81–90 of 424 posts
So basically, a ton of more failures in teh past, now it's slowed down but we are losing our stuff over it?
Losing stuff now seems... premature, but not insane.
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Yeah these sorts of figures always frustrate me because the historical context for these things is so much broader, and it seems obvious to me to go back to the 80s, if not earlier. There's a better figure here I think: https://www.pewresearch.org/short-reads/2023/04/11/most-u-s-... Also some nice figures here: https://www.bankingstrategist.com/history-of-us-bank-failure...
TIL there was a different "First Republic Bank" that failed in 1988. This name carries a curse now.
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?
Earlier quoted context omitted.
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…
Evidently, the best way to run a bank is a 0% cash reserve minimum (as was granted to US banks starting during COVID), so you can make money off of literally every last penny, and then discourage and prevent customers from taking their money out, then [externalizing all costs]/[socialize losses] onto government (taxpayer) via bailout or customer via bail-in, while privatizing all profits in the meantime. And charge p…
The list of large corporate banks that charge NSF fees and overdrafts is vanishingly small.
OTOH, I know of plenty of credit unions that still do both.
Would be slightly more insightful if it was inflation adjusted. The circles on the right should be ~30% smaller.
Earlier quoted context omitted.
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…
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…
Earlier quoted context omitted.
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?
If you’ve ever tried to practically use multiple banking institutions in the US, especially through the 80s-90s, you’d immediately relate to only using a single account regardless of what the statistical hazards are. It’s 2023 and my institution limits Zelle transfers to $2,500/mo. Want more, just as fast? Back to human wires and fax machines…
Weird 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.
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 dealing with this problem. SVB and First Republic were handled appropriately. Investors written down to zero, depositors made whole.
The future banking system will be even more robust after having learned this new lesson. I've no doubt that we'll have regulations that demand a better mix of investments that are regularly audited and stress tested.
We as a society also have to stop thinking of banks as a means to earn interest on deposits. Chasing the best rate has led to this problem. Deposits are liabilities.