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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

#131

Post by pcthrowaway »

raziel2701 wrote: post #73
gnfargbl wrote: post #29

Earlier quoted context omitted.

I'll ask the obvious question, because I have no clue about this stuff. The early failures in 2008 seem to have been followed by a cascade of smaller failures. Is that going to happen again?

We don't know yet, we're slowly finding out who had exposure to what and how things are interconnected. It's a complicated machine and we'll probably know only after the fact. There's a lot of damage control messaging going on right now, and that actually makes me feel more bearish: All rumors are false until officially denied. Right now we're dealing with the psychology of markets, if a large enough group of people…

> All rumors are false until officially denied.

Even officially denied rumors can be true. See FTX ensuring panicking users that they were very much liquid, days (hours?) before they announced bankruptcy

Re: There have been 562 bank failures since 2000

#132

Post by than3 »

I'm surprised no one is talking about what it takes to get a bank charter to begin with.

Starting in 2009 (iirc), the requirements changed to be so stringent that basically the only people who would be on the board of directors were people that lie about their kickbacks for being on the board. You'll notice a sharp falloff of the banks being created after that time, and banking has become so consolidated now that if one of the majors goes under, the others are unlikely to be able to absorb the costs or losses.

I mean, who in their right mind would sit on a bank board, accept personal liability for decisions made, and be prohibited from receiving any kind of compensation for those risks (including just a basic salary).

Re: There have been 562 bank failures since 2000

#133

Post by dragonwriter »

Scoundreller wrote: post #116
dragonwriter wrote: post #66

Earlier quoted context omitted.

> The day before SVB fell, everybody said everything was fine. Well, no, people were saying “Get your money out of SVB if its above the insurance limit”, because the run was already happening and that SVB couldn’t handle the run was a pretty widespread opinion. But, while there are systemic/institutional/regulatory reasons why SVB’s conduct which created the vulnerability was possible, it doesn’t seem that the vulner…

Wouldn't we expect a lot of orgs to suddenly start caring if they have more than $250k in their accounts and start spreading it out over the next week, or removing it from banks entirely and putting into treasuries or other assets? Or withdrawing entirely from niche/smaller banks and into bigger/more diversified ones? (diversified banks are great because payday becomes mostly book entries instead of massive inflows/o…

> Wouldn’t we expect a lot of orgs to suddenly start caring if they have more than $250k in their accounts and start spreading it out over the next week, or removing it from banks entirely and putting into treasuries or other assets?

I’d expect big orgs to mostly have money in banks specifically for reasonable cash needs (or temporary inbound flowthrough), and to have it in treasuries or other assets otherwise, but I wouldn’t expect to see much change. There’s no news here impacting accounts in other banks: the $250K insurance limit isn’t news, and there’s no reason to think that SVBs particular concentration of assets in long-maturity illiquid assets that have lost value is systemic rather than sui generis.

The ripple effects that will occur, I would think, will be more through companies that were dependent on SVB than companies with money in other banks.

Re: There have been 562 bank failures since 2000

#134

Post by imtringued »

mindslight wrote: post #67
dantheman wrote: post #65

Earlier quoted context omitted.

Wouldn't it be better for congress to spend less? That's way better than raising taxes.

That doesn't address inflation. The point is that money needs to be taken out of the system. That used to be done by high tax rates on high incomes, and the estate tax. Both have basically been neutered. But all things considered, 5% is not really a high interest rate. People are just acting as if it's unreasonable because they'd become accustomed to ZIRP. Personally I hope rates stay above several percent for the fo…

>Personally I hope rates stay above several percent for the foreseeable future, for climate/resource reasons.

I don't know what this has to do with climate or resource reasons. Cutting down the rain forest, polluting the planet with CO2 and sitting on interest payments are optimal in that scenario. Ultimately positive interest rates encourage corruption and short term thinking because earning money today ,no matter the cost, is better than earning money in the future.

Meanwhile with lower interest rates the future isn't discounted anymore and it is worth it to invest in emission reductions.

Re: There have been 562 bank failures since 2000

#135

Post by imtringued »

frankfrankfrank wrote: post #47
TheOtherHobbes wrote: post #35

Earlier quoted context omitted.

Inflation is caused by profiteering and opportunism aided by the occasional supply shock. Trying to control it solely with interest rates makes as much sense as trying to fly a beach ball to Mars.

Those are simply common correlate effects. Inflation is really rather simple, it is inflation of the money supply, i.e., printing more Monopoly money for oneself, knockoff purses, using chemicals to create fake honey, it’s what counterfeiters do … whether it’s some North Koreans or the federal government … its fraud, criminal, illegal, immoral, evil, and a clear indicator of illegitimacy of this or any government tha…

Except that view is divorced from reality.

https://economicsfromthetopdown.com/2023/01/17/is-stagflatio...

Re: There have been 562 bank failures since 2000

#136

Post by rcme »

oarabbus_ wrote: post #126
vikramkr wrote: post #86

Earlier quoted context omitted.

The shortfall only occurred because they had to sell their assets before maturity, and the value of those assets have decreased. If they were able to hold them to maturity there wouldn't have been a problem - they still pay out the same amount of money at the end - but right now people are willing to pay less for future money than they used to. So if they spend 90 bucks on a bond that matures in 5 years and pays 100…

This seems like a rather exaggerated framing to absolve SVB of any responsibility for what happened, and is not accurate. SVB overleveraged into long-term bonds in 2021 when interest rates were at an all time low. A financial institution/bank normally would hold a mix of maturities in their fixed-income holdings - 1 year, 3 year, 10 year - to maintain liquidity and reduce insolvency risk. "If they were able to hold t…

The main cause of the issue was that deposits increased so much over the pandemic and then decreased a lot simultaneously with a huge spike in interest rates. The Fed and the government have (unintentionally) engineered a banking crisis. A lot of banks are having liquidity issues now.

Re: There have been 562 bank failures since 2000

#138

Post by frompdx »

frompdx wrote: post #21
kibwen wrote: post #10

Is that "second largest bank failure of all time" adjusting for inflation?

Based on the wiki for WaMu, the numbers are not inflation adjusted. According to the BLS CPI calculator, $1.00 in October 2022 has the buying power of $0.73 in September 2008, when WaMu failed. 20.9b is closer to 15.3b in 2008 dollars. Based on the graphic in the post, it's still the second largest, yet half as large as the largest. As a disclaimer, I'm not an expert and am unaware what flaws my analysis may have. ht…

Edit: The values should be Should be 209b and 153b, respectively. The author of the article made a mistake in their graphic which showed the value of SVB as 20.9b when it should have been 209b. I carried this mistake over in my original post. The author has since updated their numbers.

Re: There have been 562 bank failures since 2000

#139

Post by vikramkr »

oarabbus_ wrote: post #126
vikramkr wrote: post #86

Earlier quoted context omitted.

The shortfall only occurred because they had to sell their assets before maturity, and the value of those assets have decreased. If they were able to hold them to maturity there wouldn't have been a problem - they still pay out the same amount of money at the end - but right now people are willing to pay less for future money than they used to. So if they spend 90 bucks on a bond that matures in 5 years and pays 100…

This seems like a rather exaggerated framing to absolve SVB of any responsibility for what happened, and is not accurate. SVB overleveraged into long-term bonds in 2021 when interest rates were at an all time low. A financial institution/bank normally would hold a mix of maturities in their fixed-income holdings - 1 year, 3 year, 10 year - to maintain liquidity and reduce insolvency risk. "If they were able to hold t…

Why would my explanation read as absolving them of responsibility? The folks running the bank are professional bankers. They took a position that massively exposed them to interest rate risk and market cycle risk (when all of their clients are concentrated in a single industry!). As I said, they'd have been fine if they didn't need to cash in on those bonds or if interest rates stayed low. Making that assumption that they wouldn't need to sell (i.e. deposits would keep coming in) was obviously very stupid and failing to hedge interest rate risk (when high interest rates might directly lead to lower deposits because of the vc/startup client base!) is an even higher level of stupid that led to the whole thing collapsing in 48 hours. That doesn't invalidate that the bonds are still good/they have assets greater than deposits (though obvioust rhere could be fraud/devaluation when they try to sell) and that the FDIC has a pretty good chance of getting most people's money back (eventually, hopefully).
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