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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

#391

Post by wodenokoto »

riffraff wrote: post #243
wodenokoto wrote: post #234

Earlier quoted context omitted.

Who are we calling an "advanced economy", but also considering having an unreliable legal system? Contenders, in my mind: - China, second largest economy, but generally still considered developing, so I don't think it counts as "advanced" - Russia? They've been a big player in the world economy long enough it is hard to call it a developing country.

Italy for example (second exporter in Europe, tenth by GDP in the world) has notorious issues with its legal system (for a variety of reasons) where trial may take many years to be concluded.

Wow, I stand corrected. Italy is scoring terribly. Somehow I thought “the old guard in EU are okay”

https://www.theglobaleconomy.com/rankings/wb_ruleoflaw/

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

#392

Post by arcticbull »

klyrs wrote: post #155
arcticbull wrote: post #91

Earlier quoted context omitted.

My money still seems to work great. Those are some serious fiscal and social (but not monetary) issues that should be taken up with Congress not the Fed, and not the FDIC. Who handled this all very well I might add. > Median savings is $4500. The average American family has a $748,000 net worth, according to Federal Reserve data, median $121,000. Savings isn't just what's in your 'savings' account. Mine definitely is…

By your numbers, the median American family could put their entire net worth towards a cramped condo and still be making payments. That is not the image of stability that you're pretending it is.

It’s hardly the image of stability but saying people only have $4500 and it’s the Fed’s fault is wrong in two ways.

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

#393

Post by olddustytrail »

oblio wrote: post #166
Avshalom wrote: post #82

Earlier quoted context omitted.

I mean hubris and arrogance are in full and open display pretty constantly. The inability to actually control shit is why its always a moving target. but the idea that rich people are acting in a manner to maintain/increase their wealth aint exactly a conspiracy theory.

> but the idea that > are acting in a manner to maintain/increase their wealth aint exactly a conspiracy theory. This is the correct statement and it's not a conspiracy theory, it's a banality.

It's certainly not correct. If it was far fewer people would be in debt. People generally prioritise short term happiness over wealth building.

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

#394

Post by sangnoir »

meltyness wrote: post #357
Joel_Mckay wrote: post #263

I find it more interesting few seem able to recall what happened the year prior in 2007. Recall the elevated marketing hype from those trimming portfolios knowing full well what was happening. What I see is a short term 30% sales bump in real-estate (ratio of debts in negative amortization) as the amateur tries to find inflationary shelters after getting disappointed by laggard bond markets. Kind of reminds one of gi…

Where's the "occupy movement"? Where's the "CHAZ/CHOP" of 2023? What about "hope"? Are netizens signing up for exorbitantly expensive new services on a widespread basis? If individuals aren't being "excessively enriched" by conditions it's unlikely to become another spectacular market wide blow-up. Social causes are a proxy for froth. A short Friday memo probably isn't. Exuberance is in the hands of price gougers rig…

> Where's the "occupy movement"? Where's the "CHAZ/CHOP" of 2023?

We have Doge and memestocks as movements for the "common man" that are preemptively subveted.

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

#395

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…

>"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."

When IndyMac Bank failed in the 2008 financial crisis, the FDIC paid uninsured depositors 50 cents of every dollar[1][2][3]. I would say that very much of "this day and age."

From the FDIC's IndyMac Resolution:

"If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B. This means that you will eventually recover some of your uninsured funds. The FDIC declared a 50% advance dividend for uninsured deposits."[2]

It's bizarre to argue that what was literally an exceptional decision(SRE) by the FDIC could not have been otherwise.

[1] https://www.ocregister.com/2009/07/13/indymac-customers-stil...

[2] https://www.fdic.gov/resources/resolutions/bank-failures/fai...

[3] https://www.brookings.edu/2023/03/21/how-does-deposit-insura...

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

#396

Post by vkou »

Jochim wrote: post #360
vkou wrote: post #206

Earlier quoted context omitted.

> Do depositors have some sort of moral superiority to investors, or simply a legal priority? Depositors don't stand to benefit from a bank engaging in stupid risky bets with depositor money. Investors do (on the upside of those bets). This is why depositors should (and do) have moral priority for their money. Investors also are able to directly control the degree of stupid risk-taking behaviour taken by the bank, by…

While I largely agree, it could be argued that banks engaging in risky behaviour might attract depositors with higher interest rates than a more responsible bank. If depositors know that their money is fully covered, you incentivise them to move their money from responsible banks to irresponsible ones. It's easy to imagine a knock-on effect where responsible banks are incentivised to behave less so in order to retain…

You can make that argument, but just like a spherical cow, it has no bearing on reality. SVB and it's ilk offered the same non-existent interest rates as any other non-distressed bank.

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

#397

Post by meltyness »

sangnoir wrote: post #394
meltyness wrote: post #357

Earlier quoted context omitted.

Where's the "occupy movement"? Where's the "CHAZ/CHOP" of 2023? What about "hope"? Are netizens signing up for exorbitantly expensive new services on a widespread basis? If individuals aren't being "excessively enriched" by conditions it's unlikely to become another spectacular market wide blow-up. Social causes are a proxy for froth. A short Friday memo probably isn't. Exuberance is in the hands of price gougers rig…

> Where's the "occupy movement"? Where's the "CHAZ/CHOP" of 2023? We have Doge and memestocks as movements for the "common man" that are preemptively subveted.

Crypto is diffuse and not very many people. Fewer than 2M bitcoin wallets contain $28K, a median family's worth of savings / 4 checking accounts.

That's not even a whole city's worth of people "demonstrating", and it's a global thing. It's a quarter of the speculative value of AAPL.

It's also concurrent and passive. Very few people have dropped everything to do the crypto influencer dance, and now influencer+crypto is seeing SEC crackdowns.

Crypto is at most slacktivism right now. Nothing like BLM, MAGA, which are no doubt viewed by powerful economic planners as wasteful.

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

#398

Post by klyrs »

arcticbull wrote: post #392
klyrs wrote: post #155

Earlier quoted context omitted.

By your numbers, the median American family could put their entire net worth towards a cramped condo and still be making payments. That is not the image of stability that you're pretending it is.

It’s hardly the image of stability but saying people only have $4500 and it’s the Fed’s fault is wrong in two ways.

Problem being that total assets does not measure liquidity. That people only have $4500 of cash is a significant problem if they have a relatively minor emergency. Especially in the US, where a $4500 hospital bill is pretty cheap.

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

#399

Post by danaris »

ren_engineer wrote: post #149
fyzix wrote: post #23

History never repeats itself, but it does often rhyme. We cannot have a decade of 0% interest rates and expect no consequences. Peter Schiff predicted this from the moment the fed bailouted the banks in 2008. There's nothing the fed can do to escape this one, it's either massive inflation or massive recession. The fed has avoided the latter by bailing out the banks again so expect double digit inflation for the next…

Capitalism is based around bad decisions being punished, which didn't happen in 2008 because of the bailouts. Nobody went to jail, nothing extreme enough was done to actually enforce cultural changes in the finance industry, so of course having the same problems occur was inevitable. Adding to the problem is that the economy is actually going to get less efficient on a fundamental level due to the geopolitical situat…

> Capitalism is based around bad decisions being punished

Where did you get that idea?

Capitalism is based on people who have more money/wealth (aka capital) making more money.

In our system as it exists today, the capital owners have managed to use their vastly disproportionate wealth to influence the government to prioritize their needs over all others. This is a nearly inevitable outcome of unfettered capitalism, combined with legalized bribery of elected officials (lobbying, PACs, etc).

Now, it's certainly true that no system is going to remain in balance long if people can make decisions that hurt the system and suffer no negative consequences themselves—all the moreso if those decisions actually benefit them. But that's not at all the same as saying that capitalism—or any economic system—is based around those kinds of feedback loops.

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

#400

Post by arcticbull »

imtringued wrote: post #325
arcticbull wrote: post #81

Earlier quoted context omitted.

> 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…

This strategy only makes sense if the Fed believes this to be a short term problem for which it is worth buying time for. If it was genuinely hopeless and in the next decade will see 5% interest, making all those 10 year bonds worthless then there is no rhyme or reason to bail anyone out. The return on selling bonds today or waiting until maturity would be identical.

They’re treasuries, when they mature you get the full face value plus interest. They cannot be worthless at maturity without the entire American state imploding. That's why they're able to offer this facility at all.
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