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America will soon see a wave of bank mergers?

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Re: America will soon see a wave of bank mergers?

#441
post #438

Earlier quoted context omitted.

What exposure to the stock market are you talking about?

Any bank with a ticker on a market. Technically no security on the market is safe from this mechanism. Banks are particularly vulnerable. With a properly timed news drop, shorting, and forcing the market maker to exit delta-hedging (due to volatility) you end up having them create synthetic shares that in addition to the loaned shorted shares push the price downwards (because there will always be more shares since th…

What "capitalization rate" (?) that banks use includes the publicly traded share price in its calculation?

Re: America will soon see a wave of bank mergers?

#442
post #428

Earlier quoted context omitted.

Your friend often asks for you to spot them $5 when you are out at lunch, it’s no big deal and they’ve always paid it back. Now they want to borrow $5k all of a sudden. Do you give it to them, just based on the above history?

I absolutely don't spot them $5k all of a sudden, based on that history. I may based on other factors, but certainly not based on a long history of them borrowing $5 and returning it. That seems like such an obvious answer to me I want to ask if you intended to ask that of me or the person I was responding to.

You’re right, mine should have gone to the person you were responding to, sorry about that :)

Re: America will soon see a wave of bank mergers?

#443
post #438

Earlier quoted context omitted.

Any bank with a ticker on a market. Technically no security on the market is safe from this mechanism. Banks are particularly vulnerable. With a properly timed news drop, shorting, and forcing the market maker to exit delta-hedging (due to volatility) you end up having them create synthetic shares that in addition to the loaned shorted shares push the price downwards (because there will always be more shares since th…

What "capitalization rate" (?) that banks use includes the publicly traded share price in its calculation?

Two mechanisms,

* Basel 3 counts capitalization as capital reserves instead of the normal deposit reserves we expect in fractional banking, this was adopted just recently (which is why the Fed site shows 0% deposit requirements).

If your reserves dip under the requirements you have 1-2 months to correct (from what I've read, although I'm not an expert and its very legalese, and dense so don't take that as advice). Basel is very opaque compared to Federal Reserve reporting in my opinion.

* Aggregate Indebtedness violations have to do with the SEC and market's net capital rules. In the case of SBLOCs or Securities backed loans, sudden drops in capitalization from price action can trigger illiquidity as any existing revolving credit can be frozen, and interest on utilization can balloon in addition to any further ballooning that might occur as a result of rating downgrades (S&P/Moodies).

Either are directly impacted by the company capitalization which is based on current ticker price and the shares outstanding.

Re: America will soon see a wave of bank mergers?

#444

Earlier quoted context omitted.

Hard to collect money on unemployed and dead.

Your thinking is too fine grained. Missing forest through the trees. For a nation state with it's own currency, money is the sum of the production capacity / natural resources of that nation state. You don't need Joe and Sue to pay you back.

This line of thinking is just flat out wrong, and uneducated.

Price discovery is critical to any system, and money is the shared store of value of those that hold it so long as it retains that store of value.

Producers set prices to make a profit, if they can't do that they stop producing. Factor markets, same things happen, as an employee you don't do $1000 of work in exchange for $1 in purchasing power by the time you get paid.

When government debases currency, unproductive efforts unwind into losses at the individual level, and inflation at the macro level. You can't print money out of air and use it to pay for things without issues that result in cascade collapses over time. The more you do it, the bigger the bubble, deflation, and crash/collapse from a combination of interest rates (that need to raise to fight inflation) and bubble pressure.

If it continues, eventually credibility is lost, and the currency is abandoned. This usually happens sometime after a 3:1 debt to GDP ratio, though it can be much higher, anything after 3:1 is where the smaller effects become noticeable.

I'd suggest you educate yourself a bit more on this. I'd recommend Debt, the first 5,000 years by David Graeber as a starting point, and then Big Debt Crises by Bridgewater/Ray Dalio for case studies of how these things actually play out.

If pricing becomes irrational, you run into economic calculation problem, breakdown, shortages ensue, then death (its been tried in non-market socialist systems).

There's a good reason central banks were not allowed during our countries early years. Quite simply, its well known in a historic context that money printing can end civilizations.

Re: America will soon see a wave of bank mergers?

#445
post #443

Earlier quoted context omitted.

What "capitalization rate" (?) that banks use includes the publicly traded share price in its calculation?

Two mechanisms, * Basel 3 counts capitalization as capital reserves instead of the normal deposit reserves we expect in fractional banking, this was adopted just recently (which is why the Fed site shows 0% deposit requirements). If your reserves dip under the requirements you have 1-2 months to correct (from what I've read, although I'm not an expert and its very legalese, and dense so don't take that as advice). Ba…

Maybe you are confused by the words "common stock" in Basel 3 or something -- that's in the stockholders' equity line, book value, and is not defined by the market price of the company's own common shares.

(For example, you can look at PACW's Q1 press release, and see its Tier 1 capital ratio not getting cut by 2/3 by the precipitous drop in share price they endured: https://www.pacwestbancorp.com/news-market-data/news/news-de... )

Re: America will soon see a wave of bank mergers?

#446

Earlier quoted context omitted.

>The US government is wholesale spying on the entirety of electronic communications and working with social media sites to make some voices less prominent. Private business should be able to tell the government to pound sand when banking data is requested without a warrant or subpoena. Do they actually tell the government to pound sand, though? In the end, if I can only rely on the moral codes of for-profit companies…

You're dancing around a point. > for-profit companies who are weighing the value of a good relationship with me versus one with the US government For-profit companies shouldn't need or care about a relationship with the US government beyond selling the same product they do to everybody else. That is my ideal. How to get there is the contention. You would like to give the for-profit company to the US government and th…

Large banks, and, more broadly, any large company is also concentrated power, though.

Re: America will soon see a wave of bank mergers?

#447

Earlier quoted context omitted.

You're dancing around a point. > for-profit companies who are weighing the value of a good relationship with me versus one with the US government For-profit companies shouldn't need or care about a relationship with the US government beyond selling the same product they do to everybody else. That is my ideal. How to get there is the contention. You would like to give the for-profit company to the US government and th…

Large banks, and, more broadly, any large company is also concentrated power, though.

True. But large companies don't have the power to jail you, or worse, for crossing them. History has shown how hellish living under a powerful malevolent government can be.

Re: America will soon see a wave of bank mergers?

#448

Earlier quoted context omitted.

Large banks, and, more broadly, any large company is also concentrated power, though.

True. But large companies don't have the power to jail you, or worse, for crossing them. History has shown how hellish living under a powerful malevolent government can be.

The only reason why they don't have that power is because the government jealously guards it. In places where that's not the case, what would stop them?

Re: America will soon see a wave of bank mergers?

#449

Earlier quoted context omitted.

True. But large companies don't have the power to jail you, or worse, for crossing them. History has shown how hellish living under a powerful malevolent government can be.

The only reason why they don't have that power is because the government jealously guards it. In places where that's not the case, what would stop them?

Nothing. That is why we gave government the power to make and enforce laws and limited power elsewhere.

Re: America will soon see a wave of bank mergers?

#450

Earlier quoted context omitted.

The only reason why they don't have that power is because the government jealously guards it. In places where that's not the case, what would stop them?

Nothing. That is why we gave government the power to make and enforce laws and limited power elsewhere.

And how stable did that configuration prove to be?
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