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Bank Failures Visualized

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Re: Bank Failures Visualized

#71

Post by NoMoreNicksLeft »

cperciva wrote: post #44
photochemsyn wrote: post #28

Community-scale banks (aka credit unions) are a better idea for local-regional communities (aka cities and towns and agricultural regions) because their managers have to live with their clients. Take a community of 100,000 families, in an economic system where they're all collecting income and paying bills and so on. The idea behind a bank is that they hold the community's money securely while making their own money…

The model you describe is exactly why S&L happened . Small banks with highly correlated deposits holding their own loan books is a recipe for maximizing vulnerability to economic shocks. Interest rates go up and the loan book loses value; the local housing market drops and the loans get foreclosed and lose value; a major local employer goes out of business and depositors all start pulling their money out instead of r…

> Banks don't work that way any more because it's a really bad way to run a bank.

As compared to what we have now? With dubious financial instruments so opaque I'd have to spend 30 years lurking underneath desks on Wall Street eavesdropping on conversations just to have any clue at all how the fuck those work?

I'm almost comforted when there's a Bernie Madoff, because at least I can wrap my head around how a Ponzi scheme works (ignoring the ethics, obviously). I'm (irrationally?) worried that some of what's been going on the last few years actually makes plain Ponzi schemes look legitimate by comparison.

Not 25 years ago, we used to laugh about the stupid books with titles like "Dow Jones 100,000!" and whatnot, I think it was a Slashdot post way back when. And while we haven't quite reached that pinnacle of absurdity, it did hit 37,000 not so long ago.

None of us may be able to pick the queen of hearts, but some of us have caught on to the fact that it's three card monte. When it all falls down, should we console ourselves with "well at least the banks weren't small and local and vulnerable to economic shocks"?

Re: Bank Failures Visualized

#72

Post by tiedieconderoga »

noduerme wrote: post #66
photochemsyn wrote: post #54

Earlier quoted context omitted.

This is a rather skewed perspective that ignores the fact that if you have FDIC insurance for depositors then that can be gamed unless you have strict regulation of the banks: > "The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees." https://www.investopedia.com/terms/s/sl-crisis.asp This is why a lot of p…

One thing I don't understand, and perhaps you could explain, is why anyone in the US would ever keep more cash in any one bank account than what was covered by FDIC insurance. It's precisely the reason I don't e.g. take my savings to an offshore bank that offers much higher interest rates. Is this just a matter of people taking trust in a bank's solvency for granted?

Banks can offer incentives for certain levels of deposits. Better interest rates, better cards, better loans. SVB offered perks to bank exclusively with them.

https://www.cnbc.com/2023/03/12/silicon-valley-bank-signed-e...

If you took that sort of agreement and bet on being bailed out in the event of a failure, you won your bet.

Re: Bank Failures Visualized

#74

Post by jeremyjh »

rrrrrrrrrrrryan wrote: post #33
FormerBandmate wrote: post #7

Earlier quoted context omitted.

08 was artificially low because many banks got merged at a fire sale. Wachovia, Merrill Lynch, Bear Stearns, and National City stick out. Other financial institutions got essentially nationalized and stock became mostly worthless like Citi and AIG, although the government sold most of their stock in 2011 Credit Suisse is about the same size as SVB, Signature Bank, and First Republic combined but it got “acquired” by…

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.

Re: Bank Failures Visualized

#75

Post by beginnings »

National governments should control their own money, scrap interest entirely. Let the market decide what each currency is worth for international trading.

The status quo international banking system is designed to enslave, and governments can't do anything about it because the banks are above them.

How anyone can defend the current system is beyond me. It's not remotely close to being the best we can do, it's a scam at every level, way more complicated that it needs to be, by design.

Re: Bank Failures Visualized

#76

Post by jeremyjh »

btilly wrote: post #25
FormerBandmate wrote: post #7

Earlier quoted context omitted.

08 was artificially low because many banks got merged at a fire sale. Wachovia, Merrill Lynch, Bear Stearns, and National City stick out. Other financial institutions got essentially nationalized and stock became mostly worthless like Citi and AIG, although the government sold most of their stock in 2011 Credit Suisse is about the same size as SVB, Signature Bank, and First Republic combined but it got “acquired” by…

Credit Suisse is not included because it is a Swiss bank, not an FDIC insured US bank. Lehman Brothers is also not included because, even though it was a US bank, it was an investment bank with no FDIC insured deposits. It was around the size of all of this year's failures, combined. As you note, bank bailouts that were not FDIC bankruptcies are also not included.

I think GP knows this, but I also think you know that the graph is trying to paint a particular picture, and that picture is misleading because a lot of information is missing. We are not in the midst of a financial crisis that approaches 2008, and the graph is trying to make us think something different.

Re: Bank Failures Visualized

#77

Post by dlisboa »

noduerme wrote: post #66
photochemsyn wrote: post #54

Earlier quoted context omitted.

This is a rather skewed perspective that ignores the fact that if you have FDIC insurance for depositors then that can be gamed unless you have strict regulation of the banks: > "The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees." https://www.investopedia.com/terms/s/sl-crisis.asp This is why a lot of p…

One thing I don't understand, and perhaps you could explain, is why anyone in the US would ever keep more cash in any one bank account than what was covered by FDIC insurance. It's precisely the reason I don't e.g. take my savings to an offshore bank that offers much higher interest rates. Is this just a matter of people taking trust in a bank's solvency for granted?

FDIC limit is 250k per bank, so if you have 1 million you'd need 4 banks. If you have 10 million you'd need 40 banks. Having money spread out like that doesn't seem easy to manage. Also having 10 million in one bank gives you better interest rates and service at that bank than if you only had 250k.

Re: Bank Failures Visualized

#78

Post by jeremyjh »

fragsworth wrote: post #31
thehumanmeat wrote: post #2

That needs to go back to the 80s to capture the SnL crisis. It dwarfs 08 in bank failures. It better indicates the conglomeration of the many banks into the few we have today.

You are correct. Additionally, the size of the bank(s) are not really what matters. I want to see the scale (sum) of what was actually lost when they went bankrupt, and how much we (the public) have to put up to keep the system from collapsing. Does anyone have an actual visualization of how much we ponied up to keep our banking system from collapsing? Did the public just provide a reasonable interest rate loan for a…

There were winners and losers, but the government made money on TARP. That doesn't fit anyone's narrative very well, so you don't hear that much about it, but its a fact. So far not a public dollar has been lost in the current crisis. FDIC, like other insurance, is paid for by the insured. Every FDIC bank in the country is paying the cost of this.

https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

Re: Bank Failures Visualized

#80

Post by aaronharnly »

noduerme wrote: post #66
photochemsyn wrote: post #54

Earlier quoted context omitted.

This is a rather skewed perspective that ignores the fact that if you have FDIC insurance for depositors then that can be gamed unless you have strict regulation of the banks: > "The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees." https://www.investopedia.com/terms/s/sl-crisis.asp This is why a lot of p…

One thing I don't understand, and perhaps you could explain, is why anyone in the US would ever keep more cash in any one bank account than what was covered by FDIC insurance. It's precisely the reason I don't e.g. take my savings to an offshore bank that offers much higher interest rates. Is this just a matter of people taking trust in a bank's solvency for granted?

I’m not sure about personal banking (since I’ve never had enough in a bank to worry about it!), but in commercial banking I imagine it’s routine. I work at a medium sized firm and I authorize multiple payments a week that are over the FDIC limit. I’m not sure how much juggling it would take to transact at volume and never have an account go over the limit, or for long.
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