There's lots of little differences, but the big difference is that in 2007-2008 I believed the government/fed would do the right thing and let the banks fail. They didn't, they created massive moral hazard, and communicated clearly they would be bailed out again.
Ask HN: Do you think this is the start of the new financial crisis?
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Re: Ask HN: Do you think this is the start of the new financial crisis?
#12No, I don't think it's the start, and no, it doesn't feel very similar. There's just no obvious asset bubble or other obvious overhang of risk. Credit Suisse and SVB feel like idiosyncratic outliers, not like the first pebbles of an avalanche.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#13ehh, not really. Watch The Big Short to get an idea of what was going on. Bankers were giving money to anyone with a pulse so they could buy a 3rd investment house. Liar loans, subprime mortgages, option-ARMS, etc. The real estate market last year was nuts but nothing like that.
Yes, car loan delinquencies are up and mortgage delinquencies are trending up but mortgage delinquencies are still at some of the lowest levels (~1%) in the past 15 years.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#14In 2008, a couple of very large banks failed because they were more exposed to assets that every bank held, signaling widespread distress.
The bank failures going on right now are due to still large, but smaller banks courting customers that most banks don't deal with. Other banks still have to deal with the rise in interest rates impacting the value of bonds they hold as capital, but they aren't so uniformly exposed/overexposed as was the case in 2008.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#15In 2008 the leading news was mortgage write-down, with the prospect of $200/bbl crude somewhere in the background. In 2023, the leading news is raging inflation (with crude trading for zero just 3 years ago) and people vaguely aware of a lockup in the real estate markets.
History doesn't repeat, but it sure does rhyme.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#16ehh, not really. Watch The Big Short to get an idea of what was going on. Bankers were giving money to anyone with a pulse so they could buy a 3rd investment house. Liar loans, subprime mortgages, option-ARMS, etc. The real estate market last year was nuts but nothing like that. Yes, car loan delinquencies are up and mortgage delinquencies are trending up but mortgage delinquencies are still at some of the lowest lev…
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Re: Ask HN: Do you think this is the start of the new financial crisis?
#17I don't think this will be anywhere close to 2008.
In many ways, SVB was a perfect storm of many factors. High uninsured deposits. Few, tech-savvy despositors. Bad investment choices w.r.t. interest rates. Makes sense why a run was possible.
Other smaller banks - while they may even have similar investment choices - are likely to have many depositors who are under the FDIC limit. So... rationally... they shouldn't call in their money. But also practically, it seems unlikely the masses will be able to effectively coordinate.
I think, however, that this will start a slow long-term erosion of many community banks. How it affects a short-term recession that's looming is hard for anyone to predict. If you're in the camp that the Fed is being too aggressive, maybe this actually slows down interest rate hikes... which might end up being a good thing!
All in all, fundamentals of banks just aren't as bad as '08.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#18It’s not a great situation. What we’re seeing is that the fed can’t raise rates to fight inflation without further eroding the balance sheet of big institutions holding large amounts of low yield bonds. So they’re kinda stuck. Hello stagflation.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#19The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate. That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead) , DB, HSBC) I'm skeptical of. And a recession feels imminent (felt to me this way even before SVB). To sum up, I do…
I don't understand how residential housing isn't a big bubble. That has to have second order effects yet to be fully felt.
I guess maybe it could look like even more inflation? If inflation goes up enough and wages mostly keep up, housing could become relatively reasonably priced again.
Re: Ask HN: Do you think this is the start of the new financial crisis?
#20ehh, not really. Watch The Big Short to get an idea of what was going on. Bankers were giving money to anyone with a pulse so they could buy a 3rd investment house. Liar loans, subprime mortgages, option-ARMS, etc. The real estate market last year was nuts but nothing like that. Yes, car loan delinquencies are up and mortgage delinquencies are trending up but mortgage delinquencies are still at some of the lowest lev…
About a third of housing sales now go to investors. We really don’t know what their balance sheets look like - but presumably someone is lending them money. Some fraction of those loans will be variable interest rate.
Housing was returning 20% YoY - I wouldn’t be surprised to learn some investors are holding 10% mortgages which they may not be able to carry.