Banks

I am off in an hour for more school training for the reading cadre. Meanwhile I have a little time to type. Riley and Trevor have been staying after school doing make up work and the weight training room is open for business. The coach wants to strengthen Trevor and his other football players in the off season. I would love to find a place in our house to set up our resistance training equipment still stored in the basement.

Tom and I were watching the news last night. We have been reading the books on the financial crisis that have plagued our country over the last 30 years. Den of Thieves, Too Big to Fail, The Big Short. Tom is way ahead of me but I am plugging along. These books are great reads as well as informative. The eighties with the junk bonds scandal, the recent banks bail out which still haunts us with the occupy Wall Street protesters and our government debt.

FNMA, Fannie Mae just gave it's bonuses out in excess of millions of dollars to its staff while the mortgage foreclosures continue in the market place. This was an institution that was bailed out and has yet to pay back its government.

The books all emphasized the greed and manipulation of the system. One trader was so powerful he found it was fun to manipulate stocks with his own trades causing price swings as others followed his actions. He did it for no other reason than it was fun to manipulate people.

On the news, the worry was with the inter tangling of our world markets and the European crisis, how do the governments control runs on the banks. We are talking about sovereign nations going bankrupt and not honoring their debts. Institutions like Pension Funds own these bonds. They are required to sell them out of their portfolios if the bonds are downgraded below institutional grade. Imagine if they all came at once to claim their money. This is how Lehman Brothers failed. Everyone came to claim their money and Lehman didn't have enough money to cover.

Those that bought insurance thought they were covered, but because so many had bought insurance, the insurance company AIG couldn't cover its payouts. When Lehman failed its international branches failed, it brought the whole world system to the brink of complete shut down. There is still a huge lack of trust. The financial system is still under the microscope.

Are we turning into a nation of Czars? I now read the fine print and question everything I sign. I don't trust the banks not to try to sneak something over on me. I am afraid to invest in the markets since I can't trust the CEOs of corporations. I can't trust the wealthy not to use their power to manipulate stocks. Half my friends are doing the Dave Ramsey method of life. No credit cards, no bank accounts. I took all my money and bought a house, a tangible asset, that worst case scenario will provide a roof over our heads and a safe place to live. This only exacerbates our slow economy.

Tom wrote on a financials blog, when some one asked what stocks he liked, he doesn't do stocks any more. He does ETFs and flips them quickly, not to stay in them long. The markets are so volatile, he has his bet on the night before when he goes to bed to catch the morning open and takes the bet off as needed when he gets up. The overnight activity in the international markets has become as important an influence as our own market on the world. You cant trust individual stocks. From these books I read, with millions of dollars going out to bonuses, you can't trust these big companies and their leaders. Hostile take overs that over leverage and leave a company in debt or insider trading on the knowledge.

So what do you do with your money, if you have any left? Tom said buy food. Stock up on staples. If our government doesn't step up to the table soon and I don't have much faith that they will, I am going to be ready for the worst.

As we are throwing out ideas of how we would solve the crisis, Tom suggests that it may be time to nationalize banks. Put a bureaucrat in charge at a bureaucratic wage. No more millions in bonuses. The people would have faith again in the banking system. No more reason to pull your money out. Can you imagine a nationalized bank? As I think about it I think about how slow bureaucrats work. Can you imagine going for a loan to a bureaucrat. Nope, not the answer either.

There are credit unions now. I am moving my money to a credit union. I have more faith in the small local credit union. I am not afraid of being manipulated on an international scale. If the CU ends up being poorly managed, a credit union going under will not bankrupt the insurance company that has to pay out.

My preference would, and I hate to say this, but more regulation. Put the rules back in place that were instituted after the Great Depression. Banks should not be loaning out 30% to 40% of their assets. They should be conservative with conservative returns. We should not be expecting to make 10%, 12%, 20% returns. Natural growth is 3% to 4%. It is healthy at that level.

Banks used to be allowed to loan out less than 10%. They made their money in fees, the fees we are all throwing such a stink about. Over drafts, ATM charges, those were the traditional areas that banks made their money. Then regulations weakened, banks were allowed to loan more of our money, leverage more.

I should not be able to get a car loan probably for three times the value of my car if I tried to sell it, giving it to a woman without a job.Of course I am taking advantage of it. To me it is like a personal loan of trust, I will honor my obligation. Would I return the favor? Absolutely not.

The markets are getting to a big turning point. Which way? up or down? I can't help being pessimistic with so much debt and sovereign debt and the same mistakes going on and on with no corrections.

Individual companies are punished for making good choices. They pay higher taxes than the maga big international companies that can find the loop holes and hide profits and get bailed out on losses. You tax the rich and they move away. New Jersey and Maryland tried the Sir tax on their millionaires. The result was the wealthy just up and left the state. They lost a significant population of wealthy families. I don't blame them. Tom and I did the same thing. We purposefully moved to a state without income tax. We would rather pay sales tax. Why should we be punished with higher taxes for making good and healthy choices.

Businesses have become too big to fail, so intertwined with each other as trading partners. Spreading the risk, but then not taking the fall, putting the losses onto the government and the tax payer.

The other side of the coin, though, is to compete on the international markets and get the huge billion dollar projects they have to be big and international. I can't wait until some think tank comes up with a solution. Until then I am hunkering down with a survivalist instinct, stocking food like the Mormons and preparing for a long siege.