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America's pensions can't beat Vanguard but they can close a hospital

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Re: America's pensions can't beat Vanguard but they can close a hospital

#301

Post by freejazz »

sejje wrote: post #87
etchalon wrote: post #70

Earlier quoted context omitted.

So you believe universities have taken advantage of students by crafting, encouraging and financing education programs with an understanding that those programs would not result in jobs which would be sufficient to repay the debt needed to complete them, but you think the 18 year olds who were taken advantage of should be forced to suffer for their failure to make perfect decisions at 18. Cool. Cool.

So you believe uninvolved taxpayers should be on the hook when the 18 year olds make bad decisions. Cool cool.

Why have police? Why have firefighters? Why have EMS?

Re: America's pensions can't beat Vanguard but they can close a hospital

#302

Post by lotsofpulp »

bpt3 wrote: post #82
lotsofpulp wrote: post #53

Earlier quoted context omitted.

Insurance priced for damages capped at $250k per person per bank or whatever it is. If the insurance covered unlimited damages, then this wouldn’t be a discussion.

Yes. What are these repeated bailouts by taxpayers that you mentioned? And you can't think of any way that the federal government providing retail banking services could possibly go wrong?

https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...

https://americandeposits.com/insights/brief-history-us-bank-...

>In response to these significant failures, the FDIC took historic action to restore faith in the banking system and protected all deposits – even those above the traditional limit. However, it is important to note that the FDIC limit did not change, nor did the standard process for protecting deposits. Instead, the extended protection offered to depositors of Signature Bank and SVB was an exception to the normal operating procedure.

I do not have a comprehensive list of every time depositors have been bailed out, but I have read about it multiple times in my adult life of the last 25 years.

>And you can't think of any way that the federal government providing retail banking services could possibly go wrong?

The federal government already controls all the banks. What could go wrong that they already do not have the power to make go wrong?

The act of maintaining a central database of funds so that individuals can transfer money to one another is a relatively simple and cheap problem, one perfectly suited to be provided by the government. It should be infrastructure, just like printing money is infrastructure under the purview of the government.

Re: America's pensions can't beat Vanguard but they can close a hospital

#303

Post by LorenPechtel »

OGEnthusiast wrote: post #2

I don't understand why we don't just ban private equity. Seems like zero value-add to the actual real economy.

Private equity is simply a person (or small group of people) owning a company. Basically every small business in the US.

The problem is not private equity, but that private equity engages in corporate raiding--buy up a company, borrow, extract capital, sell it to suckers who don't see the problems. Dig into practically all malfeasance and you'll find it's someone who benefits from making the future value of something look better than it really is and then leaving the problem for somebody else. At the executive level I think the answer is mandating income above a certain threshold be paid over time based on the future value. (Stuff that's actively traded would be easy: Let's say the cap was $1m. Pay the CEO 10m? No, he gets $1m, plus shares currently worth $1m to be delivered in a year, shares currently worth $1m to be delivered in two years and so on.) And while there is pending income they are categorically prohibited from any transaction that benefits from a drop in share price. Inadvertent (say, bought a fund that shorted the stock) it's a 100% tax rate, deliberate and all pending shares are forfeit. I have no idea of an answer with the PE problem.

Re: America's pensions can't beat Vanguard but they can close a hospital

#304

Post by lotsofpulp »

avidiax wrote: post #58
lotsofpulp wrote: post #31

Earlier quoted context omitted.

> bank depositors are not engaging in risky behavior, Because the taxpayers (and all users of USD) repeatedly bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. More importantly, if there is no risk, what purpose does a bank serve? They’re a pretty bloated middleman if their sole purpose is to update a database to reflect incoming and outgoing cash flow. The government sh…

Depositors are lending their money to the bank at low interest. They may seek risk in terms of increased yield on their savings account, but FDIC insured banks will have trouble meeting their requirements while offering high yields on their accounts. Banks provide security for deposits as well as liquidity (velocity of money), and slight inflationary pressure. Wiping out depositors doesn't prevent much moral hazard s…

Unsophisticated depositors are not holding more than $250k of cash in bank accounts. The problem is not that depositors were made whole, the problem is that the FDIC insurance prices are based on limited losses, when for all intents and purposes, the depositors' risk is completely based on their political influence.

This type of corruption is antithetical to a strict, rules based system, which is needed for trust in the financial system. Either give everyone the same protection explicitly, or follow the rules.

Also, the rules and lack of centralization might have made sense when cash was a thing, but in a society where electronic money is the primary mode of payment, I see no reason why a non government entity should be involved at all in the simple act of maintaining a record of how much money is an account and adding and subtracting to it.

Re: America's pensions can't beat Vanguard but they can close a hospital

#305

Post by mordechai9000 »

creato wrote: post #131
terminalshort wrote: post #47

Earlier quoted context omitted.

> bank depositors are not engaging in risky behavior, they are putting cash in a bank That is risky behavior. You can't earn interest without taking a risk.

Is there a lower risk, lower interest option with the same capabilities (ability to use the money to pay others)? Genuine question, I have no idea, but I didn't choose my bank based on interest rate. I can't pay bills or transfer money if it's cash under the mattress.

In the US, depositors are insured by the FDIC (Federal Depositors Insurance Fund) up to $250000 per institution. This doesn't apply to investment accounts, but would cover standard checking and savings accounts, even if they pay interest. The interest on those accounts is usually negligible at most banks, anyway - not even close to offsetting inflation.

Edited to add: not my area of expertise, but I did research it a couple years ago when I was acting as executor for the estate of a deceased person. So take what you will from that. I do notice banks usually have a sign up saying they are FDIC insured. I think it's required, but I don't know for sure. I suppose a shady investment firm could try to suggest they are an insured bank without actually saying so.

Re: America's pensions can't beat Vanguard but they can close a hospital

#306

Post by sejje »

bee_rider wrote: post #144
sejje wrote: post #87

Earlier quoted context omitted.

So you believe uninvolved taxpayers should be on the hook when the 18 year olds make bad decisions. Cool cool.

The decision to invent a new special type of debt for student loans was a political decision made by our representatives. To the extent that the voters/taxpayers are responsible for anything: this is our shared mess. I mean, the whole premise of representative democracy is that we’re responsible for the messes we send representatives to make. If we don’t want that responsibility, I guess we’d have to look at alternat…

I accept responsibility, let's fix it.

Re: America's pensions can't beat Vanguard but they can close a hospital

#307

Post by terminalshort »

munk-a wrote: post #98
terminalshort wrote: post #65

Earlier quoted context omitted.

You can't load someone else with debt. That's obviously illegal. When you buy a company it isn't "them" anymore. And the new owners have exactly the same rights to borrow money as the old ones.

That's true when the debt is taken it is taken by the company (at the direction of the acquiring firm)... and maybe the bigger issue is that banks should be a whole lot more judicious in extending that debt. But some firms have found a heck of a loophole in buying a company, running an extremely high debt line, paying the acquiring firm (themselves) handsomely and then innocently whistling when the business collapses…

It isn't rewarded. If a business you buy collapses, you lose money. You seem to be falling for the conspiracy theory that private equity wants to collapse businesses.

Re: America's pensions can't beat Vanguard but they can close a hospital

#308

Post by bpt3 »

lotsofpulp wrote: post #302
bpt3 wrote: post #82

Earlier quoted context omitted.

Yes. What are these repeated bailouts by taxpayers that you mentioned? And you can't think of any way that the federal government providing retail banking services could possibly go wrong?

https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U... https://americandeposits.com/insights/brief-history-us-bank-... >In response to these significant failures, the FDIC took historic action to restore faith in the banking system and protected all deposits – even those above the traditional limit. However, it is important to note that the FDIC limit did not change, nor did the standard process for protecti…

All this demonstrates is that you don't understand how the US banking system works. Bank failures != taxpayer funded bailouts.

Also, I don't know what you have been reading, but a comprehensive list of times that depositors have been bailed out by taxpayers (or anyone else, as the FDIC is not bailing out anyone by definition) would be quite short.

Lastly, there is a huge distinction between regulating banks and directly controlling access to an individual's funds. If you really can't see any theoretical problems there, I suggest you work on your creativity.

Re: America's pensions can't beat Vanguard but they can close a hospital

#309

Post by bpt3 »

chasd00 wrote: post #214
stanmancan wrote: post #42

Earlier quoted context omitted.

> Because the taxpayers bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. I feel like I must be misunderstanding something here because it sounds like you're saying depositing funds in a bank is considered risky behaviour?

> depositing funds in a bank is considered risky behaviour? of course it is, that's why the bank pays you interest on your deposit. They loan out what you deposit at a higher rate and collect the difference as profit. If that loan defaults then your money is gone because the bank was never able to collect it back. FDIC was invented to insure your deposit up to 250k so you're protected (up to 250k) in case that happen…

No, the bank pays you interest on your deposit to entice you to deposit money there so they can lend it out. There is literally zero risk involved (other than something on the scale of the collapse of the US government, which no one is really considering here) because of the FDIC, and yet interest rates on FDIC protected assets are not 0%.

Re: America's pensions can't beat Vanguard but they can close a hospital

#310

Post by justin66 »

sidewndr46 wrote: post #297
justin66 wrote: post #146

Earlier quoted context omitted.

> how do you crash an ETF? I'm talking about broad index funds. Not stuff like ARKK Any ETF's share value can "crash" if there are not enough buyers to purchase shares when they are trading below NAV (net asset value). It's worth a quick google to see what "market makers" or "authorized participants" do, but the thing to keep in mind is: if the market is kind of exploding in some major ways (think 2008) an ETF might…

But why would that happen? Let's say an ETF normally trades at 99% of it's NAV. Suddenly it "crashes" and only trades at 97.2% after some bad news. Bob in accounting embezzled millions. It's gone, Bob spent it all at the strip club. Wouldn't some investor decide to just net the approximately ~1.8% by increasing demand and buying it up? After all, Bob embezzled millions. Not the billions that larger ETFs control. Unle…

> Wouldn't some investor decide to just net the approximately ~1.8% by increasing demand and buying it up?

When it comes to individual investors, sure, in a situation where everything is going crazy in the markets some will buy and some will be happy to sell, provided the exchange doesn't halt trading temporarily in response to an extreme drop in share prices. The problem comes when the large market makers who are meant to really be on the ball and buy large blocks of shares quickly are suddenly worried about their own survival, or at least that's the way I remember a few of the chaotic days of 2008.

I knew a few people who made money buying bond ETFs at a discount to NAV.

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