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DesideriScuri -> RE: New Zealand is thinking of going all Cyprus (3/20/2013 5:18:53 AM)
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ORIGINAL: vincentML
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All deposits over $250k would have been lost. And, the banks would have had a shit of a time getting people to believe in banks again, most likely leading to significantly lower risk taking.
Firstly, let's understand that over 50% of working people in this country hardly have $25K in savings. So, mostly it is a moot point.
I understand that. And, it could be "sold" as a safe method by Big Gov since the majority will not be hit outside of possible couple days of no access to their funds.
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Secondly, people with significant funds do not often keep more than $250k in one bank. If they have millions their money is probably in the Caymen Islands.
If they're smart, they have everything under $250k, so this may only hit the stupid and rich (a fool and his money thing, eh?).
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Here is a list of banks that failed in the FDIC system since 2000. It is an eye opener: FDIC SOURCE No deposits were lost, no accounts were seized. No deposits have been lost since 1934.
You mean the FDIC did it's job? Good. Did the FDIC require any taxpayer money to do so?
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The reason why the big banks HAD to be saved in 2008 was because they had loads of falsely valued mortgage backed securities on their account books while homeowners were defaulting on their mortgages. The bundled securities in turn were tied into bets made by credit default swaps. The whole thing was a house of cards. Credit availability was suddenly frozen, business could not borrow, and even money market funds were in danger of being devalued. The Fed stepped in and transferred the toxic MBS off the banks' books and pretty much saved our economy.
I can't really give you numbers but I suspect the private property being considered for seizure in this thread would amount to little more than spit in the ocean because the value of 401Ks would likely plunge and be nearly worthless during the crisis. I submit that all this fear of seizing private accounts is probably a fruitless exercise because they would be worthless. Think about it. Do you really think your money would have any value in the event of a crash of the banking system? That's why it can't be allowed to happen.
The only solutions to 'too big to fail' that I have heard seem reasonable are (a) break up the big banks, (b) enforce a hardened Volker rule to seperate deposits from proprietary investments, (c) require the banks to raise sufficient capital through stock sales to cover their loan and investment activity . . . or all three.
Just my [sm=2cents.gif]
I respect your viewpoint Vincent. If pretty much the entire big banking system was built on a house of cards, bailing them out did what? Supported the house of cards. It would have been extremely ugly and tough had it all fallen down. I still support the idea that it should have all fallen down, regardless. It's not that I want people to suffer, but that would be natural consequence of allowing too risky decisions. Not all banks or lenders had money tied up in incorrectly valued assets. Why let a bank, investment house, or lender off the hook because they didn't do their due diligence? If investments were made into faulty products, then those investments should take the consequences. If the investors scream about having been fraudulently sold into the investments, then that needs to be investigated and the consequences exacted from the ones that fraudulently sold the products. If it was the rating houses, then they should be taken to task.
We would have recovered. We will still recover from what happened and how it was handled. I fully believe we'd be on significantly more solid ground than we are at this time. The economy would have been rebuilt on a better foundation. Markets would be more properly valued. Yes, it would have sucked. Yes, the Democrats would have won in 2008 even if they ran a tree stump for a candidate.
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