Australian Politics Forum - Are our banks in trouble?

mantra

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Are our banks in trouble?
Oct 12^th, 2008 at 9:53pm

Rudd has made a mistake today by announcing there will be no cap on bank deposits if the banks get into trouble - unless he's decided to use the "future fund" as the government's insurance.

He's also guaranteed to honour all foreign loans.

Rudd is trying to stop the panic because Australians are beginning to withdraw their savings and we are still being warned to spread any cash we have around with different banks.

Although a lot of cash is apparently being invested by foreigners in our banks at present and that is good, there are some economists who are saying that we don't really know yet how much trouble the big 4 are in and this is only the beginning.

Something isn't right. I believe a couple of our banks are stumbling - in particular the Commonwealth, who convinced many customers with term deposits to invest in shares and invested huge amounts in foreign corporations, which are now collapsing.

Turnbull is trying to take credit for Rudd's backing of the banks - but his directive would have come from the G7 and the IMF.

Their countries have run out of money - so they want ours to feed into the black hole.

We can thank George Bush for this and his easy come - easy go extreme capitalism.

If our banks were doing well - why were they given $4 billion last week and another $4 billion today?

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Sprintcyclist

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Re: Are our banks in trouble?
Reply #1 - Oct 12^th, 2008 at 10:12pm

I think the aussie banks are in fine form mantra.
We have a very well regulated banking system.

As I see it, the problems with subprime loans in US sent a few banks to the wall. Banks were hesitant to lend liquidity to other banks.
This led to they system slowing rapidly.

Aussie banks have very few low doc loans. The rules in Auss are different in regaining funds from delinquent borrowers.
In US, the banks can't and don't. IN Aussie, banks can and do..

Rudd put money into the Auss and a group of countries to assist in liquidity.
It is not a gift.

rudd has done ok here.

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freediver Gold Member Offline www.ozpolitic.com Posts: 48814 At my desk.	Re: Are our banks in trouble? Reply #2 - Oct 13^th, 2008 at 12:45pm The original reason our banks were in trouble is because they bought a lot of those sub prime mortgages from the American banks. I think history will see that more as a trigger than a cause.
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mantra

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Re: Are our banks in trouble?
Reply #3 - Oct 13^th, 2008 at 1:03pm

Quote:

Rudd put money into the Auss and a group of countries to assist in liquidity.
It is not a gift.

rudd has done ok here.

I disagree. Rudd has committed every Australian man, woman and child to $600,000 each ($1.2 trillion - if my maths is right) to guarantee any unforeseeable IOU's which is a strong possibility. Governments shouldn't interfere. Rudd should have remained strong under pressure from the G7 & IMF. We're not even members. We are a little country, who might be healthy - according to the government - but if we're not - where do we get $1.2 trillion from?

THEIR word may be their bond, but the world's top finance ministers and central bankers must quickly deliver on their plan to jump-start the seized-up international banking system with the mother of all government promises.

In effect, it's a promise of a government guarantee for the debts of the world's banking system.

It's a promise to "take all necessary steps" using "all available tools" to rescue global capitalism from what the International Monetary Fund calls "the brink of systemic meltdown".

So get ready for urgent detailed announcements from the major financial powers to try to prevent another week of financial market turmoil like the past two. If this won't work, what will?

Global financial capitalism got too big for national regulation during the credit boom. Now the boom has bust; the markets have been panicked by the lack of a credible global authority to clean up the mess and sort out which banks could be trusted.

The source of the crisis, the US, is in a presidential power vacuum. And European nations have squabbled among themselves.

The weekend plan aims to end the debacle of national governments announcing unco-ordinated rescue plans that have simply destabilised other national banking systems.

Kevin Rudd's guarantee over $1.2 trillion of bank deposits for three years, his guarantee over the wholesale term funding of Australian banks as long as the crisis lasts, and his plan to inject another $4 billion from the budget surplus into the stalled residential mortgage securities market normally would be seen as radical, even reckless.

Only weeks ago, the Prime Minister and Wayne Swan were bashing the big four Aussie banks.

Now Mr Rudd and the Treasurer are exposing taxpayers to more than a trillion dollars of liabilities of those same banks as part of the five-point G7-IMF emergency plan to:

Stop systemically important banks from failing.

US Treasury Secretary Henry Paulson's mid-September decision to let Wall Street investment bank Lehman Brothers collapse sparked the current panic.

So no more bank collapses, whatever it takes. So far, that hasn't been a problem here.

Unfreeze money markets and ensure banks have access to liquidity and funding.

The Reserve Bank has pumped billions of dollars of extra liquidity into the short-term markets.

As The Weekend Australian reported on Saturday, Australia's big four bank chiefs are worried that an international package that guaranteed bank debt would disadvantage them if Australia didn't do the same. Hence Rudd's move to guarantee the wholesale debt of Australian banks.

Ensure national bank deposit schemes are consistent and maintain the confidence of retail depositors.

Ireland is also blamed for much of the recent panic by suddenly guaranteeing all the deposits of its six big banks almost two weeks ago.

Britain and other European nations complained this threatened an outflow of deposits from their banks.

Rudd's three-year guarantee of all deposits in Australian banks, building societies and credit unions goes way beyond Australia's existing system of giving depositors first call on bank assets over creditors and shareholders. And it goes well beyond Swan's scheme to guarantee quick payment of $20,000 per depositor in case of bank failure.

The big banks don't need the extra government guarantee as deposits are flooding in. But this might help regional and second-tier banks.

Ensure banks can raise public as well as private capital.

The US and British plans include using taxpayer money to help recapitalise their banks.

Australia's big banks don't need or want the Government - other than perhaps its Future Fund - to buy their shares. And the big four are buying up second- and third-tier finance outfits that have been weakened by the crisis.

Restart markets for securitised mortgages that have been frozen by the crisis.

Last month, Swan said the Government would put $4 billion of the budget surplus into AAA-rated mortgage securities.

Yesterday's move puts another $4 billion into the mortgage securities market, this time for non-bank lenders as the government tries to keep fringe non-bank lending competition alive.

http://www.theaustralian.news.com.au/story/0,25197,24486157-7583,00.html

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Sprintcyclist

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Re: Are our banks in trouble?
Reply #4 - Oct 13^th, 2008 at 1:38pm

Fair calls F/d and mantra.

I heard some Aussies had bought subprime mortgages.
Also heard Aussie banks had 1% or less in low doc loans.

Your maths is probably right. The 1.2 trillion would be every dollar in every bank.
It is to stop a bank run, which is NOT every dollar in every bank. And is only a fleeting temporary thing.

Is this the first time I have suported rudd ??

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tallowood

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Re: Are our banks in trouble?
Reply #5 - Oct 13^th, 2008 at 4:13pm

It is mistake to dwell in horrors of the past and to panic when there is a profit to be made if you keep positive outlook. Last week I bought some ANZ shares when they were down and sold them today at good profit when they went up in the morning trade.
IMHO, Rudd has done very well.

I would like to hear from all the forum people what bad or good things happened to them personally this far and why. Maybe such a list would help them to avoid future mistakes.

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Sprintcyclist Gold Member Offline OzPolitic Posts: 40346 Gender:	Re: Are our banks in trouble? Reply #6 - Oct 13^th, 2008 at 4:24pm tallow, I am an active investor and use oldfashioned simple rules. Buy the winners and sell the losers. ie, buy when they are going up, sell when they are going down. I miss out on the lows and sell losers quickly. Have had no holdings for about 6 months. It's very boring.
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mantra

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Re: Are our banks in trouble?
Reply #7 - Oct 13^th, 2008 at 4:24pm

Quote:

Last week I bought some ANZ shares when they were down and sold them today at good profit when they went up in the morning trade.
IMHO, Rudd has done very well.

I would like to hear from all the forum people what bad or good things happened to them personally this far and why. Maybe such a list would help them to avoid future mistakes.

Good for you Tallowood. The international "lucrative" company my daughter works for terminated the employment of half of its professional & admin staff of 120 today. The remaining 60 have no idea if they will have a job next week.

This company was still employing until a week ago. Consumers have lost confidence in spending and yes it's good if you are stockmarket savvy. Great to see you've got some gambling money left to play with.

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Sprintcyclist Gold Member Offline OzPolitic Posts: 40346 Gender:	Re: Are our banks in trouble? Reply #8 - Oct 13^th, 2008 at 4:31pm mantra - ouch !! That may be the part where we all get hurt. Good luck to her
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freediver

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Re: Are our banks in trouble?
Reply #9 - Oct 13^th, 2008 at 4:41pm

Sprintcyclist wrote on Oct 13^th, 2008 at 4:24pm:

tallow, I am an active investor and use oldfashioned simple rules.

Buy the winners and sell the losers.
ie, buy when they are going up, sell when they are going down.
I miss out on the lows and sell losers quickly.

Have had no holdings for about 6 months. It's very boring.

This makes it pure guesswork and contributes to market fluctations. The only useful 'old fashioned rule' is to buy shares when they cost less than what their true value is. If you don't know how to figure out their true value, you are gambling.

How do you figure out if a stock is going down? They go up and down cosntantly. The only way to know for sure is when it has already gone down a fair way, by which time you have done your dough, and by which time it may be a good time to buy.

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People who can't distinguish between etymology and entomology bug me in ways I cannot put into words.

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tallowood Gold Member Offline Australian Politics Posts: 5108	Re: Are our banks in trouble? Reply #10 - Oct 13^th, 2008 at 4:48pm I don't think I'm "stockmarket savvy" just don't go with a crowd's panic, take it as it comes and keep positive. A jobs is not a life and loosing one is not a death, "been there done that".
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mantra Gold Member Offline ozpolitic.com Posts: 10750 Gender:	Re: Are our banks in trouble? Reply #11 - Oct 13^th, 2008 at 4:59pm Quote: A jobs is not a life and loosing one is not a death, "been there done that". That is true Tallowood. Nonetheless there will be plenty of workers who depend on their weekly wages for their mere existence. Australians in general have spent a lot more than they've earnt over the past decade.
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freediver Gold Member Offline www.ozpolitic.com Posts: 48814 At my desk.	Re: Are our banks in trouble? Reply #12 - Oct 13^th, 2008 at 5:09pm Nonetheless there will be plenty of workers who depend on their weekly wages for their mere existence. None do, in Australia. Only their lifestyle is at risk.
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Aussie Gold Member Offline OzPolitic Posts: 38451 Gender:	Re: Are our banks in trouble? Reply #13 - Oct 13^th, 2008 at 5:14pm Ya have to give credit where it is due. Labor cannot claim any concerning the accepted capacity of Australia to largely withstand the current problem. Howard/Costello, and China, can take the kudos. Yet, then again, it was Hawke.............
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tallowood

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Re: Are our banks in trouble?
Reply #14 - Oct 13^th, 2008 at 5:20pm

People still have to eat and be clothed and sheltered; they will not give up on loving and laughing. That’s why the economy is not going to die because media of exchange losing its meaning. It will temporarily change to more natural and basic things like it always had done before but it is actually not bad for small communities to have some degree of barter going on. It makes social life better and brings back humanity. Hopefully it will stop globalization for a while too.

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Reality is a figment of imagination

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