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The problem is that liability still falls upon depositors in a bail-in. So, at the end of the day, it's still the unwitting public's money on the hook in the w

by erdevs 10y ago

The problem is that liability still falls upon depositors in a bail-in. So, at the end of the day, it's still the unwitting public's money on the hook in the worst case scenarios, even if it's not a "bail out". The expedited and more regulated insolvency proceedings are a big improvement and the bail-in provisions help within some lower boundary cases. But if "shit hits the fan", bail-in alone is not going to be enough. The point is that Wall St won't really be "tamed" until we further minimize the possibility of shit and fan colliding. To do that, we need to further limit the risks investment banks can take on and greatly limit the risks that depository banks can take on. If we don't do that, we're talking about how to cure the disease as opposed to how to prevent it. The fact is, we need more preventative measures and more cures. The bail-in is a good cure for some situations, but if the patient is too fargone it'd be too little, too late.

bradleyjg 10y ago
> greatly limit the risks that depository banks can take on Are people going to be okay with getting no interest and instead paying large-ish fees every month to cover the cost of bank branches, ATMs, debit cards, websites, money transfers, checks, and so on? If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits. Those services have to be paid for somehow. Anyway, if the answer is yes, I don't see what's stopping people from putting their money with neo-goldsmith banks right now.
- erdevs 10y ago
  > Are people going to be okay with getting no interest and instead paying large-ish fees every month to cover the cost of bank branches, ATMs, debit cards, websites, money transfers, checks, and so on? Looks at bank statements: .... Zero interest, check. High fees, check. I'm pretty sure... that's how it already is? What bank do you recommend? Hook a brother up. > If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits You realize that this is how it used to be, right? Up until 1999. I don't know about you, but I got more interest and paid fewer fees back then... I think this is oversimplifying things overall. Higher risk doesn't necessarily mean higher return in general, and definitely not when dealing with tremendously large pools of capital as depository banks do. There is a limit to how much total capital you can invest in a given level of risk, and what return you can actually achieve in practice for that level of risk. It's fallacious to think that regulating the types of risk depository banks can participate in and how much total risk they can take on would necessarily lessen their returns over the long-term in practice. Moreover, on an operational basis banks are more profitable today than possibly ever. So, those fees and low interest rates are paying for more than all their services, by a wide margin. (At least as of the last time I looked into this.)
  - bradleyjg 10y ago
    >> If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits > You realize that this is how it used to be, right? Up until 1999. I don't know about you, but I got more interest and paid fewer fees back then... No it isn't. Yes, the retroactive magic bullet Glass-Steagall act was in place but no they were certainly not very risk adverse. Do you remember Savings & Loan? 'cause I do. Again, what's stopping you from opening a neo-goldsmith bank today (we have mattresses so you don't have to!)?
    - dragonwriter 10y ago
      > Yes the retroactive magic bullet Glass-Steagall act was in place but they were certainly not very risk adverse. Do you remember Savings & Loan? 'cause I do. Savings and Loan associations (while they perform some similar functions) are different institutions than banks, governed by different laws and regulations, and the high-risk behavior that played a major role in the S&L crisis was directly enabled by the deregulation of that industry (it's a much more clear example than the ties between the banking deregulation and the recent housing finance crisis.) You can't point to the S&L crisis as evidence that banks weren't risk-averse at the time, since high-risk behavior at issue there was at S&Ls, not banks, and was directly tied to the laxer regulatory oversight of S&Ls at the time, compared to banks.
  - yompers888 10y ago
    Are credit unions not available to you? The only banking fees I've ever paid in my life were foreign transaction fees at ATMs in China and Spain.

by erdevs 10y ago

bradleyjg 10y ago

> greatly limit the risks that depository banks can take on Are people going to be okay with getting no interest and instead paying large-ish fees every month to cover the cost of bank branches, ATMs, debit cards, websites, money transfers, checks, and so on? If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits. Those services have to be paid for somehow. Anyway, if the answer is yes, I don't see what's stopping people from putting their money with neo-goldsmith banks right now.

erdevs 10y ago
> Are people going to be okay with getting no interest and instead paying large-ish fees every month to cover the cost of bank branches, ATMs, debit cards, websites, money transfers, checks, and so on? Looks at bank statements: .... Zero interest, check. High fees, check. I'm pretty sure... that's how it already is? What bank do you recommend? Hook a brother up. > If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits You realize that this is how it used to be, right? Up until 1999. I don't know about you, but I got more interest and paid fewer fees back then... I think this is oversimplifying things overall. Higher risk doesn't necessarily mean higher return in general, and definitely not when dealing with tremendously large pools of capital as depository banks do. There is a limit to how much total capital you can invest in a given level of risk, and what return you can actually achieve in practice for that level of risk. It's fallacious to think that regulating the types of risk depository banks can participate in and how much total risk they can take on would necessarily lessen their returns over the long-term in practice. Moreover, on an operational basis banks are more profitable today than possibly ever. So, those fees and low interest rates are paying for more than all their services, by a wide margin. (At least as of the last time I looked into this.)
- bradleyjg 10y ago
  >> If depository banks are going to be very risk adverse they won't be earning much on the use of those demand deposits > You realize that this is how it used to be, right? Up until 1999. I don't know about you, but I got more interest and paid fewer fees back then... No it isn't. Yes, the retroactive magic bullet Glass-Steagall act was in place but no they were certainly not very risk adverse. Do you remember Savings & Loan? 'cause I do. Again, what's stopping you from opening a neo-goldsmith bank today (we have mattresses so you don't have to!)?
  - dragonwriter 10y ago
    > Yes the retroactive magic bullet Glass-Steagall act was in place but they were certainly not very risk adverse. Do you remember Savings & Loan? 'cause I do. Savings and Loan associations (while they perform some similar functions) are different institutions than banks, governed by different laws and regulations, and the high-risk behavior that played a major role in the S&L crisis was directly enabled by the deregulation of that industry (it's a much more clear example than the ties between the banking deregulation and the recent housing finance crisis.) You can't point to the S&L crisis as evidence that banks weren't risk-averse at the time, since high-risk behavior at issue there was at S&Ls, not banks, and was directly tied to the laxer regulatory oversight of S&Ls at the time, compared to banks.
- yompers888 10y ago
  Are credit unions not available to you? The only banking fees I've ever paid in my life were foreign transaction fees at ATMs in China and Spain.