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There have been 562 bank failures since 2000

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Re: There have been 562 bank failures since 2000

#81

Post by rufus_foreman »

gnfargbl wrote: post #29
ezekg wrote: post #2

I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 . It shows how bad the SVB situation really is. It’s been very quiet since 2008 and its aftermath. Until now.

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?

I have no clue about this stuff either, but in my mind, every competent CEO has already asked their staff what uninsured deposits they have, what the financial condition of the institutions they have those uninsured deposits in is, they've asked their staff what they can do to mitigate risk from those uninsured deposits, and they want that answered over the weekend so they can go over it in an 8AM meeting on Monday and decide on what actions to take.

Re: There have been 562 bank failures since 2000

#82

Post by nico »

saveferris wrote: post #27
Grimburger wrote: post #23

Earlier quoted context omitted.

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…

Unfortunately, the current tax structure disproportionately affects not-as-wealthy people/companies. So raising taxes would probably be a very unfair move to most people.

My fantasy would be for the government to abolish taxes altogether and just print the money they need, then use whatever mechanisms they have to take enough money out of the market to keep inflation in check.

That way we wouldn't have to pay taxes and the government could just get whatever money they need when they need it. I mean, they already do, so why make people jump through hoops and threaten them with jail for not paying taxes properly, if they could just do without taxes in the first place?

It kinda feels like the whole system is a scam to keep control over the population.

Re: There have been 562 bank failures since 2000

#83

Post by mindslight »

dantheman wrote: post #78
mindslight wrote: post #67

Earlier quoted context omitted.

That doesn't address inflation. The point is that money needs to be taken out of the system. That used to be done by high tax rates on high incomes, and the estate tax. Both have basically been neutered. 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 fo…

Not spending takes it out of the system.

I don't really know what you're try to say with this short blurb. Yes, money has to be taken out of the system via taxes and then not re-spent in order to successfully shrink the money supply. But compared with the current approach of creating new money and spending it, raising money through taxes for that spending will be an improvement.

Also focusing on executive spending is a bit of a red herring given how much outflow has occurred from the Fed itself over the past few decades via low interest rate loans. Basically rather than letting the gains from technology and offshoring accrue throughout society (via price deflation), or be spent purposefully (executive spending), the Fed has been squandering these gains to create an asset bubble.

Re: There have been 562 bank failures since 2000

#84

Post by bumby »

rektide wrote: post #19
ezekg wrote: post #2

I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 . It shows how bad the SVB situation really is. It’s been very quiet since 2008 and its aftermath. Until now.

That shows money, which is interesting. I'd also like to see "Years of Banking Institutions Lost"... SVB is supposedly 40 years old... how old were banks that had failed in the past? That'd be an interesting other way to tally/view the magnitude of what happens, a kind of indicator of volatility. My thought is... if a whole bunch of banks open then shut down 3 years latter, it doesn't seem as notable as a bunch of mo…

Why does that sort of “infant mortality” matter in finance if they play by the same rules?

I’m not being argumentative, just trying to understand. In physical systems, that view would be used to apply additional stress testing early to reduce the overall risk exposure (e.g., test a pump for a certain run time to be assured it’s made it out of the early failure age and is more likely to last a lot longer). I’m not quite sure how this applies to contrived (non-physical) systems.

Re: There have been 562 bank failures since 2000

#85

Post by igonvalue »

arcticbull wrote: post #28
ezekg wrote: post #2

I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 . It shows how bad the SVB situation really is. It’s been very quiet since 2008 and its aftermath. Until now.

That chart would probably be more useful if expressed as the shortfall between assets and deposits. It's not really a huge issue if a bank with $1T in assets has a $1M shortfall but the regulators will sure a shit still close it down.

The article has an entire infographic titled "Most banks held more assets than deposits at the time they failed".

Re: There have been 562 bank failures since 2000

#86

Post by vikramkr »

greenthrow wrote: post #59
mike_d wrote: post #52

Earlier quoted context omitted.

Almost all failed banks (including SVB) in recent history held more assets than deposits. Liquidity is the issue. Imagine you take your $10 million fortune and convert it all into gold bars and hide it under you bed. Then you order a pizza. When the pizza guy shows up, even though you are "rich," you are also in that moment broke and can't pay for the pizza. Not only will the pizza guy not take gold, you can't find s…

Your assertion about SVB does not match up with all the information out there, which indicates they do have a shortfall of at least $1.5B. I don't know why HN seems to have locked into this meme that SVB does not have a shortfall. It does not reflect reality.

The shortfall only occurred because they had to sell their assets before maturity, and the value of those assets have decreased. If they were able to hold them to maturity there wouldn't have been a problem - they still pay out the same amount of money at the end - but right now people are willing to pay less for future money than they used to. So if they spend 90 bucks on a bond that matures in 5 years and pays 100 bucks, if they were able to hold for 5 years, they'd still have gotten their hundred. But, both the accidental run (no new vc money while companies keep spending their deposits) and the actual run on thursday meant they had to get that cash back now, and today people might only be willing to pay 80 bucks for that bond that still pays 100 bucks 4 years from now, so they lose 10 bucks. This is why if there was no run, there was no shortfall, but because there was a run, there was shortfall.

Re: There have been 562 bank failures since 2000

#87

Post by resource0x »

dragonwriter wrote: post #70
resource0x wrote: post #53

Earlier quoted context omitted.

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.

> They can’t set the rules individually for each “problematic” bank. 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 uni…

This "future" will arrive the very next day wrt another bank under the same type of stress, and then the next... Ad-hoc action for SVB might aggravate the situation.

Re: There have been 562 bank failures since 2000

#88

Post by SilverBirch »

One thing that's kind of weird here is the peverse incentives. There are quite a lot of people going around insisting that the government has to step in and bail out the large depositors of SVB becuase if you don't, well... then no small bank is safe! There should be a run on every bank! Which is kind of... you know. Scummmy. If your money is locked up in SVB its certainly convenient if the Fed feels it has to step in and bail you out even though SVB isn't systemically important. So what you do is you make the argument that the system will collapse because there will be a run on every bank! But... the only thing that's likely to cause a run on every bank is... you. You, running around shouting that no bank is safe. Real people are FDIC insured.

The problems with SVB are specific, not systemic, and there are other banks and they may also have this specific issue, but if they do then people will pretty quickly catch on (hint: these issues weren't hidden). You can make a broader point, which is that SVB failing will impact a lot of silicon valley businesses, and you can do your best to argue those businesses are creating a fantastic new world and there worth saving (and definitely aren't causing teen depression, minting billionaires who use their wealth to destroy free speech, and generally just enriching loathsome fraudsters), but then you are basically arguing for the Fed to step in and socialise the losses of douchebag libertarians. Fine, save SVB, funded by a 1-off 100% wealth tax on anyone worth over $10m in silicon valley. Welcome comrade.

Re: There have been 562 bank failures since 2000

#89

Post by di456 »

saveferris wrote: post #27
Grimburger wrote: post #23

Earlier quoted context omitted.

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…

The notion of managing "core" inflation ignores huge cost increases for housing, energy, education, and healthcare

All of those are to me basic infrastructure to support a healthy economy.

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