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  #1  
Old 03-02-2009, 09:19 PM
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What would really happen if the banks collapsed?

I am not an economist or a banker so I am wondering what would really happen? would everyone who had a loan just not have to pay it back? I realize that any money you had in an account would be gone or would the FDIC still cover it? I'm just trying to figure out the worse case scenario.-Scott

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Old 03-02-2009, 09:58 PM
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Not too sure what would happen on the "economy" side, but if you had a loan I can guarentee you that that loan would most likely be sold to a collector, at say at a discount, and they would hound you to collect!!!
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Old 03-02-2009, 10:01 PM
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generally, when a bank goes TU, the government jumps in and tries to find a buyer real fast. You still owe the debts and must contimue making payments. Your money is usually insured upto whatever $ amount they had listed. Just may take some time to get it. Now if all banks go belly up, you still owe the debts, but good luck getting your money. In that case keep your money in your mattress and be careful who you sleep with.
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Old 03-02-2009, 10:29 PM
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Originally Posted by BobK View Post
generally, when a bank goes TU, the government jumps in and tries to find a buyer real fast. You still owe the debts and must contimue making payments. Your money is usually insured upto whatever $ amount they had listed. Just may take some time to get it. Now if all banks go belly up, you still owe the debts, but good luck getting your money. In that case keep your money in your mattress and be careful who you sleep with.
So- if all the banks go belly up you still owe your debts, but to who? And if that is the case then wouldn't that mean the bank didn,t really go under but just changed names? Sorry if I am a bit ignorant on the subject, but I really wonder what would happen if the govt. just did nothing and let businesses fail.-Scott
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Old 03-02-2009, 10:47 PM
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Sorry if I am a bit ignorant on the subject, but I really wonder what would happen if the govt. just did nothing and let businesses fail.-Scott
If the current stimulus plan fails, then that's plan B. Google Great Depression and multiply by factor 3.

I hope plan A works, cause plan B would really suck.
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Old 03-02-2009, 11:27 PM
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What would happen if AIG is allowed to fail? To whom do they owe all those $billions? Hedge funds investors? Supposedly their insurance side was doing OK, so was it mostly due to bad CDS investments? If so, why is the public on the hook - considering CDSs are unregulated to begin with?
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Old 03-02-2009, 11:58 PM
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I guess I could quit paying my mortgage if the banks fail; that would save me a considerable monthly sum.
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Old 03-03-2009, 12:02 AM
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Originally Posted by 10fords View Post
So- if all the banks go belly up you still owe your debts, but to who? And if that is the case then wouldn't that mean the bank didn,t really go under but just changed names? Sorry if I am a bit ignorant on the subject, but I really wonder what would happen if the govt. just did nothing and let businesses fail.-Scott
You don't necessarily owe your debt to someone. The failing bank would try to sell your loan to someone else. If enough banks fail, it would be difficult to find a buyer no matter how cheap they sold your loan. This would result in them collecting whatever of yours they can as collateral and selling it.
Meanwhile, the banks owe money too. So if they collect 50K worth on the 100K you owe, but owe someone else 500K, that guy takes a bath. Multiply that by however many people borrow money and however many people loan money. The guy the banks owe probably run businesses of their own, which would then be in the red.
Furthermore, viable businesses that do not generate daily revenues would have trouble paying daily bills. Or weekly, bi-weekly (paychecks), etc..
Viable businesses that need startup money to get going would not be able to get it.

The question is one of scale. If the Big 3 go down, lots of businesses close doors, lots of people lose their jobs, but someone will step in and buy parts that are good. But banks are how people buy things that are good. No one has $8 or 9 billion in their hand to give to GM for Cadillac. Few people even have $50K in their hands to give over for your loan. A few banks going down would be like the Big 3 going down. Sucks, but survivable. A big portion of banks going down, and no matter the price offered, no one will be able to walk up and hand over cash for any of your loan.

At some point, eventually, some 20 or 30 people might get together and buy your loan together. And a new bank may be born. Between failing and the eventual new bank, there would be much death, destruction, and starvation.
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Old 03-03-2009, 01:35 AM
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They would become nationalized, and this mess would be over.

They would start lending again.

Home values could be corrected with the stroke of a pen.

Thats why you hear so much on TV about socialism being bad.

Got to give the ignorant something to chant about.
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Old 03-03-2009, 01:43 AM
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If they failed there assets would be bought up by other people and banks for pennies on the dollar, and much money would be made as better banks rise in there place.

Oh don't worry about any loans, someone will buy them and still service them you would have to pay.

Contrary to popular belief the world would not end, if say AIG went under, the sun would come up tomarrow. Sure things would be messy for a bit...well like they are now...and getting some kinds of loans would be hard...well like now, but after a fairly short period of time the vultures of the market would buy up the assets that are worth buying and make them productive again.
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Old 03-03-2009, 01:50 AM
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Local banks whose boards consist of local businessmen and women that made conservative loans are doing pretty well. Humungous banks whose boards consist of former senators, congressmen and presidents are in financial trouble.

There is no correlation.
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  #12  
Old 03-03-2009, 02:51 AM
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Quote:
Originally Posted by POS View Post
I guess I could quit paying my mortgage if the banks fail; that would save me a considerable monthly sum.

I don't have a mortgage on the house.


My Subaru auto mortgage is zero percent and it will be gone in a year.


The credit cards are paid.



I utterly despise banks, and the evil greedheads that control them, and don't want to be partners with them in ANYTHING, if I can help it.


Do you know that we still have usury laws, the limit is 10% interest, but the banks' lobbyists and lawyers long long ago bribed Congress so that banks are SPECIFICALLY exempt from all usury laws?



I pulled 1500 off a credit card to by a '90 560 SEL not long ago, and when I looked at the Credit card statement that came later, I saw that caper, by their terms was subject to 41% interest.


You heard me: FORTY ONE PER CENT.
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  #13  
Old 03-03-2009, 11:09 AM
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Quote:
Originally Posted by Jim B. View Post
I don't have a mortgage on the house.


My Subaru auto mortgage is zero percent and it will be gone in a year.


The credit cards are paid.



I utterly despise banks, and the evil greedheads that control them, and don't want to be partners with them in ANYTHING, if I can help it.


Do you know that we still have usury laws, the limit is 10% interest, but the banks' lobbyists and lawyers long long ago bribed Congress so that banks are SPECIFICALLY exempt from all usury laws?



I pulled 1500 off a credit card to by a '90 560 SEL not long ago, and when I looked at the Credit card statement that came later, I saw that caper, by their terms was subject to 41% interest.


You heard me: FORTY ONE PER CENT.
I have a credit card that I don't use except for my internet monthly payment and I noticed a few months ago that the default rate is 74.99%!!! I called them because I thought that was the definition of usury. They said that they rarely go that high, but they reserve the right to and it is legal! Now, I have excellent credit and I pay my balance every month, but I noticed my statement was coming later every month. It got to the point where if I didn't get my mail the day the statement came and send off the payment the next day it would be late and I would have to pay a $36 late fee on a $21 balance!! needless to say I dont use that card anymore. FYI it is a Chase Visa-Scott
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  #14  
Old 03-03-2009, 11:29 AM
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Quote:
Originally Posted by 10fords View Post
I am not an economist or a banker so I am wondering what would really happen? would everyone who had a loan just not have to pay it back? I realize that any money you had in an account would be gone or would the FDIC still cover it? I'm just trying to figure out the worse case scenario.-Scott

To answer your question without osmosis of comments that have nothing to do with your question.

If the bank is insured with the FDIC you are covered, banks that are FDIC insured have a written notice about the protection provided by FDIC.

If you had a loan you can bet sure as $hit that you will have to pay it back, even more so than if the bank was solvent.

Last edited by Medmech; 03-03-2009 at 11:36 AM.
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  #15  
Old 03-03-2009, 12:42 PM
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I am going to go out and buy the biggest house I can find with a bank that is about to go down the tubes so I don't have to pay for it.

If only that were true.

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