Results 17,576 to 17,600 of 18222
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03-15-2023, 12:22 PM #17576
That's Matthew Yglesias' solution, "regional banks like Silicon Valley Bank are bad and we should encourage more consolidation among them to try to have eight or nine huge megabanks instead of just four." Meanwhile, megabank Credit Suisse is in trouble too...
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03-15-2023, 12:29 PM #17577
CS been in trouble for many years. Plenty of time to exit for all stakeholders
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03-15-2023, 12:43 PM #17578
I think this cycle argues for a pretty short timeframe, assuming someone could identify an opportune target. Not unlike short squeezing on GME.
Thanks, #3 was particularly helpful. It kind of seems like #2 is put in doubt by backstopping uninsured deposits, though, which is what prompted the question.
In the post-Elon Twitter Era it seems like there's a non-zero risk that not all capital is in hands that only use it to make more.
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03-15-2023, 12:47 PM #17579I drink it up
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Is the stock market going to tank?
Because a bank won’t notice you parking a few billion, invest it immediately in long term assets, and then be shocked when you yank the cash a few days/weeks/months later? Even SVB’s ALCO would have caught that.
Nobody guaranteed backstopping deposits. You can just hope. Big risk small reward.focus.
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03-15-2023, 12:52 PM #17580
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03-15-2023, 12:57 PM #17581
Is the stock market going to tank?
I’m going to put all my cash, tens or hundreds of billions of dollars, in a bank, just to take it all out at once in the hopes I make money shorting the bank? Back when there was no guarantee on all of those tens or hundreds of billions (aside from my first 250k)?
No.
EDIT: …and collude…with the federal reserve…to quickly raise interest rates so they are forced sellers at a loss to their balance sheet, so there’s questions into the ability of the bank to meet other depositors withdrawals. Need that point too.
No.Decisions Decisions
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03-15-2023, 01:01 PM #17582
Green shoots
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03-15-2023, 01:01 PM #17583
To be clear, I'm not saying it already happened. I'm saying there may be a downside to normalizing the infinite backstop.
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03-15-2023, 01:05 PM #17584
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03-15-2023, 01:07 PM #17585
The reality is, banks should be regulated and run like utilities.
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03-15-2023, 01:07 PM #17586
Maybe so. Canada seems to have figured it out. One thing that is known with pretty good certainty, and please don't shoot the messenger on this (as he ducks and covers), deposit insurance gives bank executives an incentive to take socially excessive risks resulting in more, not fewer, bank failures. It's well established in the literature.
The argument makes more sense if instead of suggesting a preconceived plan the planets aligned and somebody took their shot. I'm not arguing that's what happened either, only that it seems at least possible in some reality.
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03-15-2023, 01:09 PM #17587
If this bank run started as a genuine worry that the back would be insolvent and impact business it’s clear that a) counterparty risk was a thing b) they had ways to know even if they outsourced reading of public? Information to other partys. If you don’t care about insolvency- why move your money?
infinite balance guarantee might have been a mostly practicality happening thing, but it’s clear they didn’t believe that, and that’s a change worth money (and regulation if it’s going to stay a thing)
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03-15-2023, 01:09 PM #17588I drink it up
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03-15-2023, 01:10 PM #17589
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03-15-2023, 01:10 PM #17590
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03-15-2023, 01:15 PM #17591I drink it up
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03-15-2023, 01:17 PM #17592
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03-15-2023, 01:20 PM #17593I drink it up
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03-15-2023, 01:23 PM #17594
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03-15-2023, 01:28 PM #17595
I'm trying to understand what's to stop someone from repeating Thiel's moves (against which the shareholders were not protected) but actually making money from it. I certainly agree that no one would have risked a huge deposit to do that. But you've been arguing for an unlimited backstop going forward, which removes any such risk. At which point the risk is just getting caught, right? IOW, how well the rules get written and enforced vs. the Beverly Hillbillies' ability to disguise their intentions or whatever.
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03-15-2023, 01:32 PM #17596I drink it up
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Ah.
I’m not sure I truly believe in unlimited FDIC insurance, but I think the idea might have legs and make sense just because faith and trust in the banking system is so critical to the rest of the economy. If I put $100 in, I expect to take $100 out down the road sometime. The calculus doesn’t change much at $1M, except it does and perhaps it shouldn’t.
But I believe I also said that costs and regulation would also increase at least proportionally, and that’s something that would become very real and very onerous for me, personally. I don’t relish the thought.focus.
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03-15-2023, 01:32 PM #17597
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03-15-2023, 01:33 PM #17598I drink it up
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03-15-2023, 01:36 PM #17599
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03-15-2023, 01:38 PM #17600
Just spitballing here, let's all agree hardly anyone can independently determine the safety and soundness of a complex bank. I think that makes sense. You're right, Yglesias is right, everyone making this point is right. Does that even matter?
On average, most people can't independently asses most things. And yet people figured out Yale and and Stanford are better than Utah state. Most people can't wrench on their own cars but they know a Toyota is more reliable than a Fiat. Few people can evaluate individual doctors but they know the Mayo Clinic is better than a small community hospital.
Unlike schools, cars and medical care, nobody pays attention to bank safety because they don't have to. They used to. But now, as a result of people not worrying about it any more banks can be more reckless because the average person isn't paying attention.
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