Please consider buying stock in my new bank (business proposal)

[JackRiddler]

The plan is as follows: I'll accept a dollar deposit, lend out eight to anyone breathing at variable interest, issue derivatives backed by the loans and sell these to a Norwegian pension fund, buy swaps on both sides of the derivatives, and relabel all of that as assets so that I can leverage a new credit at 40:1.

Then I'll take 70 percent of that to the market to buy and short the same stocks simultaneously based on charts, without knowing which businesses they're in because that would jinx it. Another 20 percent will go into paying myself via offshore entities, 5 percent is to lobby and give campaign contributions to Congress for a later bailout, and five percent will be kept in reserve for a legal fund and/or getaway vehicle. Also, I'll hire colorful analysts to go scream the company's name on CNBC, and my CEO and CFO will be mathematicians who devise obscure algorithms that I will not understand when time comes for them to get a subpoena. Sorry, I don't recall if I remember any of this. Could you repeat the question?

We promise astonishing returns. Don't be a loser, think of your future, buy now.

Okay?

[Aloha Spirit]

1. Will you give me an extra dollar for each new customer I bring in?

[JackRiddler]

6. That's a great resume!

I like your go-go style. We want you to be our Supreme Sales Czar for the Entire Fucking Northeast Region (DDS). That's a 20% commission in the form of options on the IPO and a car loan. Have you seen our workplace chapel?

[Jackpine Radical]

2. Where do I sign up?

I figger if I have no clue what it's all about, it must have been designed by somebody a lot smarter than me. Somebody with a physics PhD, most likely.

[Skink]

3. Been done.

think of something original. K.

[angstlessk]

4. please help a tree person understand all this forest stuff...questions follow

1. Where does the other (initial) $7 come from to lend out $8?(one dollar deposit and loan out $8)
2. What EXACTLY is a derivative? and how are they issued? like a stock certificate?
3. Are derivatives more than $8 if so, how does that happen?
5. What then gives you the right to increase your leverage from 8:1 to 40:1?
6. Is the income ONLY from interest (initially)

Help out someone who does NOT understand all this fancy footwork?

[JackRiddler]

10. It doesn't quite work that way for the real world as a whole.

But there was room for any one entity to play the game as described, long as it can.

1) A bank can only loan up to what it has on deposit, keeping a legally required reserve, but the deposit can result from a loan taken out from another bank and redeposited in yours, which means that the total of credit overall exceeds deposits by a multiple depending on the reserve.

See here (wiki disclaimer) for a pretty good primer, especially the example chart.
http://en.wikipedia.org/wiki/Fractional-reserve_banking

Loans that are paid off cease to be money in the economy. The money from loans that are defaulted on stays in the system. The interest comes out of growth, long as the economy grows. When it doesn't, ouch.

I won't pretend I get it, either.

So here are my best guesses as a completely unqualified non-economist:

2) Paper. Meaning, nowadays: virtual paper.

3) They're initially sold at a fraction of the later redemption, assuming the later redemption is possible before the ponzi scheme falls apart.

5) Someone has to be sucker enough to lend it to me. It would be convenient if we were in bed together and controlled various offshore entities through which we pretend to be third parties doing the lending.

6) No. There's also return on investment in actual business, and return from sales. But why bother with income, if you can just lose the loan somewhere along the way?

[marions ghost]

5. OK

;-)

[Vilis Veritas]

7. Will this work?

[Aloha Spirit]

9. AAAhhh!

[moggie]

8. Milo Minderbinder, is that you? n/t

[JackRiddler]

11. No, I'm afraid the Founder of Our Business has passed on...

but he's always in our prayers. He started a heck of a charitable foundation before his final reward.

[Greyhound]

12. This exchange always stands out for me, moreso today.

1st Lt. Milo Minderbinder: Nately died a wealthy man, Yossarian. He had over sixty shares in the syndicate.

Yossarian: What difference does that make? He's dead.

1st Lt. Milo Minderbinder: Then his family will get it.

Yossarian: He didn't have time to have a family.

1st Lt. Milo Minderbinder: Then his parents will get it.

Yossarian: They don't need it, they're rich.

1st Lt. Milo Minderbinder: Then they'll understand.

[moggie]

14. And remember:

"What's good for M&M enterprises is good for the country"

[ITsec]

13. Only if I get a new toaster oven when I sign up. n/t

[tuckessee]

15. Did you say I'd get filthy rich quickly w/o having to do a damn thing?

Here, take my money. All of it. I'll borrow more to give you soon.

[librechik]

16. To borrow from Bill Maher: That's legal and pot isn't?

yup. Why we are going down like OJ in prison.

[Cronus Protagonist]

17. Isn't that the Enron model?

Except they pretended they were an energy company instead of a pretend bank?

[unblock]

18. you forgot: this is not a solicition, an offer can only be made in the prospectus :)

:hi:

[Piewhacket]

19. Sounds vaguely familiar. Has it ever been done before?

and did it work? :crazy:


(nice job)

[Name removed]

20. Deleted message

Message removed by moderator. Click here to review the message board rules.

[JackRiddler]

21. Come on, this is the opportunity of the century!!!