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

351–360 of 451 posts

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

#351

Post by bradleyjg »

JumpCrisscross wrote: post #350
bradleyjg wrote: post #280

Earlier quoted context omitted.

Increasingly banks are only lending to a different parts of the federal government anyway-—deploying their cash on treasuries and agency debt. They are being driven to this by the risk weighted capital adequacy requirements. The whole thing resembles an ever more intricate Rube Goldberg machine.

> increasingly banks are only lending to a different parts of the federal government anyway-—deploying their cash on treasuries and agency debt This is incorrect. In 2022, the largest increases were in credit cards (+17.4%), commercial and industrial loans (+14.5%), consumer loans (+11.6%), commercial real estate loans (+11.3%) and real estate loans (+10.1%) [1]. Treasury and agency security holdings across American…

What‘s the decade by decade trend?

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

#352

Post by fowtowmowcow »

diordiderot wrote: post #319
fowtowmowcow wrote: post #292

Earlier quoted context omitted.

Hard to collect money on unemployed and dead.

Your thinking is too fine grained. Missing forest through the trees. For a nation state with it's own currency, money is the sum of the production capacity / natural resources of that nation state. You don't need Joe and Sue to pay you back.

Okay Joe and Sue don't pay back their loan.

Either Beth now has to borrow for her house or business at a higher rate of interest OR we deflate the value of the currency (by increasing the money supply) to make up for the loss on the balance sheet.

Congratulations your civilization just discovered run away inflation.

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

#353

Post by CrimsonCape »

jliptzin wrote: post #225
lxgr wrote: post #111

Earlier quoted context omitted.

> 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…

We have a de-facto two class system: the capitalists and "everybody else class". The capitalist class, those with capital, investments, stake (a la stakeholder), who mobilize lobbying on behalf of and to protect their capital, who will 99.99% of the time have the ultimate impact on legislation; the impact being positive effects on themselves at the cost of everyone else in the general public.

I'm not sure we can even get a vote on the floor that would have detrimental effects on the former class. The legislation is preordained.

You are proposing that bank management and equity holders get wiped out, not the general public checking account-holder; how would that even be possible, since they write the rules, pull the strings, lobby, etc. magnitudes more than you? They are the rulebook. They do so to such an extent that the entire system is predicated on everybody agreeing to do the same thing lest the system collapse.

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

#354

Post by nickjj »

HWR_14 wrote: post #307
tiedieconderoga wrote: post #265

Earlier quoted context omitted.

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.

That's such a strange system if common routine things aren't counted towards your score. Is this a ploy to get you to buy things you don't need just to prove you can pay it back?

Personally I've never owned a credit card, I always pay with a debit card or cash. 20 years ago I refused to participate in the credit scoring system and still stand by it.

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

#355

Post by CrimsonCape »

mrep wrote: post #69
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.

> 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? That's not what the FED is doing though. They are protecting the depositors not the business. The equity holders are getting completely wiped out and most of the employees at First Republic Bank are probably going to lose their jobs so the business is defi…

But people don't really understand the nuance between "let First Republic fail and let the FDIC step in to protect the depositors" versus "let's sell First Republic to Wells Fargo under orders of USGov to protect the depositors." Why not the former?

I agree that in both of the above cases, First Republic shareholders and staffing suffer. But the latter introduces the conspiratorial angle and the unjust-ness.

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

#356

Post by bradleyjg »

akira2501 wrote: post #275
bradleyjg wrote: post #92

Earlier quoted context omitted.

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…

> There’s no business model that can provide that. They used to. So.. what changed?

They never did. Since we’ve had banks, we’ve had banking crises. Either people need to accept that there’s risk or we need to scrap the model.

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

#357

Post by kwere »

yalogin wrote: post #78

How does one decide whether 1 bank for every 77k people is a good thing or bad? What metrics go into such an evaluation? It feels to me that banks can be a bit bigger to reduce risk given the global nature of markets these days.

ROA in the banking sector average 1.21% now, a lot of smaller/scantier operation will feel the heat

https://www.fdic.gov/news/press-releases/2022/pr22082.html

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

#358

Post by merek »

TexanFeller wrote: post #347
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…

Credit scores make more sense if you think of them not as scores of your ability to pay back debt, but as scores of likely profitability for the creditor. Someone who never carries a balance and never will pay the occasional late fee is less profitable and thus has a lower score.

I think you need to factor in risk. This is a simplistic example but demonstrates the influence of risk.

Who would you rather lend a mortgage to?

- Group A, consisting of people who prudently pay debts early

- Group B, consisting of people who pay debts on their due date, and sometimes after

Let's say you lend $100B to each group A and group B. Historical data might show that in aggregate, group A has a default rate of 1% and group B 5% (there's 5% chance that a person from group B defaults on the loan).

Because of defaults (risk), you expect to lose $1B of principal on group A and $5B principal on group B. To break even, you need to charge group A interest that would at least offset their $1B loss, and charge group B interest to offset their $5B loss, hence group B's higher interest rate. One group is not automatically more profitable than the other.

Group B might incur more costs such as late fees, but this only works against their ability to make future payments.

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

#359

Post by zamnos »

toast0 wrote: post #132
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…

> The big banks are terrible Fixed that for you. The big banks have one thing going for them, they're big. That means they will have a wide network and a large service organization, but most feel no need to meaningfully compete for your business. You're going to use them because they're big. You're not going to get meaningful interest on your deposits at a big bank, because they don't need your deposits; bankrate sho…

Even if you're not in the bay area, you should check out credit unions or really anything else (Wealthfront, betterment, withcompound, just buying bonds/tbills, etc), so you're not getting approximately 0.0000% on CDs.

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

#360

Post by zamnos »

toast0 wrote: post #132
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…

> The big banks are terrible Fixed that for you. The big banks have one thing going for them, they're big. That means they will have a wide network and a large service organization, but most feel no need to meaningfully compete for your business. You're going to use them because they're big. You're not going to get meaningful interest on your deposits at a big bank, because they don't need your deposits; bankrate sho…

As for the limited paperwork rate adjustment, the word you're looking for is recast (instead of a refinance), and it's fairly common
Post reply on HN