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Reasons the banking crisis isn’t a repeat of 2008

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Re: Reasons the banking crisis isn’t a repeat of 2008

#121

Post by bogomipz »

arcticbull wrote: post #81
bogomipz wrote: post #79

Earlier quoted context omitted.

>"The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued." Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? You also seem to have overlooked some significant details and context. To date th…

> SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact. Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders. All the bank's equity would have been wiped out sure (and it was anyways) but losses to depositors would likely be slim…

>"Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders."

Do you realize how many tech companies used SVB as their primary banking facility? There were plenty of companies who would not have made pay role. So yes real regular people would have been affected.

>"It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position."

The FDIC invoked a "systemic risk exception" in order to make SVB and Signature Bank depositors whole. Federal law requires the FDIC to resolve failed banks by choosing the method the least costly to the Deposit Insurance Fund. Here "resolved" means making only insured depositors whole. The only exception to this is the systemic risk exception. This is law not just some shit you can make up.

>"The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses "

Uh no, the issue that is that there's a lot of uncertainty. I don't think nobody really knows the extent of it at this point because a lot of midsize banks haven't really been under strong regulatory scrutiny until very recently. A crisis of confidence is still a crisis. A crisis of confidence is precisely what causes a run on banks.

Re: Reasons the banking crisis isn’t a repeat of 2008

#122

Post by mNovak »

alxmng wrote: post #87

Who cares about keeping deposits safe when money isn’t worth anything? Americans don’t even have money in the bank. Median savings is $4500. Many people who perform socially useful jobs can barely afford the basic basket of goods like rent, food, and transportation.

If anyone is interested, as I was, data up to 2019 comes from [1].

Note that it's plotting medians of those who hold the asset, so i.e. "non-residential real estate" (held by 7% of households) is median $70k.

[1] https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...

Re: Reasons the banking crisis isn’t a repeat of 2008

#123

Post by ashwagary »

oblio wrote: post #74
chiefalchemist wrote: post #71

Earlier quoted context omitted.

> The fucking owners of capital seem bound and determined to destroy their own system. Nah. These disruptions are a means to an ends. That is, shifting still more wealth to the top. Follow that graph. Everything else is a means to that ends or a distraction.

I hate all these conspiracy theories. And you know why? It's because they imply hubris, arrogance, control. Let's just realize that we all have a lot less control over our environment than we think we do, and some things are just forces beyond anyone's control.

>I hate all these conspiracy theories.

>Let's just realize that we all have a lot less control over our environment than we think we do

Do the privately run secretive organization that sets the time value of money and the people that influence it not have "control"?

To be clear, I'm talking about the central bank.

Re: Reasons the banking crisis isn’t a repeat of 2008

#124

Post by remexre »

fyzix wrote: post #117
paulpauper wrote: post #107

Earlier quoted context omitted.

Peter Schiff predicted this from the moment the fed bailouted the banks in 2008. He predicted dollar collapse, hyperinflation for 11 years, and a bunch of other stuff the didn't come true. Major broken clock syndrome on his part. Inflation finally spiked, but after being wrong since 2008. Gold still has not done much in a decade. The inflation was from the post-covid recovery, which was so strong that supply chain co…

It's better to be wrong until you're right than right until you're wrong...because you will get the last laugh. The fundamental problem is that price controls never work and the interest rate is the price of money. If you understand this, then it's easy to predict the endgame, whether it takes 10 or 20 yrs to fail, you will still be right once you position yourself for the windfall.

Not too knowledgeable about macro -- is that tantamount to saying that monetary policy doesn't work? And what's the windfall in this case, given that the dollar is the reserve currency; RMB-denominated assets?

Re: Reasons the banking crisis isn’t a repeat of 2008

#125

Post by A4ET8a8uTh0 »

arcticbull wrote: post #81
bogomipz wrote: post #79

Earlier quoted context omitted.

>"The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued." Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? You also seem to have overlooked some significant details and context. To date th…

> SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact. Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders. All the bank's equity would have been wiped out sure (and it was anyways) but losses to depositors would likely be slim…

That is a very interesting question. I agree it is not clear, but it is not in ' not clear' status due to some legalistic formality. It is unclear, because it would appear treasuries around the world[1] are basically making up rules as they go. It does not inspire confidence.

The question is definitely open and I honestly do not know the answer.

[1]https://www.marketwatch.com/story/contracts-are-made-to-be-h...

Re: Reasons the banking crisis isn’t a repeat of 2008

#126

Post by roenxi »

bigdaddyrabbit2 wrote: post #116
fyzix wrote: post #113

Earlier quoted context omitted.

By "banks", I mean 90% of the other banks in the country that would've failed, absent the SVB depositor bailout. If the FED didn't step in, every regional bank in the country would experience a bank run as people would withdraw everything and deposit in the "too big to fail" banks for safety. Why I think the depositors should've suffered a haircut: What the FED did, was implicitly guarantee the deposits, this incenti…

>banks to become even riskier with deposits as they get to keep the profits if their risky bets payoff and get bailed out if they fail This isn't true, is it? While they do get to keep profits, if the bets don't pay off, the bankers - shareholders, bondholders, employees, executives - all get wiped out (as happened with SI, Signature and SVB). The depositors get bailed out. They get to keep profits if they win, but l…

The bankers are closet creatives; they're probably going set up structures where the equity-holders are on paper running something that looks like a charity and there is a class of "depositors" who are making suspiciously high returns. They just need to figure out how to get the money into their sphere of control as a deposit rather than as equity.

Indeed, in the SVB case there is probably an interesting story around why all these startups were banking with this one bank. It suggests complex relationships between entities and it wouldn't be that weird if it turns out the people being bailed out and the equity holders going broke are the same physical people.

Re: Reasons the banking crisis isn’t a repeat of 2008

#127

Post by bogomipz »

Avshalom wrote: post #85
bogomipz wrote: post #79

Earlier quoted context omitted.

>"The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued." Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive? You also seem to have overlooked some significant details and context. To date th…

>>four bank rescues not two - Signature Bank, First Republic, SVB and Credit Suisse. so when I said two and a half banks with two rescued it was actually two and a half banks with two and a half rescued. feels to me like even less of a banking crisis.

I provided numerous points that show how the events of the last two weeks are of significance but it seems you want to cherry pick just one. At any rate, all four of those banks were rescued. The FDIC arranging for a healthy bank to take over an unhealthy bank is a form of rescue. This type of rescue has roots in the 2008 crisis. It's interesting how confident you seem to be in your assertion that all of this is non-issue yet your comments indicate you might not understand very much about banking or the banking system.

Re: Reasons the banking crisis isn’t a repeat of 2008

#128

Post by fyzix »

dragonwriter wrote: post #111
fyzix wrote: post #104

Earlier quoted context omitted.

Schiff didn't account for the economic ignorance of the masses in his prediction. He understood that runaway inflation would cause the gold price to spike, he didn't foresee the confidence that traders have in the FED to fight off inflation. The FED cannot win the inflation fight (confirmed by their recent soft pivot back to QE) and gold will not go up until the traders realize this fact.

> Schiff didn’t account for the economic ignorance of the masses in his prediction. Literally every economic misprediction can be blamed on not accounting for the way people actually behave in real-world economies, but…that’s not something that adds credibility for the next prediction by the same predictor.

1.decade of 0% apr >>> 2.high inflation >>> 3.gold price surge

We have gotten 1 and 2 but we haven't gotten to 3 because traders believe that the FED can win the inflation fight. The FED abandoned the inflation fight with a soft pivot yet traders are still not buying gold. This is what Peter couldn't foresee...traders' unwillingness to go against the FED.

This is not a misprediction because in any sane world, the prospects of very high inflation would result in a spike of the gold price.

Re: Reasons the banking crisis isn’t a repeat of 2008

#129

Post by hayst4ck » 

  The primary function of central banks isn’t managing 
  inflation and employment, it is acting as a lender of 
  last resort. In this way, central banks provide the 
  bedrock for the banking system. The Fed’s ability to 
  perform this role expanded during the Global Financial 
  Crisis. They created many different types of lending 
  facilities to provide liquidity to banks, and many 
  former broker-dealers (like Morgan Stanley and Goldman 
  Sachs) became bank holding companies so that they could 
  access them.
Am I crazy or was there an entire section that said "this isn't a crisis because the fed is happy to give banks that make poor investment decisions taxpayer money?"

Doesn't this say that when a bank makes a poor investment, they can borrow from the taxpayer so they don't have to realize their loss?

Re: Reasons the banking crisis isn’t a repeat of 2008

#130

Post by eqmvii »

treebeard901 wrote: post #101

In 2008, the Treasury and Federal Reserve had a ton of ammo to use to provide liquidity. Since then, they have tried to inflate their way out of it using creative accounting and quantitative easing. The reason this could be worse than 2008 is that those methods will not work as well. Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc. When they tried to sell…

> Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc. When they tried to sell it to provide liquidity for deposits they found there were not many buyers for it.

What? That’s nonsense. There is an extremely liquid market for the securities and selling them was no problem.

The problem is that they lost value when interest rates rose, were held in a “hold to maturity” portfolio to avoid having to mark down prices as interest rates rose, and the bank didn’t properly hedge its interest rate risk.

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