Posts Tagged ‘banks’

Government May Have Partial Nationalization of Banks

Tuesday, February 24th, 2009

With all the concern about the Federal government nationalizing banks, you have to understand that there is a major incentive to NOT want to do that. Our country is based on capitalism, albeit it has been a modified form and with the last few decades we have been in what can be called world wide capitalism at it’s best. People and countries moving markets left and right. We didn’t have any checks or balances. Okay, so moving forward what can we do?

For the short term, unless somebody comes up with something else, the Federal government is looking to step in to help cover bad loans. Personally, I think it is a bad idea and that businesses should be allowed to die off if they are bankrupt. People have been cut off left and right already so at this point there isn’t much left of a lot of the beasts except a debt filled corporate carcass.

Unfortunately, that isn’t how things look to be going and a lot of companies may be saved with the Federal govt stepping in. Saved is a generous word since there will be major accountability issues and probably a lot more red tape than the companies had before.

Ultimately it isn’t going to help the average taxpayer until jobs are being created again and wealth starts getting back into the hands of the American and subsequently world population.

There will be more of a freefall in the stock market like Monday was if more and more banks get partial or complete subsidies to run their business.  The share values of stocks will be worth next to yuck and phooey in terms of price.  Where is a good place to put your money?  I am open to suggestions.

Be safe and healthy!

 

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  Practical Money Making-Surviving Recession, Layoffs, Credit Problems, Generating Passive Income Streams, Working Full Time or Part Time and Retirement

 Kim Isaac Greenblatt

Government May Have Partial Nationalization of Banks

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Why Banks Aren’t Lending –Yet

Tuesday, December 9th, 2008

Question for Kim: “With all this bailout cash the banks are getting, how come they aren’t lending buckets of money out yet?”

My answer is that I think I have figured it out so bear with me as I explain it.  They are sitting on cash or they are investing it in US Treasury instruments.  Like you, I thought at first that this might be a bad idea but if you stop and think about it, this may (and the operative word here is MAY) be the way to go for a very short time to try and balance between the depression we are in and the huge monster called inflation waiting just around the corner.  I still think it isn’t fair that the banks get to have a huge cash rebate while the rest of us are scrambling to see what we need to do because the money rules changed over the last ten years (maybe more or less).

 

 

 

 As I’ve stated in another article, I think we are in financial constipation mode.  The money from the Fed is “stuck” if you will in banks who are scared and waiting to see what else the government is going to do.  Right now, some banks are taking the money they have received and turning around and buying T-bills.  That may not be a bad idea because the Federal government needs to get money invested back in itself.  As we all have seen, the Fed (and other governments) can always print more money when they need it.  The trick is to use it to fight inflation.

There isn’t really a trick that they can pull out of their hat to fight deflation other than to get more money into the system.  And there is the problem.  There is already plenty of money out there so by rights, things should be adjusting up in cost.  They aren’t yet because people don’t have the money to spend.  Companies (well some of them) don’t and the Fed is trying to get more money coming in for them to use so the US dollar doesn’t stay flattened like a leaky tire.

The next step for the Fed and the banks should be to get their proposed infrastructure programs going and this time, keep the money domestically and fairly distributed so locals (that is people in the United States) can benefit from the money and not outsource the business to countries that will turn around and bad mouth us anyways.

As you know, I am an open minded international kind of guy but right now, if America falls too much further financially, the rest of the world will have big problems as well so we have to take care of things here at home first.

It is only a few more weeks until our Presidential Elect gets sworn in to become President and he is already hustling on getting some programs going.  The finalized tax regulations for the Fed should be coming out soon (fingers and toes crossed) and we can see there what might be on the books to help individuals directly.

None of this will be an overnight fix, so make sure that you have enough in savings and access to food, clothing and shelter.  It isn’t the end of the world. It just seems like it these days.

Remember, we as a nation, will have a lot of debt.  We can always print more money to make the money, well, not as valuable, as it was to minimize the debt income.  We just aren’t there yet and nobody is quite sure what is going on or what will work or won’t.

So, back to your original question, when will they start lending again?  (I get asked this alot these days).  Some of them are, though they are more stringent with their requirements.  If the auto industry gets their cash infusion or a piece of it (they may need to wait for the lame duck Administration to leave) there may be more cash going out in the next few months.  Remember that banks are in business to make money and they are over-reacting just like you or I would.  They were lending all kinds of money almost as speculators during the real estate boom and credit card issuance boom.  Now, they are freaking out and they may, in some cases for those of us with decent credit, be throwing the baby out with the bathwater by cutting their credit and not issuing money to people who need it. 

People have long memories when it comes to who helps them out in a financial pinch and they will learn that some banks may have a harder time getting and retaining their clients unless they really have great interest rates or go back to giving free toaster ovens.

 

  Practical Money Making-Surviving Recession, Layoffs, Credit Problems, Generating Passive Income Streams, Working Full Time or Part Time and Retirement 

Kim Isaac Greenblatt

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Future of Credit Availability

Wednesday, October 22nd, 2008

Question for Kim from a reader: “How come the banks are getting money and they aren’t kicking it down?”

My answer: I think the banks are kicking money down, though they are doing it slower and with tighter regulations than before.  The best analogy I can think of is that the pendulum has been swinging to the side of what I would call fiscal conservatism or tighter money.  Cash was free and easy for years and just by virtue of having a mailing address you could get offers for credit cards, home loans, etc. Bank reps were turning a blind eye to compliance with regulations, limits as to how much somebody could qualify for a loan, and something as plain as having 20% down as a home down payment. Times have changed-and it may not be for the worse over the long run. A lot depends on how the new administration gets projects going to put people to work so they can get paid, but I am getting off topic and on my soap box here.

Cash still can be come by but it isn’t free and easy as it was ten or twenty years ago.  I have talked to a lot of people who have had their HELOCS cancelled and after an appraisal, they have had them reinstated.

Did anything change in their credit situation?  Probably not.  The property values were finally looked at realistically and the bank/lender used a realistic more conservative valuation method – versus the blind computer method that they used for years and that gave a true example that not everybody in America is upside down on their mortgage.

The same can be said for credit card issuance.  People are still getting applications for credit cards and lines of credit so the money appears to be there – it is just that the bar has been raised back to the way it use to be decades ago where they actually expect to have reasonable valuations and down payments before lending money for homes and some sort of track record before issuing credit cards.

I wouldn’t be surprised to see credit tighten for personal non-secured lines (like credit cards) though that may be superseded by interest rates going up once the economy finds a direction.  That may not happen though for a few years since it will take some time for the economy to sort itself out and in the meantime credit may be a tighter than it was before.

So the solution?  Try and keep a positive cash flow, save money and pay bills on time.  Eventually, you will get credit card offers and when you do, watch the interest rates and use them sparingly and not as sources of income.

Whether you agree with the bank bailouts or not, the profitable way of approaching credit in any of its shape or forms (credit card, HELOC, line of credit, etc) is to remember that the purpose of it is to jumpstart or help out something, not to be used as an income stream.  The money is borrowed – that means that sooner or later that cash has to be paid back.  If interest rates go up, and they will over time, you don’t want to end up paying more money than you borrowed among other things.

On a separate note, I’ve started working on my next non-fiction book.  The book has to do with personal finance.  Now, more than ever, we have to not only make sure our own financial acts are together but we need to make sure that our children are learning to budget and watch their money.

 I will give you more information as it develops.  If you have any ideas or suggestions for titles, please drop me a line or a post on the blog.

Kim Greenblatt

 

You are reading the profitable blog and Kim Greenblatt answers a reader asking when banks will kick down money.

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