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comment by b_b

Why do they even have a nominal cap on the amount of deposit that's insured? Have they ever enforced it?





kleinbl00  ·  657 days ago  ·  link  ·  

This is worth your time.

The shenanigans last time basically involved bullying JP Morgan into buying Bear Stearns, followed by Lehman eating shit, followed by everyone recognizing that all these deck chair games were meaningless while AIG ate shit.

This movie? This movie is about AIG.

See, the proletariat loves thinking in "Big Short" terms because of course they do, that's why it exists. Big Short is about some scrappy traders that bet big who won the lottery, American Carnage is very much off-screen. TBTF and Margin Call are about clever people within their expertise who made the wrong calls despite all the information in the world and they know we're all fucked and their only rational choice is to fuck everyone else more.

Big Short is 100% "look how clever our scrappers are" while the movies the traders worship are fucking horror movies. You can't avoid the slasher if you have to go camping in the woods. Because here's the problem: There isn't enough policy in the world to stave off systemic collapse, there never has been, there never will be, so all these ostensibly dispassionate regulators have to engage in horse-trading in order to keep the music going and historically? It delays the inevitable for anywhere from a few days to a few months. As of this writing, we are 21 hours past the Treasury's bid deadline for Silicon Valley Bank. Someone was supposed to swoop in, scoop up their assets and make everyone whole and all I can see is that PNC isn't someone.

You've got an ocean liner. It's got 2200 passengers. It's got lifeboats for 900. You just hit an iceberg. Do you immediately begin the rational, calculating process of figuring out which 1300 passengers are designated drowners so you can get the other 900 to sea? Or do you rearrange some deck chairs and cue the band so people panic less while you get your loved ones and family afloat?

We're all busy cosplaying Jack and Rose while the Treasury is doing everything they can to put off drawing straws. The 14-lifeboat idea was signed off by everyone, we all agreed it was better than nothing, and then we diligently planned on not hitting an iceberg, and here we are.

b_b  ·  657 days ago  ·  link  ·  

Thanks. Will watch. Meantime it’s fascinating to see how fast SVB’s balance sheet quadrupled like right after Dodd-frank was amended to only require stress testing >250 billion, instead of 50. It’s almost as if capital requirements are there for a reason.

kleinbl00  ·  657 days ago  ·  link  ·  

the real problem is a bit back.

The long and the short of it is that banks' casino moves busted the house and the result was the Great Depression. Glass Steagall, in a nutshell, says "you can be a player or you can be the house, you can't be both" - you are either a "thrift", (place people put their money for safe keeping) or an "investment bank", (place people put their money to make it grow.) Dodd-Frank, on the other hand, recognized that thrifts starve to death under perpetually low interest rates. But rather than, you know, raise interest rates to the point where companies couldn't buy each other out for two six packs and a promise, Dodd-Frank allowed thrifts to be investment banks.

The upside of this is that banks made a fuckton of money. The downside of this is that banks made a fuckton of money by doing risky shit, the more risky shit they did the more money they made, the more money they made the higher their stock price went up, the higher their stock price went up the easier they could finance buying each other out, the more they financed buying each other out the more the bond market grew, the more the bond market grew the riskier everything got, the riskier everything got the more likely the banks were to bust again.

    ''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''

- Paul Wellstone

Wellstone, of course, was dead within three years. I'm sure it was nothing.

b_b  ·  657 days ago  ·  link  ·  

Did you read that book?! Is it crackpot or is there a there there?

Of course G-S was the thing that should have been reinstated instead of Dodd-Frank, but the stranglehold that the banks have on Washington just ensures that we get what we get and we don't throw a fit, as I tell my 3 year old.

kleinbl00  ·  657 days ago  ·  link  ·  

    Did you read that book?! Is it crackpot or is there a there there?

Hell nah. I'm an Ockham's Razor kinda guy and Paul Wellstone's death was a secular tragedy... but if it was arranged, it was arranged better than most. Ultimately it doesn't matter. He died, things sucked, as Harari points out, history is generally written by the biggest dicks who commit the most atrocities.

I point out to my kid that we're all equal but some are more equal than others and that if you aren't very carefully making sure you're on the right side of the trade you're likely to fall victim to everyone else doing the exact same thing.

It's pretty funny to me that SIVB is the biggest crash since Washington Mutual, since Washington Mutual ate shit by going neck-deep in dumb mortgages and risky loans while their credit card department also lobbied like mutherfuckers to make bankruptcy debt harder to disburse. On the one hand they really wanted unsecured loans to be forever while on the other hand they generated secured loans well past their collateral. End result? People walking away from their underwater mortgages so they could make their credit card payments and WaMu ate shit.

It's the shareholder conundrum - when you conduct business one quarter at a time and your pathway to advancement is "impact" rather than "consistency" you're gonna crash the train every time.

user-inactivated  ·  658 days ago  ·  link  ·  

also, if it was a 100% insurance, banks would have to either take 0% risk and offer 0% interest, or the money to make it up will keep coming from taxpayers

i don't really care how silicon companies are doing so would rather not the second one, and the first seems to dilute what a bank is able to do by a lot

edit: just saw your other post - yea it's scummy they can pick and choose when they're allowed to ignore the limit

kleinbl00  ·  657 days ago  ·  link  ·  

Crop insurance is 100% backed by the government and 100% sold by private industry. It's the best arbitrage in the business. You, as the insurance company, have zero risk - your only cost of business is administration.

uhsguy  ·  658 days ago  ·  link  ·  

I think it’s set by law. Congress would have to override it

b_b  ·  658 days ago  ·  link  ·  

Right. That’s my point. Shouldn’t Congress have to weigh in for the fdic and/or fed to bail out depositors over the cap? Seems to never work that way. Everyone gets a prize.

kleinbl00  ·  657 days ago  ·  link  ·  

Banking Act of 1933 set it at $125k, Dodd-Frank upped it to $250k.