Biden wants to Appoint Communist to take over Banking: Scary & Unbelievable

[Rhea]

Reopening thread.

Please recall: We strive to create a forum for meaningful discussion of interesting issues. Insulting other members does not serve that purpose and is a violation of the terms of use. You all agree to abide by the Terms Of Use or face infractions that will limit your use of the forum.

 

[funinspace]

OH, it was a Navy hospital ship. Excuse me.

No. Not likely. I mean, you COULD have said "he sent a ship" and been completely correct. Or "...a military asset" or "military personnel" or "Navy issued doctor people." All KINDS of things you might have said to make your point.
But, alas, you half-remembered an anecdote and were content to just make shit up.

And not even good shit.

We do not have a battleship Trump could have sent, not a manned and operational one, and it would not have been terribly useful anyway.

You show you are not really familiar with the topic, the details. You are clesrly just parroting shit you kinda heard, half-remember, and baselessly feel strongly about. And you come out looking rather like you went off half-cocked. Or cucked.

It's like you read my mind...

And then Gen55 thinks we should take heed to his national security suck ups to his favorite Clownstick seriously, cuz ya know Trump was playing 3-D chess the whole time. He's the smartest, bestest, smarter than the Generals and everyone. Yeah, the guy who didn't know WTF the nuclear triad was while running for president nor dozens of other obvious things internationally. Butt butt...he got the NK dictator to make him a pretty promise after giving the petty little dictator a world stage to play on for the first time ever. Good thing he didn't try to order the generals to invade the wrong country...Balkins-Baltic.. or even an imaginary one (Nambia). And good thing Clownstick got the border between Colorado and Mexico secured...can't believe those dumb librals never closed that up. It’s not like India's got China on its border, and sooo many other deranged thoughts from the orange turd...

Regardless of the mistake of saying Mexico/Colorado border, do you believe in open borders or not? Marxists believe in open borders and that people should be able to go wherever they want no questions asked.

No I don't believe in open borders. I know of so few "Marxists", why do you go on about this tiny segment of society so much? BTW, I'd say libertarians are generally for open borders...probably more so than socialists.

<snipped noise> I just don't agree with how liberals say, "Christians suck! Terrible people!" but when they speak of Muslims they say, "not all Muslims are bad!!!!" Seems like they should be just as quick to say, "not all christians are bad!!!"

You have funky sock puppets that you seem to talk too a lot... There are good Christians, just as there are bad atheists. But what in Zeus' name does this have to do with anything?

 

[Loren Pechtel]

The paper in question sounds a lot like the Chicago Plan advocated by Irving Fisher, Henry Simons and Milton Friedman (extreme free-market liberals). Private financial institutions would be perfectly free to intermediate between savers, borrowers and investors and would still have access to Fed funds. But the power to create money on Main St would be insulated from the casino banking of Wall St:

If Main Street can't "create money" then banks can't loan, they have no way to make money and they will close.

And note that giving banks access to Wall Street was done to keep the whole banking system from crashing due to holding a bunch of fixed-rate mortgages in times of rising interest. It's not an ideal system--but an ideal system can't exist.

I can't tell whether you misunderstand the proposal, the banking and monetary system or both.

Money is "created" by making loans.

Correct.

If you say banks can't create money that means they can't make loans. No loans = no income = no bank.

Incorrect. Read the paper.

Paper: (How to attribute this quote??)

A realistic model needs to reflect the fact that under the present system banks do not have to wait for depositors to appear and make funds available before they can on-lend, or intermediate, those funds. Rather, they create their own funds, deposits, in the act of lending.

In other words, this is based on conspiracy nonsense. Banks can't loan without having the money on deposit.

And they seem to feel the primary job of loans is to lend money into existence.

 

[funinspace]

@Loren Pechtel

Why Banks Don't Need Your Money to Make Loans

Here's more information about how banks don't need your money to make loans, but they do want it to make those loans more profitable.

www.investopedia.com

Banks in the Real World​

In today’s modern economy most money takes the form of deposits, but rather than being created by a group of savers entrusting the bank withholding their money, deposits are actually created when banks extend credit (i.e., create new loans). As Joseph Schumpeter once wrote, “It is much more realistic to say that the banks 'create credit,' that is, that they create deposits in their act of lending than to say that they lend the deposits that have been entrusted to them.”2


When a bank makes a loan, there are two corresponding entries that are made on its balance sheet, one on the assets side and one on the liabilities side. The loan counts as an asset to the bank and it is simultaneously offset by a newly created deposit, which is a liability of the bank to the depositor holder. Contrary to the story described above, loans actually create deposits.

 

[Canard DuJour]

The paper in question sounds a lot like the Chicago Plan advocated by Irving Fisher, Henry Simons and Milton Friedman (extreme free-market liberals). Private financial institutions would be perfectly free to intermediate between savers, borrowers and investors and would still have access to Fed funds. But the power to create money on Main St would be insulated from the casino banking of Wall St:

If Main Street can't "create money" then banks can't loan, they have no way to make money and they will close.

And note that giving banks access to Wall Street was done to keep the whole banking system from crashing due to holding a bunch of fixed-rate mortgages in times of rising interest. It's not an ideal system--but an ideal system can't exist.

I can't tell whether you misunderstand the proposal, the banking and monetary system or both.

Money is "created" by making loans.

Correct.

If you say banks can't create money that means they can't make loans. No loans = no income = no bank.

Incorrect. Read the paper.

Paper: (How to attribute this quote??)

A realistic model needs to reflect the fact that under the present system banks do not have to wait for depositors to appear and make funds available before they can on-lend, or intermediate, those funds. Rather, they create their own funds, deposits, in the act of lending.

In other words, this is based on conspiracy nonsense. Banks can't loan without having the money on deposit.

And they seem to feel the primary job of loans is to lend money into existence.

Way too much of this forum is people pointing this individual to evidence, over and over, which he simply ignores. If any serious debater is interested, see funinspace's link above or I can cite others.

 

[Swammerdami]

I clicked the link and learned something I didn't know:

As announced on March 15, 2020, the [Federal Reserve] Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

What??? I thought there was a glut (trillions of dollars) in excess reserves! Has that changed? How does it make sense to lower the already-low reserve requirement, if banks won't or can't even lend out their excess reserves?

I'd go to the FRED website and graph the Excess Reserve totals over the past few years. BUT, if I recall correctly, FRED has discontinued that data series! (I suppose the reason for that may be obvious. If the reserve req't is Zero, then 'Reserves' and 'Excess Reserves' become synonyms.)

 

[Canard DuJour]

I clicked the link and learned something I didn't know:

As announced on March 15, 2020, the [Federal Reserve] Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

What??? I thought there was a glut (trillions of dollars) in excess reserves! Has that changed? How does it make sense to lower the already-low reserve requirement, if banks won't or can't even lend out their excess reserves?

It's the last-ditch attempt to encourage lending, borrowing and spending after flooding the system with reserves hasn't worked. If the banks have way more reserves than they need to settle transactions any day, the reserve ratio requirement is redundant.

I'd go to the FRED website and graph the Excess Reserve totals over the past few years. BUT, if I recall correctly, FRED has discontinued that data series! (I suppose the reason for that may be obvious. If the reserve req't is Zero, then 'Reserves' and 'Excess Reserves' become synonyms.)

Yep.

 

[Loren Pechtel]

@Loren Pechtel

Why Banks Don't Need Your Money to Make Loans

Here's more information about how banks don't need your money to make loans, but they do want it to make those loans more profitable.

www.investopedia.com

Banks in the Real World​

In today’s modern economy most money takes the form of deposits, but rather than being created by a group of savers entrusting the bank withholding their money, deposits are actually created when banks extend credit (i.e., create new loans). As Joseph Schumpeter once wrote, “It is much more realistic to say that the banks 'create credit,' that is, that they create deposits in their act of lending than to say that they lend the deposits that have been entrusted to them.”2


When a bank makes a loan, there are two corresponding entries that are made on its balance sheet, one on the assets side and one on the liabilities side. The loan counts as an asset to the bank and it is simultaneously offset by a newly created deposit, which is a liability of the bank to the depositor holder. Contrary to the story described above, loans actually create deposits.

I'm tired of this conspiracy theory that keeps popping up. In the real world banks can't just hand out money they don't have. Just because the second part is true (making a loan means the money goes somewhere, generally to a deposit in some bank) doesn't mean the first is.

 

[Loren Pechtel]

I clicked the link and learned something I didn't know:

As announced on March 15, 2020, the [Federal Reserve] Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

What??? I thought there was a glut (trillions of dollars) in excess reserves! Has that changed? How does it make sense to lower the already-low reserve requirement, if banks won't or can't even lend out their excess reserves?

I'd go to the FRED website and graph the Excess Reserve totals over the past few years. BUT, if I recall correctly, FRED has discontinued that data series! (I suppose the reason for that may be obvious. If the reserve req't is Zero, then 'Reserves' and 'Excess Reserves' become synonyms.)

The theory being proposed is in effect negative reserve requirements. A reserve requirement of zero means they can loan out as much as they have on deposit + capital.

Note that accounts receivable (the loan) is not money on deposit.

 

[Canard DuJour]

I clicked the link and learned something I didn't know:

As announced on March 15, 2020, the [Federal Reserve] Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.

What??? I thought there was a glut (trillions of dollars) in excess reserves! Has that changed? How does it make sense to lower the already-low reserve requirement, if banks won't or can't even lend out their excess reserves?

I'd go to the FRED website and graph the Excess Reserve totals over the past few years. BUT, if I recall correctly, FRED has discontinued that data series! (I suppose the reason for that may be obvious. If the reserve req't is Zero, then 'Reserves' and 'Excess Reserves' become synonyms.)

The theory being proposed is in effect negative reserve requirements.

Eh? "Negative reserve requirements" would mean that only banks which cannot settle transactions could lend. It doesn't really mean anything.

A reserve requirement of zero means they can loan out as much as they have on deposit + capital.

Nope, that'd be a full reserve requirement.


This is the kind of garbage people end up spouting when they mistake their opinion for fact.

 

[Swammerdami]

A reserve requirement of zero means they can loan out as much as they have on deposit + capital.

Nope, that'd be a full reserve requirement.

I'm afraid you're both wrong!
In particular, reserve requirement does NOT limit loans based on deposits; it limits deposits based on vault cash. In other words. deposits hinder meeting that requirement, rather than helping. (For brevity let's write "vault cash" to include the bank's deposits at a Federal Reserve Bank.)

A borrower — for definiteness say Jason borrows $1000 — will be given either cash or some sort of demand deposit paper. If he asks for cash, the bank cannot fulfill the loan unless they have $1000 in their vaults. This is true regardless of any reserve requirement,.

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

A 10% reserve requirement means that a bank with (demand) deposits totaling $70 million would have to have "MB" totaling at least $7 million. This MB would include the Federal Reserve notes the bank has in its vaults, and its demand deposits at Federal Reserve banks.

Note that accounts receivable (the loan) is not money on deposit.

This seems confused. Deposits are liabilities. If the bank hasn't disposed of the cash customer deposited, that cash is "vault cash", not "money on deposit."

The whole question "Do banks 'create money' via loans or deposits?" seems like a red herring to me. Both the deposits and the loans are involved. But
(1) Deposits occur automatically. People don't like leaving large sums of cash under their mattress, while good loans may be hard to come by, depending on the economy. So it is the loans that are non-automatic, and therefore the essential key.
(2) When Bill deposits $1000 cash at a bank and receives a checkbook, "M1" (the definition of money supply) does NOT increase. Yes, the $1000 checkbook counts as money, but the $1000 the bank now has in its vault, while included in "MB" (see above), is NOT included in M1.
(3) It is when Jason then borrows $1000 from that bank that M1 increases by $1000. This is true whether he takes his $1000 as a checkbook or as cash from the bank's vault.

~ ~ ~ ~ ~ ~ ~ ~ ~

I still feel like finance has entered some sort of Fantasyland. Germany and Holland still have negative nominal interest rates on long-term "risk-free" debt? Absurd!! And the U.S. eliminating the reserve requirement baffles me.

Recall the 1980's when newly-deregulated Savings and Loans were making loans to cronies, loans that never got repaid? Is something like that soon to happen? What premiums do banks now pay to their FDIC insurer? I suppose in yet another gift to the banks, these premiums have been lowered also.

 

[Canard DuJour]

A reserve requirement of zero means they can loan out as much as they have on deposit + capital.

Nope, that'd be a full reserve requirement.

I'm afraid you're both wrong!
In particular, reserve requirement does NOT limit loans based on deposits; it limits deposits based on vault cash. In other words. deposits hinder meeting that requirement, rather than helping. (For brevity let's write "vault cash" to include the bank's deposits at a Federal Reserve Bank.)

A borrower — for definiteness say Jason borrows $1000 — will be given either cash or some sort of demand deposit paper. If he asks for cash, the bank cannot fulfill the loan unless they have $1000 in their vaults. This is true regardless of any reserve requirement,.

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." [etc]

It isn't since he claims that money "on deposit" is that which banks must have as a precondition for making loans. Otherwise I don't disagree.

 

[Loren Pechtel]

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

No, because that would allow a situation where the bank ran out of capital. Loans have to have enough reserves to make them. The doge of giving them a checkbook doesn't address this.

 

[Swammerdami]

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

No, because that would allow a situation where the bank ran out of capital. Loans have to have enough reserves to make them. The doge of giving them a checkbook doesn't address this.

You're correct, sort of. But you (sort of) make the same point as made in the very excerpt you quote!

I write "sort of" because loans are ASSETS. Assets are good! (As long as they're accompanied with appropriate "loan loss reserves" on the opposite side of the balance sheet. And loans do NOT deplete capital unless they're bad loans.)

Yes this is all counter-intuitive and may seem backwards. When people deposit money in a bank, the bank becomes stronger, not weaker. Loans, on the other hand, are risky. But when discussing the details of bank regulation or money creation it's best, I think, to follow the indicated arithmetics rigorously.

 

[laughing dog]

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

No, because that would allow a situation where the bank ran out of capital. Loans have to have enough reserves to make them. The doge of giving them a checkbook doesn't address this.

You are mistaken. The entire concept of fractional reserve system means that loans do not have to have enough reserves to make them.

 

[Loren Pechtel]

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

No, because that would allow a situation where the bank ran out of capital. Loans have to have enough reserves to make them. The doge of giving them a checkbook doesn't address this.

You are mistaken. The entire concept of fractional reserve system means that loans do not have to have enough reserves to make them.

Each bank must have enough reserves to make the loans it originates. The system overall does not because those loans end up on deposit somewhere else.

 

[laughing dog]

If instead the bank gives the borrower a checkbook with a $1000 balance, they now have $1000 on deposit, which is included in Loren's "as much as they have on deposit + capital." As long as the borrower accepts a checkbook, the loan could have been for a million dollars or a billion, regardless of how little capital the bank has! (There is a separate maximum on the liability-to-capital ratio independent of the reserve requirement, so a small bank couldn't do this.)

No, because that would allow a situation where the bank ran out of capital. Loans have to have enough reserves to make them. The doge of giving them a checkbook doesn't address this.

You are mistaken. The entire concept of fractional reserve system means that loans do not have to have enough reserves to make them.

Each bank must have enough reserves to make the loans it originates. The system overall does not because those loans end up on deposit somewhere else.

You are mistaken, especially in the case of zero reserve requirements.

 

[barbos]

OK, she is out.

Police report reveals striking details about Biden nom Saule Omarova's 'retail theft' arrest

Fox News obtained the police report from the arrest of Saule Omarova, Biden’s pick to lead the Office of the Comptroller of the Currency (OCC).

www.foxnews.com

Is that true?

Speaking of that Komsomol membership exchange during hearings.
She was right, membership automatically expired at the age of 28. Which would have been 1994 for her. Usually people join communist party before that.
But Komsomol as organization was liquidated in 1991, the year she went to US. Anyway, I did not like how she tried to avoid answering the question. It was completely unnecessary. She should have said "Yes I was, if I was not I would not have been here becasue I would not have been accepted to the Moscow university"
Well, I am not 100% sure about the last part, but I think it would have been extremely difficult for her to defend her thesis without it.

 

[laughing dog]

Ms Omarova has withdrawn from the nomination.

 

[Gun Nut]

Generation 55, do you even remember what this thread that you started was even about? In all seriousness are you suffering from a condition that has an adverse affect to your attention span? You appear to be simply spewing unrelated bullshit with no rhyme nor reason.

This is is basic.. It is what you get when your worldview is based on whataboutism... when the solution to a logical problem is to move onto another logical problem, this is exactly what it sounds like.