Financial topics

[Higgenbotham]

Banks are primarily in the business of making private sector loans.

No.

Banks are primarily in the business of making profits for the benefit of the people running them, and, except when the people running them are thieves, for the benefit of the shareholders. Just like any other private business.

Most of the profits that banks make come from making private sector loans. All businesses try to make profits, but that says nothing about the particular business they are primarily in.

[aedens]

http://www.rotten.com/library/crime/org ... urder-inc/

Back in the Day it was up close and personal. Now we just drone em.

[Reality Check]

Banks are primarily in the business of making private sector loans.

No.

Banks are primarily in the business of making profits for the benefit of the people running them, and, except when the people running them are thieves, for the benefit of the shareholders. Just like any other private business.

Most of the profits that banks make come from making private sector loans. All businesses try to make profits, but that says nothing about the particular business they are primarily in.

Again, Wrong.

Where bank profits ( and losses ) come from has profoundly changed since 1990, and even more profoundly changed since 2000.

Take a look at Mortgage Loan Backed Securities business, Credit Card Loan Backed Securities business, Auto Loan Backed Securities business and speculative trading in Credit Debt Swaps and other Financial Derivatives.

Stock brokerage profits from price differences in ask price and sell price on internally settled trades are another new business not allowed prior to Banks being allowed to also become stock brokers.

Both the massive increases in the size of the Financial Sector of the U.S. economy, and the crisis of 2007-20??, resulted from Gargantuan Profits and the even more massive losses generated in the period of 1990 to date, by these new forms of Business the banks are conducting.

To suggest that a bank's options for leveraging it's portion of a windfall of 1.4 Trillion of excess reserves in their Federal Reserve Accounts are restricted to only the type of Fractional Reserve Loan business that was allowed in 1960 is preposterous.

[Reality Check]

...

Banks are primarily in the business of making private sector loans.

No.

Banks are primarily in the business of making profits for the benefit of the people running them, and, except when the people running them are thieves, for the benefit of the shareholders. Just like any other private business.

In the 1960s the only way banks with Federal Insured Deposits were allowed to legally make substantial profits, was by making fractional reserve bank loans. Laws put in place during the Great Depression, after bank failures, and after the federally mandated bank holiday, made it illegal for banks to act as stock brokers or make speculative investments, or act as insurance companies, or do any transactions with related parties, or conduct banking operations across state lines, and doing almost any kind of business other than fractional reserve bank loans was prohibited by federal law to avoid the kind of conflicts of interests bankers had in the late 1920s and early 1930s.

It is interesting to note that business across state lines limitations were to prevent banks with federally insured deposits becoming "too big to fail" and also to allow state regulators to be able to insure financial entities within their borders were following the state's security brokerage and insurance brokerage laws, and brokers were not able to avoid state regulation by doing business with out of state banks.

That has changed. Most of the restrictive federal laws were systematically repealed in the 1980s, 1990s and 2000s.

Banks were even exempted from state regulation of their insurance activities by federal law.

Today's banks, especially the "too big to fail" bank holding companies, have federally insured deposits, and may legally conduct all kind's of different types of business with both related, and unrelated parties. These bank holding companies do indeed conduct a mix of many different types of business, even with related parties, in the manner the bank holding company views as most profitable for the bank holding company.


The point is this is not 1960. The banking laws have no resemblance at all to what they were in 1960 or 1970 or even 1980.

These are not your grandfather's Banks. These Banks are not run by your Grandfather's Banker.

[Higgenbotham]

No.

Banks are primarily in the business of making profits for the benefit of the people running them, and, except when the people running them are thieves, for the benefit of the shareholders. Just like any other private business.

Most of the profits that banks make come from making private sector loans. All businesses try to make profits, but that says nothing about the particular business they are primarily in.

Again, Wrong.

As one example of a large diversified US bank, Wells Fargo gets 50% of its income from interest. But that's just one part of the income that comes from making private sector loans. There is also fee income and other income associated with the bank's primary business of making private sector loans.

https://www.wellsfargo.com/invest_relat ... nt_profile

Small and medium sized banks get an even larger percentage of income from private sector loans.

[Higgenbotham]

Banks are primarily in the business of making private sector loans.

No.

http://www.google.com/search?hl=en&outp ... s%22&btnK=

From the first few hits:

Banks are primarily in the business of lending money...
Banks are primarily in the business of loaning money...
Banks are primarily in the business of lending money...
Banks are primarily in the business of lending money...
Remember that the banks are primarily in the business to keep deposits and make loans.
Banks are primarily in the business of borrowing money, mainly through deposits, and lending that money.

Last one is from the St Louis Fed.
http://www.stlouisfed.org/col/director/ ... onents.htm

Banks are primarily in the business of borrowing money, mainly through deposits, and lending that money.

[Trevor]

Which is why you can get away with missing mortgage payments. There are millions of people 6 months behind that haven't lost their homes, because the bank can't do anything with them. Home sales are still low and if they foreclose, it becomes little more than a useless lot.

[Marc]

Which is why you can get away with missing mortgage payments. There are millions of people 6 months behind that haven't lost their homes, because the bank can't do anything with them. Home sales are still low and if they foreclose, it becomes little more than a useless lot.

Indeed, many times that is true. Thanks for the perspective. For other homeowners who are/were not so blessed, missing mortgage payments can unfortunately lead to foreclosure relatively rapidly, especially for those who reside in non-judicial-foreclosure states. What might make foreclosure attractive to the bank is the promise of private mortgage insurance or insurance from the GSE's (Fannie Mae, Freddie Mac) kicking in after a Trustee Sale, along with potential tax write-offs. This was no doubt was a key factor in banks giving out mortgage loans like confetti from late 2006 to late 2007 (at least for those loans they chose not to securitize during that time frame).

Combed in with today's World View story about Barclays, it is obvious that the recent late Third Turning environment crated conditions in which the banks would (and still will) do anything to make beaucoup bucks...maybe home-pollution loans somehow woven in with mortgage-backed securities will be next.... —Regards/Peace, Marc

[Reality Check]

.....

Banks are primarily in the business of lending money...
Banks are primarily in the business of loaning money...
Banks are primarily in the business of lending money...
Banks are primarily in the business of lending money...

No.

Regardless of how many times your repeat it,

Banks are primarily in the business of making profits for the benefit of the people running them, and, except when the people running them are thieves, for the benefit of the shareholders. Just like any other private business.

In the 1960s the only way banks with Federal Insured Deposits were allowed to legally make substantial profits, was by making fractional reserve bank loans. Laws put in place during the Great Depression, after bank failures, and after the federally mandated bank holiday, made it illegal for banks to act as stock brokers or make speculative investments, or act as insurance companies, or do any transactions with related parties, or conduct banking operations across state lines, and doing almost any kind of business other than fractional reserve bank loans was prohibited by federal law to avoid the kind of conflicts of interests bankers had in the late 1920s and early 1930s.

It is interesting to note that business across state lines limitations were to prevent banks with federally insured deposits becoming "too big to fail" and also to allow state regulators to be able to insure financial entities within their borders were following the state's security brokerage and insurance brokerage laws, and brokers were not able to avoid state regulation by doing business with out of state banks.

That has changed. Most of the restrictive federal laws were systematically repealed in the 1980s, 1990s and 2000s.

Banks were even exempted from state regulation of their insurance activities by federal law.

Today's banks, especially the "too big to fail" bank holding companies, have federally insured deposits, and may legally conduct all kind's of different types of business with both related, and unrelated parties. These bank holding companies do indeed conduct a mix of many different types of business, even with related parties, in the manner the bank holding company views as most profitable for the bank holding company.


The point is this is not 1960. The banking laws have no resemblance at all to what they were in 1960 or 1970 or even 1980.

These are not your grandfather's Banks. These Banks are not run by your Grandfather's Banker.

[Reality Check]

Which is why you can get away with missing mortgage payments. There are millions of people 6 months behind that haven't lost their homes, because the bank can't do anything with them. Home sales are still low and if they foreclose, it becomes little more than a useless lot.

Indeed, many times that is true. Thanks for the perspective. For other homeowners who are/were not so blessed, missing mortgage payments can unfortunately lead to foreclosure relatively rapidly, especially for those who reside in non-judicial-foreclosure states. What might make foreclosure attractive to the bank is the promise of private mortgage insurance or insurance from the GSE's (Fannie Mae, Freddie Mac) kicking in after a Trustee Sale, along with potential tax write-offs. This was no doubt was a key factor in banks giving out mortgage loans like confetti from late 2006 to late 2007 (at least for those loans they chose not to securitize during that time frame).

Combed in with today's World View story about Barclays, it is obvious that the recent late Third Turning environment crated conditions in which the banks would (and still will) do anything to make beaucoup bucks...maybe home-pollution loans somehow woven in with mortgage-backed securities will be next.... —Regards/Peace, Marc

It would be interesting to see just which types of properties, with which type of loan insurance, are being foreclosed on promptly, and which are being left to stagnate, and thus kept off the local real estate market.

My suspicion is that the answer would be counter intuitive in many cases.

It very well maybe that those with Federal Mortgage Insurance or Federal Agency MBS insurance, are not foreclosed upon promptly to avoid flooding the local housing market and forcing down housing prices.

Instead houses without Federal Insurance would be foreclosed on immediately, or as soon as allowed by state laws, so that the property can be refinanced before foreclosure is complete, or resold after foreclosure, using a new Federally guaranteed loan. The goal being to transition as many mortgages as possible from private label mortgage insurance ( or no mortgage insurance ) , to federally insured mortgages. before the local housing prices collapse under the weight of the larger numbers of homes in default which already have federally insured mortgages.

As I said, it is counter intuitive, and probably varies depending on which banking institution is making the decision on foreclosure timing and what their financial interests are.