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America will soon see a wave of bank mergers?

economist.com

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Re: America will soon see a wave of bank mergers?

#111

Post by lxgr »

jliptzin wrote: post #53

It’s too late now, but the FDIC should just guarantee all deposits with no limit. If they did it with SVB they should do it for every other bank too moving forward. It is ridiculous to expect the average person to dig into bank balance sheets and try to determine whether their bank is managing risk properly. That would have prevented these runs, which counterintuitively means fewer FDIC payouts, not more. Then couple…

> It is ridiculous to expect the average person to dig into bank balance sheets and try to determine whether their bank is managing risk properly.

We don't: The average person does not have $250k sitting in a checking or savings account at a single bank.

SVB collapsed because they have highly correlated (due to being startups under effective, if not actual, corporate control of a few VCs), jumpy depositors. This is something regulatory rules have not incorporated into their risk frameworks (at least not sufficiently to allow for a margin of safety in times of raising interest rates).

Re: America will soon see a wave of bank mergers?

#112

Post by passwordoops »

lockhouse wrote: post #96
passwordoops wrote: post #89

Earlier quoted context omitted.

Thing is neither are the oligarchs who run the financial system. Take a look at the labor struggles of the early 1900s in the US - that wasn't people struggling against a government using their army, it was people struggling against private ownership turning hired militias against their employees. The problem is concentrated power. Whether it's government or private, concentrated power in anything is bad

Yes but in theory the banks are under the pressure of competition. Anything that is moved under the umbrella of the federal government essentially becomes a monopoly. I can switch banks in less than an hour, it takes months to years to switch countries.

Like in theory Google and Microsoft are competing? Or CVS and Walgreens? Or Boeing and Lockheed? Or Visa and MasterCard?

Oligopolies are arranged monopolies with the further disadvantage of not being subject to the freedoms and rights set out by the constitution. Unless they are broken up, we'll eventually be in a place where things are worse than under government control

Re: America will soon see a wave of bank mergers?

#113

Post by oarsinsync »

bradleyjg wrote: post #92
passwordoops wrote: post #20

I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist" I'm not sure what the best solution is here, but making the big banks even bigger is not it. This is just going to make the banking system more concentrated and no concentrated market is good for anyone. Least of all because the past decade+ has set the precedent that the banks will be bailed out... If they're big enough

Banking is fundamentally broken. People want zero risk, demand deposits that pay interest. There’s no business model that can provide that. It would be perfectly possible for a business to provide zero risk demand deposits—-but the business would have to charge customers for its custodial operations rather than making money by writing loans. Of course because we live in times where no one can tell the people that wha…

> People want zero risk, demand deposits that pay interest. There’s no business model that can provide that.

> It would be perfectly possible for a business to provide zero risk demand deposits—-but the business would have to charge customers for its custodial operations rather than making money by writing loans

That was true when we lived with 0% interest rates. Now, there’s no reason why a narrow bank couldn’t take deposits, stick them in with the fed providing 4% interest, and keep 25% of that for itself to cover its costs, passing 3% onto the customer.

Except they wont get a banking license issued if they state thats what they intend to do, because the system depends on people depositing money with banks that make risky loans, so that the risk is spread across lots of people.

Re: America will soon see a wave of bank mergers?

#114

Post by tester756 »

siliconc0w wrote: post #107

The big banks are terrible if you fall outside their algorithmic expectation. My partner and I were trying to get a mortgage and despite near perfect credit, large incomes, etc our apps were auto-denied because I never opened multiple open loan lines. Never needed them, just used CCs I immediately paid off for points as I always had a job/savings and bought cheap used cars for cash. We eventually got one but it took…

Is this why some people recommend to take loan for something that you have money?

Like - you wanna spend 30K on a car and you have it in cash? take loan

you'll lose a some $$, but you'll be building your history.

Re: America will soon see a wave of bank mergers?

#116

Post by lxgr »

beiller wrote: post #82
senectus1 wrote: post #56

Earlier quoted context omitted.

with what money will they guarantee all deposits? Governments dont have much money, they have taxes. when they can't tax their current voters they tax future voters by printing money. If you told the banks that you will protect their business regardless of what corrupt, stupid or greedy behavior's they practice... what do you think they'll do? this is so very screwed up.

The government controls the amount of dollars. It's not paying back out of coffers, just print the money. But if you really want to, you could cover the deposits from FDIC which is insurance paid by that bank. Secondly we're not bailing out banks. We'd be bailing out the depositors. The banks and their stock is free to go to zero, everyone is fired, etc. I think you've conflated two different things.

So you're suggesting we should let commercial banks run as risky a business as they like, pocket the profits if it works out, and pay for the deficits using newly printed central bank money if it doesn't?

> The banks and their stock is free to go to zero,

Sure, but what about the dividends and bonuses already paid out from the times it worked out in the risky banks' favor? You're suggesting a government/central bank subsidized casino.

Re: America will soon see a wave of bank mergers?

#117

Post by inconceivable »

siliconc0w wrote: post #107

The big banks are terrible if you fall outside their algorithmic expectation. My partner and I were trying to get a mortgage and despite near perfect credit, large incomes, etc our apps were auto-denied because I never opened multiple open loan lines. Never needed them, just used CCs I immediately paid off for points as I always had a job/savings and bought cheap used cars for cash. We eventually got one but it took…

never buy a mortgage through an app. use a human broker or if you're rich enough, a bank salesman.

and for those of you who refuse to talk to people when spending multiple hundreds of thousands or even millions of dollars, well... this is what you get to deal with.

Re: America will soon see a wave of bank mergers?

#118

Post by JohnFen »

tester756 wrote: post #114
siliconc0w wrote: post #107

The big banks are terrible if you fall outside their algorithmic expectation. My partner and I were trying to get a mortgage and despite near perfect credit, large incomes, etc our apps were auto-denied because I never opened multiple open loan lines. Never needed them, just used CCs I immediately paid off for points as I always had a job/savings and bought cheap used cars for cash. We eventually got one but it took…

Is this why some people recommend to take loan for something that you have money? Like - you wanna spend 30K on a car and you have it in cash? take loan you'll lose a some $$, but you'll be building your history.

I think that the usual rationale for taking a loan out to pay for something you can afford without a loan is that you can take the money you have and invest it in something that pays more than what the interest on the loan is.

It's a kind of arbitrage. If you're losing money overall, you're doing it wrong.

Re: America will soon see a wave of bank mergers?

#119

Post by runnerup »

bradleyjg wrote: post #110
runnerup wrote: post #101

Earlier quoted context omitted.

People aren’t demanding deposit accounts that pay interest. The banks with the most deposits are providing 0.01% interest. People are still sticking their money there more than they put in banks which are offering >3% APR.

That’s still positive. If they want no risk, that number needs to be negative to cover the costs of holding and moving money around.

It really doesn’t. They charge plenty of fees to plenty of customers. They also use daily banking as a loss-leader for profitable services like loans.

Chase collected $1.25 billion in overdraft fees alone last year. My “Chase College” account currently gets charged $6/month for some reason I haven’t bothered figuring out, maybe a newly instated minimum balance or direct deposit requirement that wasn’t there years ago.

Re: America will soon see a wave of bank mergers?

#120

Post by skeeter2020 »

passwordoops wrote: post #20

I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist" I'm not sure what the best solution is here, but making the big banks even bigger is not it. This is just going to make the banking system more concentrated and no concentrated market is good for anyone. Least of all because the past decade+ has set the precedent that the banks will be bailed out... If they're big enough

Well you now have JP Morgan Chase with almost 2.5 TRILLION dollars in deposits, and the current regulators have essentially punted on this issue to the next administration. If they have a liquidity crisis the western world will essentially end.
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