Australian Politics General...

[SirRumpole]

You understand that protects depositors and not share holders right?

So you don't think that insurance on a business trading stock protects shareholders ?

If part of a business assets is buildings and they burn down , if there is no insurance then the shareholders pay if there is insurance then the insurance company pays. It's the same with cash at the bank.

Of course the government guarantee protects shareholders from losses .

 

[luutzu]

I can think of heaps of situations where banks have gone under and shareholders have lost all or significant share of their capital, not so many cases of depositors losing, can you think of any?

$US5 trillion in pensions, homes and savings were lost by Americans alone during the GFC.

Maybe the depositors didn't lose much or any. But that's because the gov't bailed the bankers out didn't they? To the total tune of about $7 trillion over next couple of years.


The only reason any bank ever go broke is because they were reckless. Not because their banking business is risky.

Why should anyone guarantee or pay for the risks the bankers take on themselves?

I mean, why should depositors have to pay through earning a real negative/zero return so that the bankers can make more profit from "risks" they themselves created.

If the banks simply offer a big massive safe, security guards, people at the counters, ATMs... take money in, flip it around for some 200% profit, or even 100% gross... I'd say it's a very safe and profitable business to be in.

But if that's not enough and they get speculative in the global financial markets. They should bear that cost, shouldn't they?

But yea, four banks in Australia, where are the customers going to go right?

 

[Value Collector]

$US5 trillion in pensions, homes and savings were lost by Americans alone during the GFC.

They are bank deposits. That is an example of the people further up the capital structure that lose out before depositors lose.

Maybe the depositors didn't lose much or any. But that's because the gov't bailed the bankers out didn't they? To the total tune of about $7 trillion over next couple of years.

Bail outs didn't stop certain banks share holders losing their equity, in some cases 100% of their equity.

And a lot of the "Bail outs" were investments that made money for the government and federal reserve.

The only reason any bank ever go broke is because they were reckless. Not because their banking business is risky.

Why should anyone guarantee or pay for the risks the bankers take on themselves?

No one does guarantee the banks equity or capital

I mean, why should depositors have to pay through earning a real negative/zero return so that the bankers can make more profit from "risks" they themselves created.

Huh??? taking on risk is the only way the bank can earn money, and hence provide depositors with a safe place to store funds.

I ask you the same question I asked Rumpole, how much interest would you have to be offered to take the position described above?

 

[Value Collector]

So you don't think that insurance on a business trading stock protects shareholders ?

If part of a business assets is buildings and they burn down , if there is no insurance then the shareholders pay if there is insurance then the insurance company pays. It's the same with cash at the bank.

Of course the government guarantee protects shareholders from losses .

Dude, The government guarantee does not pay out 1 single dollar until the bank is bankrupt and share holders capital and all the none secured funding is 100% gone.

The government doesn't step in and pay anything to share holders.

If you want to use an example, a correct example would be like the government insuring a Woolworths supplier, so if Woolworths goes bankrupt the supplier still gets paid for the money they are owed, it doesn't protect Woolworths owners.

 

[SirRumpole]

Dude, The government guarantee does not pay out 1 single dollar until the bank is bankrupt and share holders capital and all the none secured funding is 100% gone.

But the guarantee gives customers the security of having their funds guaranteed so they are less likely to run to the banks and withdraw money leading to bank losses.

It protects shareholders from runs on the bank's, oops sorry the depositor's money.

 

[Value Collector]

But the guarantee gives customers the security of having their funds guaranteed so they are less likely to run to the banks and withdraw money leading to bank losses.

It protects shareholders from runs on the bank's, oops sorry the depositor's money.

The most important protection from a run on a bank is the reserve bank, that hold capital from all the other banks in the system, ready to assist a bank that has a run.

But you are confusing things here, the way a bank will risk losing is if the loan go bad, this is where share holders funds are securing the depositors funds

 

[luutzu]

They are bank deposits. That is an example of the people further up the capital structure that lose out before depositors lose.



Bail outs didn't stop certain banks share holders losing their equity, in some cases 100% of their equity.

And a lot of the "Bail outs" were investments that made money for the government and federal reserve.



No one does guarantee the banks equity or capital




Huh??? taking on risk is the only way the bank can earn money, and hence provide depositors with a safe place to store funds.

I ask you the same question I asked Rumpole, how much interest would you have to be offered to take the position described above?

How does a bail out that stop the bank from going bankrupt not save shareholders from losing their equity?
I mean, if the shareholders sell out before the bail out, sure they'd lose. But if they hang on and the gov't steps in, bank survived and so shareholders equity are protected.

Yes, the gov't did make money on the bail-outs, but they didn't own the entire bank like the practically did own it right? In fact, I heard one of the banks that got bailed out turn around and sue the US gov't for bailing them out at "outrageous" interest rate.

Yea, gov't guarantee does not protect banks equity holders. But it does provide them with a free insurance policy, making it possible to get people's deposits. True? Without that guarantee, people would either demand a much higher interest rate, which they can't anyway, so they'd just go out and buy their own safe.

Banks does not need to take risk to make money. How risky is it to lend properly? To assess borrower's credit, jobs, income? Yea, there's some risk, but not the kind of risk that justifies making 200% gross on depositors cash while paying them diddly.

The kind of risk I was referring to are non-systemic. They're optional risks. Risks the bank takes on in speculating in the financial markets and its many fancy instruments.

That's not really a banking business risk; that's just speculative risk the bank decides to take on to gain more money.. knowing that if they win, they keep the profit; if they lose, the gov't will bail them out.

Can't use that optional risk and greed to justify that bank shareholders take on more risk so they deserve more profit while depositors are lucky to get nothing for their cash.

 

[Value Collector]

How does a bail out that stop the bank from going bankrupt not save shareholders from losing their equity?
.

Because the only reason the bank was going bankrupt is because of large capital losses, so before the bailout was brought in to prevent complete collapse, the share holders had already lost a bunch of their equity, Do you think all those foreclosures at at less then the loan amounts wasn't causing the banks capital to take a hit.

Also, Dilution of the share registry, the financial institutions that were "Bailed out" were also forced to raise capital, which wiped out a chunk of exisiting share holders capital also.

 

[luutzu]

Because the only reason the bank was going bankrupt is because of large capital losses, so before the bailout was brought in to prevent complete collapse, the share holders had already lost a bunch of their equity, Do you think all those foreclosures at at less then the loan amounts wasn't causing the banks capital to take a hit.

Also, Dilution of the share registry, the financial institutions that were "Bailed out" were also forced to raise capital, which wiped out a chunk of exisiting share holders capital also.

Is there a donation hotline we could use to help out with a few dollars a month?

Poor banks man, selling garbage to investors the world over and most of the CEOs get to keep all of their bonuses.

Know the CEO of Bear Stern, or was it Lehman Bros... the guy played by James Woods in Too Big to Fail...

anyway, I saw the real dude in front of the US Senate saying how everyday, he live with the pain of the losses his pain cause to investors. To which a Senator replied, yea azzhole, you get to walk away with $450M golden parachute.

 

[Value Collector]

Is there a donation hotline we could use to help out with a few dollars a month?

You are acting like I am asking you to feel sorry of bank investors that have lost money, I'm not, all I am saying is that it happens, you can't really predict when it will happen, but it will happen again.

So, I believe that we shouldn't try and demonise people at the pointy end of the capital structure.

Back when I was in the Army, one of the tasks my regiment was trained to carry out was identifying and rendering safe road side bombs (along with some other pretty dangerous jobs).

All the members that were likely to be deployed if those jobs came up earned an extra $10K - $15K per year depending on training, I can remember being told by a captain from outside the regiment it was a rort and we didn't deserve the "danger money" because there was no way we would ever be used in that role.

less than 12months later our regiment was deployed to Afghanistan for pretty much the whole conflict digging up road side bombs and other booby traps, we had a few guys killed and a bunch of others suffering permanent injuries, not to mention the mental injuries.

It's easy to say people don't deserve to be paid for taking risk, when you think the future is all rosy, but times change real quick sometimes, and then what appeared to be a nice little benefit can suddenly seem like no where near enough compensation.

 

[luutzu]

You are acting like I am asking you to feel sorry of bank investors that have lost money, I'm not, all I am saying is that it happens, you can't really predict when it will happen, but it will happen again.

So, I believe that we shouldn't try and demonise people at the pointy end of the capital structure.

Back when I was in the Army, one of the tasks my regiment was trained to carry out was identifying and rendering safe road side bombs (along with some other pretty dangerous jobs).

All the members that were likely to be deployed if those jobs came up earned an extra $10K - $15K per year depending on training, I can remember being told by a captain from outside the regiment it was a rort and we didn't deserve the "danger money" because there was no way we would ever be used in that role.

less than 12months later our regiment was deployed to Afghanistan for pretty much the whole conflict digging up road side bombs and other booby traps, we had a few guys killed and a bunch of others suffering permanent injuries, not to mention the mental injuries.

It's easy to say people don't deserve to be paid for taking risk, when you think the future is all rosy, but times change real quick sometimes, and then what appeared to be a nice little benefit can suddenly seem like no where near enough compensation.

That's stretching it a lot man.

Your regiment's job is more dangerous. Takes more risk, a lot more skills I'd imagine. So fair enough.

A depositor is lending their money to the banks. It's hardly fair for the bank to turn around and say that since they're taking no risk, they're having it good to just zero real return.

First, they are taking a risk, just the risk is mostly guarantee by them through the gov't. Socialised risk, for free to the banks.

Second, they're not supposed to take any risk because they're simply depositing money at the bank.

So what's risk-free money worth? Nothing? Less than nothing in most cases?

Third, the extra risk that the banks take on in lending... that's their decision. If they do it properly, most often there really is no risk in lending on average.

For banks to speculate and get creative, sure that's extra risk but why should depositors have to pay for that? Paying in somehow expected to get zero for their money?

That's just simply the big four boys using their market power to screw over people with little other options.

That's capitalism or whatever, fair enough. Can't say it's fair that depositors should get nothing for their money beside it being kept safe and they can access it.

 

[Value Collector]

That's stretching it a lot man.

Your regiment's job is more dangerous. Takes more risk, a lot more skills I'd imagine. So fair enough.

A depositor is lending their money to the banks. It's hardly fair for the bank to turn around and say that since they're taking no risk, they're having it good to just zero real return.

First, they are taking a risk, just the risk is mostly guarantee by them through the gov't. Socialised risk, for free to the banks.

Second, they're not supposed to take any risk because they're simply depositing money at the bank.

So what's risk-free money worth? Nothing? Less than nothing in most cases?

Third, the extra risk that the banks take on in lending... that's their decision. If they do it properly, most often there really is no risk in lending on average.

For banks to speculate and get creative, sure that's extra risk but why should depositors have to pay for that? Paying in somehow expected to get zero for their money?

That's just simply the big four boys using their market power to screw over people with little other options.

That's capitalism or whatever, fair enough. Can't say it's fair that depositors should get nothing for their money beside it being kept safe and they can access it.

I will exit the conversation here we are just going round in circles, But as I have said, a bank offering a safe place to store cash is a benefit in its self, and thats all most depositors really deserve, inflation hedging is about all that should be expected, only when you lock into a term deposit.

 

[SirRumpole]

I will exit the conversation here we are just going round in circles, But as I have said, a bank offering a safe place to store cash is a benefit in its self, and thats all most depositors really deserve, inflation hedging is about all that should be expected, only when you lock into a term deposit.

But if customers are also being charged account keeping fees and eftpos fees and so on then that detracts from the benefit doesn't it ? And if the interest rates are just at inflation rates then the customers are making a net loss, so your bank is a ripoff merchant.

I think a Royal Commission would be good to clear the air and bring to light whether banks are really a good deal or not.

 

[Value Collector]

But if customers are also being charged account keeping fees and eftpos fees and so on then that detracts from the benefit doesn't it ? And if the interest rates are just at inflation rates then the customers are making a net loss, so your bank is a ripoff merchant.

I think a Royal Commission would be good to clear the air and bring to light whether banks are really a good deal or not.

You only get charged account keeping fees if you are a small customer not doing much business with the bank.

If all you do is deposit your pay check on Thursday and withdraw it Thursday night the bank isn't making any income from you, so will charge you for the service.

 

[SirRumpole]

You only get charged account keeping fees if you are a small customer not doing much business with the bank.

If all you do is deposit your pay check on Thursday and withdraw it Thursday night the bank isn't making any income from you, so will charge you for the service.

As I've been saying, a ripoff.

 

[Value Collector]

As I've been saying, a ripoff.

A monthly fee on a bank account is less than a coffee at star bucks, 3 times less than a monthly fee on a Netflix subscription, 4 times less than a newspaper subscription, about the same cost as the Harbour bridge toll, less than a return adult train ticket from parramatta to the city.

Where is the rip off,

 

[Tisme]

A monthly fee on a bank account is less than a coffee at star bucks, 3 times less than a monthly fee on a Netflix subscription, 4 times less than a newspaper subscription, about the same cost as the Harbour bridge toll, less than a return adult train ticket from parramatta to the city.

Where is the rip off,

Comparison rate?

 

[Value Collector]

Comparison rate?

I am not sure what you mean

 

[Tisme]

I am not sure what you mean

The comparison rate which banks must produce would include all those fees and charges. Simple maths A-B=C would expose those oncosts

 

[Ves]

A monthly fee on a bank account is less than a coffee at star bucks, 3 times less than a monthly fee on a Netflix subscription, 4 times less than a newspaper subscription, about the same cost as the Harbour bridge toll, less than a return adult train ticket from parramatta to the city.

Where is the rip off,

The brilliant thing for the banks is that a person could have $10 million in one of their transaction accounts, pay the $4 monthly fee, and earn absolutely zero interest. Check the interest rates for say CBA's smart access account for example.

Now, you can make the argument that it'd be silly to leave $10 million in one of those accounts, but I'd suspect it's also not very ethical of a bank to not pay interest on such a large amount when no doubt they're using these funds to expand their balance sheet and profitability.