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You seem to keep taking my positions and reducing them to absurdity. > So I do not think we can work on the assumption that we only need to worry about deposit

by erdevs 10y ago

You seem to keep taking my positions and reducing them to absurdity. > So I do not think we can work on the assumption that we only need to worry about deposit taking institutions and let investment bank collapse. I did not say that. Or anything like. I'm consistently saying: We should regulate both retail banks and investment banks more. And part of that increased regulation ought to be splitting investment banking risk from retail banking risk again. Both are risky enough as is. Combining their (sometimes correlated!) risk is a really bad idea. I agree with you that retail banks can cause huge problems (eg your UK examples). I agree with you that pure investment banks (or merely broker-dealers) can cause huge problems. Hence the need to regulate both and do what we can to prevent crises (not just treat them more effectively), while constraining economic activity as little as we can, of course.

princeb 10y ago
> And part of that increased regulation ought to be splitting investment banking risk from retail banking risk again. Both are risky enough as is. Combining their (sometimes correlated!) risk is a really bad idea. the implication of calling retail and investment banking risks "sometimes correlated" is that they are also sometimes uncorrelated. The two common examples of diversified survivors of the last GFC are Citi and JPMC.
- erdevs 10y ago
  Yes, they are not always correlated. Obviously. What point are you trying to make? > The two common examples of diversified survivors of the last GFC are Citi and JPMC. Are you actually holding Citi and JPMC up as examples of some kind in regard to benefits of combining retail and investment banking? If so, would you similarly argue that because not all S&L associations had gone bankrupt or been shuttered by the late 90s, that's somehow an indication that S&L associations needed no regulatory reform? If there are 10 people on an island and all of them eat a particular indigenous fruit and then 8 of them die from it-- but two survive unharmed!!-- would you say it is wise to continue eating the fruit?
  - princeb 10y ago
    as long as they have any kind of non-correlation, they will benefit from merging. > would you say it is wise to continue eating the fruit i would say it is wise to do what the 2 survivors did... which is to have a diversified portfolio of retail and investment banking revenue streams.

by erdevs 10y ago

princeb 10y ago

> And part of that increased regulation ought to be splitting investment banking risk from retail banking risk again. Both are risky enough as is. Combining their (sometimes correlated!) risk is a really bad idea. the implication of calling retail and investment banking risks "sometimes correlated" is that they are also sometimes uncorrelated. The two common examples of diversified survivors of the last GFC are Citi and JPMC.

erdevs 10y ago
Yes, they are not always correlated. Obviously. What point are you trying to make? > The two common examples of diversified survivors of the last GFC are Citi and JPMC. Are you actually holding Citi and JPMC up as examples of some kind in regard to benefits of combining retail and investment banking? If so, would you similarly argue that because not all S&L associations had gone bankrupt or been shuttered by the late 90s, that's somehow an indication that S&L associations needed no regulatory reform? If there are 10 people on an island and all of them eat a particular indigenous fruit and then 8 of them die from it-- but two survive unharmed!!-- would you say it is wise to continue eating the fruit?
- princeb 10y ago
  as long as they have any kind of non-correlation, they will benefit from merging. > would you say it is wise to continue eating the fruit i would say it is wise to do what the 2 survivors did... which is to have a diversified portfolio of retail and investment banking revenue streams.