Brian4Liberty
09-03-2007, 09:19 PM
My take on the "liquidity crisis":
As most of us know, there was a "liquidity crisis" recently in the financial markets. What I have not seen commented on is the root cause of this problem.
Once again, the greatest enemy of competitive markets is oligopolies, trusts and collusion...
Think about this: The lenders have lended money on credit cards at rates of almost 30%. Home loans, car loans, etc. range from 6% to 12%. So why do many of the largest banks only pay 1% to depositors? Even the most competitive deposit returns are around 5%. This reeks of collusion.
If these banks/money markets/etc had raised the rates that they paid depositors, would there have been a liquidity crisis? Isn't this how markets are supposed to behave? Supply and demand. Consumers demand a higher rate in times of uncertainty. Pay a rate of 6% or more to depositors, and these entities that whined for a government bailout would have had more deposits than they could deal with. People would have poured money into money markets, cds, and savings accounts. So why not? It's collusion. They don't want to pay a higher rate to depositors. They collude to keep that rate low.
In a bailout attempt (and a possible future anti-competitive merger), Bank of America deposited $2 Billion with Countrywide with a guaranteed return of 7.25%. Why wasn't that rate offered to average consumers? Collusion.
The liquidity crisis is a farce, perpetrated on the American people to allow a government bail-out; an increase of profits, at the American taxpayer’s expense. It's criminal. This isn't a question of regulation; it's a question of crime. No matter how elaborate the scam, it's still a crime.
But you will never see this in the media...even if Bush pays lip-service to prosecuting the criminals in the lending industry. Don't hold your breath waiting for that to happen.
The keys are real competition in the markets, and prosecution of the criminal scammers. For true free-markets to thrive, these are mandatory. As long as these are ignored, the taxpayer rip-offs will continue...
And just to be clear, windfall profits taxes and other penalty fees are NOT a solution. They are just another rip-off of the common consumer and share-holder.
As most of us know, there was a "liquidity crisis" recently in the financial markets. What I have not seen commented on is the root cause of this problem.
Once again, the greatest enemy of competitive markets is oligopolies, trusts and collusion...
Think about this: The lenders have lended money on credit cards at rates of almost 30%. Home loans, car loans, etc. range from 6% to 12%. So why do many of the largest banks only pay 1% to depositors? Even the most competitive deposit returns are around 5%. This reeks of collusion.
If these banks/money markets/etc had raised the rates that they paid depositors, would there have been a liquidity crisis? Isn't this how markets are supposed to behave? Supply and demand. Consumers demand a higher rate in times of uncertainty. Pay a rate of 6% or more to depositors, and these entities that whined for a government bailout would have had more deposits than they could deal with. People would have poured money into money markets, cds, and savings accounts. So why not? It's collusion. They don't want to pay a higher rate to depositors. They collude to keep that rate low.
In a bailout attempt (and a possible future anti-competitive merger), Bank of America deposited $2 Billion with Countrywide with a guaranteed return of 7.25%. Why wasn't that rate offered to average consumers? Collusion.
The liquidity crisis is a farce, perpetrated on the American people to allow a government bail-out; an increase of profits, at the American taxpayer’s expense. It's criminal. This isn't a question of regulation; it's a question of crime. No matter how elaborate the scam, it's still a crime.
But you will never see this in the media...even if Bush pays lip-service to prosecuting the criminals in the lending industry. Don't hold your breath waiting for that to happen.
The keys are real competition in the markets, and prosecution of the criminal scammers. For true free-markets to thrive, these are mandatory. As long as these are ignored, the taxpayer rip-offs will continue...
And just to be clear, windfall profits taxes and other penalty fees are NOT a solution. They are just another rip-off of the common consumer and share-holder.