I was reading the inimitably calm Frank Shostak on USA bank supervision when I came across this.
7%? 9% I thought it was 10%. High quality capital? Bank stock? Retained earnings?
That 7% reserve requirement is no favor to small banks. It just means in a downturn they are the first to go out of business, leaving the "too big to fail" sopping up these losers, and making it convenient for the few bigger banks to be bailed out. And if the banks go bust, stock does too. So bank stock is high quality capital? And retained earnings is an accounting entry. So essentially there is zero reserve banking in USA.
People always say busts "happened so fast!" No, only the end is fast, like death. We are way beyond fixing the dead economy, it is just a matter of when people realize.
The end of Hostess Twinkies seemed a surprise, except it took a long time. First, the pensions need to be looted and the unions need to be busted. These things take time. Then the new, lower cost factory can make even more profits than before.
Pension fund money is often company treasury capital so the company can spend it any way it wants, as long as it accounts for it. But in bankruptcy... oooops... all gone! (Social Security is even worse, but that is something else.)
Now, you can say "this is wrong, we need stronger regulations!" But the regulations in place were to cover the last set of abuses. You cannot regulate fairness. You can only foment good in freedom.
You all recall the Twinkie Riots. No? The Trucker riots of the 80s? Longshoremen riots of the 90s? The Pilot riots this of the 00s? No. Of course not. They all experienced the same thing. But since we have a "safety net" of freebies people do not object too much. There will be no changes, except the major change coming after the system crashes.
Whatever business you have will go up in value tremendously as so much else unravels.
Feel free to forward this by email to three of your friends.
On Tuesday July 2, US central bank policy makers voted in favour of the US version of the global bank rules known as the Basel 3 accord. The cornerstone of the new rules is a requirement that banks maintain high quality capital, such as stock or retained earnings, equal to 7% of their loans and assets.
The bigger banks may be required to hold more than 9%. The Fed was also drafting new rules to limit how much banks can borrow to fund their business known as the leverage ratio.
7%? 9% I thought it was 10%. High quality capital? Bank stock? Retained earnings?
That 7% reserve requirement is no favor to small banks. It just means in a downturn they are the first to go out of business, leaving the "too big to fail" sopping up these losers, and making it convenient for the few bigger banks to be bailed out. And if the banks go bust, stock does too. So bank stock is high quality capital? And retained earnings is an accounting entry. So essentially there is zero reserve banking in USA.
People always say busts "happened so fast!" No, only the end is fast, like death. We are way beyond fixing the dead economy, it is just a matter of when people realize.
The end of Hostess Twinkies seemed a surprise, except it took a long time. First, the pensions need to be looted and the unions need to be busted. These things take time. Then the new, lower cost factory can make even more profits than before.
Hostess Brands acknowledged for the first time in a news report Monday that the company diverted workers' pension money for other company uses.
The bankrupt baker told The Wall Street Journal that money taken out of workers' paychecks, intended for their retirement funds, was used for company operations instead. Hostess, which was under different management at the time the diversions began in August 2011, said it does not know how much money it took.
.....
Hostess Brands, which filed for bankruptcy for a second time in January, started liquidating its operations in November after the bakers' union refused to take another pay cut and went on strike. The liquidation will leave about 18,000 workers without jobs.
In November, a judge approved Hostess' plan to pay $1.8 million in bonuses to 19 executives, according to CNBC. Rayburn declined to take a bonus but also avoided a company-wide pay cut that he imposed, Hostess told HuffPost.
Pension fund money is often company treasury capital so the company can spend it any way it wants, as long as it accounts for it. But in bankruptcy... oooops... all gone! (Social Security is even worse, but that is something else.)
Now, you can say "this is wrong, we need stronger regulations!" But the regulations in place were to cover the last set of abuses. You cannot regulate fairness. You can only foment good in freedom.
You all recall the Twinkie Riots. No? The Trucker riots of the 80s? Longshoremen riots of the 90s? The Pilot riots this of the 00s? No. Of course not. They all experienced the same thing. But since we have a "safety net" of freebies people do not object too much. There will be no changes, except the major change coming after the system crashes.
Whatever business you have will go up in value tremendously as so much else unravels.
Feel free to forward this by email to three of your friends.
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