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Why politician never tell the truth.

Discussion in 'The OT' started by yosoyellobo, Mar 26, 2013.

  1. yosoyellobo

    yosoyellobo Icon

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    Jacksonville Fl
  2. phrelin

    phrelin Hall Of Fame DBSTalk Club

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    Northern...
    The problem with the article is that it tells just half the story.

    In the U.S., the FDIC handles a bank that has essentially failed. The FDIC steps in, grabs the records, and hauls them off to Washington while arranging for another bank to pick up the depositors' accounts - usually depositors experience a minimum of hassle and are made whole. Shareholders and some uninsured accounts, not so much, but that's the risk. And this is half the story.

    Most of the banks that go under in the U.S. are regional or local banks. Among other things they have issued construction loans to individuals and contractors and they have issued cash flow lines of credit to local businesses. When the FDIC takes over, those loans usually ceased to be honored. The banks that pick up the depositors have no obligation regarding those loans and, at best, might hand the borrower a loan application form.

    This leaves people in the local economy struggling. Have an 80% finished building and its time to pay some contractors progress payments? Maybe in a few months you can find a new lender, maybe. Need to make payroll in your business and the bank was to give you a cash flow loan secured by your new receivables? Expect to face down some angry employees and handle a complaint from the State Department of Labor.

    That's the other half of the story and really the important part of the story. If the bank was significant in your local economy, there's about a year for that big hole to get backfilled.

    So if a Eurozone leader honestly says "Hey, anywhere there are marginal banks we're going to shut them down", the impact is far less on the depositors then on borrowers expecting funding commitments to be honored.

    Yes, the politician may be telling the truth. But for the businesses (and those who work for them) which depend upon ongoing lending to maintain the economy in, say, Slovenia, it's time to panic. And that should soon be followed by a general economic panic in, say, Slovenia.

    The answers are never as easy as most people, including most politicians, would prefer. Babbling off the top of your head is a truly irresponsible thing for a politician in that guy's position to do.
     
  3. RasputinAXP

    RasputinAXP Kwisatz Haderach of Cordcuttery

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    Jan 23, 2008
    Usually. The bank that held all but one of my church's accounts failed with little to no warning. Luckily there was enough in the one other account to cover the shortfall that week but it took about 3-4 weeks to get the money back out and into the new bank. Complete mess.
     

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