Money Matters!

Size does matter when it comes to MY bank account. When my retirement funds disappeared, when everything else these guys at the banks told me seems to be crumbling away and there seems NO WAY to get through the last bailout package without turning over a new set of government money that seems like throwing good money after bad, then, I am just as worried as the next guy. Over the years I have learned that there are very few people who can actually predict what is going to happen with the stock market. So, this is what I have always figured. The stock market is a crap shoot (a gamble) now matter how you slice it. What the hell is wrong with us today? I just read something on Motley Fool, who I never got a bad report from yet. They say that the investment banks (investment banks means they gamble with out money to increase capital rather than wait to earn interest the way we do) have had some rough times. The report is: *"House of cards
And I really mean collapse. Of the big five investment banks, only Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) are still standing, with Lehman, Bear Stearns, and Merrill Lynch all either bankrupt or sold."


Same with the biggest retail banks. Citigroup (NYSE: C) fell from over $50 per share to under $5 per share despite huge cash infusions, and Bank of America (NYSE: BAC) looks to be getting there. Wachovia, the fourth-biggest bank, was acquired. Washington Mutual, the sixth-biggest, became the biggest failure in U.S. banking history.

Without government assistance, it seems likely that most of the top-tier banks would have collapsed. As if that weren't enough, the Bank Insurance Fund (BIF) -- which provides deposit insurance -- has less than $100 billion, enough to cover only 1.01% of outstanding deposits. Citigroup alone has over $600 billion in deposits. By itself, Washington Mutual would have drained the BIF if the Federal Deposit Insurance Corp. hadn't used sleight of hand to transfer WaMu's operations to JPMorgan (NYSE: JPM).

With widespread bank failures, deposit insurance would falter, and the taxpayers would be footing the bill regardless. That's why we see all these acquisitions -- because the banking system can't handle the failures. It's cheaper for the country to just save the banks.

The domino effect
If we do let the banks go under, there will be huge problems, because our whole economic system runs on credit. How many small companies use lines of credits to handle seasonality in their businesses? How many large companies rely on sales of commercial paper? If that money is unavailable, many completely viable businesses will go under because of liquidity issues.

Any company that uses debt is vulnerable. Procter & Gamble (NYSE: PG) is practically invincible in any normal situation. But it has $35 billion in net debt. What happens when its lenders ask for some of that money back, and it has to borrow at 15% to get the cash? Wal-Mart (NYSE: WMT) has $41 billion in net debt. When nobody wants to lend, how do you borrow $41 billion?

What happens when the farmers, truckers, and other businesses making up the backbone of our infrastructure, fail? Will there still be food on the supermarket shelves? I don't know, but I'm not eager to find out."

I follow the blogs and it doesn't seem to matter to some people whether our economy as a nation dissolves. I guess they don't realise that the day that happens is when we will have to resort to something, then, and only then will we end up having to resort to the exact same things that Republicans say they are afraid of. They don't seem to realise that they are leading to the road of all of their greatest fears. I never agreed that we should live on Credit instead of a Gold Reserve, Richard Millhouse Nixon (that's right, the same guy who helped give us the Watergate scandal) did that for us. So, at that point we live on credit (money lent to us by foreign banks) right now China is our biggest lender. I notice when the news stations talk about us borrowing money from China now they never use the word 'red' in front of it like they used to in order to remind us they were communists. You see, if we get too far into debt instead of working on fixing the national debt and we already owe most of our money to a communist country, what do you think is going to happen when they see us depending on them? What happens when they pull the plug? I am sure they are going to help us one more time as long as we let them dictate to us what kind of economic system we will set up to get enough money to survive. No, but the same people who are screaming about this becoming a socialist/communist society already are going to make that happen.

I just found an article which resoundingly cries the problems we have are deficits of the Clinton administration's insistance that the Fannie Mae and Freddie Mac lend money to people who couldn't afford to pay back the loans. And so, as usual, they are trying to make excuses for the people who are called (please pay attention to this first word) predatory lenders. Compass Bank and Bank of America actually had commercials in Arizona stating that they were giving home loans and that I.D. and background checks weren't necessary. Who were they telling that? I dare you to tell me that you don't think that was aimed at illegal aliens. Here is how that works. You sell them a house. they make the down payment, the first years monthly payments, then, you see that they have plenty of warning that the A.R.M. is getting ready to become unaffordable. their usual M.O. is to change fake I.D., become someone else, and disappear. You, as the lender, pretend they were renting the house while it was on the market, clean and do the repair work and NOW you resell the house as new again. The banks got in over their heads. Fannie and Freddie were but a portion of the housing crisis. And you people who don't live in places like this don't understand what kind of prices they were charging here for living space. 1.5 million for a condominium with one bedroom and 2.5 million for one with two bedrooms. I was working for the company who was donit the scaffolding for the job. They told us on the first day to be careful not to lean on the wall. It would knock a hole in it, because the wall was mostly styrofoam and really cheap plywood about a half inch too thin.

They built the places really fast, but they didn't worry about how well they did them and as usual, they built them like they were expecting more growth than we have seen here since the auto plants closed down in '81.

I was in Iowa recently and they look at you as if you have genitals growing from your forehead if you mention trying to sell a house for over 150,000 dollars. So, imagine what they would think about farm workers buying a house in Scottsdale. That is a good part of what happened to the housing market. I am a construction worker, so I saw it first hand.

And now there are those of us who were paying on time, had our house or condo/townhouse paid for, and then all of a sudden trying to get a credit card or loan became like asking to be the victim of a loan shark. The only thing I find ironic is that those were the first banks to fail. They invested their money in houses no one wanted. The housing market does this every so often, especially during an election year. No one figured Wall Street to start all these problems that they did. Also, anyone who thinks this was an economic cycle and isn't normal better ask yourself how much money the Arabs had invested here. The Chinese almost own us now, literally. So, keep making waves and insisting to your congressmen that the stimulus isn't a good idea and you have sold us to them completely.

OK, now, let's talk about the "Federal Reserve Banking System". I found a video explaining the problems we always have with them. Please excuse the fact that the guy who is speaking is not Robert Redford. Federal Reserve.



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* Motley Fool "http://www.fool.com/investing/value/2009/01/30/this-bailout-is-great.aspx" >