How does this square with his Ayn Rand philosophy? By the way, the PR release was misleading. On a taxable basis BB&T will be paying 8% interest, not 5. If BB&T has plenty of money to loan, why would they borrow at 8% taxable and give warrants? But more to the point, is it ethical that Allison, if what he says is true (that the bank is fine without the infusion) to put his palm out for taxpayer money? Also, before Allison was FOR the bailout money he was against it. What do others think of this?
Ayn Rand was way ahead of her time. My understanding is Allison didn't really have a choice. Liberal democratic socialism implemented by Barak Hussein Obama will fix all this I'm sure. How does some off shore banking sound?
Key part of your post by kalinda stevenson: " A bank manufactures money by using the deposits of customers to make loans. The loans become assets and the assets turn into money."
key words deposits and assets
Gomer, do you have any idea of how the fractional reserve system works? Do you understand how banks create money? Any idea Gomer? Well here is a link for you (now this is harder to understand):
Now if you read and followed the money creation process you should understand that a bank loaning JUST 101% of deposits is very, very conserative. If you don't understand then you will continue to think it is risky.
Now keep up Gomer, I said tier 1 capital is for daily cash needs not loaning. Besides tier 1 capital just increased $3.1 billion which probably bumps it over 10%.
I believe the minimum required tier 1 capital is around 6% - so I believe that gives them some flexibility in loaning from capital if they want.
Is that so hard to understand?
When a bank has more loans than deposits (101%), they no longer lend deposits. Tier 1 capital is the "safety net" of the bank, its not used as a lending source.
Now, is that so hard to understand?
Their tier 1 capital easily supports this level of loans. I guess though you don't understand how banks make money. They accept deposits and pay x% interest on thos deposits. They loan that money out and carge x+y% interest. Tier 1 capital is available to meet withdrawal and cash operating requirements. Y-x-expenses + otherIncome is earnings.
Now is that so hard to understand?
If you are playing a football game and the refs change the rules at halftime, you change, play by the new rules or lose any competitive edge you might have. Even elementary students know that. If one cant stay up with change you lose