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Notably compared to the 2008 program, this time around they allow dealer banks to take out cash loans using... equities.. as collateral. Dealer goes bust, mark

Notably compared to the 2008 program, this time around they allow dealer banks to take out cash loans using... equities.. as collateral. Dealer goes bust, market takes a huge hit, and the collateral value shrinks in correspondence to that hit. Madness. And still the markets have barely even sniffed at these announcements. I expect before this is all over, POTUS will be making those daily coronavirus livestreams wearing fancy dress and cracking jokes just to keep people interested, because they've already spent every last drop of substance in the opening weeks of what promises to be a 6+ month journey.

aaronblohowiak 7y ago
BoJ has for a long time purchased equities (like the fed will sometimes buy treasuries and MBS.) ECB just announced this as well. Would you rather equities used as collateral or to have the fed purchase them? As collateral, it is an interesting statement of faith on their future value. If you follow MMT, we could do away with the whole “loan” shenanigans and just print it and distribute directly.
- toomuchtodo 7y ago
  If you print to buy equities, that’s reasonable, as long as you’re distributing the gains to citizens as UBI and not just buying to put a price floor on assets to maintain the wealth of a small subset of the country. So start buying up assets and fire up ACH transfers for citizens to get their dividends. “Backstop America”, not just the wealthy. That’s the injustice people take issue with (and rightfully so). We’ve seen this before, we’ve seen how it played out, and the appetite for it to be repeated is likely not there.
  - TAForObvReasons 7y ago
    The appetite for bank bailouts wasn't there in 2008 either, people took issue with how banks paid massive bonuses during that time. Still it happened. We're doomed to repeat the mistake again
    - adrr 7y ago
      Bank bailouts weren’t the problem. Massive amount of fraud the banks allowed was the problem. They allowed people to borrow massive amounts of cash with little to no income. None of the senior execs were prosecuted.
      - toomuchtodo 7y ago
        To be clear, the fraud was banks packaging up subprime loans as prime and then dumping them on the secondary market to unsuspecting investors who thought they were getting quality mortgage bonds (I gloss over the nuance of tranches and CDOs for brevity). This of course hurt homeowners who had loans made that never should’ve been made, but the root cause was investors not getting what they thought they were buying, and the resulting collapse in confidence. Homeowners were collateral damage, and as you mention, prosecutions were underwhelming (only 1 person was prosecuted).
        Gibbon1 7y ago
        I felt really bad about ordinary people that got clobberd and then just left to fend for themselves. Ordinary people don't buy houses as 'prudent investments'. They do it because that's where they are in life.
      - Ididntdothis 7y ago
        I thought it was the banks building derivatives on top of derivatives on top of derivatives and then paying off the ratings agencies.

aaronblohowiak 7y ago

BoJ has for a long time purchased equities (like the fed will sometimes buy treasuries and MBS.) ECB just announced this as well. Would you rather equities used as collateral or to have the fed purchase them? As collateral, it is an interesting statement of faith on their future value. If you follow MMT, we could do away with the whole “loan” shenanigans and just print it and distribute directly.

toomuchtodo 7y ago
If you print to buy equities, that’s reasonable, as long as you’re distributing the gains to citizens as UBI and not just buying to put a price floor on assets to maintain the wealth of a small subset of the country. So start buying up assets and fire up ACH transfers for citizens to get their dividends. “Backstop America”, not just the wealthy. That’s the injustice people take issue with (and rightfully so). We’ve seen this before, we’ve seen how it played out, and the appetite for it to be repeated is likely not there.
- TAForObvReasons 7y ago
  The appetite for bank bailouts wasn't there in 2008 either, people took issue with how banks paid massive bonuses during that time. Still it happened. We're doomed to repeat the mistake again
  - adrr 7y ago
    Bank bailouts weren’t the problem. Massive amount of fraud the banks allowed was the problem. They allowed people to borrow massive amounts of cash with little to no income. None of the senior execs were prosecuted.
    - toomuchtodo 7y ago
      To be clear, the fraud was banks packaging up subprime loans as prime and then dumping them on the secondary market to unsuspecting investors who thought they were getting quality mortgage bonds (I gloss over the nuance of tranches and CDOs for brevity). This of course hurt homeowners who had loans made that never should’ve been made, but the root cause was investors not getting what they thought they were buying, and the resulting collapse in confidence. Homeowners were collateral damage, and as you mention, prosecutions were underwhelming (only 1 person was prosecuted).
      - Gibbon1 7y ago
        I felt really bad about ordinary people that got clobberd and then just left to fend for themselves. Ordinary people don't buy houses as 'prudent investments'. They do it because that's where they are in life.
    - Ididntdothis 7y ago
      I thought it was the banks building derivatives on top of derivatives on top of derivatives and then paying off the ratings agencies.