CNN/Money: Fed Bends Rules to Help Two Big Banks (Citi and Bank of America)

[Fergasun]

In a clear sign that the credit crunch is still affecting the nation's largest financial institutions, the Federal Reserve agreed this week to bend key banking regulations to help out Citigroup (Charts, Fortune 500) and Bank of America (Charts, Fortune 500), according to documents posted Friday on the Fed's web site.

The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letters, to provide liquidity to those holding mortgage loans, mortgage-backed securities, and other securities.

What good is regulation if you can break it nilly-willy like this? This seems pretty wrong to me... and looks like a move to keep housing strong for another 3-4 months or something? Seems like something pretty significant... but not many are grasping the significance...

[Thiebear]

You bend rules to fix the country... duh...

What are rules if there is nothing left to regulate.

[Larry]

Granted, I know less about the banking and credit business than, well, I can't think of anything where my ignorance is even comparable.

But, . . .

Somehow I suspect that the reason this limit is there is the same reason most other baking regulations are there: To reduce the potential for bank failures.

I'm wondering if, 10 years from now, they'll look at this as "helping" a gambler who's losing money by allowing him to borrow more money.

[Fergasun]

I'm wondering if, 10 years from now, they'll look at this as "helping" a gambler who's losing money by allowing him to borrow more money.

That's what I think too... especially since they allowed them to go 2.5x beyond the old limit... especially since this is FDIC insured money.

[isle-hawg]

Somehow I suspect that the reason this limit is there is the same reason most other baking regulations are there: To reduce the potential for bank failures.

I'm wondering if, 10 years from now, they'll look at this as "helping" a gambler who's losing money by allowing him to borrow more money.

I think you nailed it.

[PeterMP]

Granted, I know less about the banking and credit business than, well, I can't think of anything where my ignorance is even comparable.

But, . . .

Somehow I suspect that the reason this limit is there is the same reason most other baking regulations are there: To reduce the potential for bank failures.

I'm wondering if, 10 years from now, they'll look at this as "helping" a gambler who's losing money by allowing him to borrow more money.

Hopefully, they are using the borrowed money to pay of the debts they have to a loan sharks and/or their bookie whom would charge them higher interest rates and/or injure them to the point that they can't work and therefore collect the money. If they are using the money to "place more bets", then this is messed up.

[Larry]

OK, so what do I (we?) do about it?

I've been wondering about taking some of my money out of mutual funds (which haven't been doing that well, lately, anyway), and buying some CDs. Good idea?

(I'd been thinking about buying a house and renting it out, but

1. I've heard that the learning curve in the landlord business can be expensive.
   
2. Here in Florida, property taxes have gone through the roof (because property values have gone up, not because of any actual increases), (and Florida has a rule that the appraisal on residential property can only go up some small amount a year. Net result: If I buy a house, the taxes on that house will likely double simply because I bought it.), and the folks in Tallahasee are getting ready to pretty much eliminate all taxes on owner-occupied housing (thus guaranteeing that the taxes won't go down on the rental property I was considering buying, and meaning that all of my potential tenants will then have a big, tax-based incentive to buy their own house instead of renting from me.)
   

[Ignatius J.]

Larry,

You should ask yourself why you put money in a mutual fund in the first place.

Was it because you thought you were willing to take a risk with it in order to get a higher expectation? That's still the case right now.

Remember, the way to make money over the long haul is to buy low and sell high. If your mutual funds have taken a dip recently, (as many have) then is now really the time to sell? Also, is now really the time to get into a house? The real estate market is the most likely to suffer an ongoing shift as real estate is the market where all the restructuring is happening. Does that really make sense?

[Larry]

Part of my reasoning about getting into real estate is:

1) Prices in my area have fallen 10-15% in the last year. (Could be a buying opportunity. Or maybe it'll fall another 10-15% next year.)

2) I know that I'm going to have to buy a house someday. (Right now I'm living in Mom's house, while I take care of her. But that's not going to last forever, and I'm going to need a place of my own down the road.)

(And I figure that if I get a house now, then whatever happens to housing prices, will also happen to the price of my next house. If the price of my eventual house goes up, so will the value of the house I bought. I can, in effect, lock in the price of my house right now.)

3) One nice thing about a real estate investment: Whatever happens to the market, you've still got a house.

[CoachingWinsChampionships]

I've been wondering about taking some of my money out of mutual funds (which haven't been doing that well, lately, anyway), and buying some CDs. Good idea?

I heard Avril Lavigne has an awesome new CD coming out soon... be sure to pick that one up while its hot.

[isle-hawg]

OK, so what do I (we?) do about it?

I've been wondering about taking some of my money out of mutual funds (which haven't been doing that well, lately, anyway), and buying some CDs. Good idea?

(I'd been thinking about buying a house and renting it out,

I am no expert (not even close), but it seems to me if the subprime, loansharks go under and start bringing down the economy, it is because of many foreclosures they get stuck with. If this holds true the housing market will get flooded with houses thus bringing down housing prices. I am thinking the last thing I want to do now is buy another house. Investing in CD's in a legit bank (i.e. banks not named citi-bank or BoA), would be safer investments IMO, but what the heck do I know?

[PeterMP]

Part of my reasoning about getting into real estate is:

1) Prices in my area have fallen 10-15% in the last year. (Could be a buying opportunity. Or maybe it'll fall another 10-15% next year.)

2) I know that I'm going to have to buy a house someday. (Right now I'm living in Mom's house, while I take care of her. But that's not going to last forever, and I'm going to need a place of my own down the road.)

(And I figure that if I get a house now, then whatever happens to housing prices, will also happen to the price of my next house. If the price of my eventual house goes up, so will the value of the house I bought. I can, in effect, lock in the price of my house right now.)

3) One nice thing about a real estate investment: Whatever happens to the market, you've still got a house.

Stay in the market assuming you can afford some loss. If not, you shouldn't be in the market period. If you go real estate. go commercial for now. House prices, in my opinion, will hit a floor and stay there for at least 6 months before any serious move up. If prices in your area have been pretty constant for the last 6 months I'd think about it, but that sounds unlikely. You are better off buying into anything a little late (i.e. you didn't get the lowest price possible) then buying into early (i.e. before it bottomed out). In the first case, yes, you don't make max profit, but the second case can be very expensive.

[Koolblue13]

investigative journalist, economic expert and Harvard Doctor of Political Science Jerome Corsi

Does anybody know who this is?

[Fergasun]

investigative journalist, economic expert and Harvard Doctor of Political Science Jerome Corsi

Does anybody know who this is?

He's a far-right winger. I know he writes a ton of articles on the Amero and North American Union.... but he didn't author this one..