I agree with you one hundred percent. However, many of the big boys that have gone under were over leveraged something like 80:1, one of the outfits was estimated to be 120:1.

In pro-positive corporate lingo, this is called financial innovation, and anyone who advocated a cap of 10:1 was seen as a stodgy old ninny.

Jokes on us!

CC companies still make money even if you dont pay intrest. It cost money to run your CC though the system to charge it

Yes, once the money is out from under the mattress we're all at risk.

True, the merchants are still charged.

It's for investors and banks to decide what an appropriate level of gearing is really - if a company has massive levels of debts, then investors are unlikely to get any money back on their shares (there's a good chance the company could go under, in which case they get nothing, or the company just performs ok, and has all of it's profits sucked up by the interest on the debt). Meanwhile if the company looks to obtain more debt from banks, then the banks have to guage the chances of ever getting that money back if the company is already swimming in debt, and so likely won't lend (or will demand very high rates). As a result of this a company will be restricted in what sort of levels of debt it can afford to have. If those banks or investors make mistakes and invest in/loan to a company with too much debt, and that company fails, they should then be left to pay for their mistakes, meaning either they adapt and learn from their practices, or they fail and a competitor who will be a bit more prudent will take their place.

Unfortunately massive bailouts of banks/investors that make the above mistake don't exactly help this process!

 

As to the 0% CC issue, yes the company will likely be losing money if you never go overdrawn. However they offer the policy because they know that many people will go over, and will end up hitting the limit imposed that causes them to go from 0% to a really high %, and that's where the company makes it's money. If they could they probably would like to be able to advertise a 'get a 0% rate - but only if it doesn't apply to you' policy, but fortunately that's just not feasible meaning if you're careful with your spending and keep track of your credit card then you can let those foolish with their spending/money effectively pay for your credit card. Although I'm generally careful with my money (only gone overdrawn a couple of times, and then it was typically for a day or two at most) I still wouldn't want to get a 0% credit card though, just for the fear that I did forget to pay it off by the relevant date and got hit by the heavier penalties. I'm happy not using a credit card at all, and instead making sure I've got the money in my bank account to spend directly at the relevant time.

well..... we now know to where that leads ...

"business/investors know best" .... is a huge fallacy that is at the core of the current fanancial crises ... not just crisis.

First they applied that fallacy and let them swallow other comapnies .... till they got big ... they repeated it again and again till they got to be "too big to allow to fail" ...

in order for the system to function properly and actually let the market be the self-correction mechanism ... there must be a reasonable set of regulations that prevents the greed and deceit from taking over the system as it did during the past 8 yrs... and now we see the results.

The sad fact is that those regualtions were put in place after the 1930's system collapse ... somehow in the last 8 yrs they managed to either dismantle whatever was left of it or just ignore the violations ..... the mentality of "the government IS the problem NOT the soultion" reached its pinnackle when they allowed all those institutions and companies to merge disregarding all market monopoly rules and the risk it posed for the country ...

imagine that we had 10 automakers not 3 ... or we had 20 large banks not just 3 or 4 mega banks ...

we could have easily, as you said, let those who made mistakes suffer their fate ... and fail.

but when their fate is integrally tied to the fate of the nation's fanancial system .... is it possible to allow them to fail? ...

the peopel who championed that "the government IS the problem NOT the soultion" policy are now the SAME people who are coming to THAT same Gov. to bail them out .... and who pays?

WE ...... now and in the foreseeable future ....

look at Citi bank..... two weeks ago it was trying to buy another huge bank ..... now it needed bailout? ... and they got it of course ... because it is too big to allow to fail ....

even crysler ... they got bailed out before ... then they merged with Mercedes Benz .. then they got out of it ... all under the eyes and oversight of sleeping regulators !!!! now they need a bailout again.... great .... they never learned .... but they are too big to allow to fail !!!!!! they fought fuel efficiency standards here by 2020 even though they are a min for Japan NOW... no wonder that they are on the brink while ALL foreign car makers are in good shape and making money ...

well ... they are too big to allow to fail.... that is the only sad true fact in this whole fallacy .... the world now is not the world of the 1930's .. if they fail .. we will be finished as a financial power ... and you cant be a militry power without a finacial power ....

we are in debt to every nation on earth ... we import almost every single thing from other nation ....

we only hold their money here .. in those banks and investment companies ...

if those fail .... all other nations have to do ... to actually take over this country is to call the loans we got from them ....

we can print money to pay them .. then the Dollar collaps totally .. then they will stop selling us in dollars ... and where would we get that Euros or Yens ? ...

got the picture?

please correct me if i am wrong ... because i am hoping that i am !!!!

Yeah, Wachovia, too, only six months ago bought out World Savings. Like someone said above the jokes on us.

It's no fallacy. Let people spend their own money as they want. If they make foolish investments they will pay the cost. Greed is the easy target, and is the wrong one, since it is greed you can rely on to make things better - if I'm greedy, I'm not going to want to throw away my money on some reckless scheme. As soon as you start imposing regulations saying 'well I know you want to invest in this company but they're too risky, so you can't spend your money on what you want to' you move into very dangerous territory. Let people spend their money as they want, and just make sure you don't bail them out each time they make a mistake.

No fallacy????!!!!

Read what you said again ... and you will see it clearly .... if you open your eyes that is !!!!!!

your statement is full of "my money" and "their money" !!!!

is that what we really are talking about? ..... were all those trillions of dollars of losses "your money" or "their money" ????

they didnt lose any thing of "their money" .... actually all those losses were added to "their money" ..... FROM OTHER PEOPLE's MONEY  !!!!

what kind of thinking is this ????!!!!

wake up people !!!!! we are talking about "my money" and "your money" and millions of of other people like us who gave them "our money" to invest ... assuming .. no not assuming, we were told that regulations were there and there were Gov agency making sure that the rules are followed and they were for years ....

but the overseers closed their eyes and used the same logic you saying should continue .... and see where we are now ... our money is gone ... and added to "their money" .... that was their objectives and they achieved it ... and we are left empty handed .....

they designed the scam ... and perpetuated the fallacy you still believe in and the foolish majority believed it too ...

if it is your money ... sure enough ... go and do whatever in hell you want to do with it ....

but if it is the money of not just a group of investors or some rich people out there but the NATION's total and full treasure box ... you still say they can and should do whatever they want with it with no oversight from the NATION's Gov?????

we were never told that .... we were always told that there are rules to insure the reasonable safety of our money ...

no one is talking about stock markets ups and downs here ...we are talking about major banks and investment companies giving loans with no hope of repayment and trading in thin air with no value whatsoever ... all they wanted is to get their commission upfront .. what happens to the money itself was not any of their interest .... it was not "their money" .... it was our money ....

the regulations are there to prevent that .... but the regulators believed that fallacy ....

the crook-in-chief, Greenspan, admitted that already .. and you still believe it????????

how many times you have to get hit on the head in order to realize that the guy hitting you doesnt really like you???????

they rub you and the rest of us blind and you still say ... yes let them do it??????

may be you are one of them .... in that case .. i can understand your position. if so ... congratulations on your smart scheme ... it fooled and still fooling a lot of fools.

I saw a wamu commercail on tv last night and almost busted a nut laughing so hard...

I'm not normally too fussy over grammer etc., but could you re-read what you said and possibly even edit it? Having to read 100 ? and !'s really hurts my eyes.

 

Their money.

We're talking about the investors money - the key being the final word in the section I quoted on you. People who chose to invest in a company gave their money to that company to do with as they wished. Also most normal people like 'me and you' will be protected by various guarantees on savers money meaning people investing in a bank which they think is risk free should get something that is practically risk free. Of course it shouldn't be entirely risk free, since you're getting a better return than if you lend to (save with) the government, but ultimately you are choosing where to invest. Don't blame the investors for then investing that money, the only people to really blame in such a situation (assuming the company didn't break any laws relevant to how they invest) would be yourself (and whoever told you a slightly risky investment was completely risk free), and of course some blame on the investors for investing your money poorly (but not for investing it in the first place).

Because the politicians (and presumably a significant number of people) decided that it would be too painful to see institutions that had done a poor job fail, and so they wrote a near-blank cheque to those institutions, and created a real mess of incentives. Now a company knows that even if they fail they'll be ok because they can rely on a nice big bail out. Not only that, but you're now creating incentives for companies to form monopolies so they become 'too big to fail' and get a bail out, and monopolies reduce competition, increasing prices and decreasing choice - basically a lose-lose-lose situation for people.

You mean you have just one bank in the US which has all of the population+government's savings? Last I checked it was spread out among at least a few banks. Anyway yes, you shouldn't give them oversight, since you shouldn't be bailing them out in the first place. If savers choose to invest in anyone, they do so at their own risk. The government should make sure that any information supplied is accurate to avoid misleading the public, but that's about as far as it should go.

Reasonable safety - these are far from 'reasonable' circumstances. Regardless, a hefty chunk is insured by the government last I checked.

Which is why they should be allowed to fail as a punishment. Otherwise more companies will just do the same.

It was, because if they handle investors money poorly, they won't get any further investment, and will lose their current investment, meaning they lose business, likely go bankrupt, the workers lose their jobs, etc. etc....unless they know they can count on a bailout!

They didn't rub or rob anyone - people CHOSE to invest in them. You should live with the consequences of your choices, not get shielded from them because they might not have been the best ones you could've made. How else are you to learn how to wisely invest your money?

I saw a wamu commercail on tv last night and almost busted a nut laughing so hard

Yeah, me too--both nuts!

I think you and TA are on differnt pages. It's true stock and corporate bond investors are at risk and not subject to regulation, but the SEC ideally should question rambunctious managers that jeopardize a viable company[AIG, Enron] and certainly investigate fraudulent practices. The banking industry, however, is supposed to be intensely scrutinized to ensure a rational flow of credit that precludes a "run-on" because the government insures the depositors. The current trouble is that there is no longer a differentiation between banks and investment banks--both should be watched closely even though the latter does not insure their stockholders.. 

 

a sad fact is though people will once again put money there and if it fails again they will wonder what happend.  Me I bank at a small bank that has a total of 10 branches... and most are in stores with a few B&M offices here and there... I never did trust big banks.... and what has happend sure as heck didnt put any confidence in them ... that and Ive had my account with them before i was even born ( thanks mom and dad lol )

I intend to move from Wachovia-Wells Fargo to SunTrust run by Buffet.

DO you know what Buffet's shares are selling for?

Let me give you a little hint (having dealt with Suntrust and know some who work there).

Got 10 million?  NO?  Then they will piss on you.

Good luck!  Buffet likes them because they think like he does.  Piss on the 80% of depositors that have only 20% of the deposits.  Kiss ass to the other 20%.