Why is there still a "credit freeze"??

[kentuck]

Didn't we just give the banks, thru the Treasury, about $300 billion dollars? That ain't chicken feed, you know?

If they have all this money, then why are they refusing to loan it out? Why would they want to hang on to it so desperately?

It seems like a simple question to me. Why can't the banks loan out the money to folks like GM and other businesses? Why are they hanging on to the money so tightly? Did the Chinese inform our government that they would not buy any more of our bonds? So now the banks need a large nest egg in the banks just in case that happens? What other reason would they be holding on to the money for? Someone reported that the banks spent $160 billion of that bailout on dividends and bonuses??

So, why is there a "credit freeze"? Is it because the banks will not lend anyone any money? the question is why????

[midnight]

1. Why indeed? Thank you for asking the obvious that we all

should be asking a bit louder.

[Idealism]

2. There are a few potential reasons for this

1. There is nobody to lend to (compared to 8 months ago). Consumer spending has dropped off a cliff and it isn't coming back anytime soon, so people are asking to be lent to less. Jobs are being slashed everywhere, so payroll lending isn't as demanding as it once was to banks.

2. The banks are in such a precarious position, holding hundreds of billions in assets that have literally no discernable value, that they are hoarding cash to stave off potential runs and bankruptcy.

Another thing to point out: There is no way the $160 billion figure is legit, lets take the tinfoil hats off people

[Two Americas]

8. that is funny

Yeah, damned people won't borrow money, so I guess we will have to hang on to their money!"

If "there is no one to lend money to" what did they need the bail out for?

If the banks are "in such a precarious position" what does that say about the rest of us?

The bail out was sold on the idea that it was necessary to help the economy, not help the bankers.

[Idealism]

14. I should point out the reason for the bank bailout

was to buy up troubled assets off the balance sheets of these banks. In the middle of the process, Paulson changed his mind. I assume the reasoning for this was the banks would go under if there wasn't direct liquidity leaked into them, and the whole premise behind TARP was quite silly to begin with, really. The banks aren't in trouble because they don't have the money to lend to people, they are in trouble because many of them owe more than their assets are worth, and those that aren't upside-down in their values yet may soon be, due to the collapsing prices of real estate and mortgage backed securities that practically all these firms bought by the boatload.

And to reply to your comment, what the sad state of affairs means to us: we are all in for a rough ride, to say the least, over the next few years :(

[kentuck]

15. Thanks for those encouraging words...

So basically, the message is: "We are Screwed!" ?

[Idealism]

16. Sorry :(

It is in my estimation that I am simply being realistic about a probable future. If you plan for the worst, so to speak.

I don't think we are all screwed, it just won't be the pain-free living many Americans are used to.
When you look at global economies, all of them practically are in the trash, some for differant reasons. Our biggest nemesis, Russia, won't be able to accomplish much for years down the line due to the recent tank in the commodities market (Oil accounts for 80% of the economy in Russia), same with Venezuela. China will be hindered by the fall in consumer spending, and it may precipitate violence in the region. Some experts say China must grow at a 10-15% rate per year to sustain its insatiable appetite for expansion, and to keep civil disobedience to a minimum. Without that, the 1 billion plus could get antsy, to say the least. Each passing day the Middle-East's influence over America lessens just a bit, and with no resources outside of oil really, the future prospects don't look so good. So, to review, yes it will hurt, yes it may be long and ugly for awhile in the US, but globally we will be fine because everyone is in the same boat.

[SoCalDem]

48. people are tapped out, and probably are having problems paying off what they owe NOW

and are unwilling to take on MORE debt..and when banks look at the balance sheets of people with excessive debt, they are less likely to loan them MORE money.. Banks have gone back to the "olden days" when it comes to loaning money.. When we were a young married couple, we always used to laugh about how the only way the bank I worked at, would lend money..was if you proved to them you did not need it:)

We had to pass up a 4 bedroom split-level house on 3/4 acre..ON Lake Michigan because we could not come up with 30% down...selling price $24,000.00..:)

[marketcrazy1]

3. because banks have much more

in losses coming and they know it, they are hoarding cash against future losses, also they KNOW the economy is crashing, look at the jobs reports getting worse every month! why risk lending when the chances are high that a good percentage of loans will go bad! they cannot afford the losses they are taking NOW!. they MUST be careful to avoid more losses going forward, hence tight credit. someone who qualified for a loan last year may not qualify now and even fewer will qualify next year, loan rates are going to go up even a prices drop.

[kentuck]

5. If that is the case....?

Then how is our economy supposed to recover??

[zagging]

9. Recovery reschmovery

Uncle Sam just sold 30B worth of 90day bonds at zero percent interest. Zero-fricking-percent There are some big money holders out there who refuse to put their money into banks and equities, and figure the US treasury is the only somewhat reliable game in town. They figure that principal preservation in US T-bills is the only way to be ahead of the curve for the short term, forget profit.

Hang on to your hat, or ass, or whatever you can hang on to.

Edit: The princiPAL is our PAL!

[earth mom]

40. I'm surprised more people on DU aren't taking note of the fact that the mega rich have ZERO faith

in the market.

That they are parking their money like this should not only shock the hell out of all of us, it should piss everyone off too.

Because it proves the Stock Market is nothing more than a Ponzi Scheme-Pyramid Scheme-Scam of Epic Proportions and the rich know it!!! :grr:

[zagging]

42. Scares the hell out of me

The banks know what's coming. They're the ultimate insiders who leak to their friends. What kills me is that nobody in the press is really ringing the alarm bell. It's being published, but not as it should be. Bought and sold.

[earth mom]

47. Rich rethugs own the media, so don't expect any truth from them anytime soon.

If it wasn't for the internet, we would have little if any information about what's really going on.

Which is why the rich bastards are also trying to gain control of the internet too. :grr:

[Dont_Bogart_the_Pretzel]

7. Also, for every lost job, there is one less loan given.

[Two Americas]

11. right

They should not risk landing money to us, dead beats that we are, but we should pour billions into their pockets because they have proved to be so trustworthy.

In other words, the defenders of Wall Street are now arguing the exact opposite position they were arguing before the bail out.

The corporations are hording the money to protect their own asses from the coming economic meltdown - that they caused - and the hell with us. Got it.

I do think the words "market" and "crazy" go together well, don't you?

[alittlelark]

59. So we gave them $ because they are crappy buisnesses?

THEY are intricately involved in this crash - THEY flew in their private jets to casually ask for $$$$$ and it was given to them w/ no strings attached.

Each and every one of them should have gone down. I'd rather have our economy die quickly (and be re-born more quickly) rather than this prolonged hideous demise.

They KNEW what was going on....that's why they were soooo desperate for our SS $$$$.

[Juche]

4. They probably fear it won't be paid back

That is the main answer. With a middle class that was on the brink of collapse anyway and a global economic slowdown they worry that any money lent will not be returned with interest. Too many people and organizations are already on the brink for them to think the money to be returned. PLus if the banks themselves are on the brink, a few bad loans could be a catastrophe. Bette to hoarde the money and use it to survive the crisis.

The long term solution to that, IMO, is to build a stronger middle class to increase financial security and demand which would mean more reliable healthcare, a strong union movement to spread the wealth around and tax cuts for middle class families and college students. As long as the majority of the american people are always one bill, illness or job loss away from collapse and have to go into debt just to survive you can't have any real financial security. If our middle class were a bit more stable this housing crisis which started the economic collapse would not be nearly as bad.

[elleng]

6. Doing their 'own' business; the people be damned.

Who just bought a chinese bank, with some of the $ 'we' gave them?

If not explicitly REQUIRED, they won't do it; they weren't, so they don't.

[marketcrazy1]

10. if you "force" banks to lend

who will they lend to?? and since they were "forced" to make loans who will pay for the ones that go bad? will we next "force" people to borrow?? if I were a banker i would not lend to a borrower who i felt might not be able to pay ( based on credit history, debt to income, and job stability )

[Two Americas]

12. ROFL

Do you have even the vaguest idea of how illogical your arguments are?

:rofl:

[girl gone mad]

37. I think he or she is right.

Forcing the banks to lend in the face of a depression is not a good solution. It would be smarter to just go ahead and nationalize the banks, lower fees and RAISE interest rates.

[Two Americas]

49. oh I agree

I don't think we should force anyone to lend. The point is, I don't think we should have been forced to bail them out.

[kentuck]

13. Perhaps the people should not have loaned the money to the banks??

Or did we just give it to them? And now they won't give our own money back to us?? Something smells in Denmark.

[jwirr]

19. The refusal to lend is NOW based on much more than just the ability

of the borrower. The banks know how close we are to a total meltdown and there is hardly anyone who will not be effected by that meltdown. Thus there is no one that can guarantee a payback. We are now driven by fear of the future, reasonable or not. Didn't some guy once say something about that?

[elleng]

24. I don't think I suggested 'force' anything.

REQUIRE is another thing. We give huge 'bailout,' in order to help things move, doesn't mean move to bank vaults, means move out into the economy, so 'require' such normal day to day transactions in order to stabilize economy.

How dumb to suggest any reasonable person would 'force' to make bad loans! Make the same loans they were making prior, like auto dealerships they'd dealth with for years, to maintain their inventory.

[alittlelark]

58. Wow....just....WOW.

:crazy: :crazy: :eyes:

[xiamiam]

62. you've got it wrong..

[gravity]

17. If you are financially sound, you can get credit.

There isn't a credit freeze anymore. It is just that the banks aren't willing to take the same risks in giving out loans because they don't want to be the next to go under. They are looking out for their own asses.

[Tuesday Afternoon]

18. If there is a freeze, then why I am still credit card offers in the mail? n/t

[Oregone]

20. Would you lend people money in an economy that promises everyone utter disaster?

Lets be honest now...thats the truth. You wouldn't throw your money around unless you knew and were alright with not getting it back. Well, thats the chances, because we are headed for the shit. Maybe if everyone decided to lend at once the economy would stand a better chance, but the fundamentals are not strong on so many levels its terrifying. You would be insane to think lending money will produce a positive ROI at the moment. Its not a matter of them having it or not.

[leftstreet]

21. Then maybe we should take it back

:D

Just to be on the safe side.

[Idealism]

23. When did we give them money?

When did you write a check to Bank of America?

It wasn't us who will pay for this, if it ever gets repaid, its our children (or maybe their children).

[Two Americas]

27. oh

:silly:

[kentuck]

28. When our Congress, which represents us all...

voted to give Henry Paulson and this White House $700 billion dollars to bale out the "troubled assets". They "agreed" to only take half of it from us this time - they could ask for the other half later. After all, these folks were financiers, they were smarter than us common citizens. Who were we to question what they were going to do with the first $350 billion installment?

Feel like a number....

[Idealism]

31. It was a rhetorical question

We haven't paid them out of our pockets, future generations will, so to respond to the other poster asking why don't we take it back- it wasn't ours in the first place.

[kentuck]

33. Then who's was it in "the first place"??

Is blind faith all that we have to back up the Treasury of United States? Is that the way our financial system works? I hesitate to say our "economic" system - perhaps there is a difference?

[Idealism]

34. Thats a silly question

Its being printed right now, who owned it before it was created?

[kentuck]

35. So it is worthless paper...

with nothing of value, such as gold or silver, to back it up? So the scam has been discovered? Save your copper, boys! :-)

[Idealism]

36. Thats the funniest part about this whole scam

The entire world economy is in the shitter, our stock market is awash in red ink, and the safest bet that can be made is US treasury bills. There is actually a -0.01% return rate on a 3-month t-bill now because there is TOO much demand for them! Its actually costing the US less to borrow now than it did earlier this year, yet we are in trillions more of public debt that we were before. Thats why inflation hasn't really hit hard yet, it still may in the immediate future, but as of right now we could be much worse off.

[girl gone mad]

38. Inflation won't hit anytime soon.

We've got deflation for the foreseeable future.

[Oregone]

30. You never gave money. You purchased fradulent securities and worthless assets.

You should be more concerned about having your government at least distribute them so you can burn them for fuel in the upcoming crisis.

[leftstreet]

32. True enough

[Two Americas]

26. insane

Before the bail out:

"Give us the money or credit markets will freeze and the economy will go down the toilet! If we can't lend money payrolls won't be met and people will lose their homes!!"

After the bail out:

"Loan money? Are you nuts? With the economy in the toilet? With people unable to keep their houses and everyone losing their jobs? We will be hanging on to 'our' money now. Hey, best of luck to you folks! Guess your headed for the shit. But thanks to you suckers, we will be fine."

Did we ever get hustled and ripped off.

[Oregone]

29. You got hustled, yes, with a smile on your faces

They were always going to do it. The entire fake first vote and all the PR was just to make sure the populace stays nice. So now everyone still thinks they live in a democracy that has a shred of integrity, yet your coffers and your children's coffers are empty. Despite such, with a smile, you will continue to help build wealth and shuttle it all proportionally to your democratically elected elite rulers. Every now and then, a "crisis" will encourage the flow.

[earth mom]

39. What you're missing here is that is OUR money from OUR taxes they are refusing to loan.

:grr:

[Oregone]

41. How am I missing that? Regardless, its their money...

You bought their junk securities...(with some of my money too before I bolted).

The shitty bill doesn't morally obligate them to lend it back to you. Do you ask your buddies for money after they clean you out in poker? Sure...but do they feel bad telling you to fuck off? Probably not.

[kentuck]

44. But who told them to play poker with our chips ??

:-) Isn't that against the law? Are you saying laws are only relevant for those at the bottom in our society??

[Oregone]

45. Essentially I am saying that...

Because they are meant to keep these virtual slaves in slavery and enforce the social order that the elite benefit from.

[JCMach1]

22. Because companies like CITI are too busy bailing out Dubai

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4653828

[kentuck]

25. What if the banks continue to refuse to make any loans??

Would that not drive all of us deeper and deeper into the crapper, so to speak? As our entire country slid into a depression, the banks refused to let go of very little of the money they stole from our Congress. What should be done then, if that happens??

[KakistocracyHater]

43. most markets awash in red ink

so then ,where did the money GO? SOMEONE has made money, they are pocketing it in secret, using all this as a distraction, like a stage magician. I'd look in Switzerland accounts, use that Act to 'follow the leaf lettuce', right up to the rat's nest. I'd also look in the most unexpected places too.

[kurt_cagle]

46. Banks are corporations

Corporations are chartered by a state or the federal government. What the Government gives, the government can take away. Should the scenario you describe ever come to pass, then the banks will be out of business, and the asset holders (the board of directors, et al.) can be sued for all lost assets. It doesn't happen very often, of course, but it has happened before, and I dare say it could happen again.

[SammyWinstonJack]

50. "THANK GOD IT PASSED!"

:eyes:

[TroglodyteScholar]

51. Just curious...

...have you, personally, been denied any credit or loans since the bailout?

[leftofthedial]

52. no regulation, no oversight

Paulson and Kashkari gave them the money as a gift

Why would they (capitalists) do the "right thing" with it?

[spanone]

53. because it was not a bailout...it was a handout...a freebie

[SammyWinstonJack]

54. BINGO!

:thumbsup:

[Blarch]

55. In the British bailout...

they got guarantees that the banks would loan the money. It was a condition.

[sarcasmo]

56. One of the banks bought a company in Spain for 50 billion. Biggest swindle in

American history.

[underpants]

57. Those silly little peons don't know what to do with money

How do you think all those Masters of the Universe got all their money?
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=409166&mesg_id=409166

[WhiteTara]

60. it's a giant ponzi scheme and they

have to pay up the chain or die.

[Horse with no Name]

61. Another thing that should really piss everyone off is

that gas prices are now what they should have been all along--before the trillions in futures were sucked out of Wall Street AND Main Street through our bank accounts and into our gas tanks.

[specimenfred1984]

63. The whole "bailout" is a propaganda construct based on a false premise

Banks never stopped loaning money. Banks created a huge network of fraud based on lies and crimes the same way Madoff did, by faking "investments" that never existed. Banks can't "write off" these fake products because they never existed to begin with. Nobody will buy these fake products from banks because, again, the products never existed. The banks said they had a lot of real estate worth a hell of a lot more than the real estate ever was and then the banks created huge fraudulent products based on insuring the fake products and created even more spin-offs of the fake products and sold them to everyone.

Banks have robbed us, defrauded us, betrayed us and conspired to do it all repeatedly. The fascist U.S. gov't currently in place is simply paying off their corrupt cronies because the gov't has been doing the exact same thing, defrauding the American tax-payer with fake wars, no-bid contracts, selling fear and all it's supposed remedies, paying for propaganda, rewarding corrupt cronies like Paulson, faking science, rigging courts, no-fly lists, NSA wiretapping and basically the entire military complex in which 70% of all Americans are invested in one way or another.

[unblock]

64. simply put, a lack of trust is not cured by mere wealth.

if i think you're going to go belly up, then the government coming in and giving me billions isn't going to change my opinion.

what would change my opinion is if i were convinced that the government would bail YOU out.

and therein lies the problem. with the decision to bailout SOME, but NOT ALL of the major cases, the government is throwing away a ton of money without properly rebuilding the trust that is the ENTIRE POINT of the bailout.

[kentuck]

65. It's almost like they woke up one morning and realized...

Shit, all we have are these worthless sheets of paper. We are busted. We need Uncle Sam to put some money into our banks. Maybe if we lie to Congress, they will fall for it? Then we can get rid of these worthless paper promises and put US Treasury notes in our banks? If we don't do that, it will be the end of the world for us. And, as far as the investment banks go, it probably would have been the end of their world. But Goldman Sachs was not going down without a fight.

The only solution for the people of this country, who actually bailed out the banks, is to stake a claim in each of the banks that accepted the bailout. We know that Citigroup is indebted to the American people for about $300 billion. Three-hundred billion dollars!! But how do we get that money back. We get our Congress to change the tax laws of this country so that these folks find themselves paying more in taxes. If they refuse to obey our laws, then our Justice Department will see that they remember the lesson of Al Capone. They owe us - the people.