BREAKING: Trump said to consider breaking up banks

[GnauzBookOfRhymes]

Lmao at anyone believing this shyt. Just some shyt he heard someone say earlier that morning probably.

 

[Menelik II]

Republicans are marching ahead with a mammoth 593-page bill to deregulate Wall Street

 

[Menelik II]

Would it really?

It's like breaking up Standard Oil. All they did was break up into smaller pieces for what was ultimately the same owner.

I look at this like a stock split. So you broke them up? All that means is that Wall street gets to put even higher and more fraudulent valuations on smaller pieces. It's BS.

Want to really straighten the banks out?

Force the Fed to make loans to small business owners and home loans at the same favorable rates the banks borrow from them from. Elizabeth Warren also had a great idea where the Fed would have to make student loans at the same rates. This in effect nationalizes the banking system which -- funny enough I think I'm for at this point.

this wouldn't make sense for many reasons - its a terrible idea

 

[Robbie3000]

Lol... or not

Seems like Congress and Wall Street are going about their business without a care about what Trump thinks.

This dude has effectively bodied himself through his incompetence.

 

[the cac mamba]

this wouldn't make sense for many reasons - its a terrible idea

expound

 

[Jhoon]

If you believe him, you're as gullible as the people who voted for him.

 

[Meta Reign]

this wouldn't make sense for many reasons - its a terrible idea

It's not only a great idea. It's a just one.

 

[ADevilYouKhow]

Nothing Commie about it. Infact it's the right thing to do constitutionally. Congress is suppose to "coin" the currency.

If it were up to me I would immediately nationalize the Fed and allow citizens to directly take out loans at near zero percent. I'd allow banks to compete for the less credit worthy. I'd allow states to create banks with competing currencies backed by whatever they choose.

Congress can't even form a budget. Most of them know next to nothing about anything they should have no say in monetary policy.

 

[Robbie3000]

Would it really?

It's like breaking up Standard Oil. All they did was break up into smaller pieces for what was ultimately the same owner.

I look at this like a stock split. So you broke them up? All that means is that Wall street gets to put even higher and more fraudulent valuations on smaller pieces. It's BS.

Want to really straighten the banks out?

Force the Fed to make loans to small business owners and home loans at the same favorable rates the banks borrow from them from. Elizabeth Warren also had a great idea where the Fed would have to make student loans at the same rates. This in effect nationalizes the banking system which -- funny enough I think I'm for at this point.

I don't think you understand what the Fed does in reality.

 

[Menelik II]

It's not only a great idea. It's a just one.

expound

ok, the Feds mandate is to 1) keep a stable inflation rate, stable growth/unemployment and 2) regulate the banking system, reduce systemic risk.

So dealing with the first part. The bank has a few tools but the main ones are setting the interest rate on its loans and controlling the money supply in the economy, e.g. increase the money supply / loans will lower the interest rate and vice versa. So far so good. The bank also defines the reserve requirement; how much money banks have to keep on deposit from the money that is lent to them. e.g. Fed lends chase $100M, with a reserve requirement of 10%, chase needs to hold $10M incase shyt hits the fan. Chase can then lend out $90M at various rates to various customers, businesses etc.

right. So in the above example Fed has lent chase $100M, then Chase lent out $90M to Wachovia, they then lend out $81M to Exxon, and so on and so on. Eventually the fed has effectively created $1Bn of money supply in the economy from lending just $100M, due to a multiplier effect.

If the FEd lends directly to small businesses there is no multiplier effect, their $100M loan, only increases the money supply by $100M - Sad!

If the fed reduce the money supply IRL they can just call in the $100M from chase, and they stop lending or recall that money from the wholesale market. Quickly the supply reduces by $1Bn in the economy. If the Fed tried to call in $100M from small businesses they wouldn't get their money back, people would say "but ive got 2 years left to pay you". So there is a big asymmetry lending directly to customers, you can increase the small by a small amount, but you cant reduce it.


Now, The fed deals in wholesale rates, they are not geared up for calculating each individual's counterparty risk, retail banks have huge departments for that. They work out Blockbuster video is high risk so they charge them a higher rate as there is more chance they will default on the loan. the Fed is wholesale not retail. this is like asking a microchip producer to also start making laptops AND not sell them at any more of a profit!

Added to this, you would be asking 100,000s of companies to line up at the federal reserve bank to speak to their relationship bank manager to talk about their individual business needs. Just wouldn't work. The fed would need to employ 500,000 people not the <1000 they do at the moment.

You were saying all borrowers should all have the same market rate, this will create a huge moral hazard - whether your risk is high or low, you still get the same loan rate. Suddenly there is no benefit being prudent and sensible, anyone gets a loan regardless whether you're a crackhead or california state. Banks borrow at low rates as they provide a specific service for the fed, and they have very low default risk.

Lastly, people are less likely to pay the fed than retail banks. People think 'the govt already have money' or think that the debt will be forgiven, look at their attitude to student loans.

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so if you were to do your utopian ideal of the fed lending to small business and individuals at market rates
1) massively reduce the effectiveness of monetary policy.
2) monetary policy would would be asymmetric
3) you would have to increase the scope and size of the Fed by a factor of 100s
4) significantly increase the loan default rate overnight
5) massively increase the moral hazard - as high or low risk individuals borrow at the same rate.

 

[TransJenner]

I hope the SEC is paying close attention to the trades that are going on

Market value will be sanctified

 

[Anerdyblackguy]

I doubt this will happen, but if Trump pulled it off, I would salute him for this.