Injin Posted February 20, 2009 Share Posted February 20, 2009 (edited) Matthew 16:2.3Jesus said: When it is evening, ye say, It will be fair weather: for the sky is red. And in the morning, It will be foul weather to day: for the sky is red and lowring. O ye hypocrites, ye can discern the face of the sky; but can ye not discern the signs of the times? Right, just another 143,999 to find. Edited February 20, 2009 by Injin Quote Link to comment Share on other sites More sharing options...
bogbrush Posted February 20, 2009 Share Posted February 20, 2009 So essentially what I’m driving at is are you sure that deposits are legally treated as debt, the same as bond investors? It doesn't matter. Let it all go, and then let us decide to give credit to what you and I know to be depositors in NewBank. Easy. The law is simply our will, let it be as we want. Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 Well actually we can draw the line where we damn well want. If these poorly run businesses collapse I have no problem with a collective decision to grant credit notes to authentic depositors (who placed funds essentially for safe keeping and to operate their normal transactions) and leave investors (a risk based activity to make money) to lose out. That's a decision for the people to take. What is the difference between a loan made as an investment and one made for safe keeping and how do you tell them apart? Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 Agree. It would just be a variation on the disastrous Gold Standard/ERM. Still think it will happen, as the big boys will have to choose between conflict (not necessarily war) and tying each other together. Perhaps, but it'll just create conflict further down the line - and not much further at that. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 What is the difference between a loan made as an investment and one made for safe keeping and how do you tell them apart? Did I mention that people who have put their money "into" the bank don't know they actually made a loan yet? I'd suggest doing it along the lines of who will drag you out into the street and hang you when they find out the truth, to be honest. Best off keeping those guys in the dark. Quote Link to comment Share on other sites More sharing options...
KingBingo Posted February 20, 2009 Share Posted February 20, 2009 What is the difference between a loan made as an investment and one made for safe keeping and how do you tell them apart? On one you earn the risk free rate, the other you earn the risk free rate + a risk premium. For the additional risk you take. Quote Link to comment Share on other sites More sharing options...
bogbrush Posted February 20, 2009 Share Posted February 20, 2009 What is the difference between a loan made as an investment and one made for safe keeping and how do you tell them apart? There are plenty of substantive differences. We could start with the documentation which would indicate the purpose of the money transfer. If it walks like a duck............. Line me up 20 examples and I'd be able to tell them from one another. Why seek a problem that isn't there? Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 You are hung up on a technicality. If the people decide that those who fell into the category of what they understood to be depositors can have credits in the NewBank, then they can. End of story. Nobody can say we can't do this.Other creditors such as foreign governments can go hang for the money. The old bank is just hosed down and left to rot. I am saying you can't do it because you can't tell em apart. Quote Link to comment Share on other sites More sharing options...
bogbrush Posted February 20, 2009 Share Posted February 20, 2009 (edited) I am saying you can't do it because you can't tell em apart. Sorry, but that ignores practicality. Remember, NewBank can do what it pleases on grounds it can create. Oldbanks assets are ALL lost. EDIT: To be more helpful, can you explain to me how you make an investment in a bank, what your investment is called and what you get, please. Edited February 20, 2009 by bogbrush Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 I am saying you can't do it because you can't tell em apart. Why do you think the system is unfixable? Why do you thinkl fraudsters like Stanford and Madoff have proliferated? Have £100,000,000 to tide you over while you think about the answer. Quote Link to comment Share on other sites More sharing options...
R K Posted February 20, 2009 Share Posted February 20, 2009 (edited) No, when you make a deposit at a bank, you lend money to the bank. They can do with it as they see fit (subject to "regulation"),Peter. Indeed. Hence why there is an FSCS, and why the govt. has refused to give an explicit guarantee on deposits beyond the £50k. I know the reason for this is ostensibly to avoid RBS etc liabilities becoming UK liabilities, but it also means they could, if necessary, refuse to honour deposits > £50k. Although I consider that to be right at the top end of extremely unlikely. Edit: We have already seen what happens here with B&B. FSCS was called upon to pay out to depositors and Govt. had to lend the FSCS the cash to pay them. Edited February 20, 2009 by Red Kharma Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 I do respect your contributions, and I'm sure you know what your talking about but I hope your either wrong misinformed. The reason I say this is probably my background in fund management. As a fund manager I made decisions on the way the funds money was invested, but it was never my money or the firms money it was held by the custodians and they simply granted us the rights to manage the money (even though we set up the fund and got the money in). If Bingo Asset Management ever went bust then the custodians could return the money back to investors, we would not be allowed to touch it. Now I specialized in AIM companies, which explains my lack of understanding about how banks are legally setup. And I appreciate banks also serve the custodian role. But I would be amazed if the money was not legally ring fenced. i.e. the bank cannot use deposited money for their own costs and liabilities, only to loan it out through normal course of business. If what your saying is right a bank could legally use my money to pay head office costs, rather than my money being reserved for lending, and the interest the bank earning on that normal course of business can be spilt, mostly to them but a small amount back to me. As I understood it the reason certain banks are in trouble is that their income on loans no longer exceeds operating costs. Whereas for example at Barclays income on normal business exceeds operating costs and debt servicing by £2Bn. So say a bank like RBS where to be nationalized, the deposits would continue to be legally ring fenced. The equity and debt holders wiped out. The cost of servicing the debt is wiped out and cash is pumped in to payoff trading liabilities. The bank returns to operating profit and is sold. So essentially what I’m driving at is are you sure that deposits are legally treated as debt, the same as bond investors? Yes, of course, which is why you get bank runs. I think you are confused about cash flow in banks – none of it is ring fenced, on a basic level it just goes into a big pot and is lent out. Regulators make sure that a high enough proportion of that pot is the banks own money, but when people take their money out of the pot, and the banks can’t get their loans back, then they have a problem. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 Yes, of course, which is why you get bank runs.I think you are confused about cash flow in banks – none of it is ring fenced, on a basic level it just goes into a big pot and is lent out. Regulators make sure that a high enough proportion of that pot is the banks own money, but when people take their money out of the pot, and the banks can’t get their loans back, then they have a problem. Only because they lied. Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 SPX at 666Obviously. Very good. Not far now, either! Quote Link to comment Share on other sites More sharing options...
Methinkshe Posted February 20, 2009 Share Posted February 20, 2009 Right, just another 143,999 to find. Don't fall for JW claptrap. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 Don't fall for JW claptrap. Back to 144,000! Bugger. Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 It doesn't matter. Let it all go, and then let us decide to give credit to what you and I know to be depositors in NewBank.Easy. The law is simply our will, let it be as we want. You are unable to make the choices. The only way to do it it is via the capital structure as I pointed out in the first post. Quote Link to comment Share on other sites More sharing options...
bagsos Posted February 20, 2009 Share Posted February 20, 2009 If what your saying is right a bank could legally use my money to pay head office costs, rather than my money being reserved for lending, and the interest the bank earning on that normal course of business can be spilt, mostly to them but a small amount back to me. So essentially what I’m driving at is are you sure that deposits are legally treated as debt, the same as bond investors? Re the bold bit, yes, in theory they are. There is no banking equivalent of State Street which holds all the cash as custodian. That's why their capital structures are in theory regulated, but the problem at the moment is that their head office costs, in the form of bad debts, are rising faster than they or the regulators anticipated. That's why they need more capital. If they don't get it, you don't get your deposit back. Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 Did I mention that people who have put their money "into" the bank don't know they actually made a loan yet?I'd suggest doing it along the lines of who will drag you out into the street and hang you when they find out the truth, to be honest. Best off keeping those guys in the dark. Did you? Maybe a lot of people don't, but those queuing outside Northern Rock 18 months ago had twigged to it I reckon. Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 On one you earn the risk free rate, the other you earn the risk free rate + a risk premium. For the additional risk you take. Come on... Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 (edited) Did you?Maybe a lot of people don't, but those queuing outside Northern Rock 18 months ago had twigged to it I reckon. They thought that the bank had "lost" their money. You can tell that people don't know how the banking system works because the interest rate they demand is so low. If everyone knew, the interest rate would rise in proportion to inflation caused + the risk, making FRB impossible. Oh haven't said it for a while - All banking is fraud. Stuff 'em. Edited February 20, 2009 by Injin Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 There are plenty of substantive differences. We could start with the documentation which would indicate the purpose of the money transfer.If it walks like a duck............. Line me up 20 examples and I'd be able to tell them from one another. Why seek a problem that isn't there? I've just given you two examples and you can't tell them apart, so why should I give you 20? Quote Link to comment Share on other sites More sharing options...
Extradry Martini Posted February 20, 2009 Author Share Posted February 20, 2009 Sorry, but that ignores practicality. Remember, NewBank can do what it pleases on grounds it can create. Oldbanks assets are ALL lost.EDIT: To be more helpful, can you explain to me how you make an investment in a bank, what your investment is called and what you get, please. I don't, because I don't try to make the distinction that you make. All loans are investments. Quote Link to comment Share on other sites More sharing options...
Methinkshe Posted February 20, 2009 Share Posted February 20, 2009 Back to 144,000!Bugger. Lol! Incorrigible! Just steer clear of JWs, okay? They are a modern cult founded by a 33rd degree mason - nothing to do with Christianity. There are many "forgeries" of true Christianity, and many are very good - until one takes a closer look; they have to be if they are to be passed off as the true thing - just as a forged banknote has to be good in order to deceive. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 20, 2009 Share Posted February 20, 2009 I don't, because I don't try to make the distinction that you make. All loans are investments. What, even if it's for 14 tubs of magnolia and some MDF? Quote Link to comment Share on other sites More sharing options...
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