On Thu, 9 Oct 2008 19:35:59 +1100, Bill Bartlett <billbartlett at aapt.net.au> wrote:
> It only reduces their revenue if they pass on the rate cut to their
> borrowers.
As I understand it, in the case of "tracker" mortgates the effect is immediate, the rate only needs be passed on in the case of 'variable rate' mortgages, and new mortgages.
> In Australia the official rate was cut by 1% two days ago,
> the banks have passed on .8% to home buyers, they've passed on
> nothing to credit card borrowers, So effectively the rate cut means a
> huge jump in profit margins.
Which, to me, illustrates that the issue is with demand for debt, not supply as has been claimed by some here and in almost all the media. Qualified borrowers are what is scarce, not available funds. Thus the debt-funded bailout/rescue/public-investment and the interest rate drop. The state makes a great qualified borrower (borrower-of-last-resort?), especially when the funds borrowed are for investing in banks! Is there something I am misunderstanding?
Having run out of suckers, now we need the State to take the #1 name off of the list, move the other names up and add our names to the bottom.
> In fact the big banks are like sharks in a feeding
> frenzy, gobbling up small banks at bargain prices.
Exactly, and not to belabour a discussion nobody seems to want to have, but consolidation, not failure is the likely outcome. Could it be the government is stepping in with public funds not so much to stop banks from "failing," but rather to prevent acquisition by foreign banks, especially by those of the "semi-periphery?"
-- Dmytri Kleiner editing text files since 1981
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