A Quote by Michael Hudson
When you say "bank," a bank is a building, a set of computers and chairs and things. The bankers are the people running these banks. They're the chief officers, and they push the loans because they don't care if they go bad. For one thing, they may package these bad loans and sell them off to gullible institutional investors.
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If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.
Don't reward bad behavior. It is one of the first rules of parenting. During the financial cataclysm of 2008, we said it differently. When we bailed out banks that had created their own misfortune, we called it a 'moral hazard,' because the bailout absolved the bank's bad acts and created an incentive for it to make the same bad loans again.
If bankers can push the loans and make more profits for the bank, they get paid higher bonuses. They often also get stock options. If the bank goes under, they get to keep all of these salaries and options - and the government will bail out the bank. These guys will take their money and run, which is pretty much what they're doing now.
If I'm a bank, and I'm making risky loans, I have an incentive, if I can, to make those loans using other people's money: in other words, to make highly leveraged loans.
I founded Grameen Bank to provide loans to those considered traditionally unbankable. Grameen Bank works with the poorest and often illiterate, providing uncollateralized micro-loans for tiny business enterprises by which they can lift themselves and their families out of poverty.
In the past when money was given from government to government, there was no accountability, especially the World Bank loans. Nobody was held accountable for the misuse of World Bank loans. That is why it is important to channel some of the money through civil society groups.
So we are in for years of debt deflation. That means that people have to pay so much debt service for mortgages, credit cards, student loans, bank loans and other obligations
that they have less to spend on goods and services. So markets shrink. New investment and employment fall off, and the economy is falls into a downward spiral.
If banks anticipate government will come to the rescue should the credit market go badly awry, they may make loans that would otherwise be imprudent, e.g. subprime loans with little prospect of repayment.
And so it can be very much in the interest of bank A to sell-short bank B shares, or buy CDSes on bank B, because they have exposure to bank B. It's the responsible thing to do as a fiduciary, and yet if everyone does it at the same time, it's destabilizing because everyone is selling.
Both HUD and the Department of Justice began bringing lawsuits against mortgage bankers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans. A substantial majority of both black and white mortgage loan applicants had their loans approved but a statistical difference was enough to get a bank sued.
If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible - but there it is.
They say the average bank robber lives within say about 20 miles of the bank that he robs There's this little bank not so far from here I've been watching now for a while Seems like lately alls I can think about is how bad I wanna go out in style
Normally, banks record profits on loans only as they are repaid, whether they securitize the loans or hold them on their books.
In the subprime mortgage industry, bankers handed out iffy loans like candy at a parade because such loans meant revenue and, hence, bonuses for executives in the here-and-now.
The federal [bank deposit] insurance scheme has worked up to now simply and solely because there have been very few bank failures. The next time we have a pestilence of them it will come to grief quickly enough, and if the good banks escape ruin with the bad ones it will be only because the taxpayer foots the bill.
In housing you have jingle mail and you can walk away and leave the bank holding the bag. In the case of student loans, the debt follows you through life, and the banks or government will turn it over to collection agencies that are not very nice people and can do all sorts of harassing things to you. It's becoming a nightmare.
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