDIC, which only has $45.2 Bil. to cover our bank deposits.

But, not to worry.

Quote from Sep 16 AP article:

"Treasury Secretary Henry Paulson said Monday that the country's commercial banking system 'is safe and sound' and that 'the American people can be very, very confident about their accounts in our banking system.' FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital."

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

Some how Paulson's reassurances don't reassure.

How long before your boss starts offering services in kind in lieu of cash? Personally, I'm fine with it, I work at a bar!

[sinkingfeeling]

1. So why doesn't the government just take over Banks A & B and stop the nonsense?

[bushmeister0]

2. Banks A and B are all the banks, from what I understand.

[Poll_Blind]

3. Because when the government takes over the banks the nonsense gets MUCH worse.

You don't want the government in the banking business. Really, with a Federal Debt of 9.5 Trillian dollars, you don't want them in the banking business. They already don't publish any of the M2/M3 numbers- for the last few years it has actually been a (no kidding) "National Secret" how many dollars are in circulation.

Think about that.

It's not uncommon in a situation like this to think- "Man, if only the government would get involved this would get better." In this case, it would only lead to a more serious lack of confidence in the banks the government bought up.

Let the institutions which made these incredibly stupid and greedy moves (after all, they were lending to people they knew, statistically, had a very low chance of actually paying them back) take the hit for their mistakes.

Let the financial organizations which made these unsound moves fail.

Let the financial organizations which used prudence and sound business practices, and are not affected by this, continue.

There is no reason to sink somewhere around a Trillian dollars into unsound institutions. After all, this is an investment by the American people and we should be no different in expecting a return on our money.

PB

[bushmeister0]

4. The world turned upside down.

Now the Dems sound like conservatives and the conservatives sound like tax and spend liberals.

[Poll_Blind]

5. Nah, I think the government should be involved in healthcare, for instance.

However, with this record for the last 8 or so years of absolute A) Financial incompetence by the Executive Branch and B) Near-total spinelessness from the Legislative branch and at best the amount of money involved (700+ Billion) and the incompetent hands distributing it make it a terribly bad investment.

PB

[sinkingfeeling]

6. Called a 'bank holiday' and worked well in 1933 for FDR. I guess you think it's better to let the

Treasury run a hedge fund?

[galileoreloaded]

7. Better get anything of value out of your safe depoit box first...Executive O. 6106...n/t