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How deep is the rot in America’s banking industry?
281–290 of 325 posts
Re: How deep is the rot in America’s banking industry?
#282Earlier 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…
Here is my question about that: whatever the increased costs to insure other banks by making uninsured depositors whole, aren't they ultimately based on the resolution costs for SVB itself? That is to say: in the limit, if it costs almost nothing to wrap up SVB, because their assets are fine (just inconveniently structured), what drives insurance costs up at other banks? I'd also add that covering uninsured depositor…
I think this move probably saved the FDIC money. If you had a massive bank run(1), it's probably cheaper to pay back 250k+ depositors of one bank than for the FDIC to pay out 1. which seemed pretty likely, I know people who over the weekend were planning to pull all of their money out of a regional bank and put it in one of the 4 super banks Monday morning)
Re: How deep is the rot in America’s banking industry?
#283Minority?? Opinion follows:
The rot is at the core, the Federal Reserve. My parents saved money in a savings account for their eventual retirement. It was a prudent and accepted way to do things. Over time, with Reagan and deregulation of everything that followed, their savings rate effectively dropped from 5-8% to zero. That income was expected to fund part of their retirement, and it was stolen from them in order to prop up wall-street.
Those zero and near-zero rates distorted fiscal reality in the US and elsewhere they've effectively broken the system. At some point, we'll be bailing out whole countries to keep kicking the can down the road, and that's when things will be too big to save and we get to The Great Simplification.
I only hope we've got alternatives to fossil fuels figured out at scale and somewhat in place, otherwise civilization could collapse in World Depression II.
Re: How deep is the rot in America’s banking industry?
#284Earlier quoted context omitted.
The public does know the current value of all securities, and of several different buckets. Yes, these market values will change at different rates for individual assets, and we dont have a list of every stock, bond, and loan. We still have a very good understanding of the "delta" and the magnitude of the loss, if not with crystal clarity. Nearly all of the unrealized loss was in securities more than >10 years. They…
We can estimate the delta as of filing dates. We don’t know what the delta is. That doesn’t matter, because they’re federally backed. But it’s a crucial difference to appreciate less than one week after a run.
Like I said above, you won't have a crystal clear number but you have some brackets on the fair market value. The assets under management belong to the account holders so you can zero them out. You can zero out the shareholder value which is zero. This mainly leaves there other cash assets and physical assets.
I'm not willing to do it to win a hn debate, but there's enough public information to estimate the size of their hole within a billion or two.
Claims that they were evasive or hiding things in their financial reportings are off base. Claims that it would be impossible to get an idea of their Financial losses are also off base.
Re: How deep is the rot in America’s banking industry?
#285Earlier quoted context omitted.
The FDIC insures the entirety of the deposits either way. > Insurance only pays out . . . if a bank fails That's a good point. So one difference is that while the money is equally insured in both cases, the payout dynamics would change. Very roughly, the amount of a payout might be expected to go down in the cross-bank case (smaller account values, but then also more accounts per bank, so it isn't quite so simple), a…
>The FDIC insures the entirety of the deposits either way. This is new with SVB. I get the whole "250K minimum" argumemt, but this is the first where we are seeing major 10M++ depositors getting 100% guarantees. I don't see issue with spreading money across smaller banks - other than perhaps they may not be able to assess risk as well as larger banks. But again, SVB. I think one thing to keep in mind is that most ban…
If you look through the thread I replied to and the broader conversation, some people objected to backstopping deposits without limit and think rates have to go up if this is the new status quo.
The question is in what way(s) does it matter whether deposits are insured without limit in a single account, which is new, or with limits when spread across an arbitrary number of accounts, which isn't? If one costs 1x, why should the other cost > 1x?
It's a serious question. FDIC assessment rates aren't as simple as tax brackets and for example it's possible that the act of spreading deposits across more accounts in more banks would increase the fees paid into the existing system anyway.
Re: How deep is the rot in America’s banking industry?
#286People 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…
It's too hard to understand so it is easier to pick a black or white side.
Re: How deep is the rot in America’s banking industry?
#287Earlier quoted context omitted.
>The FDIC insures the entirety of the deposits either way. This is new with SVB. I get the whole "250K minimum" argumemt, but this is the first where we are seeing major 10M++ depositors getting 100% guarantees. I don't see issue with spreading money across smaller banks - other than perhaps they may not be able to assess risk as well as larger banks. But again, SVB. I think one thing to keep in mind is that most ban…
If you look through the thread I replied to and the broader conversation, some people objected to backstopping deposits without limit and think rates have to go up if this is the new status quo. The question is in what way(s) does it matter whether deposits are insured without limit in a single account, which is new, or with limits when spread across an arbitrary number of accounts, which isn't? If one costs 1x, why…
>The question is in what way(s) does it matter whether deposits are insured without limit in a single account, which is new, or with limits when spread across an arbitrary number of accounts, which isn't?
It matters because only 1 (SVB) bank failed. If those depositors had their money swept across multiple banks this point would be moot.
Edit: If deposits are spread about multiple banks, the FDIC does not need to carry as large of a balance to cover the loses of any single bank, which results in less indirect fees to depositors of different banks.
Re: How deep is the rot in America’s banking industry?
#288People 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…
The main source of upset I've seen (disregarding the silly "woke bank" hot air) is less about banking industry regulations per se and more about viewing government priorities writ large through a blurry sense of class warfare. For example, there's a particular feeling of a double standard between SVB depositors and people with student loan debt. When the government decided to bend the rules for the former, it was don…
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Re: How deep is the rot in America’s banking industry?
#289People 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…
You don't address the fact that they paid out bonuses for doing a horrible job just prior to the seizure, nor the very real danger of further concentration of the banking sector (We are down to the big 3 now?).
The issue isn't that too big to fail happened, because its immaterial after the fact. Its that little punishment was actually done for bad management, and not only that, the situation is left worse because we have a banking concentration problem.
If you look at the number of banks chartered after 2008, its dropped to negligible amounts going into the business, and regulation has only been increasing. You have to lie to get a charter because no reasonable person would accept the personal liability without something in it for them. The requirements are that onerous.
Everything is now so big it will certainly fail, and that's what people are angry about. There is plenty of evidence over the past 100 years (and longer if you go further), that as sector concentration goes up, so does corruption, frauds, and other crimes that are largely based around deception at our loss. It becomes easier to increase the scope, and get away with it when setting up dominoes to fall (so you can profit on event's you manufacturered).
The fed aren't doing there jobs, and worse, it looks like they could never meet their original charter to begin with. They aren't government, they are private bankers.
So they try to justify bailouts as a way of saving the system, and really its just acting as a wealth transfer to the elite rich whose pockets they are lining via a money printer at the expense of the public taxed by inflation.
Re: How deep is the rot in America’s banking industry?
#290Earlier quoted context omitted.
> SVB would have held them to maturity had the bank run not happened, and now somebody else will instead This "somebody" is the government aka the central bank putting these bonds on their balance sheet. This is a new form of quantitative easing.
This is not true. SVB had 91 billion in hold-to-maturity securities. These were auctioned off to other Banks. The FED did not take them. If the Fed did take them, it would be a drop in the ocean. The FED is already holding 2.7 trillion dollars of underwater mortgage-backed securities they bought. They have six trillion dollars of other securities they are holding. Nobody can do a bank run on the Fed and they control…
You might want to have another look at the Fed balance sheet this week: https://fred.stlouisfed.org/series/WALCL
Months of work undone by loaning to banks which made risky investments betting against high interest rates.
Any uptick on this graph is equal to printing money which causes inflation. They can wait it out while we collectively pay the cost of this increased money supply.