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Bank Failures Visualized
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Re: Bank Failures Visualized
#416Earlier quoted context omitted.
However, this time it looks like the government failed, not the banks. If you look at the US government (bonds) as just another business the bank can invest in, you can't help but notice that the business had not been very well managed. It promised that bonds will keep their value, but they did not (currently at market price and in the future, due to their yield suffering from inflation). We still don't have a clear…
The issuer of a bond only promises that they will pay the principal of the bond back with interest. They don't promise that the bond will hold its value in the market.
Yes, but here the issuer is strongly related to the levers of interest rates and money supply which directly impact the long term value of the issued bonds.
Re: Bank Failures Visualized
#417And now that the fed said they will only "fully" back depositors in large banks that go under, there will be even more consolidation, so the next crash can consist of just one huge circle that acted gregariously and irresponsibly before its collapse, but no one could do anything because of its size. What makes this even worse, is that Yellen would have lost nothing had she said they would back every bank and not just…
The large banks are more heavily regulated. Trump raised the limit at which a bank is called large from 50bil to 250bil. The small banks value their freedom from regulation more than they would value full FDIC coverage. The fed would love to make that trade:more regulation of small banks in exchange for full FDIC coverage for small banks. Canada is dominated by five enormous banks, they are closely regulated, and Can…
Canada has higher real interest rates paid to customers? You sure? My Canadian bank account pays pretty much what my US one does, 0.00001% or something similar.
Re: Bank Failures Visualized
#418Weird part about this whole thing is, we have been repeatedly told that banks are good and they learned a lesson in 08. Now both tech and banking are in trouble again.
> 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…
Every time someone says "stress test", I will point out that the stress tests did not model for interest rates rising like they did, which triggered the current problems we're having (or, really, interest rates being so low for so long was the actual problem IMO, but that's a whole separate conversation). Stress tests as currently implemented would not resolve the issue, and even if they were so wise to reactively throw in more aggressive changes to interest rates to these stress tests, would that be enough to catch the next problem?
https://www.federalreserve.gov/supervisionreg/dfa-stress-tes...
See Tables 2.A and 3.A in 2022 Stress Test Scenarios (PDF), covering a 3-year period starting in Q1 2022. Look at the 3-month Treasury rate. In 2.A, rates go up to 1.5 by Q1 2024 and sit there. In 3.A, rates sit at 0.1 for three years.
Rates are not the only variables, but the point remains that the interest rate changes that triggered these problems do not appear in the stress tests.
Re: Bank Failures Visualized
#419Great, the more the system cracks the sooner the veil will come down.
Re: Bank Failures Visualized
#420Earlier quoted context omitted.
> The list of large corporate banks that charge NSF fees and overdrafts is vanishingly small. True for NSF fees, absolutely false for overdraft fees. https://files.consumerfinance.gov/f/documents/cfpb_overdraft...
I would need to see 2022 as well. Many banks announced changes middle of 2021 and 2022.
Fair, not sure when the new data comes out.