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There have been 562 bank failures since 2000

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Re: There have been 562 bank failures since 2000

#101

Post by vishal0123 »

mdasen wrote: post #11

It's not just SVB, but the title is a bit misleading. There's been 22 failures since 2016 and 10 since 2018 and they've been really small compared to SVB. The article has this information so it isn't a misleading article, but damn the title is misleading. The 562 number makes it seem like bank failures are really common. These failures aren't common, especially of SVB's size. Washington Mutual is the only larger fail…

> These failures aren't common

These are common when inflation rate grows faster than expected. Since 2016 is a small timeframe to find the average.

Re: There have been 562 bank failures since 2000

#102

Post by davrosthedalek »

bumby wrote: post #84
rektide wrote: post #19

Earlier quoted context omitted.

That shows money, which is interesting. I'd also like to see "Years of Banking Institutions Lost"... SVB is supposedly 40 years old... how old were banks that had failed in the past? That'd be an interesting other way to tally/view the magnitude of what happens, a kind of indicator of volatility. My thought is... if a whole bunch of banks open then shut down 3 years latter, it doesn't seem as notable as a bunch of mo…

Why does that sort of “infant mortality” matter in finance if they play by the same rules? I’m not being argumentative, just trying to understand. In physical systems, that view would be used to apply additional stress testing early to reduce the overall risk exposure (e.g., test a pump for a certain run time to be assured it’s made it out of the early failure age and is more likely to last a lot longer). I’m not qui…

I can imagine two effects why a younger bank might experience higher risk:

1) a young bank is more likely to experience a high-growth phase, which produces operational challenges

2) a young bank might be founded to serve a new business niche, and experience with the challenges of that niche might be less prevalent in the banking sector. Like airplane regulations, rules are written in blood.

Re: There have been 562 bank failures since 2000

#103

Post by rtkwe »

swatcoder wrote: post #97
mike_d wrote: post #52

Earlier quoted context omitted.

Almost all failed banks (including SVB) in recent history held more assets than deposits. Liquidity is the issue. Imagine you take your $10 million fortune and convert it all into gold bars and hide it under you bed. Then you order a pizza. When the pizza guy shows up, even though you are "rich," you are also in that moment broke and can't pay for the pizza. Not only will the pizza guy not take gold, you can't find s…

That analogy only works when your gold is obviously worth a lot more than your pizza bill. For SVB, the knock on the door is more like a loan shark coming by to call in for their return. You have gold under the mattress that is sometimes worth plenty, but it’s value isn’t determined until it sells and it isn’t looking to square up with what’s due.

Isn't the thing they got caught out on mainly TBills though? So the metaphor falls apart again because they have a practically guaranteed value just with a long time horizon.

Re: There have been 562 bank failures since 2000

#104

Post by nico »

mindslight wrote: post #95
nico wrote: post #82

Earlier quoted context omitted.

Unfortunately, the current tax structure disproportionately affects not-as-wealthy people/companies. So raising taxes would probably be a very unfair move to most people. My fantasy would be for the government to abolish taxes altogether and just print the money they need, then use whatever mechanisms they have to take enough money out of the market to keep inflation in check. That way we wouldn't have to pay taxes a…

> then use whatever mechanisms they have to take enough money out of the market to keep inflation in check. What mechanisms would these be, if not taxes? The other main contemporary mechanism is raising interest rates, which only works on money that has been previously loaned out at a lower rate, and thus isn't a long term sustainable mechanism for recapture.

Great question. I don’t know, that’s why it’s a fantasy.

But I’m guessing that taxes isn’t the only or even the biggest way in which money is taken out of circulation.

In fact, if you ask google “how is money taken out of circulation?”, the first few answers don’t mention taxes at all.

Re: There have been 562 bank failures since 2000

#105

Post by saalweachter »

bink wrote: post #3
ezekg wrote: post #2

I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 . It shows how bad the SVB situation really is. It’s been very quiet since 2008 and its aftermath. Until now.

Yeah, I don't know anyone saying "it's just SVB since 2000". They're saying SVB is the first major bank in a long time (and hopefully not a harbinger of things to come).

I'm actually curious if SVB failed because it had so many highly connected "big" customers.

A panic moves a lot faster if each person is pulling 8+ figures from the bank, and you have a lot more incentive to panic if you have more than the 6 figures of FDIC insured balance in the bank. There's also a measurable difference in hearing crazy Jim down at the pub pulled his $400 out of the local credit union because he heard the fed was raising rates and hearing from the VC on your startup's board that three guys -- guys you know and think are cooler than you -- have pulled their next year of runway from SVB because they're worried for vague handwaving macroeconomics reasons that sound plausibly impressive to you.

Re: There have been 562 bank failures since 2000

#106

Post by lucb1e »

FormerBandmate wrote: post #30
mdasen wrote: post #11

It's not just SVB, but the title is a bit misleading. There's been 22 failures since 2016 and 10 since 2018 and they've been really small compared to SVB. The article has this information so it isn't a misleading article, but damn the title is misleading. The 562 number makes it seem like bank failures are really common. These failures aren't common, especially of SVB's size. Washington Mutual is the only larger fail…

SVB is the second largest failure ever. Nobody really cares in finance circles if some tiny bank in Missouri with $5 million in assets fails, people certainly do about this

Is that "second largest failure ever" after adjusting for inflation? (I have no idea, I'm not really following these things so I hope it's okay to just ask the obvious)

Edit: randomly spotted that I asked a duplicate question from another subthread https://news.ycombinator.com/item?id=35111958 According to the reply there, it's not adjusted, so the highscore seems a bit meaningless

Re: There have been 562 bank failures since 2000

#107

Post by muyuu »

Kyragem wrote: post #42

Trump and republicans increased the capital treshhold of banks from 50B to 250B where banks must comply with an FDIC stress test as defined by Dodd-frank regulations. A small bank like SVB would have probably been required to hold more capital and wouldn’t have gone bankrupt.

or perhaps it wouldn't have been able to survive to that regulation in the first place

it does seem like the current banking system is weird and full of vestigial features, they are so regulated they might as well be publicly owned

Re: There have been 562 bank failures since 2000

#108

Post by adolph »

SilverBirch wrote: post #88

One thing that's kind of weird here is the peverse incentives. There are quite a lot of people going around insisting that the government has to step in and bail out the large depositors of SVB becuase if you don't, well... then no small bank is safe! There should be a run on every bank! Which is kind of... you know. Scummmy. If your money is locked up in SVB its certainly convenient if the Fed feels it has to step i…

> Fine, save SVB, funded by a 1-off 100% wealth tax on anyone worth over $10m in silicon valley.

The interesting part to this is that if wealth (assets) were taxed thusly, they would probably lose a lot of value when liquidated to pay taxes, thus decreasing the realized taxable amount. As I understand it, a similar principle was behind SVB’s “losses” as well.

Re: There have been 562 bank failures since 2000

#109

Post by swatcoder »

rtkwe wrote: post #103
swatcoder wrote: post #97

Earlier quoted context omitted.

That analogy only works when your gold is obviously worth a lot more than your pizza bill. For SVB, the knock on the door is more like a loan shark coming by to call in for their return. You have gold under the mattress that is sometimes worth plenty, but it’s value isn’t determined until it sells and it isn’t looking to square up with what’s due.

Isn't the thing they got caught out on mainly TBills though? So the metaphor falls apart again because they have a practically guaranteed value just with a long time horizon.

The value at maturity doesn’t matter. It’s not like they were going to sit on them for the whole term anyway. They’re just an asset that’s usually fairly stable and that usually stays that way over a certain window, and so they’re actively traded and have a market value based on those characteristics.

In their case, the market value of the TBills that they purchased slipped too much. Because that’s just paper value and could have recovered or been been balanced for eventually, it might not have been an issue without a run of withdrawls. But buzz hit that they were in an unexpectedly and unisually fragile position, and that made people start the run that broke them.

Re: There have been 562 bank failures since 2000

#110

Post by [deleted] »

lazide wrote: post #55
mxkopy wrote: post #38

Earlier quoted context omitted.

> Congress are cowards and won’t do what should be done - raise taxes. They're still cowards for not doing it but what should've been done is an increase in interest rates half a decade ago.

The fed tried - and the chairman almost got fired for it. Remember? [ https://www.cnbc.com/amp/2018/12/22/trump-reportedly-wants-t... ] Almost 5 years ago exactly.

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