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So I looked it up. As of September 30, 2022, there are 4,746 commercial banks in the US. That's 11.8% failure in 23 years. That includes 2008. Those banks total $23.6 trillion in assets. Looking at the tweet cited by ezekg, I'd eyeball that as about $1 trillion in assets in the banks that have failed in the last 23 years. So, 11.8% by number of banks, but only 4.2% by assets. That's still more than I thought. But the…
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It might. Have to see what else breaks and/or gets bailed out on Monday.
I'm very curious about the bailout criterion. They can't set the rules individually for each "problematic" bank. Whatever formulation they come up with, will be immediately abused by creative financial engineering, so the problem will soon re-emerge in a different, totally unexpected shape.
Can't they?
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I'll ask the obvious question, because I have no clue about this stuff. The early failures in 2008 seem to have been followed by a cascade of smaller failures. Is that going to happen again?
There doesn't really seem to be any evidence of greater contagion, SVB is already gone.
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It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it.
What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
That there maybe shouldn't be as many:
> Basel exempted businesses’
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What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
Not the poster you asked. But, a lesson we continue to ignore is that there are other options to tame inflation besides raising interest rates. The problem is the option isn’t politically expedient so Congress just raises its hands in mock exasperation and says well, it’s the Fed’s mandate to manage inflation. Congress are cowards and won’t do what should be done - raise taxes. That is likely the fastest least painfu…
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There doesn't really seem to be any evidence of greater contagion, SVB is already gone.
It’s been a day. We don’t know anything. The day before SVB fell, everybody said everything was fine. There could very well be contagion come Monday.
Well, no, people were saying “Get your money out of SVB if its above the insurance limit”, because the run was already happening and that SVB couldn’t handle the run was a pretty widespread opinion.
But, while there are systemic/institutional/regulatory reasons why SVB’s conduct which created the vulnerability was possible, it doesn’t seem that the vulnerability itself is systemic in a way which makes other similar failures likely to be imminent.
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Not the poster you asked. But, a lesson we continue to ignore is that there are other options to tame inflation besides raising interest rates. The problem is the option isn’t politically expedient so Congress just raises its hands in mock exasperation and says well, it’s the Fed’s mandate to manage inflation. Congress are cowards and won’t do what should be done - raise taxes. That is likely the fastest least painfu…
Wouldn't it be better for congress to spend less? That's way better than raising taxes.
But all things considered, 5% is not really a high interest rate. People are just acting as if it's unreasonable because they'd become accustomed to ZIRP. Personally I hope rates stay above several percent for the foreseeable future, for climate/resource reasons.
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It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it.
What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
Instead, once things got super hot inflation-wise, then they flip flop and start a very rapid pace of rate hikes, unsurprisingly something broke and here we are once more talking about bailouts, about more QE. We're frenetically going from rapid tightening of financial conditions, to potentially, rapid loosening of said conditions. The Fed is supposed to raise rates in two weeks, I'm not sure if they will change their mind given what just transpired this last week.
I agree inflation must be tamed, I criticize the Fed's inability, or unwillingness, to start addressing it at least a year earlier. From my cynical perspective, keeping rates super low is a fucking party to the stock market and lots of powerful people want to keep the party going and they closed their ears to the inflation alarms. Now we're facing the possibility of another crisis (we'll see how things play out next week) and we know that the proposed solution will be to lower rates and accommodative policy that actually contributes to inflation. It's a shit show I'm tired of seeing repeat.
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It might. Have to see what else breaks and/or gets bailed out on Monday.
I'm very curious about the bailout criterion. They can't set the rules individually for each "problematic" bank. Whatever formulation they come up with, will be immediately abused by creative financial engineering, so the problem will soon re-emerge in a different, totally unexpected shape.
Most past bailouts have been sui generis actions with rules adopted for individual or small numbers of institutions currently in trouble, not forward-reaching “rights” that future actors could exploit. So I don’t see why you characterize this as impossible here; if there is any bailout beyond regular FDIC process, the most likely case would be a unique specific plan for this institution that creates no general rule that anyone else could force the government to use in the future.