The So-called $83B Bank Subsidy

Our modern banking system has many huge problems - mostly the fact it seems to be run and allowed to be so run by socioaths.

BUT: A clarification on that "$83 billion subsidy" proclamation.  It is not what it seems.

The government does not give that money to banks - the so-called "subsidy" arises from a standard central banking function: "lender of last resort."

IF a regulated bank is in trouble and having trouble attracting sufficient deposits to remain in operation, and IF the central bank decides it is a temporary situation and the bank can be restored to profitability, THEN the central bank (in the US, the Federal Reserve) will lend money to that bank to restore it.

Now, most people don't know that banks are constantly lending money to each other, large amounts of money - to help maintain reserve deposits and as a central part of the money payment systems among banks, etc.

Those loans are made between banks at the "Fed Funds rate," a rate set among the banks (NOT by the Federal Reserve.)  And the Fed Funds Rate is the rate on which all other rates are based - commercial loans, consumer loans, credit card rates, etc.

Like all loan rates, the rates reflect the perceived risk that the borrower will default.  

Because of the lender of last resort policy, the perceived risks of inter-bank lending are lower, and that keeps the Fed Funds rate low, which in turn is reflected in all other loan rates.

That "$83 billion subsidy" is the calculated savings from lower interest rates which arise from the "lender of last resort" policy.

So (1) it is not money going from the Fed to the banks, and (2) it keeps interest rates throughout our economy lower - and in that sense is a subsidy for all of us. 

FB Group "Kick Butt Liberals" Kicks My Butt

I was kicked off of a "liberal Facebook page today because I objected to a "joke" which I believe promoted rape culture and considered offensive

Here is the exchange (I have deleted posts which addressed the other political content of the thread.)

QUOTE

David Allen
******GOOD MORNING FELLOW BUTT-KICKERS******

Today is Wednesday. It’s Hump Day. So feel free to hump the co-worker of your choice.

Okay, I know. It’s an old joke. But I think it’s still a good one. 

. . . . [Text on another issue deleted ] 

From the admin team at Kick Butt Liberals. HAVE A GREAT DAY!!

David Allen 
Kathy Harbaugh 
Maxine Levy
Bill Pelland
= = = =
[Note the attempt at a polite tone]
Bob Walker @David Allen >>Okay, I know. It’s an old joke. But I think it’s still a good one.

Ahhhh, I'm not so sure. It has a suggestion that non-consensual sex is OK - aka "rape culture.

I hope you'll reconsider your take on this one. (Not too long ago, I would have agreed with you, but hanging with feminists, including my daughters, has been a great education.)

2 hours ago · Like
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David Allen Sigh...it's a joke. If I ever get so bloody PC that I can't take a joke, then wrap me in my shroud. I'm dead.

I have no intention of offending anyone, but the only way to be certain not to offend ANYONE is to not talk at all.
about an hour ago via mobile · Like · 1
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Bob Walker @David Allen >>Sigh...it's a joke.

If it is a joke, it sure as hell isn't funny. And this isn't a matter of "PC" - this is a matter of promoting or objecting to rape culture

If you happen to work in either of the offices my daughters work in, I'll encourage them to castrate you. On a Wednesday only, of course.

Only joking..... Right?
about an hour ago · Like
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David Allen Bob,. I am currently on a cell phone, & I cannot p.m.. So I am going to tell you exactly like it is here now. nowhere in there joke was there even a hint that sex was going to be non consensual. You are whining over something that doesn't exist.

if you have a problem with the way I, or any other admin posts, then you may feel free to leave.
about an hour ago via mobile · Edited · Like · 2
. . . .
Bob Walker @David Allen >>nowhere in there joke was there even a hint that sex was going to be non consensual.

What about "So feel free to hump the co-worker of your choice." In case you missed it: "YOUR choice."

40 minutes ago · Edited · Like
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Bill Pelland Bob Walker It is time to let it go. It is obvious you do not care for the joke. On KBL we allow (even encourage) humor. Not all our members think all jokes are humorous - so be it. There was much in David Allen's post of value politically speaking and that is what this page is about. I strongly suggest you concentrate on that portion of David's post!
35 minutes ago · Like · 2
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Bob Walker >>It is obvious you do not care for the joke. 

Promoting the rape culture of today isn't a joke

.
>>& I cannot p.m..

I believe this discussion should be held in the light of day for all to see.

.
>>if you have a problem with the way I, or any other admin posts, then you may feel free to leave.

I happen to like this group. But I think your "joke" was, at best, in poor taste. If you have a problem with my disagreeing with you, feel free to ban me.

But if you do so, consider just how liberal you really are.

.
And perhaps you might consider consulting with the other moderators.

If they all agree with you that "it's just a joke," please let me know because I will want to leave..
21 minutes ago · Like
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Bob Walker I'm curious as to what the other administrators think: Maxine Levy, Kathy Harbaugh, Bill Pelland. 

Note: "On Oct 21,2013 (9 days ago) David Allen became the 4th admin at Kick Butt Liberals."
17 minutes ago · Like
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Bill Pelland Bob Walker- I am an admin and the only other one online. I sent you a personal message which is what you should have done in the first place. I am TELLING YOU NOW - Let it go!
15 minutes ago · Edited · Like · 3
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Maxine Levy Bob, as an administrator you want to know what I think. Let it go and really sometimes it is no one's business what I think. KBL is for the members.
9 minutes ago · Like · 1
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Bill Pelland Bob Walker One thing you have to realize is that while David Allen is a new admin he (Like I) are long time members of KBL. Kathy Harbaugh and Maxine Levy have entrusted us with this responsibility and we have their full backing and faith. When one of us speak, we speak for all.
about a minute ago · Like · 1
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Bob Walker QUOTE
Your [Personal Message] message will go to Maxine's Other folder because you aren't connected to her on Facebook. See More
END QUOTE
a few seconds ago · Like
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END QUOTE

And these PMS

QUOTE
Conversation started today
Bill Pelland
10:47am
Bill Pelland
I've asked you nicely to drop this - Please comply.  I am an admin for KBL.
= = = =

Bob Walker
11:03am
Bob Walker
"Kick Butt Liberals FB page pledges to the members in providing a forum which is comfortable for all members."
That joke made me, and I'm sure, other people uncomfortable. 
I'm sorry you can't accept that someone would disagree with you.
= = = =

Bill Pelland
11:05am
Bill Pelland
Your [sic] out of here!
= = = =

Bob Walker
11:06am
Bob Walker
LOL.
= = = =

Bill Pelland
11:10am
Bill Pelland
My initial PM:  I've asked you nicely to drop this - Please comply.  I am an admin for KBL.
Bob Walker
11:14am
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Bob Walker
>>My initial PM
So?  Do you think I will immediately look at the PM's I receive
I will likely post the exchanges on my wall for folks to see KBL's "sense of humor" and willingness to accept criticism.
= = =
END QUOTE

And this screen shot

Socialism in the US - The Real Radicals

There is a slogan floating around the internet announcing that "The time is now to stop calling the Democrats the "Democratic Party" and start calling them what they really are, the Socialist Party"

Let's think about that, and the assumption that socialism is inherently not American.  Let's start with a definition of "socialism."  Such as:

"Socialism is an economic system characterised [sic] by social ownership of the means of production and co-operative management of the economy....'Social ownership' may refer to cooperative enterprises, common ownership, state ownership...."  http://en.wikipedia.org/wiki/Socialism

Then I'd say something like, "Historically, we in America have understood that some things are best left to private enterprise, such as industry and many service businesses; and that some things are best left to socialist enterprise, like the post office and the military, as well as  municipal services such as police and fire safety, schools, trash collection, water distribution.  

"We've also traditionally believed services such as higher education can be served by both public and private non-profit institutions.

"And many services and activities have been traditionally allocated to the two systems acting cooperatively, such as road construction, which done by private enterprise on behalf and for the benefit of the public, and paid for and administered by public funds.

"Our hospital systems used to be the same, involving both public sector and the private sector.

"The idea that everything should be done, and that everything is best done, by private enterprise is a very modern and very radical idea advocated by powerful and yet extreme elements in our political system."

"True conservatives seek to retain the blended systems which have served our country so well over the centuries.  The radicals who insist on privatizing governmental services have a heavy burden of proof - and the evidence of the last 30-40 years does not support their radical ideas."

"When the only people who benefit from pure capitalism are the capitalists, then it is hard to argue that such an extreme form of economic organization is successful, from the point of view of "we, all of the people."

Rewarding Risk Takers

Conservatives argue that most of the wealth produced in our country should go to the investors - after all, they are the ones who have "taken the risk."

What about the workers.  No risk?

A worker risks his entire livelihood on whether the managers will screw up.  And whether the managers will decide to ship the jobs overseas or to some other state that cuts 'em a tax deal.  On whether the managers will decide they don't like his haircut or sexual orientation or type of car he drives and fire him.

A worker risks his livelihood on whether a venture capitalist will invade and and gut his pension and milk the company of its assets and toss it, shriveled and gutted into the gutters lining the "free market" abattoir. 

The idea that the capitalists deserve most of the wealth produced in our nation because they are the one's who "take risks" ignores the cold bright light of waking reality.

Some History of The Fed

"Get rid of the Fed" some guy on youtube screams.

Let's look at history. Modern commercial banking developed pretty much in tandem with the industrial revolution.

In the industrialized nations, under the "free markets" practices which were followed, there were rounds of systemic banking crashes roughly every 15 years. (Krugman argues every 5, but it depends on what you consider as included as a systemic crash.)

The Fed was formed in the early 1900s, primarily as a clearing bank - helping banks in one area of the country clear checks deposited with them which are drawn on banks in other areas.

In the early 1930s, following the crash of 29, the Fed was given expanded powers to regulate banks. Their central mission was to support "the safety and soundness of the banking system." (When I worked on the legal aspects of banking projects involving new products or variations of old products - one key part of every submission to the Fed in support of the products was an analysis of how the new product and how we would handle it conformed to safety and soundness principles..)

Through this role of the Fed, American commercial banking was stabilized, and the periodic and regular rounds of crashes were eliminated. We had a stable banking system from the 30s to 2008. (BTW: in case your thinking about the S&L crisis: The S&L crisis didn't involve fed regulated banks - S&Ls were not and are not commercial banks - and the S&L crisis arose from congress giving S&Ls vastly expanded powers with no increase in regulatory oversight.)

In the mid 80s, Reagan appointed libertarian Alan Greenspan to head the Fed. Greenspan was and remains a libertarian who is opposed to government regulatory power. (He was a personal friend of and was mentored by Ayn Rand.)

Greenspan did not see his job as using a regulatory structure to assure bank system safety and soundness. He believed the banks would self-regulate, acting wisely to protect their own interests. (He did admit after 2008 that his belief was a mistake.) He reduced regulations and regulatory compliance. He actually saw his job as supporting the banks in whatever they wanted to do - not to pursue safety and soundness goals.

For up to 80 years the Fed provided us with the most stable banking system I have ever read about or experienced.

The "Libertarianized Fed" is the disaster - get rid of the libertarian influences and let the fed get back to promoting safety and soundness - and get away from supporting them whatever they do.

Getting rid of the Fed is essentially what Greenspan did - with disastrous consequences.

The Fed Audit Doesn't Say

The audit of the Fed is out, and there are some people screaming -becasue they don't understand the basics of banking.

I wrote this on FB in response to one who claimed "not one dollar of the 16 trillion was repaid.

?>>money not repaid

That is one thing he got completely wrong. I think, but don't know, because he doesn't actually give sufficient details, that he read the "outstanding balance" figures of 0 as meaning the debt were forgiven, or somehow not repaid.

The report is clear, though, that money's lent were repaid. Do a word search in the report [http://www.scribd.com/doc/60553686/GAO-Fed-Investigation] for "repaid" and see the many specifications that monies were repaid. The youtube guy is just whacko on this point. (and it isn't the only thing he is whacko about.

And yeah, the interest rate charged thew banks sucks - as I said, there are many serious problems with the fed - largely, IMO, the result of Greenspan's running it.

But the guy who did the video is still an idiot

He mentions Table 8: as I suspected, the guy doesn't understand the concept of revolving credits. The lead-in to table 8 explains it, to a certain degree: 

"Table 8 aggregates total dollar transaction amounts by adding the total dollar amount of all loans butdoes not adjust these amounts to reflect differences across programs inthe term over which loans were outstanding. For example, an overnightPDCF loan of $10 billion that was renewed daily at the same level for 30business days would result in an aggregate amount borrowed of $300billion although the institution, in effect, borrowed only $10 billion over 30 days." See page 130

Under a revolving credit, a loan is made in a certain amount, repaid, remade, repaid, remade, etc.

If you have extended a $10 revolving line of credit to me, and I have drawn it down, repaid it the next day, drawn it down again, repaid it, 10 times - have I borrowed $10? (the maximum amount of the risk at any one time) or have I borrowed $100?

What if I borrowed that $10 for the full 10 days, instead of cleaning it up daily? You wouldn't say I've borrowed $100 dollars, right?

Requiring the periodic cleanup (in my example, and in the audit reports explanation, daily) is actually more restrictive and safer from the lender's point of view than letting run for a longer term.

Paul 'Pheidippides' Ryan

The man we can all believe in....