231–240 of 342 posts
We live in a world where there are huge rewards for anyone with the right connections. Banks provide very little value, they are basically a glorified SQL database at this point. They're not taking any risk, they're not really creating any economic value, and yet the rewards they receive are enormous. Watching all this going on makes me feel so disillusioned, and I don't want to participate in society anymore.
Earlier quoted context omitted.
Policy should have sent the money directly to companies from the SBA/IRS, customers then would choose the banks to service that guaranteed government grant/loan essentially. Much like the FAFSA system for student loans, you get your amount, then a servicer handles the actual loan but there is literally no risk to them as it is guaranteed. Why we sent guaranteed money to be held up in banks and did information and cre…
"The 'stimulus' for the economy, routed around the entire actual economy, never reaching individuals or true small business." How can this be true if innumerable number of individuals received $1200 checks and many small businesses also received varying amounts in the four and five digits?
Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…
You outline the problem very well. The banking sector has an ENORMOUS amount of power over the economy/society in a way that no other industry does because it literally has the ability to create money out of thin air (by loaning it into existence). The banking industry is the arbiter and credit in our society and decides where money get allocated. This would be fine if it were their own money, but it's not - it's our…
The thing here is the bank isn’t taking any risk here. All the loans are guaranteed by the government. So banks are really just a middle man that is transferring money from the SBA to a small business’s bank account and taking on zero credit risk. The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds. Banks are basically being…
In the future, we'll have better systems for this kind of thing but we don't have them today. The bank plan was the most expedient one.
Earlier quoted context omitted.
It seems apparent that the government could’ve distributed these loans to qualifying businesses if they wanted to. The government was able to distribute individual checks to people. It does not seem far fetched to extend this to business accounts. Maybe someone else can describe technical blockers as to why the government couldn’t have done this. It seems mostly political.
The banks have a preexisting relationship with these businesses and know what they would need / qualify for. Plus provide boots on the ground for vetting. The best the government could do was send a paltry check to pretty much EVERY american. I'm sure you'd object if they decided to send 1 million dollars to EVERY small business. That's the best a fed government run program could accomplish with only a couple of week…
Seems to me that the government has a comparable relationship with business. Companies report to the IRS same as individuals, and corporations are required to file annual reports with their state. You’re telling me they cant maybe slice up the market due to higher or lower risk (restaurants probably taking a way bigger hit than tech, for instance) and qualify companies according to trends in their tax filings and other data points?
Quick read looks like 2.8% off the top, for 0 risk (10/349).
Total businesses receiving loans was 1.6M (https://www.pymnts.com/loans/2020/sba-lenders-approval-ppp-l...)
Average money a bank made per loan was 10,000,000,000/1,600,000 (assuming all banks made an equal distribution of loans)
Or $6250 per loan. Given that all loans ran out about 1 week after the program was started.
I imagine the person effort per loan was pretty variable, but that's some pretty crazy capture by the banks.
(Banking sector employs almost 1.5M people), So even if every employee working at all banks, was allocated to work on one loan each for a week. (HINT THIS DIDN'T HAPPEN) the annualized salary for each of these people would have to be 6250*52, or 325K, which it's not).
I guess my question, is how was the decision made to offer banks such a big kicker for administrating loans with nonzero, but practically 0 risk?
(of note, theoretically banks are going to need to do some serving of the loan over it's lifetime, and deal with this loan forgiveness program, etc.. so if that's the case and it's more like 2-3 weeks of person work per loan, you still get some pretty big numbers, but they feel a bit more sane)
Problem with the banks (and many other huger corporations in US ie: airlines) is that during prosperity all the profits are going to narrow set of people (board and investors) but during the crisis there's always bailout using taxpayers money to save them. It essentially means that profits stay with the wealthy while losses are being spread across the poor. This is no longer capitalism but communism where they ruling…
The best analogy I use for logical errors such as this is - If you have a dependent - ie a child - whom you are a primary source of care. Should you qualify for a bigger helping hand than say, the 25 year old with no children? If you agree - then now imagine you have 500 dependents. Or in the case of some corps 500,000. You have half a million dependents who rely on you every other week for a paycheck. Do you qualify…
> Do you qualify for a larger helping hand than the 25 year old who lives alone?
No, because the "helping hand" you're getting is not helping the "children" eat in this situation. None of this $10B is going to small businesses, is it? It's literally just a payday for the bank. If you give a parent $400 extra a month, that is going towards daycare, food, etc. for their child. Your metaphor misses the mark completely.
The thing here is the bank isn’t taking any risk here. All the loans are guaranteed by the government. So banks are really just a middle man that is transferring money from the SBA to a small business’s bank account and taking on zero credit risk. The government has the ability to send funds directly to people obviously...that’s how they are sending the stimulus checks and send tax refunds. Banks are basically being…
Not only they are not taking risk, they get to pick who gets the funding so they further optimize their bottom line, by say favoring bigger loans or loans to their most indebted customers. I hope there is a reckoning but I am pretty sure there will be bonuses to the CEO's instead.
Gotta ask whether the banking system makes sense in its current form. - Part of it is actually a utility. Payments, sending money from one place to another, making sure there's an account at the other end of that number. Everyone needs this, yet being a huge international network there isn't a whole lot that one bank offers that another cannot. - Part of it is deciding who to lend money to. Makes sense for the bank t…
You outline the problem very well. The banking sector has an ENORMOUS amount of power over the economy/society in a way that no other industry does because it literally has the ability to create money out of thin air (by loaning it into existence). The banking industry is the arbiter and credit in our society and decides where money get allocated. This would be fine if it were their own money, but it's not - it's our…
Anyway, I think I like the idea of a government-centralized deposit and monetary transfer system. This is the direct electronic equivalent of cash. A single national interest rate seems reasonable since current saving account rates are essentially set by the reserve rate today anyway. But I feel there must be a better privatized lending system than the current one though.