How deep is the rot in America’s banking industry?

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

My hot take is that demand deposits should be only invested in (EDIT: short dated, thx codexb) US treasuries (a la Narrow Bank), backed by the Federal Reserve and if a bank (or anyone) wants to lend, they can issue bonds to borrow versus the Rube Goldberg mechanism we currently have of deposits, FDIC, and then the Fed still providing an unlimited guarantee anyway.

The bond market already is built to handle this, and we should stop treating demand deposits as this Schrödinger collateral. If you want to insure lending, insure the lending directly, not with consumer and business cash. I know there are no simple solutions to complex problems, but this all seems very unnecessary when you pull the system apart conceptually.

> codexb

Re: How deep is the rot in America’s banking industry?

#5

Post by [deleted] » Thu, Mar 16, 2023, 5:35 PM UTC

toomuchtodo wrote: post #4

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

My hot take is that demand deposits should be only invested in (EDIT: short dated, thx codexb) US treasuries (a la Narrow Bank), backed by the Federal Reserve and if a bank (or anyone) wants to lend, they can issue bonds to borrow versus the Rube Goldberg mechanism we currently have of deposits, FDIC, and then the Fed still providing an unlimited guarantee anyway. The bond market already is built to handle this, and…

[deleted]

Re: How deep is the rot in America’s banking industry?

#6

Post by globalreset » Thu, Mar 16, 2023, 5:36 PM UTC

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

Current global dollar-based financial system can only be sustained by an ever-increasing leverage, that allows rolling over the ever-increasing pile of dollar-denominated debt.

Since 1971 everything (all relevant policies) were geared towards increasing the amount of debt in the system. It's no surprise that student debt, mortgage debt, credit card, auto loans and whatever else were ballooning.

Regular banks not making risky bets would go against it, so it will not be done.

Re: How deep is the rot in America’s banking industry?

#7

Post by andrewmutz » Thu, Mar 16, 2023, 5:36 PM UTC

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

Would Glass-Steagall have prevented the SVB failure?

Re: How deep is the rot in America’s banking industry?

#8

Post by giantg2 » Thu, Mar 16, 2023, 5:36 PM UTC

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

Would that have made the difference? I thought that restricted banks to "safe" investments, which SVB's likely were. It's simply that they couldn't extract enough liquidity from that position to cover the run. Or were there other restrictions?

Re: How deep is the rot in America’s banking industry?

#9

Post by tptacek » Thu, Mar 16, 2023, 5:37 PM UTC

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

By all accounts, SVB's banking was boring. They borrowed short and lent long, and their long bets were very safe. The problem wasn't that they too exciting bets; its that they played the standard playbook incompetently.

Re: How deep is the rot in America’s banking industry?

#10

Post by rolobio » Thu, Mar 16, 2023, 5:37 PM UTC

toomuchtodo wrote: post #4

jgeada wrote: post #2

Bring back Glass Steagall and stop all this madness. Regular banking should be boring, not all that profitable and separated from speculation.

My hot take is that demand deposits should be only invested in (EDIT: short dated, thx codexb) US treasuries (a la Narrow Bank), backed by the Federal Reserve and if a bank (or anyone) wants to lend, they can issue bonds to borrow versus the Rube Goldberg mechanism we currently have of deposits, FDIC, and then the Fed still providing an unlimited guarantee anyway. The bond market already is built to handle this, and…

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