America will soon see a wave of bank mergers? • Hacker News Board

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

#221

Post by [deleted] » Tue, May 02, 2023, 6:21 PM UTC

epolanski wrote: post #124

skeeter2020 wrote: post #120

Earlier quoted context omitted.

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.

Ain't that too dramatic? Yes, I can imagine such a huge bank to cause deep troubles in financial markets and real economy and this impacting the livelihood of people all around the globe. But saying that "western world" will essentially end when it didn't in face of world wars, grave epidemics and plagues, etc seems definitely too dramatic.

[deleted]

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

#222

Post by RadixDLT » Tue, May 02, 2023, 6:21 PM UTC

of course, the same as in 2009.

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

#223

Post by bradleyjg » Tue, May 02, 2023, 6:24 PM UTC

samtho wrote: post #212

ptero wrote: post #191

Earlier quoted context omitted.

The problem is not what happens to the shareholders (they get zeroed out the same way that shareholders of other failing companies would be), but what happens to the depositors . The rules, as written, say that deposits above $250k can be wiped out. The rules, as the government applied to the SVB, made large depositors whole. So we have the worst of both worlds: no depositor guarantee de jure (so depositors bailed an…

I think the priority at the federal level is still in at least maintaining a facade of banking system stability. It’s very rare that the bank not only becomes insolvent but also loses all its value. Risky investments to a bank are not really considered super risky elsewhere and the investments still hold value, albeit less if they are trying to liquidate. The problem is when banks are unable to maintain enough cash w…

You’re conflating liquidity with solvency. The problem isn’t a lack of cash on hand, it’s assets that have fallen in value. Saying that they money will be there, it just takes a bunch of time, denies the reality of the time value of money. A stream of payments of $10/year for ten years is not worth $100. Never has been.

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

#224

Post by 0x457 » Tue, May 02, 2023, 6:25 PM UTC

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…

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

Given that many people bank at gigantic banks that pay 0.00001% interest...I don't think that's true.

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

#225

Post by jliptzin » Tue, May 02, 2023, 6:25 PM UTC

lxgr wrote: post #111

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 s…

Some do though. Having a lot of money in a checking account doesn’t mean someone is any more sophisticated with respect to finances. It could be retirement savings or an inheritance.

No one should wake up one day and find out most of their life savings or inheritance is gone because of banking shenanigans. This is not like a hurricane or catastrophic expensive surgery. This is entirely preventable and fixable by the government.

Gov’t sells low yield bonds to banks during pandemic => gov’t jacks up interest rates to fight inflation => value of bonds previously sold to banks plummet => bank marks bond values to market and is now technically insolvent causing a bank run => grandma loses majority of her life savings => government refuses to reimburse depositors above FDIC limit even though it created the problem to begin with.

That is not a chain of events I am ok with. Bank management and equity holders should get wiped out but not depositors.

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

#226

Post by bombcar » Tue, May 02, 2023, 6:26 PM UTC

elwebmaster wrote: post #214

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…

That’s not how the Fed interest rate works. Yo can’t just “deposit” your money with the Fed and have it pay you interest. What you can do is buy bonds. These bonds have a price and maturity date. When the interest rates keep increasing the bonds which pay less interest become cheaper. So you can’t just “withdraw” what you deposited. You have to sell what you “bought” but for much less than you paid, so you go under.

You can't. Banks can.

https://www.newyorkfed.org/markets/reference-rates/obfr and things like that.

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

#227

Post by _2z1p » Tue, May 02, 2023, 6:27 PM UTC

passwordoops wrote: post #112

lockhouse wrote: post #96

Earlier quoted context omitted.

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

All of those businesses you mentioned do largely compete with each other, in addition to other smaller players in their respective spaces.

Could you give an example of them not competing?

A government run bank seems particularly scary in this highly polarized political climate. What if this administration decided not to give out loans to buy ICE cars, but the next administration swings to the right and decides to not give out loans to buy EVs?

The federal government having direct access to your checking account is scary as well. What if they had the ability to freeze the bank accounts of those who refused to get the COVID vaccine or asked the wrong questions on social media?

The government running our entire banking system directly is one of the most dystopian things I can imagine.

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

#228

Post by danaris » Tue, May 02, 2023, 6:28 PM UTC

2OEH8eoCRo0 wrote: post #204

passwordoops wrote: post #187

Earlier quoted context omitted.

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?

While I fully support this, I think it's important to bear in mind that

a) what constitutes anticompetitive activity or otherwise warrants antitrust action is likely to always be at least somewhat subjective, and require human judgement, meaning that motivated humans can choose not to do it in many cases, and

b) depending on the degree to which the government is captured by a party that actively works against antitrust laws and believes that bigger[0] is always better, and on how long said capture lasts, it doesn't matter what laws we put in place now. Laws can be changed by the government.

We're not going to be able to make a foolproof system just by making better laws on this one issue. If we believe strongly in antitrust with teeth, we also need to be committed to supporting politicians who favor it, and political and governmental systems that prevent a vocal minority from seizing control of the engines of power, consistently for the rest of our lives.

[0] Bigger payouts for their friends, that is, which means bigger kickbacks now and bigger paychecks later when they go to work for said friends

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

#229

Post by no_wizard » Tue, May 02, 2023, 6:28 PM UTC

sclarisse wrote: post #90

WillAdams wrote: post #83

Earlier quoted context omitted.

Fine, then they should be non-profit credit unions.

No, they’ll be replaced by something like The People’s Ledger, as proposed by Comptroller of the Currency nominee, Saule Omarova, in her paper of the same name. (She was nominated by President Biden in 2021. Not just a random kook!) Under such a regime all banks will put customer funds at the Fed, which will be the sole entity to allocate credit, with banks as mere customer service frontends. It will use that power t…

This is not at all how I understood the paper. It was to allocate consumer funds directly with the Fed to prevent bank runs from restricting access to cash on hand for consumers. They just move spigots to different institutions this way. Nominally, this is what the proposal is all about. I didn't see anything about the Federal Reserve or the Government being able to access that money on a 1:10 basis or any other reserve basis. It does however outline how this would stream line government policies and operations, such as Tax Refunds, Social Security Disbursements, or any other qualifying disbursements.

Additionally, the idea that is also present in the paper is expanding low risk (demonstrably historically "safe" loans such as SBA Loans, FHA loans, traditional mortgages etc) through the Fed directly, but explicitly bans things like margin loans, PE bridges and other risky behavior.

Which, as anyone who has gotten these kinds of loans, knows the government already does this, just with extra steps. The People's Ledger paper (proposal?) simply outlines removing extra steps and barriers for the citizenry to have a better banking baseline, all told.

In essence, it makes the Central Bank, more....bank like. With some privileges, being a whole arm of the Government, its less focused on collecting fees and more interested in streamlining banking for the average citizen.

It has nothing in the paper about forgiving mortgages (or student loans, for that matter)

The paper is here, for anyone interested in this: https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?a...

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

#230

Post by danaris » Tue, May 02, 2023, 6:33 PM UTC

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.

How does that theory outweigh the theory that government is under the pressure to bow to the will of the people?

Particularly when even with healthy competition, the only thing that incentivizes a given bank to do is be slightly better than their nearest competitor in some way—whereas while your specific vote may be one among many to the government, it must follow the will of the people when enough of them agree that something needs to change.

I can switch banks until my face turns blue, but if they've all decided that the thing I want isn't worth their money, and are happy to ignore the option to compete by offering it because they've achieved a local maximum of profit-to-effort, it's not going to do me any good.