[Sixstrings]

Banks preparing in case of goverment shutdown

Financial institutions across the country have begun preparing for a worst-case scenario if Congress fails to raise the nation’s borrowing limit, assembling plans to offer customers emergency loans or waive fees if their federal pay or benefits checks do not arrive on time.

Navy Federal Credit Union, the largest in the country, said this week it would advance pay to direct-deposit members who are active-duty military or civilian employees of the Defense Department. It also said it would expedite approvals for lines of credit, overdraft programs and higher credit card limits.

A spokesman for the Office of the Comptroller of the Currency, which oversees nationally chartered banks, said it is considering guidelines that would encourage financial institutions to work with their customers if checks are delayed, particularly in the case of overdraft or penalty fees.

Some of the nation’s largest consumer banks, such as Bank of America and Wells Fargo, have not yet announced plans for customers in the event of a shutdown. A joint guidance is expected from the nation’s banking regulators within the next few days.
http://www.washingtonpost.com/business/economy/banks-preparing-in-case-of-goverment-shutdown/2011/07/29/gIQAsmSzhI_story.html

Ok sh*t just got real.

If Congress passes the debt ceiling 30 minutes to midnight on the last day well at least the constiutional crisis is over, but if this has all been kabuki then it's incredibly irresponsible. Imagine the turmoil going on in the business community right now. Banks are having to move money around, make plans, the Federal Reserve may have to open the floodgates of printing press cash so the banks can keep loaning gov check people money (not just retirees, we're talking military and federal workers.. and the millions of gov contractors I guess they're just SOL).

[EnergyUnlimited]

Banks may offer emergency loans to people getting gov checks

...and I suspect that these will carry emergency 30% interest rate.

[Cog]

You mean people don't keep a month's expenses in cash? Seems sort of reckless not to have any savings.

But don't panic yet Sixstrings. I have it on good authority, we will kick the can far enough down the road to even please a progressive like yourself. Another $3 trillion in borrowed money is coming our way over the next two years so we can pretend it will never end.

[Sixstrings]

But don't panic yet Sixstrings. I have it on good authority, we will kick the can far enough down the road to even please a progressive like yourself. Another $3 trillion in borrowed money is coming our way over the next two years so we can pretend it will never end.

I don't like the Super Congress idea, and this compromise has that. Also the joint committee will have authority for cuts and new revenue. That means taxes. You guys have said no tax increases no matter what.. so will Republicans support this?

Even a cuts to taxes ratio of 3 to 1 wouldn't be right, if it hurts senior citizens. You'll never ever agree with me Cog, but honestly millionaires and billionaires can afford to pay more taxes. The whole world would be better off, our rich are investing so much money offshore it's fueling inflation in many countries. The rich are running up oil, corn, and cotton futures, creating bubbles. Frickin' Facebook valued at a hundred billion, Farmville twenty billion. It's insanity, all because the Federal Reserve hands out cash to the rich like it's candy and you don't even want profits on this free money taxed.

[Sixstrings]

...and I suspect that these will carry emergency 30% interest rate.

Nah, I assume it will be low interest, possibly none at all or a small fee. The Fed would coordinate this, print cash and give it to the banks then the bank loans the money to people who didn't get their gov check cuz of the Tea Party battle royale.

It's actually a good idea, there's no reason for elderly and the troops to miss a month's income and have undue hardship over political breakdown.

The only problem is if all the banks don't get on board.. looks like the military is covered, but none of the consumer banks have announced anything yet. If the news is right about there being a compromise then none of this will be necessary.

[Cog]

Any ideas on revenues that this Super Congress comes up with can be rejected by vote by the whole Congress. If they reject the recommendations then automatic spending cuts happen. I see no downside here except the cuts are not severe enough to suit me. I would support a debt ceiling increase, if for instance, we cut 10% off the federal budget next year. And we did that every year until we have a balanced budget.

This latest proposal doesn't carry enough fiscal pain with it. We need more austerity and enforcement mechanisms to make it happen. A balanced budget amendment with real enforcement teeth would be something nice to have. Mostly because congress doesn't have the spine to make these decisions on their own. Hopefully that is part of the package as well.

[prajeshbhat]

A 10% cut in government spending means taking $300 Billion out of the markets. Thats almost 2.5% of the GDP. That means USA will officially be in recession again. If that is followed by rapid debt de-leveraging and austerity from the private sector as well, you are looking at a depression. Here are some graphs that shows that without deficit spending USA has been have negative GDP growth since Reagan years(except the .com bubble era).
http://dshort.com/articles/guest/2011/0428-GDP-minus-the-federal-deficit.html
US will have to go through a generation of sufferings if you want to save the dollar.

[dolanbaker]

You mean people don't keep a month's expenses in cash? Seems sort of reckless not to have any savings.

Since many people have suffered a drop in disposable income, chances are that they have eaten into all their savings already and have nothing left.

[Pretorian]

Banks may offer emergency loans to people getting gov checks

...and I suspect that these will carry emergency 30% interest rate.

Which will be paid by the taxpayers. Sure.

[careinke]

This almost happened when I was lieutenant in the Air Force. My bank at the time, (Kelly Field), sent me a letter saying they would deposit the equivalent amount of my pay into my checking account with NO interest and NO fees. Congress came through at the last moment, so it did not actually happen. However the gesture certainly made a positive impression on me.

[Cog]

A 10% cut in government spending means taking $300 Billion out of the markets. Thats almost 2.5% of the GDP. That means USA will officially be in recession again. If that is followed by rapid debt de-leveraging and austerity from the private sector as well, you are looking at a depression. Here are some graphs that shows that without deficit spending USA has been have negative GDP growth since Reagan years(except the .com bubble era).
http://dshort.com/articles/guest/2011/0428-GDP-minus-the-federal-deficit.html
US will have to go through a generation of sufferings if you want to save the dollar.

So your solution is to go full speed ahead with borrowing and printing? That doesn't sound like much of a plan to me to keep out of bankruptcy. In case you don't know, we are already in a recession. Those trillions that we are borrowing and dumping into the economy only obscure the reality of the situation. Indeed, we can do this for a while longer but the math insures you will finally default. So take the pain now over time or take it all at once in a crash. Up to you.

[gollum]

A 10% cut in government spending means taking $300 Billion out of the markets. Thats almost 2.5% of the GDP. That means USA will officially be in recession again. If that is followed by rapid debt de-leveraging and austerity from the private sector as well, you are looking at a depression. Here are some graphs that shows that without deficit spending USA has been have negative GDP growth since Reagan years(except the .com bubble era).
http://dshort.com/articles/guest/2011/0428-GDP-minus-the-federal-deficit.html
US will have to go through a generation of sufferings if you want to save the dollar.

So your solution is to go full speed ahead with borrowing and printing? That doesn't sound like much of a plan to me to keep out of bankruptcy. In case you don't know, we are already in a recession. Those trillions that we are borrowing and dumping into the economy only obscure the reality of the situation. Indeed, we can do this for a while longer but the math insures you will finally default. So take the pain now over time or take it all at once in a crash. Up to you.

It would seem to me that taking it all at once would be to the advantage of the "doomer" crowd.

[Keith_McClary]

A spokesman for the Office of the Comptroller of the Currency, which oversees nationally chartered banks, said it is considering guidelines that would encourage financial institutions to work with their customers if checks are delayed, particularly in the case of overdraft or penalty fees.

Ok sh*t just got real.

or more unreal.

I think the key paragraph is the one above that you didn't bold.

The US can't simply print money like Zimbabwe.

They could have the Fed print money and buy treasury bonds, except for that pesky debt ceiling.

So, just issue informal IOU's (which don't count as debt) to nationally chartered banks with "guidelines" to "encourage" them to accept them, and give them some sort of informal promise of loans from the Fed.

But don't worry, this is just an emergency, temporary, stopgap measure.

[Cog]

@gollum

Except for some rare examples, most doomers that I know simply understand the trends and plan accordingly, but don't want Mad Max. A crash leads to unpredictable and chaotic conditions that are impossible to prepare for. A fast crash benefits no one except for the deranged who think it represents some sort of freedom to settle scores and watch society burn down while they kick back at the doomstead.

To the extent possible, taking the pain of austerity over a period of years would be the most prudent way for the country to proceed. But make no mistake, the pain for our orgy of spending over the last 30 years will be paid. The math of it doesn't care if you like the outcome it simply shows that at some point, the country will be unable to pay any bills, even the interest on the debt.

We already face power-down due to expensive oil. Growth assumptions which underlay social security and medicare will not come about and we will face bankruptcy in the not distant future. And that is if we have no more oil shocks that would cause a very deep depression and an acceleration in the timing of fiscal default.

No one wants doom. Least of all doomers who have thought about the implications of it all.

[Fishman]

Or roughly
A 10% increase in government spending means putting $300 Billion (or so) in the markets, money that doesn't actually exist. That means your dollar is actually degraded by about 2.5% (or so). That means USA will still be in recession and your dollar will be worth much less, you know, Obama's recovery plan. Fixing no problems, creating no jobs, pathetic

[the48thronin]

Banks may offer emergency loans to people getting gov checks

...and I suspect that these will carry emergency 30% interest rate.

The credit union said it will provide those members with a one-time credit with no interest or fees so long as they had enrolled in direct deposit. It said it would contact members who may be affected by any shutdown.

near the bottom and only discussing one credit union...

[Sixstrings]

The credit union said it will provide those members with a one-time credit with no interest or fees so long as they had enrolled in direct deposit. It said it would contact members who may be affected by any shutdown.

near the bottom and only discussing one credit union...

Well that was my guess even though I didn't read the whole article I posted. Bankers aren't totally evil, they want stability, they don't really want millions of checks bouncing at once.

If this whole debt crisis was all kabuki theater this was just so irresponsible. This is serious business when banks are on the verge of contacting seniors offering a bridge loan for their Social Security.

And the military.. most of them are probably tea party yet they sure panicked about their pay checks really fast.

This whole episode was bad, it's shaken America's credibility.

[gollum]

The credit union said it will provide those members with a one-time credit with no interest or fees so long as they had enrolled in direct deposit. It said it would contact members who may be affected by any shutdown.

near the bottom and only discussing one credit union...

Well that was my guess even though I didn't read the whole article I posted. Bankers aren't totally evil, they want stability, they don't really want millions of checks bouncing at once.

If this whole debt crisis was all kabuki theater this was just so irresponsible. This is serious business when banks are on the verge of contacting seniors offering a bridge loan for their Social Security.

And the military.. most of them are probably tea party yet they sure panicked about their pay checks really fast.

This whole episode was bad, it's shaken America's credibility.

Yea the Irony of tea party seniors and right wing military not getting checks didn't go unnoticed by me either. I think everyone who emphatically states they don't want government involved in their lives will be in for a shock as their wishes are granted.

[prajeshbhat]

I don't think that USA can default on it's obligations (in the traditional sense of the word where it means going to your creditors and saying you can't pay them). Default is something the stronger party enforces on the weak. America has a large bloated military and a war-loving public. Their leaders are not going to go through the humiliation of a default. And I also don't think that hyperinflation is completely inevitable. If other major currencies(like Euro) are destroyed first, then US currency could gain some value(relative to other currencies, it's fiat remember). That could be the best US could hope for. The implicit default will come in the form of a lowered standard of living.