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Bank Failures Visualized

observablehq.com

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Re: Bank Failures Visualized

#241

Post by paulgb »

andy_ppp wrote: post #236
Agent-Cooper wrote: post #129

Earlier quoted context omitted.

The circles' areas are showing the failed assets. Observable Plot defaults to using a square root scale when encoding a quantity with the radius of a circle. https://observablehq.com/plot/marks/dot#dot-options

So weird, should it not be the area of the circle being the value? The radius should be √(Area/π) not the square root of the value or am I misunderstanding?

In this case, the x-axis is a different unit from the unit of data measured by the radius, so the fact that it's off by a constant multiple doesn't matter; it's just an arbitrary scale.

If both the x- and y-axes were encoding data in the same unit as the area encoded, then it might make sense to correct for the area, but I don't think I've ever seen a plot like that.

Re: Bank Failures Visualized

#242

Post by _heimdall »

jeremyjh wrote: post #74
rrrrrrrrrrrryan wrote: post #33

Earlier quoted context omitted.

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…

FDIC premiums are not payed by taxpayers. What we're visualizing here are bank failures assumed by FDIC. The too big to fail banks didn't technically fail, but to give an accurate picture of a financial crisis they should be on the graph.

> FDIC premiums are not payed by taxpayers

Tax payers are legally required to pay taxes in USD. I'm not actually sure if the IRS technically accepts cash but if so it would be extremely rare. Meaning all tax payers have a bank account and ultimately foot the bill even though it is technically funneled through the banks' books first.

Re: Bank Failures Visualized

#243

Post by dtech »

ivalm wrote: post #145
ajross wrote: post #132

Earlier quoted context omitted.

It's also leaving out non-FDIC bank failures like Lehman, Bear Stearns et. al. which would make the '08 crisis much (MUCH) larger. Basically post-2008 the class of "investment banks" basically disappeared. But none of that is shown in this chart.

They didn't hold deposits. So it's kind of reasonable. They are called "bank" but they aren't the same kind of institution.

but it's misleading. The financial crisis was basically triggered by those, and not by the ones shown here in 2008-2009.

Re: Bank Failures Visualized

#244

Post by _heimdall »

dandare wrote: post #213

The "Bank failures" title is misleading, when only FDIC banks failures are included.

"investment banks" are also misleadingly named in my opinion. This dataset seems to stick to what the more common idea of a bank that accepts deposits and offers checking/savings accounts.

Re: Bank Failures Visualized

#245

Post by cduzz »

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 would also have a 2nd plot that has all banks / banking / bank assets with the failures in a different color, so we could identify the relative size of the failed banks, and also see the actual size of the big players in banking.

Re: Bank Failures Visualized

#246

Post by alkonaut »

This honestly looks much less frightening that I would have thought. But then my experience of '08 was "that wasn't so bad?" which I understand is highly regional. Visited some colleagues in 2015 in the UK who kept referring to "the recession" when talking about struggling customers or abandoned buildings. I had to ask whether they had experienced another recession or whether they still meant the 2008 one...

Re: Bank Failures Visualized

#247

Post by kasey_junk »

_heimdall wrote: post #238
smashem wrote: post #86

Earlier quoted context omitted.

And how about relative to M1 money supply?

The definition of M1 and M2 money was changed in May 2020, conveniently right as the government started printing money for their pandemic response.

But inconveniently long after savings accounts started being demand deposits due to online bill pay, atms and easy access to electronic funds transfers.

If you are going to complain about changing the definitions you should complain that they did it too late.

Re: Bank Failures Visualized

#249

Post by G3rn0ti »

Mistletoe wrote: post #147
echelon wrote: post #90

Earlier quoted context omitted.

> we have been repeatedly told that banks are good and they learned a lesson in 08 This is a wholly different lesson. In 2008, banks were making bad investments. In 2023, the changing interest rate environment caused good investments to become worth less than their original value. If held to term, things would be fine, but liquidity issues put stress on the system. These are not the same, and we have better means of…

I strongly disagree, the current mess is largely caused because some banks didn’t anticipate interest rates going up from historic lows. That’s profoundly bad risk management. A child could have done better. https://fred.stlouisfed.org/series/FEDFUNDS

> interest rates going up from historic lows.

> That’s profoundly bad risk management.

Well, yes. But it's also bad economic policy. The banking sector just happened to have adapted to a decade of low interest rates. Then during the Covid crisis of 2020 the FED pumped dollars like crazy into the markets [1] -- adding fuel to the fire. If you set bad incentives you'll harvest bad behavior. That is the tragedy of FED-style economic planning in a nutshell.

[1] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

Re: Bank Failures Visualized

#250

Post by torcete »

Ok, this must be a silly question but... What programming language/library is that?

I am used to R + ggplot2 and I am aware that are quite a variety of other tools out there. In this case I unable to identify which one he is using.

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