7 ms·

Big Banks Had a Spectacular Quarter Despite All the Rules

58 points by artursapek 9y ago

matt_wulfeck 9y ago
Wasn't that literally a decade ago, not adjusted for inflation? How do the financials compare with other, unregulated sectors over the same period?
atemerev 9y ago
Those will get handy when the next crisis strikes (amplified by the vast capital held by index funds and resulting selling spree, infrastructure credit defaults, another round of real estate depreciation, etc.) If "the market moves in the direction of maximum damage" maxim is correct, I'd also add some runaway inflation to the mix.
sschueller 9y ago
The rules put in place are a joke. Next bust is coming and everyone will pretend again that they didn't see it coming. And again nothing will be fixed and the tax payer will pay the bailout to the banks and their investors.
- matt_wulfeck 9y ago
  Have you bought a home in the last 5 years? It's not easy to get a loan. I had to verify all of my financial documents pretty thoroughly. Not only that, but my loan stipulated I still have enough cash to cover the mortgage for like six months. Not many people have $20 grand laying around after they buy a house.
captain_crabs 9y ago
All right, I'll bite. If me and my SO wanna buy a house, how should we go about approaching the next financial crisis to get a good deal on one? Who predicted the last one correctly, and what are those people saying now? I'm under the assumption that the regulations put in place after the last financial crisis are impotent, and that the people in the finance industry have little incentive not to do it again. Is this an accurate statement?
- mejin 9y ago
  You can't just look at who predicted it correctly lat time. You also have to make sure that they didn't predict that it would occur other times when it didn't.
  - graphitezepp 9y ago
    Adding on to your important thought, if you do NOT accept that the regulations are impotent, than you should look to a different sector besides housing that could cause a crisis. If it is the case that something else creates the problem, different people with different domain knowledge are likely to be the ones predicting it.
    - captain_crabs 9y ago
      To grandparent comment: great point. Didn't think of that. To parent: You too!
  - deleted 9y ago
    [deleted]
- hartator 9y ago
  I am in the same situation. I feel crisis are hard to predict timing wise. However I do also feel the stars are line up for another one for sure.
- hartator 9y ago
  I am on the same situation. I feel crisis are hard to predict timing wise. However I do also feel the stars are line up for another one for sure.
- xyzzy4 9y ago
  It's difficult to say if there will be a financial crisis, but multiple current economic indicators are not predicting one any time soon (meaning in the next 6 months). This isn't counted in those indicators, but also S&P 500 earnings are predicted to go up a lot by December 2018, according to S&P Global. Credit Suisse's Global Wealth Report predicts a 5% annual increase in wealth among all adults globally in the next 5 years. Houses in major metropolitan areas have gone about 6% annually on average, counting recessions and popping of bubbles. Timing the market could help but it's very difficult. I predict they will keep rising at a 4-7% rate for the next decade, but I could be wrong. A recession is possible but I wouldn't delay buying a house right now. But I would definitely buy within your means and don't expect prices to rise, because the future is very difficult to predict.
oatsandsugar 9y ago
Restrictions breed creativity, eh? With the restrictions came huge increases in the stability and effectiveness of significant bank operations (e.g. clearing of over the counter derivatives, derivative reporting and all that). This shouldn't be surprising. But, it is interesting to see whether the restrictions have bred the stability that they were designed too, or if banks are just shifting risks to new areas.
bmcusick 9y ago
Despite all the rules? My friend, who do you think the rules are for? Compliance departments are EXPENSIVE, which means that only big banks can afford them. Which means less competition. Which means higher prices and profits for the few that remain.
- JauntTrooper 9y ago
  Yes. Before the 2008-2009 financial crisis, ~100 new banks were founded every year. From 2010-2015 there were 4 new banks total.
nissimk 9y ago
Difficult to comply with (aka expensive) regulations create a barrier of entry that helps these entrenched megabanks. Also, in finance, whenever regulations impede business, after some time bankers learn how to circumvent the regulations with new products or business process changes.
- mcguffin777 9y ago
  The answer to this is new laws and rules D.C. needs to refactor legacy See Goodharts Law, Buffets institutional imperative, and numerous other similar arguments in other contexts: we must keep evolving Government is no different. But the banks and reps get in the way of this on purpose They have good reasons to do that. IMO the public has good reasons to reject this and require them to evolve as well
dollars2donuts 9y ago
Raising interest rates certainly helped. Also, this article is discussing revenue, not profit.

58 points by artursapek 9y ago

Wasn't that literally a decade ago, not adjusted for inflation? How do the financials compare with other, unregulated sectors over the same period?

atemerev 9y ago

Those will get handy when the next crisis strikes (amplified by the vast capital held by index funds and resulting selling spree, infrastructure credit defaults, another round of real estate depreciation, etc.) If "the market moves in the direction of maximum damage" maxim is correct, I'd also add some runaway inflation to the mix.

sschueller 9y ago

The rules put in place are a joke. Next bust is coming and everyone will pretend again that they didn't see it coming. And again nothing will be fixed and the tax payer will pay the bailout to the banks and their investors.

matt_wulfeck 9y ago
Have you bought a home in the last 5 years? It's not easy to get a loan. I had to verify all of my financial documents pretty thoroughly. Not only that, but my loan stipulated I still have enough cash to cover the mortgage for like six months. Not many people have $20 grand laying around after they buy a house.

captain_crabs 9y ago

All right, I'll bite. If me and my SO wanna buy a house, how should we go about approaching the next financial crisis to get a good deal on one? Who predicted the last one correctly, and what are those people saying now? I'm under the assumption that the regulations put in place after the last financial crisis are impotent, and that the people in the finance industry have little incentive not to do it again. Is this an accurate statement?

mejin 9y ago
You can't just look at who predicted it correctly lat time. You also have to make sure that they didn't predict that it would occur other times when it didn't.
- graphitezepp 9y ago
  Adding on to your important thought, if you do NOT accept that the regulations are impotent, than you should look to a different sector besides housing that could cause a crisis. If it is the case that something else creates the problem, different people with different domain knowledge are likely to be the ones predicting it.
  - captain_crabs 9y ago
    To grandparent comment: great point. Didn't think of that. To parent: You too!
- deleted 9y ago
  [deleted]
hartator 9y ago
I am in the same situation. I feel crisis are hard to predict timing wise. However I do also feel the stars are line up for another one for sure.
hartator 9y ago
I am on the same situation. I feel crisis are hard to predict timing wise. However I do also feel the stars are line up for another one for sure.
xyzzy4 9y ago
It's difficult to say if there will be a financial crisis, but multiple current economic indicators are not predicting one any time soon (meaning in the next 6 months). This isn't counted in those indicators, but also S&P 500 earnings are predicted to go up a lot by December 2018, according to S&P Global. Credit Suisse's Global Wealth Report predicts a 5% annual increase in wealth among all adults globally in the next 5 years. Houses in major metropolitan areas have gone about 6% annually on average, counting recessions and popping of bubbles. Timing the market could help but it's very difficult. I predict they will keep rising at a 4-7% rate for the next decade, but I could be wrong. A recession is possible but I wouldn't delay buying a house right now. But I would definitely buy within your means and don't expect prices to rise, because the future is very difficult to predict.

oatsandsugar 9y ago

Restrictions breed creativity, eh? With the restrictions came huge increases in the stability and effectiveness of significant bank operations (e.g. clearing of over the counter derivatives, derivative reporting and all that). This shouldn't be surprising. But, it is interesting to see whether the restrictions have bred the stability that they were designed too, or if banks are just shifting risks to new areas.

bmcusick 9y ago

Despite all the rules? My friend, who do you think the rules are for? Compliance departments are EXPENSIVE, which means that only big banks can afford them. Which means less competition. Which means higher prices and profits for the few that remain.

JauntTrooper 9y ago
Yes. Before the 2008-2009 financial crisis, ~100 new banks were founded every year. From 2010-2015 there were 4 new banks total.

nissimk 9y ago

Difficult to comply with (aka expensive) regulations create a barrier of entry that helps these entrenched megabanks. Also, in finance, whenever regulations impede business, after some time bankers learn how to circumvent the regulations with new products or business process changes.

mcguffin777 9y ago
The answer to this is new laws and rules D.C. needs to refactor legacy See Goodharts Law, Buffets institutional imperative, and numerous other similar arguments in other contexts: we must keep evolving Government is no different. But the banks and reps get in the way of this on purpose They have good reasons to do that. IMO the public has good reasons to reject this and require them to evolve as well

dollars2donuts 9y ago

Raising interest rates certainly helped. Also, this article is discussing revenue, not profit.