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

finance.yahoo.com

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

#221

Post by christophilus »

rcme wrote: post #128
ajkjk wrote: post #14

I was pleased to read Nathan Tankus' take[1] on all this, although I wish I understood it better, which was that a lot of policy ideas that have been somewhat fringe are becoming mainstream in the last week: > The prospect of unlimited deposit insurance, whether de facto or de jure, is leading to a large-scale reconsideration of views among even “moderate” banking scholars. I imagine that's usually how real policy pr…

It depends on your view of "progress." Early in the pandemic, people thought you really could print money indefinitely and MMT was right. Now people see that classical notions of inflation are still valid.

Yeah. There were still plenty of people who predicted how foolish the early pandemic money printer was. I’d bet those same people view this new regulation with equal displeasure. I’m certainly in that camp.

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

#222

Post by SkyMarshal »

lordfrito wrote: post #171
digitaltrees wrote: post #154

Earlier quoted context omitted.

Thank you for posting. This actually changes my view entirely and makes many of my other posts invalid.

Yeah I feel this point isn't well known, but likely will be soon. I love HN because many of us actually listen to each other and debate in good faith, helping each other sharpen our views. Glad you found it helpful.

Yes, same here, thanks. It’s crazy they were so forewarned and yet did nothing, even having lived through the GFC and knowing how quickly things can go sideways. Just 15yrs and they already forgot, /smh.

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

#223

Post by christophilus »

ajkjk wrote: post #208
rcme wrote: post #128

Earlier quoted context omitted.

It depends on your view of "progress." Early in the pandemic, people thought you really could print money indefinitely and MMT was right. Now people see that classical notions of inflation are still valid.

Which people thought those things? I feel like at the time I was only hearing criticism.

There were plenty of financial podcasts that were saying, “why don’t we just keep doing this?” Animal Spirits, for example.

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

#224

Post by JumpCrisscross »

sophacles wrote: post #206
mcherm wrote: post #32

Earlier quoted context omitted.

I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDIC would cover depositor losses up to the insured limit. By choosing to cover all losses even above the insured limit, we have chosen to put the burden for paying for those losses on all of the other banks (and indirectly on those banks depositors). I suspect th…

I keep reading comments like this, but I've seen no well sourced material saying that the FDIC is raising rates. Do you have some reliable source about it? (NOT a "look at it logically" or "here's how my health insurance works, why would the FDIC be different", or "do your own research" or anything else that's some random internet comment - I'm looking for real meat about this claim).

> I've seen no well sourced material saying that the FDIC is raising rates

Beyond the special assessment, they almost certainly need to raise a new assessment to cover $250k+ deposits. Full insurance can't be on a discretionary basis.

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

#225

Post by s1artibartfast »

sophacles wrote: post #218
rippercushions wrote: post #215

Earlier quoted context omitted.

From the Treasury announcement: Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. In other words, if the FDIC's current funds can't cover the bill, an extra fee will be levied on banks to make up for it. https://home.treasury.gov/news/press-releases/jy1337

So they might raise rates. If they can't recovered from SVB assets via selloff, the government loans on bonds, etc.

Well we already know there are some nominal losses, because the FDIC did take over SVB.

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

#226

Post by rufus_foreman »

GabeIsko wrote: post #29
rolobio wrote: post #15

Earlier quoted context omitted.

SVB failed because they bought government bonds, typically the most secure thing. The problem is the Federal Reserve raised interest rates, which made the bonds pointless. They Fed will supposedly keep raising rates, which I expect will make more banks fail. After all, if the most-secure thing (bonds) is not secure, what is?

It's really important to make this distinction: those bonds were, and still are safe investments, guaranteed by the full faith and credit of the United States Government. The issue is that you have to wait for them to mature. So SVB had too much of their depositor's money tied up in long term investments. I don't want to turn this into another tutorial about pricing works on the bond market, but the issue isn't that…

>> those bonds were, and still are safe investments

No, whether they are safe or not depends on what you are using them for.

If you have to mark them to market, they aren't safe investments. If you can hold them to maturity, they are safe investments.

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

#227

Post by bagels »

strangattractor wrote: post #220
tptacek wrote: post #18

People seem to have a really hard time with the idea that, in the SVB debacle, the system worked effectively and pretty much the way it was planned to. It's not even clear what people are upset about. There's an article on the front page of The Atlantic today about how angry we should be about SVB, and if you read it, it's hard to figure out who those angry people should be. Equity is getting zeroed out. Management w…

Maybe somebody here can explain something I just doin't seem to be able to understand. Why is it so hard for banks to do a stress test? They have all the data. If I was CEO of a bank I'd want to be able to get up in the morning and have some idea how much risk and what types of risk my bank was assuming. Especially in a dynamic environment of Fed interest rate changes. I would think they would be doing it all the tim…

It isn't hard. They want a try at getting a little more profit in exchange for risk. Stress tests prevent them from taking those risks, therefore they lobby against them and don't do them unless compelled.

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

#228

Post by UncleOxidant »

jt2190 wrote: post #59
mcherm wrote: post #32

Earlier quoted context omitted.

I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDIC would cover depositor losses up to the insured limit. By choosing to cover all losses even above the insured limit, we have chosen to put the burden for paying for those losses on all of the other banks (and indirectly on those banks depositors). I suspect th…

Just so I’m clear, you’re saying that you’ve been harmed because your savings account will pay a lower interest rate? (Note that I’m not trying to suggest that you were not harmed, I just want to make sure that I understand the source of the harm.)

I'm guessing that if they work for a bank the FDIC special fee might also cut into bonuses.

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

#229

Post by s1artibartfast »

strangattractor wrote: post #220
tptacek wrote: post #18

People seem to have a really hard time with the idea that, in the SVB debacle, the system worked effectively and pretty much the way it was planned to. It's not even clear what people are upset about. There's an article on the front page of The Atlantic today about how angry we should be about SVB, and if you read it, it's hard to figure out who those angry people should be. Equity is getting zeroed out. Management w…

Maybe somebody here can explain something I just doin't seem to be able to understand. Why is it so hard for banks to do a stress test? They have all the data. If I was CEO of a bank I'd want to be able to get up in the morning and have some idea how much risk and what types of risk my bank was assuming. Especially in a dynamic environment of Fed interest rate changes. I would think they would be doing it all the tim…

They all know exactly what is up. It wasn't a surprise. They just didn't have many good options to choose from

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

#230

Post by s1artibartfast »

TuringNYC wrote: post #102
tptacek wrote: post #18

People seem to have a really hard time with the idea that, in the SVB debacle, the system worked effectively and pretty much the way it was planned to. It's not even clear what people are upset about. There's an article on the front page of The Atlantic today about how angry we should be about SVB, and if you read it, it's hard to figure out who those angry people should be. Equity is getting zeroed out. Management w…

>> SVB would have held them to maturity had the bank run not happened, and now somebody else will instead. If that were the case, they wouldn't have had to raise emergency funding last week. The assets were indeed impaired. Hiding the true values via AFS accounting treatment doesn't magically make the dire circumstances sustainable.

Nothing was hidden. Losses were clearly reported. Check out page 125 of their 10k for excruciating detail.

This misinformation needs to stop.

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