The Market : more control ?

Discussion in 'Politics' started by Spear, Sep 28, 2009.

  1. Spear

    Spear
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    Hi,

    Just after the start of the financial crisis, i wondered " Will the crisis change the habits ? ". Everyone was crying " Shame on the banks" " shame on the stock market " " shame on the traders " ....

    To be basic about my understanding of the financial things that brought us there, the banks gave money to people without being at least a minimum sure that people could give the money back, paying interests, and ... people were unable to pay back. Investors invested in that massively, encouraging the " system ", and brought them to bankrupcy. That's how i understood things.

    Here, the stock market isn't something many believe in, and it's almost easy to criticize it for many, even from my close friends or colleagues, always ready to ask for a tax of the exchanges, or point the finger on the fact 2000 people are being fired there so that the auctioneers can have their income.
    As i use to tell them, THEY are part of the system, THEY own stocks indirectly. As i told one of my colleagues weeks ago " When you go to the bank and get a life insurance, you ask for the maximum income possible, for the minimalist risk (most often), and the money you put in your " life insurance ", where and how is it invested ? Partly on the stock market, and mostly if you expect the highest income possible ". I want people to stop being hypocrits, and thinking that only " direct stock owners " play or are on the stock market. We nearly all own stocks undirectly.

    That doesn't mean i don't expect more control on the market. The first purpose of a bank is to lend money to people/companies, and to get more from the interest rate, and lend to someone else, and so on ....
    This MUST remain their first mission.
    Banks got money from the state to be saved, and when i heard yesterday " We're back on the same schemes " from a Wall Street Expert on TV, read Morgan Stanley giving amazing and obscene amounts of money to their traders (i guess you have to take a maximum risk to take a maximum bonus) ... i wonder " Does the market learn from its misinvestments ? "

    It's disappointing, i agree investors have to be paid for the risk taken, that's normal.

    Apart from that but on the financial thing, our president told on tv recently a fair share of a company's net income might be 1/3 for the company itself, 1/3 for the investors/auctioneers, 1/3 for the employees as bonuses. Honestly, i think it might be a fair and good idea, as a base rule.

    What do you think ? Are the " market " and its operators back on the same old rails, which will probably lead us to the same situation later ? What should we do ?
     
  2. Revmitchell

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    Here the federal government forced the banks to give out loans to people who were not credit worthy through Freddie and Fannie Mac. That was the primary beginning of this whole thing.
     
  3. twpaige

    twpaige
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    The first purpose of a bank is to make their owner's a PROFIT. Not to loan money. If they could make as much profit without loaning money (read 'taking a risk') you can bet they'd do it in a heartbeat.

    The only thing that we've done by bailing out these failed banks is to reinforce their improper loaning practices. We've said, 'Sure! Go ahead and loan $500k to that guy making $50k a year on an interest only loan... sure, go ahead and loan $200k to that family who's been on the job for a year, don't worry about making sure he'll pay it back, we'll back them. It's a free-for-all and the BIGGER you can make the problem, the more likely our wonderful government will swoop in and bail you out.

    It's a crying shame.
     
  4. Robert Snow

    Robert Snow
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    It is obvious that we need more control of the financial institutions. If not, greed will cause the need for another bail out in the future.
     
  5. KenH

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    If they couldn't count on being bailed out they might just be less greedy.
     
  6. Robert Snow

    Robert Snow
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    Agreed! But, since they control many lobbyists and many politicians, they can pretty much count on the American people paying for their greed again.
     
  7. KenH

    KenH
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    As long as the two major parties run things you are correct, Robert.
     
  8. Spear

    Spear
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    Did it ever happen in your political history (for my information) ? Since Republican & Democrat party exist, were they ever truly challenged by another political party ? If not, why do you think other parties have it hard to emerge ?
     
  9. billwald

    billwald
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    Get your facts straight

    "Here the federal government forced the banks to give out loans to people who were not credit worthy through Freddie and Fannie Mac."

    NOT CORRECT! The sub prime loans had a better payment record than the loans from high credit score people.
     
  10. Revmitchell

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    As usual you need to check your facts
     
  11. KenH

    KenH
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    The major parties control the state legislatures. The state legislatures control ballot access. The money that could be spent on advertising and party building is instead spent by minor parties on attaining ballot access.
     
  12. billwald

    billwald
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    I was wrong about timing however

    The law specifies that the funds must be invested in government paper. see

    http://www.ssa.gov/OP_Home/ssact/title02/0201.htm#act-201-e

    (d) It shall be the duty of the Managing Trustee to invest such portion of the Trust Funds as is not, in his judgment, required to meet current withdrawals. Such investments may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired (1) on original issue at the issue price, or (2) by purchase of outstanding obligations at the market price. The purposes for which obligations of the United States may be issued under chapter 31 of title 31, United States Code[12], are hereby extended to authorize the issuance at par of public-debt obligations for purchase by the Trust Funds. Such obligations issued for purchase by the Trust Funds shall have maturities fixed with due regard for the needs of the Trust Funds and shall bear interest at a rate equal to the average market yield (computed by the Managing Trustee on the basis of market quotations as of the end of the calendar month next preceding the date of such issue) on all marketable interest-bearing obligations of the United States then forming a part of the public debt which are not due or callable until after the expiration of four years from the end of such calendar month; except that where such average market yield is not a multiple of one-eighth of 1 per centum, the rate of interest of such obligations shall be the multiple of one-eighth of 1 per centum nearest such market yield. Each obligation issued for purchase by the Trust Funds under this subsection shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Fund to which it is issued, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest. The Managing Trustee may purchase other interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, on original issue or at the market price, only where he determines that the purchase of such other obligations is in the public interest.
    (e) Any obligations acquired by the Trust Funds (except public-debt obligations issued exclusively to the Trust Funds) may be sold by the Managing Trustee at the market price, and such public-debt obligations may be redeemed at par plus accrued interest.
    (f) The interest on, and the proceeds from the sale or redemption of, any obligations held in the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund shall be credited to and form a part of the Federal Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, respectively. Payment from the general fund of the Treasury to either of the Trust Funds of any such interest or proceeds shall be in the form of paper checks drawn on such general fund to the order of such Trust Fund.[13]
     
  13. billwald

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    BUT back to the IP

    In the old days people invested in stocks in companies that sold a good product at a fair price and turned a profit. An IPO or any stock that sold more than 5 or 6 times earnings was consider a "flyer," a gamble, not an investment.

    These days half the stock trades are made by computer programs when the program determines the price will rise. It is mostly statistical analysis. No one reads the prospectus or cares about price/earnings at the time the computer buys the stock.

    In other words, the stock market is a crap shoot that has nothing to do with investing.

    Further, the purpose of international companies is to sell stuff at a profit. There is no large (or medium size?) companies whose purpose is to provide jobs for the American working class. This is why a stock can rise when it is announced that production is going off shore and Americans will be laid off. Neither stockholders nor the management cares where the stuff is made or sold as long as it is made and sold at a profit.

    This is why only countries with large economies support free trade and why growing countries want protection for local industries - the established large economies have all the advantage.

    And why Lincoln's War was about trade regulations. The northern cotton mills wanted to force the Confederacy to sell them cotton but it was more profitable to sell cotton to England than to New England. Lincoln was trying to protect local industry at a cost to local agriculture. The big profit is always in manufacturing, not raising crops. This is even true in the dope industry. It isn't the growers who are getting rich.
     

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