Government systems that benefit the already wealthy

[Harry Bosch]

So, your idea is to fire all the US bankers in order to prevent another banking crash similar to 2008? Are you open to the idea that making financing more difficult for US companies could lead to another deep recession? There are some foreign owned banks operating in the US. Would you allow them to pick up the slack? Finally, I'm confused by your point that "most... goes to fuel competition for existing real estate". Are you saying that when a company buys a new property (either a larger building for growing business, or smaller building for contracting business), that it isn't important?

Deep recession?

Try epic depression!

At some point won't borrowing and "free" financing have to be normalized so the economy is not loaded with mal investment and stock buy backs? Without asset valuation causing ridiculous and unsustainable property values in California how does the middle class manage to buy a home there?

I am not an economist. But even I am smart enough to know that capitalism requires using money that is stable so that future decisions of capital can be intelligently made. And the stability of that money also requires a reasonable interest rate that is at least above the future rate of real inflation.

I am not sure it is a banking issue but probably a political one. But in either case, the financiers of capital are letting everyone down in a major way right now.

Dang. Very frustrated that they don't offer those "free financing" in the northwest! I could use one of those. In the NW, a market rate for a new building is about 4.95%.

 

[RVonse]

At some point won't borrowing and "free" financing have to be normalized so the economy is not loaded with mal investment and stock buy backs? Without asset valuation causing ridiculous and unsustainable property values in California how does the middle class manage to buy a home there?

I am not an economist. But even I am smart enough to know that capitalism requires using money that is stable so that future decisions of capital can be intelligently made. And the stability of that money also requires a reasonable interest rate that is at least above the future rate of real inflation.

I am not sure it is a banking issue but probably a political one. But in either case, the financiers of capital are letting everyone down in a major way right now.

Dang. Very frustrated that they don't offer those "free financing" in the northwest! I could use one of those. In the NW, a market rate for a new building is about 4.95%.

If 5% is really the rate, maybe I should loan them some of my money. 5% is a ridiculous number when I consider my retirement savings account pays only a fraction of that amount. And I should feel lucky at that, because in Europe most banks won't let you save with them unless YOU PAY THEM.

So why are banks allowed to reap a 4-5 spread on money that really isn't theirs to begin with? Are their bonuses not big enough already?

 

[Axulus]

At some point won't borrowing and "free" financing have to be normalized so the economy is not loaded with mal investment and stock buy backs? Without asset valuation causing ridiculous and unsustainable property values in California how does the middle class manage to buy a home there?

I am not an economist. But even I am smart enough to know that capitalism requires using money that is stable so that future decisions of capital can be intelligently made. And the stability of that money also requires a reasonable interest rate that is at least above the future rate of real inflation.

I am not sure it is a banking issue but probably a political one. But in either case, the financiers of capital are letting everyone down in a major way right now.

Dang. Very frustrated that they don't offer those "free financing" in the northwest! I could use one of those. In the NW, a market rate for a new building is about 4.95%.

If 5% is really the rate, maybe I should loan them some of my money. 5% is a ridiculous number when I consider my retirement savings account pays only a fraction of that amount. And I should feel lucky at that, because in Europe most banks won't let you save with them unless YOU PAY THEM.

So why are banks allowed to reap a 4-5 spread on money that really isn't theirs to begin with? Are their bonuses not big enough already?

Go ahead, have at it. This commercial real estate debt fund offers approx 6% annual distributions. You can find others offering similar.

https://fsinvestments.com/investments/funds/fs-credit-reit-zfreix

(Not an endorsement, please do your on due diligence).

Also, what do you mean why are they "allowed"? They obtain the money legally from a variety of sources (mostly other people and businesses that agree to deposit it of invest it with them with the full understanding it will be used to fund loans) and can legally loan it out at the rate they desire. This is still mostly a free country.

 

[RVonse]

If 5% is really the rate, maybe I should loan them some of my money. 5% is a ridiculous number when I consider my retirement savings account pays only a fraction of that amount. And I should feel lucky at that, because in Europe most banks won't let you save with them unless YOU PAY THEM.

So why are banks allowed to reap a 4-5 spread on money that really isn't theirs to begin with? Are their bonuses not big enough already?

Go ahead, have at it. This commercial real estate debt fund offers approx 6% annual distributions. You can find others offering similar.

https://fsinvestments.com/investments/funds/fs-credit-reit-zfreix

(Not an endorsement, please do your on due diligence).

Also, what do you mean why are they "allowed"? They obtain the money legally from a variety of sources (mostly other people and businesses that agree to deposit it of invest it with them with the full understanding it will be used to fund loans) and can legally loan it out at the rate they desire. This is still mostly a free country.

It is tempting.but for the risk.

There was a time, and not that long ago either. When you could purchase a short term and very safe treasury bill for a reasonable rate of return. A return that was not so different than the rate charged for 30 year mortgages. I can remember in 1979 the bank offering an FSLIC insured money market instrument returning 10%. All during a time while my parents were only paying 6% on their new home mortgage taken out in 1969.

Sadly, those days are over with. The days where the middle class earned interest with all the rest.

 

[Harry Bosch]

At some point won't borrowing and "free" financing have to be normalized so the economy is not loaded with mal investment and stock buy backs? Without asset valuation causing ridiculous and unsustainable property values in California how does the middle class manage to buy a home there?

I am not an economist. But even I am smart enough to know that capitalism requires using money that is stable so that future decisions of capital can be intelligently made. And the stability of that money also requires a reasonable interest rate that is at least above the future rate of real inflation.

I am not sure it is a banking issue but probably a political one. But in either case, the financiers of capital are letting everyone down in a major way right now.

Dang. Very frustrated that they don't offer those "free financing" in the northwest! I could use one of those. In the NW, a market rate for a new building is about 4.95%.

If 5% is really the rate, maybe I should loan them some of my money. 5% is a ridiculous number when I consider my retirement savings account pays only a fraction of that amount. And I should feel lucky at that, because in Europe most banks won't let you save with them unless YOU PAY THEM.

So why are banks allowed to reap a 4-5 spread on money that really isn't theirs to begin with? Are their bonuses not big enough already?

First off, there is very little risk that your savings account will lose money. There is risk that a business loan for a company buying a building can go into default. Secondly, a bank has overhead that it has to pay. I'm working with a relationship manager who is putting together my loan. She has an underwriter. She has a boss. They have a credit manager. They have a loan closer. These employees require the bank to have a HR person. The loan must conform to regulations. There are people at the bank who make sure compliance is followed. I need another bank employee to manage our deposits, another one to manage our treasury management services, and etc. I hope that you see that it's not quite as easy to lend out money as it appears. BTW: the average hard money (non-bank) lender charges about 12% for a commercial loan with a short term.

 

[Loren Pechtel]

Regular people don't get to carry forward losses to offset future taxes. Google is far from a startup. Amazon is far from a startup. Why do these corporations need these tax breaks, essentially US taxpayers subsidizing them?

They don't? If your capital losses exceed your capital gains you can deduct IIRC $3k of them, anything more than that is carried forward to next year where the same calculation is applied. You can't have a loss on regular income so the idea of an individual carrying it forward makes no sense.

Regular people still suffer huge losses all the time. See uninsured Oklahomans who's houses are now blocks away from the foundations.

And if they sell that empty foundation they have a big capital loss they can deduct against capital gains or at $3k/year otherwise.

 

[Loren Pechtel]

Regular people still suffer huge losses all the time. See uninsured Oklahomans who's houses are now blocks away from the foundations.

Such casualty losses are deductable:

https://www.irs.gov/taxtopics/tc515

Also:

When Your Loss Deduction Exceeds Your Income

If your loss deduction is more than your income, you may have a net operating loss (NOL). You don't have to be in business to have an NOL from a casualty. For more information, refer to Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.

NOLs can be carried back to claim refunds on past taxes paid and/or carried forward to offset future income, just like is being discussed.

The reason to allow NOLs is perfectly logical. A year is an arbitrary timeframe to report income and pay taxes on it. Therefore, if someone has business (or casualty) losses in one period, it should be allowed to offset income in another period.

Imagine if you had to report income daily and pay taxes on it. Some days you might pay your bills, other days you collect a bunch of income. You would be paying massive taxes if you couldn't take the deductions from the days you pay your bills against the days when you receive the income. Taxes on fictitious income.

I forgot about casualty loss deductions, yup, it's a lot more favorable than $3k/year. I didn't realize you could carry a net operating loss backwards, though.

 

[Loren Pechtel]

If 5% is really the rate, maybe I should loan them some of my money. 5% is a ridiculous number when I consider my retirement savings account pays only a fraction of that amount. And I should feel lucky at that, because in Europe most banks won't let you save with them unless YOU PAY THEM.

So why are banks allowed to reap a 4-5 spread on money that really isn't theirs to begin with? Are their bonuses not big enough already?

Then you need to reconsider where you put your retirement savings. You're not going to get 5% without some risk, though.

 

[Loren Pechtel]

It is tempting.but for the risk.

That's always how it is.

There was a time, and not that long ago either. When you could purchase a short term and very safe treasury bill for a reasonable rate of return. A return that was not so different than the rate charged for 30 year mortgages. I can remember in 1979 the bank offering an FSLIC insured money market instrument returning 10%. All during a time while my parents were only paying 6% on their new home mortgage taken out in 1969.

Sadly, those days are over with. The days where the middle class earned interest with all the rest.

No wonder you have an unrealistic view of the situation!

To get a proper picture don't compare that 10% money market account with the 10 year old mortgage, but with the mortgages at the time. Hint: The 1979 average for a 30-year fixed was 11.2%, which rose to 16.04% for 1982.

The banks were taking a major bath on those 6% mortgages which is a big part of what lead to the savings and loan debacle.

In my experience the spread has been about 3% between what they pay (on the accounts with the highest interest) and what they get (low-risk mortgages and the like.)