191–200 of 201 posts
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And Biden killed the strikes. Both parties hate the non-rich. One just hates it more and is way more obvious about it.
Claiming politicans hate the vast majority of people is so insane I can't believe I'm seeing it here.
Anyway https://scholar.princeton.edu/sites/default/files/mgilens/fi...
Lol somehow always blaming “deregulation” and politicians I’ll tell you what, it’s not regulators that caused this. IMO Banks need less regulation (and more smaller banks) and need to fail more (and have more jail time). It’s the banking executives and business analysis team at fault here. Just like it’s the startups error for failing to have multiple bank accounts. Some advice, be robust and self reliant. Assume eve…
Because the threat of punishment stops crime?
People who commit white collar crime are deeply scared of prison. And since the crimes usually are very premeditated, and not heat of the moment or out of necessity, calculations of risk do take place here.
Other than the focus on governmental regulation we should also look at the glaring principal-agent risk. Large shareholders (such as the Swedish pension fund) should have asked questions about the concentration risks and AOCI losses. Management could be loathe to realize the losses earlier due to profit targets. Their risk/reward calculation on addressing a mistake could be misaligned from the shareholders'.
Pension funds - and municipalities - have no business to take the funds that they have been entrusted with outside of the country where they reside. The same kind of nonsense led to the Icesave debacle.
This is a very different problem from a pension fund investing money abroad. An investment can always go to 0, which would hurt Swedish pensions but has no ramification outside Sweden. On the other hand the 2006 Icelandic bank sector was flush with foreign deposits that not even the Iclendic government could credibly guarantee deposits at the legal level.
Quick side note, the Icelandic deposit guarantee at the time was only ~20k USD. Not a lot.
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Doing the stress tests isn't where the cost would be coming from; the issue is more about the distraction of making sure that compliance is in place. I'd draw an analogy to having breakfast. If we legally required people to have breakfast every day, that would actually be quite expensive. It'd go from a reflex to something that has to be considered, we have to spend a little bit of time creating evidence that we had…
The issue is that you think making sure compliance being in place is a "distraction". This is like devs saying writing test classes is a "distraction", or having an infosec team is a "distraction", or having seatbelts in cars is a "distraction".
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It wouldn't matter even if they weren't of the same maturities, since you'd have to buy bonds with better interest rates, and you'd want the capital outflow to be spaced out. The mitigation to interest rate risk is by buying them spaced out so principal returns are being re-invested at changing rates, and you are never tied to a specific rate. https://www.investopedia.com/terms/b/bondladder.asp Here you see https://w…
Thanks that makes sense. What I was hoping to see was links to what specifically they did that was not smart. Eg did they really just buy a lot of bonds, not spacing it out?
Recently we've been in an inverted yield curve where short term yield was superior to longterm yield.
The way I see it they did a few things wrong:
1 - bought too much of the same instrument (diversity)
2 - did not bond ladder (put themselves into a high risk situation)
3 - Moved unrealized risks into realized losses by fireselling bonds (bad timing which provoked liquidity crisis)
If you think about it, #1 & #2 were easily manageable. It is the colossal screwup of #3 on top of #1 & #2 that proved to be the coup de grace.
Whether the interest rates were going to increase or decrease was completely up in the air. No one knows after a few rate increases.
This is equivalent to selling at a loss a stock because it has a 3 - 6 month downtrend when the stock is still fundamentally sound, nothing has changed in the thesis instead of riding it out longer with the recognition you may not receive primo returns or even decent returns, but you won't be taking a big hit either.
Earlier quoted context omitted.
The issue is that you think making sure compliance being in place is a "distraction". This is like devs saying writing test classes is a "distraction", or having an infosec team is a "distraction", or having seatbelts in cars is a "distraction".
I feel that is an unfair interpretation because there was one phrase spent on the word "distraction" and then a long paragraph included comparing stress tests to breakfast. If you feel breakfast is unimportant then more power to you I suppose, but I disagree.
There are hard tradeoffs here, and one failed bank doesn't mean the wrong choice was made. As I remember it, the reason for weakening these regulations was that Dodd-Frank is/was extremely expensive to comply with, and that created a banking sector where only the biggest banks could survive and it made no sense to start any new banks.
That is a reasonable reason, but on the other hand, that should not justify exempting the 18th largest bank in USA (the Silicon Valley Bank; as of 2022 https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_U... ) from such regulation.
Earlier quoted context omitted.
I feel that is an unfair interpretation because there was one phrase spent on the word "distraction" and then a long paragraph included comparing stress tests to breakfast. If you feel breakfast is unimportant then more power to you I suppose, but I disagree.
You're comparing breakfast to regulatory compliance for the financial system. Just think about that for a second...
This is part of why I like the analogy; something being important is different from whether it is a legal necessity. Making it a legal necessity is what brings in the complaints about costs, not the cost of doing the thing itself. The cost is in proving compliance under all possible conditions. The complying act, as the thread ancestor I first replied to noted, is often cheap and generally already done as good practice.
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Because fundamentally the US government can print money to pay US debt. You can't print money to pay off your household debt. It's a different beast altogether subject to entirely different rules and incentives than household debt.
Printing money results in inflation. That was my original point.