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ORIGINAL: DesideriScuri

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ORIGINAL: Yachtie

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ORIGINAL: mnottertail
And they forgave mortgage debt, so.........if we did that?

Interesting question, and I have seen it bantered about here and there. Our situation and Iceland's are not wholly alike. It would be wrong to forgive some mortgages and not others. Not all banks are insolvent but for government infusion.

In 2007, the value of all mortgages in the US was $14.5T.

Mortgages on 1 to 4 family residences was $11.2T

If we had "forgiven" or "paid off" 1/10 of everyone's mortgages, would that have solved anything? what about 20% of all primary residence mortgages (ignores mortgages on second/third/etc. homes)? Would that have been enough to stabilize everything, without having to do anything else? What if Government took over everyone's mortgage payments until the Market pricing leveled out and then Government made a lump sum payment to drop everyone's principle down to that new Market price? For example, if mortgage Markets were overpriced by 25%, Government would have paid down principle on every mortgage by an average of 25%. Would that have solved things?



SOURCE

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The Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate.
The legislation was signed into law by President Bill Clinton.
http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act

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ORIGINAL: mnottertail
It would have made alot less depth and breadth to this recession.  And something along those lines worked for Iceland. 

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ORIGINAL: Yachtie

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ORIGINAL: vincentML

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ORIGINAL: Yachtie

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ORIGINAL: vincentML
But wishing the collapse of our financial system just to spite the banks is beyond the pale.

No one wishes that, but neither do many want to see the banks survive at all costs (TBTF) so as to maintain the status quo / re-inflate the bubble.

Like Iceland, we have a choice.

Well, that's what DS seemed to be saying. Did I misread him?

I believe I agreed that they should be properly regulated.

Iceland bailed out its banks in a similar fashion and with help from the IMF. They did not just let them sink.
http://en.wikipedia.org/wiki/2008%e2%80%932011_Icelandic_financial_crisis

Iceland is in economic recovery with lower unemployment rates than Europe, and its President says “let the banks go bankrupt”, speaking at the annual World Economic Forum in Davos, Switzerland (23-27 January, 2013.)

In an impromptu interview with the Al Jazeera News Network’s Stephen Cole, Iceland’s President Olafur Ragnar Grimsson explains that his country was able to rebound from the worldwide financial crisis better than all other countries that faced the same problems, by doing just that, allowing the failing banks to go bankrupt.

He says “we did not follow the traditional, prevailing orthodoxies. We introduced currency control. We let the banks fail. We provided support for the poor. We did not introduce austerity measures on a scale you see in Europe. And the end result 4 years later, Iceland is enjoying progress and recovery very different from the other European countries that suffered from the financial crisis.”

However, instead of following the prevailing neoliberal economical wisdom, Iceland did the opposite. Instead of bailing out the banks, it brought charges against many involved. The banks were nationalized.

We have a conflict here. Wiki versus Icelandic President.

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Ever notice that all countries deemed to be terrorist countries do not have central banks?

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ORIGINAL: WantsOfTheFlesh
its said tha markets...

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ORIGINAL: Politesub53

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ORIGINAL: WantsOfTheFlesh

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ORIGINAL: JeffBC
I don't understand how anyone fell for this shit in the US and I don't really understand how anyone else falls for it either. Why isn't "too big to fail" synonymous with "too fucked up to allow to continue"?

thing is tha banks will cause damage no matter if the state props 'em up or they fail. its about picking the lesser of 2 evils. "too big to fail" could be an excuse but maybe sometimes it really would drag economies down or even destroy 'em.

The domino effect in the US would have been catastophic if banks had been allowed to fail, even cursory reading of the situation in 2008 tells you that.

Whats laughable here is those who were pissing and moaning about not letting banks go to the wall, are also pissing and moaning about taking money from depositors.

Does anyone on the good ship Clueless have any notion what would have happened to depositors savings if banks had been allowed to fail ?

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ORIGINAL: mnottertail

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Ever notice that all countries deemed to be terrorist countries do not have central banks?

Uh, no, nobody wears enough tinfoil besides you to notice things that are not even remotely true:

http://en.wikipedia.org/wiki/Central_Bank_of_the_Islamic_Republic_of_Iran

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History
See also: Economic history of Iran

During the Achaemenid era, trade boomed and subsequently banking operation expanded to an extent that Iranians managed to learn the banking method from the people of Babylon.[3]

The first attempt at introducing paper currency in Iran occurred during the Mongol Ilkhanate of the 13th century CE. The innovation, developed in Song Dynasty China, did not take hold in Iran, and paper currency did not return to Iran in any significant manner for several centuries.[4]
Modern era

In modern banking, the British first opened the Imperial Bank of Persia in 1889, with offices in all major cities of Persia and India. It was established in 1885 with a concession from the government of Persia to Baron Julius De Reuter, under a Royal charter from Queen Victoria.[3]

To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank.[5]

The first state owned Iranian bank, Bank Melli Iran was established in 1927 by the government of Iran.[6] The bank's primary objective was to facilitate government's financial transactions and to print and distribute the Iranian currency (rial and toman). For more than 33 years, Bank Melli Iran was acting as the central bank of Iran with the responsibility to maintain the value of Iranian rial.

In August 1960, the Iranian government established the Central Bank of Iran (CBI) and separated all central banking responsibilities from Bank Melli Iran and assigned it to the newly formed central bank.[7]

The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran" immediately after the Islamic revolution in 1979 and the overthrow of the Shah of Iran. Scope and responsibilities of the Central Bank of the Islamic Republic of Iran (CBI) have been defined in the Monetary and Banking Law of Iran.[8] CBI has been blacklisted by the U.S. government due to the bank's involvement in the Iranian nuclear program.[9]

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ORIGINAL: JeffBC

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ORIGINAL: WantsOfTheFlesh
its said tha markets...

In other words, "the bankers".

These "markets" of which you speak? How is that simply not the parliament of the ruling class? I'm frankly tired of being whipped by what "the markets" might do. The bottom line is we have crooks running those markets. Somehow that must be stopped and if the crooks get testy over it then I'm pretty fine with that.

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ORIGINAL: WantsOfTheFlesh
i dont know enough bout economics to say what would have happened in '08 if tha banks etc. were let fail but things looked ugly & looking back a few yrs on it looks like we avoided a re-run of 1929 cept maybe for greece so i reckon it was the right move. yup we should remember the fear many folks had of loosing everything wit the run on the banks.

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ORIGINAL: JeffBC

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ORIGINAL: WantsOfTheFlesh
its said tha markets...

In other words, "the bankers".

These "markets" of which you speak? How is that simply not the parliament of the ruling class? I'm frankly tired of being whipped by what "the markets" might do. The bottom line is we have crooks running those markets. Somehow that must be stopped and if the crooks get testy over it then I'm pretty fine with that.

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ORIGINAL: JeffBC
I think it's important to remember that we are talking about a "controlled fail" here. In other words, these banks would not simply close their doors and abscond with everyone's money. Rather, their stock value would drop to zero and they'd be taken over by the government. The government would then need to step in to protect depositors. Ideally we would have thrown the crooks in jail but at least we would have gotten them out of their positions of power. That's simply gotta be a good thing.

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A bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities.[1] More specifically, a bank usually fails economically when the market value of its assets declines to a value that is less than the market value of its liabilities. The insolvent bank either borrows from other solvent banks or sells its assets at a lower price than its market value to generate liquid money to pay its depositors on demand. The inability of the solvent banks to lend liquid money to the insolvent bank creates a bank panic among the depositors as more depositors try to take out cash deposits from the bank. As such, the bank is unable to fulfill the demands of all of its depositors on time. Also, a bank may be taken over by the regulating government agency if Shareholders Equity (i.e. capital ratios) are below the regulatory minimum.

The failure of a bank is generally considered to be of more importance than the failure of other types of business firms because of the interconnectedness and fragility of banking institutions. Research has shown that the market value of customers of the failed banks is adversely affected at the date of the failure announcements.[2] It is often feared that the spill over effects of a failure of one bank can quickly spread throughout the economy and possibly result in the failure of other banks, whether or not those banks were solvent at the time as the marginal depositors try to take out cash deposits from these banks to avoid from suffering losses. Thereby, the spill over effect of bank panic or systemic risk has a multiplier effect on all banks and financial institutions leading to a greater effect of bank failure in the economy. As a result, banking institutions are typically subjected to rigorous regulation, and bank failures are of major public policy concern in countries across the world.[3]

quote:

In an impromptu interview with the Al Jazeera News Network’s Stephen Cole, Iceland’s President Olafur Ragnar Grimsson explains that his country was able to rebound from the worldwide financial crisis better than all other countries that faced the same problems, by doing just that, allowing the failing banks to go bankrupt.

He says “we did not follow the traditional, prevailing orthodoxies. We introduced currency control. We let the banks fail. We provided support for the poor. We did not introduce austerity measures on a scale you see in Europe. And the end result 4 years later, Iceland is enjoying progress and recovery very different from the other European countries that suffered from the financial crisis.”

quote:

I think it's important to remember that we are talking about a "controlled fail" here. In other words, these banks would not simply close their doors and abscond with everyone's money. Rather, their stock value would drop to zero and they'd be taken over by the government. The government would then need to step in to protect depositors. Ideally we would have thrown the crooks in jail but at least we would have gotten them out of their positions of power. That's simply gotta be a good thing.

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ORIGINAL: Real0ne

the banks and their corruption are the single biggest threat to US stability. So why are they not declared a terrorist organization?

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ORIGINAL: WantsOfTheFlesh
dont think its ever that tidy. plus tha liabilities in banks are massive, like a big portion of gdp. government nationalisation still means tha government bears massive costs handed to tha tax payer. letting a bank fail can cause a massive run on a whole economy like playing wit dynamite i reckon.

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ORIGINAL: vincentML

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ORIGINAL: Real0ne

the banks and their corruption are the single biggest threat to US stability. So why are they not declared a terrorist organization?

Because they are sovereign citizens?