Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

America will soon see a wave of bank mergers?

economist.com

Post reply on HN
Print view View original

301–310 of 451 posts

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

#301

Post by brodouevencode »

IAmGraydon wrote: post #289
senectus1 wrote: post #54

These banks are counting on "Too big to fail"... and the politicians will back it. To back it they will print money, which will devalue the currency and drive up inflation. this is a sick and twisted collapse of multiple economies. It has only one direction. down. its not too late to stop it, but nobody will, because the cost to those in power will be too great.

>These banks are counting on "Too big to fail"... and the politicians will back it. To back it they will print money, which will devalue the currency and drive up inflation. Bailing out depositors isn't going to increase inflation - you're just giving people the same amount of money they already have. The big problem with it is that it prevents the natural process of wealth destruction from occurring, so it may just…

The only tool the fed has at the moment is the printer, so it very much will increase inflation by its very definition.

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

#302

Post by vkou »

kasey_junk wrote: post #210
vkou wrote: post #153

Earlier quoted context omitted.

> 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?

No, because the mechanism we currently have seems to be working. SMBs are currently scared shitless that they will be reaping the consequences of their actions. Depositors are not.

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

#303

Post by throw2awaymay »

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?

[dead]

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

#304

Post by no_wizard »

sclarisse wrote: post #276
no_wizard wrote: post #229

Earlier quoted context omitted.

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 rese…

Specific phrases many people will read as political allocation of capital: “Most objections to allowing significant quantitative growth of central bank balance sheets, in fact, reflect the underlying concerns about the qualitative, compositional aspects of such growth. Ultimately, however, these concerns are rarely substantiated by reference to anything more specific than deeply internalized skepticism toward the gov…

In context, they're talking about removing inefficiencies and increasing transparency by transacting directly through the theoretical Public Ledger system. We already do all of this with extra steps currently. There is nothing new here. A big thing this brings is transparency, because its a lot harder to hide where tax dollars get spent when you also have introspection into how the money gets allocated, rather than just cutting checks, for instance, to maintain / build highways, this would allow for the government to have better oversight with how public highway funds are being spent. Thats one example. Another is more efficient handling of farming subsidies (this is to the tune of hundreds of billions of dollars). This is plainly spelled out in the paper when read as a whole.

These aren't bad things, and they already exist. There is nothing new here, other than streamlining operations to make them more auditable, transparent, and efficient. It cuts out the "extra steps" part, which more often than not, is where most of the waste is.

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

#305

Post by HWR_14 »

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…

> despite near perfect credit

Your credit wasn't near-perfect. You hadn't defaulted, but that's far from proving that you can manage your credit/money and make payments on time. A hobo who lived in the woods would also have never missed a payment.

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

#306

Post by imtringued »

drivebyhooting wrote: post #131
JohnFen wrote: post #118

Earlier quoted context omitted.

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.

There’s no free lunch. You will be taking additional risk by doing this even if the downside seems unlikely or remote.

Yes, this is just a roundabout way to invest into stocks with borrowed money. There is probably an optimal portfolio for this strategy to minimize the risk but then it is no longer the obvious win that so many people think it is.

If we assume 8% returns and you only put 50% in the stock market and your loan costs 2% interest then your total benefit is only 4%. Putting all of it might get you 6% but you are now taking a significant amount of risk.

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

#307

Post by HWR_14 »

tiedieconderoga wrote: post #265
tester756 wrote: post #114

Earlier quoted context omitted.

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.

Nah, you can easily get a residential mortgage from smaller lenders with just proof of income/savings, and the sort of light credit usage you get from monthly CC payments, rent, utilities. That will net you a solid credit score, too. The issue is with very large banks. They have rigid underwriting deparments and poor CS, so if you approach them as a first-time buyer who isn't already leveraged to the hilt, they will…

Rent and utilities rarely report to credit scores.

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

#308

Post by HWR_14 »

drivebyhooting wrote: post #131
JohnFen wrote: post #118

Earlier quoted context omitted.

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.

There’s no free lunch. You will be taking additional risk by doing this even if the downside seems unlikely or remote.

The last few times I remember, the interest charged on the loan was less than that generated by T-bonds of the same length.

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

#309

Post by User23 »

akira2501 wrote: post #300
User23 wrote: post #285

Earlier quoted context omitted.

> It's value is not notional. If you make more currency then all currency in circulation now has less value. That's not how pricing works. It's easy to see. Consider the following. Treasury could mint a 10^33 dollar platinum coin[1], stick it in a vault at Fort Knox, and forget about it. At that point the money supply would nominally be almost all in that vault. Yet prices not only wouldn't go asymptotic, they wouldn…

> The point of all this is that price inflation is everywhere and always caused by an increase of the ratio of money-being-spent:things-being-bought. Yes.. and if you increase the amount of money in circulation this impacts the amount of money being spent. You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not? > Thi…

> You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not?

Yes, I think you're starting to get the point. It's not the money stock that causes inflation, but rather the money flow. Back to the original point that started this thread, increasing the money stock alone, that is to say growing the notional money supply, doesn't move prices. What moves prices is changes in the money flow, for which growing the money stock is neither necessary nor sufficient.

> Has this occured in the US before?

No, the USA has never experienced hyperinflation. Thankfully the principles involved are not specific to the USA. They apply generally. The operational particulars do change depending on whether or not the foreign exchange rate is floating or not. That's not really relevant here though. It all adds up to a collapse in the value of a currency being caused by a collapse in the goods and services that can be bought in that currency. That's why back when the world was more or less on the gold standard a single economy's collapse couldn't cause hyperinflation. However if, somehow, there were a collapse in global productivity then even gold would see hyperinflation, because you can't eat it and there'd be too much gold chasing too little food, fuel, and other essentials.

> The labor market has changed _drastically_ in this time. You're really willing to assume such a simplistic explanation for these facts?

At the aggregate level? Yes absolutely the law of supply and demand holds. It's the same as how I'm willing to apply the laws of thermodynamics to monstrously complex systems that I don't fully understand. I might not know how the parts all add up, but I do know that the equations will hold.

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

#310

Post by imtringued »

chrisco255 wrote: post #10
Mistletoe wrote: post #5

Earlier quoted context omitted.

SQUIRE: When America was in its earlier days, we had a - kind of a populist suspicion about big banks. SMITH: So states looked for ways to support and protect local banks. SQUIRE: A lot of states passed what were called branch banking laws, which made it illegal to operate a bank out of more than one building. It's hard to imagine it now. And so every little town in America had its own local bank. https://www.npr.org…

this doesn't really explain it at all. The diversity in the banking system both pre-dated and post-dated those laws, and is present in states that don't have those laws and never did.

It probably has to do with the fact that nowadays a bank needs 10 million euros of equity to get started in europe. also, the founders/CEO need to prove three years of academic and three years of practical experience, essentially shrinking down the people that are allowed to start new banks to existing bankers who most likely have no incentive to leave the large bank. This means the regulators are implicitly encouraging the formation of an oligopoly because they have enacted heavy regulation in response to large bank failures. It is kind of ironic.
Post reply on HN