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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?

#201

Post by userabchn »

omgomgomgomg wrote: post #152

Why exactly should banks be private companies at all? Theyre just skimming middle man between the government and end consumer. Sure, the government would know your bank balance and spendings, but that could be worked around If youre in trouble with the irs or the law, the government will have all the insight they request. Sounds crazy? We the people had to bail them out and never get anything of their profits. Too bi…

I am certain that the people who make comments like this have never lived in a country where they had to deal with something like a government-owned bank.

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

#202

Post by tastyfreeze »

brightstep wrote: post #190
syntaxing wrote: post #188

Earlier quoted context omitted.

State owned banks are usually a bad idea for one reason, corruption. Historically, having the government control money supply is usually a recipe for prolific corruption. A good modern example is Turkey.

The same kind of behavior happens in the private sector. Since it’s not government, we don’t call it corruption.

Would you rather have one bank of thousands fail due to corruption or have the one state owned bank fail and the entire economy grind to a halt?

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

#203

Post by syntaxing »

brightstep wrote: post #190
syntaxing wrote: post #188

Earlier quoted context omitted.

State owned banks are usually a bad idea for one reason, corruption. Historically, having the government control money supply is usually a recipe for prolific corruption. A good modern example is Turkey.

The same kind of behavior happens in the private sector. Since it’s not government, we don’t call it corruption.

Corruption comes in sorts of form, is unavoidable, and is a very grey subject. It’s a tough balance between growth and exploitation. But historically, government rooted corruption tends to be harder to remove than “buying” politicians” which the rich and banks do nowadays. Stanford has a really well explained thought process on this on their online philosophy library.

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

#204

Post by 2OEH8eoCRo0 »

passwordoops wrote: post #187
2OEH8eoCRo0 wrote: post #168

Earlier quoted context omitted.

It's a fuzzy boundary. I agree in theory but where is the line where something is too big? We encourage companies to grow as large as possible and hope that competition will provide the counter friction. The only fail-safe is the government trust busting on a case by case basis which might not be optimal. Are there any regulations that could provide economic incentives to small businesses and make it increasingly dif…

The regulations already exist - don't buy the competition and don't use your market power to undercut the competition. Simple and worked excellently in the post-WW2 boom years. But regulators stopped enforcing those regulations in the 1980s because of "efficiency" and each administration after Reagan doubled down. Luckily some politicians are starting to see the error of their ways and listening to thinkers like Matt…

That's my point. The govt can choose to not do anything which is how we got here which makes it not a great fail-safe. Perhaps strengthen the laws we have and make it more imperative and easy for the government to act?

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

#205

Post by SllX »

omgomgomgomg wrote: post #152

Why exactly should banks be private companies at all? Theyre just skimming middle man between the government and end consumer. Sure, the government would know your bank balance and spendings, but that could be worked around If youre in trouble with the irs or the law, the government will have all the insight they request. Sounds crazy? We the people had to bail them out and never get anything of their profits. Too bi…

Banks do more than hold deposits; they also loan money. This is not a business you want the government in; nor do you want to eliminate private sector loans.

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

#206

Post by no_wizard »

lvl102 wrote: post #91
allie1 wrote: post #76

Earlier quoted context omitted.

There are exceptions. Ally bank has been paying reasonable yields on deposits, being a digital bank with lower operating costs. The bank model works, it’s the “too big to fail” model that is broke. The one upside of TBTF banks is you forfeit any deposit earnings to get “insurance” on the full amount.

What we need is a “boring” banking model where deposits are fully guaranteed by a bank. No lending. In digital age, that should be ridiculously easy to do.

how do you propose they make money to keep the bank open? Charge for accounts? I don't think such a draconian rule is needed here. Free checking is nice.

There's nothing wrong with being a low risk lender. Thats not the central problem with the banking system in the US. Its that bigger banks take riskier and riskier bets with money that they really shouldn't be, and when bad times hit they often don't have proper risk management in place to cover it, or its unpredictably catastrophic.

It used to be that these activities were separated, limiting risk to the average person significantly as a result. Simply forcing that separation again would be more than enough to get some stability back into the banking system.

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

#207

Post by lr4444lr »

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…

Like Richard Pryor said as Montgomery Brewster in Brewster's Millions[0]:

"I don't want the interest. It's your vault. I should be paying YOU rent!"

[0] https://www.imdb.com/title/tt0088850/

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

#208

Post by jjk166 »

nonethewiser wrote: post #34
brianmcc wrote: post #29

Earlier quoted context omitted.

Also closer to absorbing the state. I'm not a tin foil hat person, but corporations growing larger than nation states just doesn't seem remotely far fetched. Which corporation will be first to sit at the UN table?

But who is creating the regulation? The answer to that is funny. It is literally the state, which is to my point, but it is also shaped by the banks, which is to your point.

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

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

#209

Post by jgilias »

alexb_ wrote: post #175
oarsinsync wrote: post #113

Earlier quoted context omitted.

> 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…

You are exactly describing what all of these banks did. What happens to the value of 4% bonds if interest rates go to 6%? What about if people want their money back before the bond duration is up, so you have to sell the 4% bonds in a 6% environment?

Note that in this interest rate environment banks don’t need to buy bonds in order to get 4%. Currently the Fed’s reverse repo facility provides more than that.

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

#210

Post by kasey_junk »

vkou wrote: post #153
graeme wrote: post #138

Earlier quoted context omitted.

You left out “zero risk” Banks have always been able to fail, then you lose the deposits. What people are now asking for is unlimited insurance, which encourages risk takings amongst banks

> What people are now asking for is unlimited insurance, which encourages risk takings amongst banks Except that when a bank is liquidated, the shareholders get zeroed out , and the executives get their money clawed back, which encourages banks to not risk-take. As a depositor, this sounds fine to me. I don't benefit from banks doing stupid, risky things, and I shouldn't suffer from it either. Raise the capital requi…

Shareholders are routinely zero’d out in bank failures. Are you proposing some other mechanism?
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