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Bank Failures Visualized

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Re: Bank Failures Visualized

#111

Post by ddeck »

rrrrrrrrrrrryan wrote: post #33
FormerBandmate wrote: post #7

Earlier quoted context omitted.

08 was artificially low because many banks got merged at a fire sale. Wachovia, Merrill Lynch, Bear Stearns, and National City stick out. Other financial institutions got essentially nationalized and stock became mostly worthless like Citi and AIG, although the government sold most of their stock in 2011 Credit Suisse is about the same size as SVB, Signature Bank, and First Republic combined but it got “acquired” by…

It depends on what we're trying to visualize. From an investor's perspective, a bank whose assets get sold for pennies on the dollar in a fire sale is essentially a failure. Lehmann Brothers was also a massive (investment) bank failure with huge second order effects on the economy. This graphic seems to be modeling things from a taxpayer perspective. These banks failed and the government needed to step in to do somet…

The government stepped in in the missing cases too, just not the FDIC. Many of the missing cases had large securities trading and investment banking activities (e.g. Bear Stearns - ~400B), and so it was the Fed and SEC that were most involved in their forced sales.

WaMu was bought by JPM and is on the chart, presumably due to the FDIC involvement, whereas Bear, which was a similar size and was also bought by JPM is not.

Re: Bank Failures Visualized

#112

Post by zamnos »

dlisboa wrote: post #77
noduerme wrote: post #66

Earlier quoted context omitted.

One thing I don't understand, and perhaps you could explain, is why anyone in the US would ever keep more cash in any one bank account than what was covered by FDIC insurance. It's precisely the reason I don't e.g. take my savings to an offshore bank that offers much higher interest rates. Is this just a matter of people taking trust in a bank's solvency for granted?

FDIC limit is 250k per bank, so if you have 1 million you'd need 4 banks. If you have 10 million you'd need 40 banks. Having money spread out like that doesn't seem easy to manage. Also having 10 million in one bank gives you better interest rates and service at that bank than if you only had 250k.

Cash sweep products are a thing. For example, Wealthfront will sweep your cash into a bunch of smaller banks, putting 250k in each, so on the off chance they fail, your money's not been disappeared.

Re: Bank Failures Visualized

#113

Post by zamnos »

SamReidHughes wrote: post #60
photochemsyn wrote: post #54

Earlier quoted context omitted.

This is a rather skewed perspective that ignores the fact that if you have FDIC insurance for depositors then that can be gamed unless you have strict regulation of the banks: > "The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees." https://www.investopedia.com/terms/s/sl-crisis.asp This is why a lot of p…

What? How do depositor bailouts affect bank managers' incentives?

The bank manager can take more risks, knowing that the depositor's won't lose their money (over $250k if the bank they manage fails. Which is important because people tend to get mad when they lose large amounts of money.

Thus, buy bailing out depositors to an unlimited amount, bank managers are then incentivized to take more risks investing the depositor's money because the more risks they take, the more likely it is that one will pay out, raising the bank manager's bonus, and what their stocks are worth. Of course, by taking more risks, they also increase the chances that one will fail catastrophically, but since the depositors are all covered, up to an unlimited amount, eh.

Re: Bank Failures Visualized

#114

Post by haldujai »

DonsDiscountGas wrote: post #18
thehumanmeat wrote: post #2

That needs to go back to the 80s to capture the SnL crisis. It dwarfs 08 in bank failures. It better indicates the conglomeration of the many banks into the few we have today.

Going by Wikipedia, in 2021 dollars I count: 1980s S&L crisis: $654 Billion (summed 1984-1992 failures) across 23 banks 2008 crisis: $733 Billion (summed 2008-2011 failures) across 61 banks 2023 so far (it's only May): $556 Billion (Signature + SVB + FRC) across 3 banks. It looks like 2008-2011 is the "winner", although other commenters have mentioned forced mergers etc. may not be counted. https://en.wikipedia.org/w…

At the very least that’s missing Fannie, Freddie, Bear, Merrill, Lehman, TARP and arguably AIG for another 1.2T+, granted a lot of this was eventually repaid as the FDIC will be as well.

Re: Bank Failures Visualized

#115

Post by yieldcrv »

senectus1 wrote: post #96
yieldcrv wrote: post #48

Earlier quoted context omitted.

reuters good enough? https://www.reuters.com/technology/bankrupt-crypto-exchange-...

its kinda lite on details, but i guess "Cash and liquid crypto assets" says enough. I think the claim they have "recovered 7.3 billion" is an overstatement... but time will tell.

we can debate liquidity and depth of the market for those assets, but they're also just using the same standard as what was lost as well as reporting where thats just asset price appreciation

Re: Bank Failures Visualized

#117

Post by zamnos »

NoMoreNicksLeft wrote: post #71
cperciva wrote: post #44

Earlier quoted context omitted.

The model you describe is exactly why S&L happened . Small banks with highly correlated deposits holding their own loan books is a recipe for maximizing vulnerability to economic shocks. Interest rates go up and the loan book loses value; the local housing market drops and the loans get foreclosed and lose value; a major local employer goes out of business and depositors all start pulling their money out instead of r…

> Banks don't work that way any more because it's a really bad way to run a bank. As compared to what we have now? With dubious financial instruments so opaque I'd have to spend 30 years lurking underneath desks on Wall Street eavesdropping on conversations just to have any clue at all how the fuck those work? I'm almost comforted when there's a Bernie Madoff, because at least I can wrap my head around how a Ponzi sc…

Why do you think it has to all fall down? What happens if it doesn't?

Re: Bank Failures Visualized

#118

Post by mbo »

DonsDiscountGas wrote: post #12
5kg wrote: post #4

r should be sqrt(assets). It is.

Or else replaced with a fixed-width rectangle and scale the height by assets. Would fit more easily on a timeline and humans are much better at comparing heights than we are areas.

your wish is my command: https://observablehq.com/@mjbo/bank-failures-as-a-stacked-ba...

Re: Bank Failures Visualized

#119

Post by mbo »

bobbylarrybobby wrote: post #110
kypro wrote: post #79

Would be slightly more insightful if it was inflation adjusted. The circles on the right should be ~30% smaller.

And if the circles’ areas, not their radii, were the failed assets. As it is, a circle’s apparent size (we judge 2D shapes by their area, not any one linear dimension — although this is difficult to do in practice, and linear marks are generally superior) is the failure size squared , which distorts the data a boatload. Here is a, er, more faithful representation of the data. The recent failures don't look quite so c…

I have also built an alternative as a stacked bar chart https://observablehq.com/@mjbo/bank-failures-as-a-stacked-ba...

Re: Bank Failures Visualized

#120

Post by JBiserkov »

bobbylarrybobby wrote: post #110
kypro wrote: post #79

Would be slightly more insightful if it was inflation adjusted. The circles on the right should be ~30% smaller.

And if the circles’ areas, not their radii, were the failed assets. As it is, a circle’s apparent size (we judge 2D shapes by their area, not any one linear dimension — although this is difficult to do in practice, and linear marks are generally superior) is the failure size squared , which distorts the data a boatload. Here is a, er, more faithful representation of the data. The recent failures don't look quite so c…

They still look pretty crazy to me! https://www.fdic.gov/bank/historical/bank/index.html

Total assets of banks failed in 2008 + 2009 => 373 + 171 = 544 Billion

Total assets of banks failed in 2023 (so far, still 2/3 to go) 548 Billion

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