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McKinsey: Half the World’s Banks Too Weak to Survive Downturn

bloomberg.com

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Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#11

Post by howard941 »

IAmEveryone wrote: post #10
omginternets wrote: post #7

Earlier quoted context omitted.

>do another bailout. I know you're being tongue-in-cheek, but in theory, are governments even capable of doing another bailout? My understanding is that public debt in most Western countries (not sure about China/India) is through the roof. Other than printing money and risking a cataclysmic devaluation, what can be done?

The problem was never with banks failing, it was with some of them being "too big to fail". This news therefore doesn't mean attempts to prevent another 2008-like crisis have been unsuccessful. Also, let's the remember the last bailout was a somewhat underrated success: " TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%…

From the bank shareholder's perspective the bailout was a stunning success. For the rest of us debtors, for those who greased the runways for the shareholders with their lost homes and lost savings that went to paying off debts in disinflationary dollars when stimulus and reasonable inflation would have made paying debts off easier, it remains an ongoing disaster.

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#13

Post by scribu »

Merrill wrote: post #12

Problems with weak banks are usually solved by merging them with stronger banks. It's the non-bank financial institutions that are more worrisome. Recall that Lehman Brothers and AIG were not banks.

> Recall that Lehman Brothers and AIG were not banks.

AIG was an insurance company, yes.

But Lehman Brothers was an investment bank.

From Wikipedia:

> in 2008, Lehman was the fourth-largest investment bank in the United States

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#14

Post by radiator »

omginternets wrote: post #7
richliss wrote: post #2

AKA On behalf of our banking customers we're going to be advising that governments get ready to do another bailout.

>do another bailout. I know you're being tongue-in-cheek, but in theory, are governments even capable of doing another bailout? My understanding is that public debt in most Western countries (not sure about China/India) is through the roof. Other than printing money and risking a cataclysmic devaluation, what can be done?

I hope it does not come as a surprise if I tell you that printing money has already been, since a long time and in great quantities, taking place. The cataclysmic devaluation part is the one they are working on postponing.

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#15

Post by formercoder »

scribu wrote: post #13
Merrill wrote: post #12

Problems with weak banks are usually solved by merging them with stronger banks. It's the non-bank financial institutions that are more worrisome. Recall that Lehman Brothers and AIG were not banks.

> Recall that Lehman Brothers and AIG were not banks. AIG was an insurance company, yes. But Lehman Brothers was an investment bank. From Wikipedia: > in 2008, Lehman was the fourth-largest investment bank in the United States

Lehman was a pure investment bank and therefore the government refused to bail them out - they did not want to be the lender of last resort to an entity they could not regulate strongly.

Once everyone saw this almost all of them converted to “commercial banks,” even Goldman, in order to receive bailouts.

The exception is Jefferies, leaving them as the only bank on Wall Street with a balance sheet that lends over 6x ebitda.

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#16

Post by ismail »

richliss wrote: post #2

AKA On behalf of our banking customers we're going to be advising that governments get ready to do another bailout.

I am going to agree with sentiments posted by others. This has nothing to do with bailouts.

I have not read the report though having read the article one thing is clear all the solutions mentioned in the article are services provided by Mckinsey. So rather than being about a bailout it is positioning their services

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#17

Post by Merrill »

scribu wrote: post #13
Merrill wrote: post #12

Problems with weak banks are usually solved by merging them with stronger banks. It's the non-bank financial institutions that are more worrisome. Recall that Lehman Brothers and AIG were not banks.

> Recall that Lehman Brothers and AIG were not banks. AIG was an insurance company, yes. But Lehman Brothers was an investment bank. From Wikipedia: > in 2008, Lehman was the fourth-largest investment bank in the United States

"Investment banks" were only colloquially banks. They were not members of the Federal Reserve, not regulated by the Office of the Comptroller of the Currency, and not FDIC insured. Survivors became banks after the crisis, but in their place we now have lots of hedge funds, private equity funds, etc. that have grown large to do similar financial operations without bank regulation.

https://en.wikipedia.org/wiki/Shadow_banking_system

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#18

Post by IAmEveryone »

howard941 wrote: post #11
IAmEveryone wrote: post #10

Earlier quoted context omitted.

The problem was never with banks failing, it was with some of them being "too big to fail". This news therefore doesn't mean attempts to prevent another 2008-like crisis have been unsuccessful. Also, let's the remember the last bailout was a somewhat underrated success: " TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%…

From the bank shareholder's perspective the bailout was a stunning success. For the rest of us debtors, for those who greased the runways for the shareholders with their lost homes and lost savings that went to paying off debts in disinflationary dollars when stimulus and reasonable inflation would have made paying debts off easier, it remains an ongoing disaster.

No, the shareholders of rescued banks got wiped out.

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#19

Post by hocuspocus »

omginternets wrote: post #7
richliss wrote: post #2

AKA On behalf of our banking customers we're going to be advising that governments get ready to do another bailout.

>do another bailout. I know you're being tongue-in-cheek, but in theory, are governments even capable of doing another bailout? My understanding is that public debt in most Western countries (not sure about China/India) is through the roof. Other than printing money and risking a cataclysmic devaluation, what can be done?

Central banks printing money to acquire bad assets from collapsing commercial banks would not cause any inflation.

Re: McKinsey: Half the World’s Banks Too Weak to Survive Downturn

#20

Post by jsjohnst »

std_throwaway wrote: post #3

We can always make more money if we really want to. The economy might run out of oil, sand, gold, land, and willpower but it will never run out of money until the central banks stop the money supply or politicians cause a hard fault.

No wonder you are hiding behind a throwaway, as you clearly don’t know what you’re talking about and are just posting mindless drivel. If you want to know the outcome of “we can always make more money” attitudes, look no further than Zimbabwe. In ~2007 they had a 50 cent paper note. ~6 months later a common paper note was $10,000,000,000. Just a short while after that, paper notes were being printed in one hundred trillion dollar increments. What could you buy with that $100T note? Basically not even something from a vending machine (aka worth less than 1 USD in value).

Source: I have all the above paper notes from Zimbabwe and have read about the economic policies that led to the collapse of the currency.

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