America’s banks are missing hundreds of billions of dollars • Hacker News Board

Re: America’s banks are missing hundreds of billions of dollars

#121

Post by ackbar03 » Wed, Mar 22, 2023, 7:56 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

> Wrong. This is corruption. Janet is picking winners and losers. Some people are losing their deposits and some are not. You are systemic if you had dinner with Janet yesterday.

No no no, that's not how financial markets work. It's the stuff that happens after dinner over drinks that makes the difference

Re: America’s banks are missing hundreds of billions of dollars

#122

Post by jquery » Wed, Mar 22, 2023, 8:02 AM UTC

tenpies wrote: post #43

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. It's not just the banks either. In most Western countries, the pension funds are highly incentivised (usually through law) to purchase government debt in some form. This is also part of the fuss on the ESG investment bill that Biden recently vetoed. The intent was to ensure that pension and fund ma…

> The intent was to ensure that pension and fund managers were focused on their fiduciary obligation first and foremost

No, the intent was to make sure ESG and other factors could not be analyzed as a risk factor, when they plainly are risk factors, just inconvenient risk factors that oil lobbyists and the like would rather you didn't pay attention to. Biden did the right thing, and ensured pension/fund managers kept their independence.

Re: America’s banks are missing hundreds of billions of dollars

#123

Post by SkyMarshal » Wed, Mar 22, 2023, 8:03 AM UTC

cudgy wrote: post #100

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

Two words … bond ladder. Stagger maturities to meet reasonably expected distributions and interest rate trends. Basic financial management 101.

“reasonably expected” works 99% of the time and then completely implodes 1% of the time.

It’s like building a seawall to protect against the next tsunami, and measuring the height of the seawall based on the worst past tsunami. But the worst past tsunami was completely unpredictable prior to it happening, based on all the lesser tsunamis that had come before it. And the future worst tsunami will be by definition worse than the past worst tsunami and similarly unpredictable based on all the lesser past ones.

Re: America’s banks are missing hundreds of billions of dollars

#124

Post by qikInNdOutReply » Wed, Mar 22, 2023, 8:10 AM UTC

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 6. Banks going under is bad look, so the government decides to inject massive liquidity into banks, now finding itself both tightening and loosening fiscal policy simultaneously.

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

Its time to get this plant swinging.

Re: America’s banks are missing hundreds of billions of dollars

#125

Post by mrbombastic » Wed, Mar 22, 2023, 8:10 AM UTC

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

I buy this outline but honest question, was the massive covid stimulus avoidable? I rode a bicycle around NYC during the early days of covid and it was a ghost town, like not a person on the streets in a city of 8 million. On the weekend I took a ride up state for a hike and virtually every business was closed on the way. It seemed inevitable at that point the economic consequences of this were going to be massive and I am kind of amazed it took this long. It feels easy to say these steps got us in this mess but I am wondering what the alternative was?

Re: America’s banks are missing hundreds of billions of dollars

#126

Post by prennert » Wed, Mar 22, 2023, 8:12 AM UTC

somenameforme wrote: post #87

nugget wrote: post #61

Earlier quoted context omitted.

Watch the exchange between Sen Lankford and Sec Yellen yourself: https://www.youtube.com/watch?v=Bcvl104tyRY Yellen says unsecured depositors at TBTF banks will always be bailed out, but those at smaller banks are on their own. It's one of the most incredible moments I've witnessed. I'm not sure if there's some hidden agenda being pursued, or if Yellen is just so far removed from the real world that she doesn't under…

I never understand things like this. She looks like a deer caught in the headlights when he asks her the most predictable and basic question about her decisions. How can you be in such a position, make such decisions, and be unable to offer a compelling answer to the most basic questions? Even if it some sort of a hidden agenda and [further] centralizing banking is just seen as a convenient stepping stone towards CBD…

There is a concept in the armed forces for making decisions in a given timeframe (struggling to find a source for this). Essentially you do the best you can in the time you are given. Then you move on and iterate. If you dither too much you probably don't have to make a decision anymore as the enemy has made it for you. In that framework it is accepted that a solution is not perfect.

I think about these crises the same way. They had 48h to sort it out and they had to make a decision. The decision has side-effect-like consequences. Should she now lie about this?

So now, why did they only have 48h to make a decision? I don't know. I doubt nobody has thought about this before. But I assume that regulating banks is particularly hard, because of lobby pushback and the banks ability to exploit any loop hole quickly. They are literally organisations that look out for how to make money by exploiting asymmetries. These organisations work against the slow democratic decision making that involves non-aligned actors (who are also often not trained in this particular issue) in the upper and lower houses of parliaments of different countries.

Another question is. Why are small banks treated differently than big banks. I have read somewhere that small banks have less regulatory oversight. Maybe the decision is much more to support heavily regulated banks and not so much those which are for various reasons not as much regulated. Why would the government want to hold the bag that it was not allowed to look into?

Re: America’s banks are missing hundreds of billions of dollars

#127

Post by SkyMarshal » Wed, Mar 22, 2023, 8:15 AM UTC

skellington wrote: post #109

somenameforme wrote: post #87

Earlier quoted context omitted.

I never understand things like this. She looks like a deer caught in the headlights when he asks her the most predictable and basic question about her decisions. How can you be in such a position, make such decisions, and be unable to offer a compelling answer to the most basic questions? Even if it some sort of a hidden agenda and [further] centralizing banking is just seen as a convenient stepping stone towards CBD…

[flagged]

You keep using that word nepotism. I do not think it means what you think it means. It’s not like Biden hired his daughter and son-in-law to bring peace to the Middle East and modernize the US govt among other tasks.

Re: America’s banks are missing hundreds of billions of dollars

#128

Post by puzzlingcaptcha » Wed, Mar 22, 2023, 8:16 AM UTC

mo_42 wrote: post #89

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

> 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. Printing money doesn’t cause inflation necessarily. Your thinking is based on Monetarism, which has been debunked a while ago. In essence, it’s not about the amount of money that is created. It's about the amount of goods we try to consume in relation to the amount of goods produced.

How do you debunk a theory in a field that doesn't allow for a hypothesis to be tested? Economics is just navel-gazing.

Re: America’s banks are missing hundreds of billions of dollars

#129

Post by hanselot » Wed, Mar 22, 2023, 8:17 AM UTC

jquery wrote: post #119

skellington wrote: post #109

Earlier quoted context omitted.

[flagged]

>Probably a Republican president would be just as bad Yes we all know the previous President famously kept his family far away from the levers of power.

This is accurate. Don't you know his son had an infamous laptop that exposed all of his illicit dealings with Ukraine, never mind the straight up insane things regarding their family affairs.

I mean, if there was ever a time to know the people supporting the current regime are in a cult, look no further.

Re: America’s banks are missing hundreds of billions of dollars

#130

Post by misja111 » Wed, Mar 22, 2023, 8:21 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

> I honestly was thinking we will stay in this zero-rate regime for the next decade or more. I suspect the people at SVB thought in a similar fashion and plan accordingly

I have been working in several trading companies, both as trader and in IT, and the first thing they teach you when trading, is that the market always knows better than you. So hedge your risks and don't trust that you have some kind of vision that knows better than the markets. Actually 'vision' was used jokingly when someone accidentally made a profit by not hedging and ending up on the right side of the market.

Bankers know this. In this case, SVB could have hedged their risk with interest rate swaps, for instance. But for those they would have to pay a premium. Why? Because the market believed there was a real chance the rates would go up. If at SVB they really planned on zero rates to stay for a decade or more, they have simply been gambling.