Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: $Revision: 1.6.2.16 $; site inmet.UUCP Path: utzoo!lsuc!watmath!clyde!cbosgd!ukma!psuvm.bitnet!psuvax1!burdvax!sdcrdcf!sdcsvax!dcdwest!ittatc!decvax!cca!inmet!nrh From: nrh@inmet.UUCP Newsgroups: net.politics.theory Subject: Re: Orphaned Response Message-ID: <28200534@inmet.UUCP> Date: Wed, 8-Jan-86 00:18:00 EST Article-I.D.: inmet.28200534 Posted: Wed Jan 8 00:18:00 1986 Date-Received: Sun, 12-Jan-86 21:29:26 EST References: <286@frog.UUCP> Lines: 183 Nf-ID: #R:frog:-28600:inmet:28200534:177600:9476 Nf-From: inmet!nrh Jan 8 00:18:00 1986 >/* Written 2:36 pm Dec 18, 1985 by berman@psuvax1 in inmet:net.politics.t */ >> >> >/* Written 12:45 pm Dec 13, 1985 by berman@psuvax1 in inmet:net.politics.t */ >> > >> >Power of banks: forcing people to do what they do not want to do. >> >Example: you want to borrow from us, you must deposit here (my >> >personal experience). >> >> Omigosh! What a huge amount of power: to trade with you only >> on terms they find agreeable! (Of course, YOU must also >> find the terms agreeable). Oh woe! >> >Using your movie theater example: it is like if you were told that >you can watch "Rainbow bright" only if you also buy tickets for "Rocky XXX". >Of course, I was not forced to make a deal: one can walk or learn how >to repair old cars. Still, I view many package deals as infringement >of my freedom, if there is no pure deal around. And, as Laura points out, a perfect opportunity for a new bank to open up, and offer the "pure" deals. It's not at all uncommon that one must buy a ticket to a double feature, even though one wants to watch only one film. Because of the pressure of competition, such double features seldom cost (say) twice as much as a regular film. Would you prefer that the banks simply charged higher interest rates and offered you the pure deal? No doubt you can find one, if you look.... >> It's quite true that the banks have a power to deny you a loan, but >> they can't "force" you to do things you don't want to do unless at >> some point you agree to this, or, of course, if the government backs >> them up. >> >> >Imagine that there is no regulations. Then you might have: you >> >want to borrow, deposit here, insure here, use us as a brocker. >> >Or worse: we do not like you, we will recommend everybody not >> >to borrow you. >> >> Such tactics work sometimes -- and sometimes not. Would you like >> to know where it's used a lot around here? Bless you Piotr! The >> GOVERNMENT operates in this way: .............................. >> >Which just supports my claim that not only the GOVERNMENT has >the power. No, Piotr. It supports the notion that the government is not a source of purely good tactics in this context. I don't deny for a moment that banking types would like to collude for purposes of blackballing, (I don't assert it, but I don't deny it either) but (happily) they tend not to believe each other, and when they do, there's an opening for what Laura has named the "Toad Terrific" bank to make a killing by applying better methods of discernment to the alleged deadbeats. >> >Example two: you do not want a financial chaos, help us (and pay >> >taxes to do it). >> >> Oho! A government goes to a bank and offers to pay more money back >> later in exchange for a quantity of money today. The bank agrees. >> The government, likely through incompetence or lack of nerve, FAILS to >> meet the deadlines. >> >> In the world of individuals, (...) >> >> In EITHER case, the bank involved would be justified in exercising >> whatever non-payment clause there was in your loan when you refused to >> pay. >> >You missed the point by a mile. Bank can invoke a non-payment clause >against a country, but only to a point. In 19 century the bank >would ask its government (US, France etc.) to size the customs of >the debtor country. Nowadays, this is not practicable, so there >exists an intricate system in which the rich governments subsidize >the poor governments so that the latter can pay increased spreads >to banks. I don't think I've missed the point, but can you state it in one sentence? If you're arguing that banks have too much power (because they can extract money, however indirectly, from the US taxpayer as taxes or as inflation) there we agree, but it is the government which gives them that power that has seriously misbehaved. If you're arguing that banks have too much power because they have a lock on money-loaning and certain financial services, I ask you: why? If the answer involves any sort of support from government, then I find it quite reasonable to take away that support. > >> >Depriving you of an asset you use (like a house) may be quite a >> >punishment. Unregulated power of banks could be very destructive. >> >> I suppose you'll find this tough to believe, but the ungrateful S.O.B.'s >> that run the movie theater nearby have just stopped showing a movie I >> liked. Further, even when they were running it, they insisted I *pay* >> them when I saw it! Oh the injustice! ..................... >> >Remember the double feature example which I gave before. Imagine >also that one company buys from the leading studios the franchise >to show their movies in, say, Cleveland. Afterwards, whoeverer >in Cleveland wants to see a movie must either a. agree to their terms, >b. travel 30 miles. This is exactly what I mean by concentration of >power. OR see it on Cable, OR buy the video-cassette, OR wait a while for it to come around to the revival houses, OR rent the film privately. Your example here wears thin: the movie studio has a monopoly on a particular film, but nobody has a monopoly on lending wealth (unless the government makes some pretty strange moves). The government is capable of this, and to some extent they've done it -- but it is the government intervention that limits the range of credit services, not those who would provide credit. >Of all the bissnesses, banks can potentially wield the greatest power. >You as individual may do not feel it this way, but every kind of >bussiness needs credit. Once there is a leverage, a dependance may >appear. If banks are accorded the exclusive right to lend money by the government (and here you'd better bear in mind that there are credit unions, international banks, and the bond market) then your statement is true. If the government makes moneylending contingent upon being in favor with the government (not just within a simple law, but in favor) then your statement is true. Other than that, I don't see how bankers could retain a monopoly (which is what you seem to fear). >> Piotr, get it straight: you can prevent any bank from gaining undue >> influence over you by making sure that a) You are willing and able to >> make the payments, and b) The other terms of the loan don't discommode you. >> and not taking the loan unless you are satisfied on counts a & b. >> >> I've no patience with Snidely Whiplash, but you rarely find Snidely Whiplash >> in the real world. >> >> It's a SHAME that folks sometimes can't make their interest payments, and >> it's also sad when nations can't. But let's hear no moaning about the >> power the banks wield: it's power given to them by their borrowers, >> and if that degree of power is unjust, let's have a closer look at the >> borrowers, shall we? It's not that the banks are complete nice-guys, >> or that any consequence of a credit shutoff is deserved (what about >> children born during a loan-induced boom who suffer during a collection- >> induced bust, for example?) but merely that the power stems not >> from the banks but from the borrowers. > >The life is more complex than your down to earth example. >Consider: John V. Decent deposits money in HugeBancorp. The president >of HB is fed lavishly by president for life of Whereitis, gen. Bozo. >Wheritis receves a loan, 1 billion dollars (plus another 10 billion from >AnotherBankIntown, ZillionYenIncorp etc.). > >7 years later (now we have seven lean years, following 7 fat ones). >Gen. Bozo is retired in St. Tropez, the former president of HB >similarly enjoys Boca Raton, the citizens of Whereitis learn that >they need an austerity program after years of depositing billions >in Swiss accounts of the most distinguished citizens, John V. Decent >learns that unless his government will help, his bank account will >go down the drain, the financial panic will drive interest rates >to the sky and his employer will bancrupt. Now, is there a little >of a reap-off here? There is indeed. Did you spot the quick fingers of the president of HB? Did you note that if HB were merely one of many, many, agencies that had to CONVINCE people of their credit-worthiness (rather than have the government DEFINE them as being credit-worthy, he'd never have gotten away with it? Do you see why, in such an environment, Mr. Decent would invest in a fund of such things, rather than betting his all on HB? Do you see that such manipulations are greatly eased if the HB president can say: (as they do, over and over) that they're insured by the FDIC? >In the unregulated past the above scenario differed: John. V. Decent >actually was loosing his account and job. And the reap-off was bigger. Ho hum. I disagree. In the unregulated past, we didn't have Continental Illinois, and Chrysler Corp bailouts to show folks that the way to save their business is NOT to keep it streamlined and honest, but to have a good Washington man. (Having a good Washington man is SOOO much more efficient.... and the little competitors, just starting out, don't have one to protect them against YOUR Washington man). By the way, unregulated private industry has never come close to equaling the failures of banking regulation: the French Assignat inflation, the Collapse of the 1920's German economy, and yes, the Great Depression. If you doubt the government's blame for the Great Depression, take a look at what Milton Friedman has to say about it.