tag:blogger.com,1999:blog-2761684730989137546.post6931969736492259304..comments2024-03-28T20:28:01.733-04:00Comments on Mike Norman Economics: Fed limits its own lending powers. Why the hell bother having a central bank at this point? Bunch of fools.mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-2761684730989137546.post-13574810192876959522015-12-01T16:08:34.820-05:002015-12-01T16:08:34.820-05:00"My answer is: how on Earth do you regulate l..."My answer is: how on Earth do you regulate loans to businesses?"<br /><br />Simple. You proscribe a list of valid purposes for a loan. Anything outside that list becomes unenforceable in court. <br /><br />That leaves the courts to decide what fits and what doesn't fit the list. If they decide it doesn't fit, then it becomes a gift of shareholders funds. <br /><br />Operate like that and I guarantee you that banks will become very keen on their due diligence - because the client just has to argue in court that the loan was 'ultra vires' to get a freebie. <br /><br />So actually it's really easy to regulate the asset side. NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-13853488333740336932015-12-01T14:09:14.472-05:002015-12-01T14:09:14.472-05:00Mike says “What about effectively regulating what ...Mike says “What about effectively regulating what the banks are doing on the asset side?” My answer is: how on Earth do you regulate loans to businesses? Judging which businesses are going to prosper and which are going to fail is extremely difficult. Do we force banks to fill in a hundred page form every time they make a loan to a business?<br /><br />Regulating mortgages is easier. But even there, if some bank wants to grant NINJA mortgages, why not let it, as long as the bank is funded just by shareholders & similar rather than depositors? And if a bank wants to specialise in risky Silicon Valley start ups, why not – as long as taxpayers aren’t on the hook for megabux when that fails?<br /><br />So I suggest regulate the liability side of lenders / banks. That is, have money lenders funded just like any other corporation: fund them via shares, bonds and similar – i.e. via any sort of stake where the saver / investor knows they may lose money, rather than fund them via deposits. That way taxpayers DON’T lose money.<br /><br />That’s full reserve banking – supported by Milton Friedman.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-75173545362717676662015-12-01T13:42:01.342-05:002015-12-01T13:42:01.342-05:00“And it lends at a penalty rate, always.” Yes: we’...“And it lends at a penalty rate, always.” Yes: we’ve been hearing that ever since Walter Bagehot advocated “penalty rates” in the 1850s. But when a crisis comes, politicians nearly always prefer to quickly paper over the cracks rather than see a large bank fail. <br /><br />The Fed loaned about $13trillion at the height of the recent crisis. I’ve tried to find out the average rate charged, can’t find anything. Certainly some of that money was loaned at a zero or near zero rate, and maybe all of it was. Anyone know the answer to that one?<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-12208976751118815962015-12-01T13:13:22.332-05:002015-12-01T13:13:22.332-05:00Tyler,
They would change their own fucking rule t...Tyler,<br /><br />They would change their own fucking rule to save a big bank. Just watch.mike normanhttps://www.blogger.com/profile/03296006882513340747noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-59551813666556015552015-12-01T13:12:41.523-05:002015-12-01T13:12:41.523-05:00Right, Matt Franko. Yellen is soooo scared of what...Right, Matt Franko. Yellen is soooo scared of what Congress might do. Greenspan befuddled them. Bernanke schooled them. Volker smacked them. Yellen "mothers" them.mike normanhttps://www.blogger.com/profile/03296006882513340747noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-10274855001424850822015-12-01T11:59:10.917-05:002015-12-01T11:59:10.917-05:00I would love to see the huge banks fail. Any nega...I would love to see the huge banks fail. Any negative effect on the economy could be easily rectified via massive fiscal stimulus.Tyler Healeyhttps://www.blogger.com/profile/05902426327183158613noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-57066318243334013212015-12-01T06:47:20.951-05:002015-12-01T06:47:20.951-05:00Its classic libertarian thinking...
If the bank ...Its classic libertarian thinking...<br /><br />If the bank blows up they say "well you should have done a better job picking the bank you put your munnie in, its a free country after all!"<br /><br />Like we all have nothing better to do than examining a potential banks asset side quality. ...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74426611457068667212015-11-30T19:58:37.337-05:002015-11-30T19:58:37.337-05:00Is disciplining the liability side just twisted cl...Is disciplining the liability side just twisted classic conservative thinking?Carloshttps://www.blogger.com/profile/13384498650711795107noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-85765944876973287812015-11-30T16:01:43.130-05:002015-11-30T16:01:43.130-05:00Mike, no need to apologize for speaking the truth....Mike, no need to apologize for speaking the truth.Geoffhttps://www.blogger.com/profile/06634433439796794973noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-62092148297523402032015-11-30T13:39:33.195-05:002015-11-30T13:39:33.195-05:00In all democracies the central bank needs merging ...In all democracies the central bank needs merging with the debt management arm of the Treasury. That way they can 'manage' the yield curve without any of these stupid stock lending fictions. NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-79690253354181451932015-11-30T13:21:40.275-05:002015-11-30T13:21:40.275-05:00Mike this supports the view that they dont EVER wa...Mike this supports the view that they dont EVER want to be put in a position to have to run "negative equity"...<br /><br />This puts a cap on their financial commitment and turns it right over to Congress for an appropriation once their cap is reached (which I'm sure will be WELL beyond the point of any risk of having to report 'negative equity'....)<br /><br />Perhaps score one for representative government here as these unqualified (alleged) 'technocrats' have surrendered their authority... but to your point throwing it right over to representatives who are just as stupid is no material help either...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74216496842630288392015-11-30T13:13:06.360-05:002015-11-30T13:13:06.360-05:00I really don't get this obsession with liabili...I really don't get this obsession with liability side restrictions. <br /><br />It has to be something to do with the obsession with 'market-based' solutions - even though the banks have demonstrated via their crappy lending decisions that approach leads to armageddon. <br /><br />Add to that lending for financial settlement (particularly FX settlement) is probably a really silly idea. (Creating more of your money and introducing it into the FX market will do what to supply and demand?), and you find that you really do need to tell banks what they can and can't create money for. (Probably by simply making a loan for any unauthorised purpose unenforceable).<br /><br />As a friend mentioned to me, these people haven't just got the wrong answers to the questions, they've got the wrong questions. <br /><br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.com