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

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

#91

Post by ur-whale »

baron_harkonnen wrote: post #86
rchaud wrote: post #50

Earlier quoted context omitted.

The difference is that in most cases, the shady mechanic is not somebody you already know from college, or from golf or your national frat society. McKinsey gets paid ungodly sums in part because they are the archetype of the old boy's club. Their new hires usually come only from top business schools, and likely already have several years under their belt at the types of companies McKinsey gets business from. In addi…

My experience has been that the vast majority of McKinsey and BCG consultants have absolutely no real world experience. My company has been hiring these people for internal roles in droves and it's hilarious (and depressing) to watch how useless they are when they can't just leave after dropping some nice sounding but useless solution on someones desk.

>My experience has been that the vast majority of McKinsey and BCG consultants have absolutely no real world experience

And one of these drones currently runs Google :(

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

#92

Post by geodel »

Scoundreller wrote: post #64
bitcoinmoney wrote: post #51

Earlier quoted context omitted.

2k/hr?????

Sounds high. Top partners at law firms will have rates lower than that.

It is extra reward for those who help leveraging the synergies while paradigms go shifting.

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

#93

Post by ur-whale »

twh270 wrote: post #48

Much, possibly most, of the economic value in a downturn comes from weeding out the weaker companies -- through bankruptcy, acquisition, or restructuring/pivoting. I well remember the "dot com" crash. It wiped out tons of companies that had no business existing (pardon the pun). (Of course when it comes to banking, that can be a bit of a special case as we've witnessed multiple times.) And yes, downturns are hard on…

I believe the consecrated term is "creative destruction"

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

#94

Post by dfxm12 »

avs733 wrote: post #29
throwaway66920 wrote: post #25

I believe this is the actual article https://www.mckinsey.com/industries/financial-services/our-i... Broadly it seems to be less extreme than Bloomberg’s summary and more nuanced to particular conditions. I like how exhibit 6 is rotated to encourage reading it from either direction. Haven’t seen that before in charts.

Well of course it's more nuanced. Bloomberg is about speed not MECE.

MECE

Mango-eating computer engineers?

No, that doesn't fit in based on the context clues...

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

#95

Post by stakhanov »

dfxm12 wrote: post #94
avs733 wrote: post #29

Earlier quoted context omitted.

Well of course it's more nuanced. Bloomberg is about speed not MECE.

MECE Mango-eating computer engineers? No, that doesn't fit in based on the context clues...

Mutually Exclusive & Comprehensively Exhaustive. It's how to do bullet points according to McKinsey. They had to invent it in the 1960s because apparently by the 1960s no one at McKinsey was yet, you know, aware of the existence of centuries' worth of literature on formal logic. So they reinvented the wheel as far as that particular cultural achievement was concerened. Or the first millionth of it, to be more precise, and left it at that, because the rest of it would have no longer fit onto a single PowerPoint slide.

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

#96

Post by mywittyname »

segmondy wrote: post #71
helpPeople wrote: post #43

I look at 8 year automotive loans, and I wonder- who is about to get screwed. People with jobs at gas stations buying new $30k vehicles. Either inflation is about to get bad, and our parents/Grandparents lose big or deflation happens and young people are screwed. Are there any other options?

$30k vehicles are cheap these days. My mouth dropped when I was at the auto show and seeing SUVs like navigator and escalade with price of $80k+

The median new car price is quickly approaching $40k. Probably 65% or so of new cars cost more than $30k.

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

#97

Post by anm89 »

IAmEveryone wrote: post #5
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.

That's a cynical, conspiratorial, and woefully uninformed take on this. On the most basic level, what you're suggesting doesn't make sense: "getting ready for a bailout" doesn't imply any real action any government would take. If anything, being warned about financial instability will lead to an increase in requirements for banks: capital requirements might increase, M&A might become harder, etc. But those are the so…

I love this idea of words which have negative(or positive) connotations in someones belief systems triggering theme based sentence generation via markov chains. I feel like this is a bizarrely insightful take on how people actually think and respond to things.

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

#98

Post by ChrisLomont »

pjmorris wrote: post #75
ChrisLomont wrote: post #68

Earlier quoted context omitted.

>The 2+ Trillion dollar expansion of the Fed balance sheet during the crisis costs taxpayers every day that they pay interest on a loan enabled by that 2T+ expansion. Taxpayers don't pay interest on Fed assets. You have a fundamental misunderstanding of how monetary policy works. What makes you think your statement true? Did you read it in a explanation of how the Fed works, or did you make it up? >The financializati…

Compare your > 'Taxpayers don't pay interest on Fed assets.' with what I said; 'they pay interest on a loan enabled by that 2T+ expansion' (of Fed assets.) The Fed bought ~1.5-2T of MBS, turning bad loans that would never be repaid - credit that simply never should have been issued - into bank reserves. Those reserves both inflate asset prices and enable the banks to make loans on which interest is paid. > When the p…

>Those reserves both inflate asset prices and enable the banks to make loans on which interest is paid

Banks don't need those assets to make loans. Banks can make loans whenever and where ever they want, and can simply borrow from the Fed. This is the point of short-term interest rates - banks can lend past reserve requirements whenever they find a decent loan to make. It's the difference between exogenous and endogenous theories of money, and modern economies with central banks usually work this way to allow the market to decide how much money is needed, not how much reserves a bank can obtain because a central bank absorbed assets.

And most loans rate people get are tied pretty directly to Fed rates, not bank reserves. This is again due to endogenous money creation - demand creates money, not reserves. So the Fed and banks having 0 reserves or having 100 trillion reserves is nearly irrelevant - it is interest rates that matter, and those are set directly by the Fed board.

Also, if you recall, the banks were famously not giving loans after the bailouts, despite having the capital to do so [4]. I guess that also doesn't help your claims.

>they pay interest on a loan enabled by that 2T+ expansion

If you're going that far afield, then it's simple to point out what financial trouble they would be in if the Fed didn't make those loans. People would likely be far worse, in which case it makes the argument for those loans even stronger.

It would be interesting to check even correlation between Fed balance and interest rates.

Here's [1] an IGM Forum economist poll of most of the country's top economists on whether or not the bailouts improved unemployment. I'd guess being unemployed is worse than claimed interest rate hikes.

Here's [2] their answer to the question: "the benefits of bailing out U.S. banks in 2008 will end up exceeding the costs" - resulting in strong support with certainty (especially considering the types of questions these polls ask - check other questions).

So there's not much real argument on the bailouts being beneficial.

Now that the Fed is selling off MBS [3], shouldn't that cause the reverse of what you claim absorbing them did? Because those effects are not see in the markets. Maybe your effects did not happen?

[1] http://www.igmchicago.org/surveys/bank-bailouts

[2] http://www.igmchicago.org/surveys/bailouts-banks-and-automak...

[3] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

[4] https://research.stlouisfed.org/publications/economic-synops...

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

#99

Post by PopeDotNinja »

rchaud wrote: post #50
dawg- wrote: post #44

And if you're a bank, guess who is conveniently standing by ready to fix it for you with an army of $2000 an hour consultants? McKinsey. Same exact scam as the shady mechanic who wants charge you $400 to flush your transmission fluid and convinces you that your car will surely blow up if you don't do it.

The difference is that in most cases, the shady mechanic is not somebody you already know from college, or from golf or your national frat society. McKinsey gets paid ungodly sums in part because they are the archetype of the old boy's club. Their new hires usually come only from top business schools, and likely already have several years under their belt at the types of companies McKinsey gets business from. In addi…

Here's the basic model:

- McKinsey hires a bunch of "top" school grads

- after a few years, some hires clearly have the potential to make partner, and most don't

- McKinsey encourages clients to hire the people who aren't partner material at an attractive wage

- feeling good about making a step up after capping out at McKinsey, most people gladly accept

- McKinsey now has an alumni network at client's which are a good source of future business

- repeat as desired to build up alumni network

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

#100

Post by toast0 »

SilasX wrote: post #74
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.

Depending on how you regard the Federal Reserve, it's already happening. The Fed has been making massive loans to banks that are unable to get overnight loans from other banks based on their portfolios. [1] The amount and duration reporting has been. Originally it was $53 billion planned for a few weeks [2], and now it's over $128 billion [3], lasting into next year. [1] https://news.ycombinator.com/item?id=21004068…

If nobody is willing/able to lend dollars overnight secured by borrowers' treasury notes as collateral, and the Fed steps in to lend, the problem is either there's not enough dollars around to lend or people don't trust the collateral.

Since treasury notes are trading at normal interest rates in the overall market, it seems pretty clear it's a liquidity issue. The potential lenders in that market don't have enough dollars to lend (in part due to post-2008 regulations and post-2008 behavioral changes by those lenders).

If it were easy to become a lender in the overnight market, you would see people swooping in to make nearly risk free loans for 8% (apr) overnight. The swooping would rather rapidly lower the interest rates back to near normal. The Fed has authority and ability to swoop in, and a desire to keep the interests low, so there you go.

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