5 ms·

>the financial system is actually fine. Banks are well capitalised and stable. No they are not. Most big European banks are technically bankrupt. Most big Amer

>the financial system is actually fine. Banks are well capitalised and stable. No they are not. Most big European banks are technically bankrupt. Most big American banks are technically bankrupt too. The only reason people in general do not know about this is because they used a lot of financial tricks to make it look like they are healthy. In fact, Deutsche Bank very likely had to announce that they are bankrupt this very month due to the fact they never learned from the former crisis -- causing a shockwave throughout the entire financial market worldwide, if not for COVID. Now they can just blame COVID when the entire financial system tanks. Here's a video explaining what has been going on in Europe all these years. It will not be different for the United States (or certain parts of Asia for that matter) -> https://www.youtube.com/watch?v=Cu6Em4a4pG4 https://www.youtube.com/watch?v=Cu6Em4a4pG4

toomuchtodo 7y ago
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Interesting time to be waiving reserve requirements of banks.
- bluGill 7y ago
  If a bank had reserves before now is the time to use them. In a few months they need to rebuild those reserves for whatever is next.
  - toomuchtodo 7y ago
    If they didn't use them before, why would they use them now? Pushing the string. Can't fix fiscal policy issues with monetary policy. Helicopter money is all that's left, but that requires a functioning legislature, so we’ve already lost.
    - spsful 7y ago
      They didn't use them before because it would have been illegal. The Fed has mandated a 10% liquidity for all major banks. See: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
      - toomuchtodo 7y ago
        Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. You need something like the US Gov’s SBA loan program or similar, to lend directly to businesses that are in jeopardy of default or failure. This is beyond the risk profile of traditional retail bank lending (although you’re probably near junk bond or hedge fund territory; at this scale though, those venues are inadequate). The Fed is attempting to inject liquidity in the wrong spot of the economy. If you’re shooting for something like “TARP for Main Street”, this is a suboptimal path based on the incentives and historical behaviors of these regulated entities. Get the money velocity back up to speed ASAP. Edit: We could’ve had the infra in place to plug into banking, credit, and IRS data for companies, to enable rapid analysis, decisioning, and funding of operating accounts in times of crisis as part of the US Treasury Dept. Perhaps next time.
        lbotos 7y ago
        > Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. If you are a bank in fractional reserve banking, who had a 10% capital requirement that is now lifted, you just got 10% more money to use to make money when it is getting increasingly hard for everyone to make money. And you think banks are gonna say, "nah, we wanna stay safe, we'll just sit on our hands"? I agree with you that monetary policy is not enough, we also need fiscal policy. That said we can't say the Fed isn't trying to do their part.
        toomuchtodo 7y ago
        I work in financial services (although that doesn’t mean you should trust my opinion any more than you otherwise might; I also do not work at a bank). I am absolutely telling you, based on my research, banks will sit on that cash and not lend it out in an appreciable amount. Did banks lend more in negative interest rate policy environments? It does not appear so based on reports from the very central banks who put those policies into place [1]. Banks want (mostly) safe returns. “Borrow at 3, lend at 6, at the golf course by 3”, as the saying goes. You need action by an institution that prioritizes rapid injections of cash to accelerate monetary velocity over conservative lending practices, and where saving the economy (and we are clearly at the precipice as indicated by how fast the Fed is moving) takes precedence over appeasing shareholders. Disclaimer: My opinions are my own, and in no way, shape, or form that of any employer past, present, or future. [1] https://www.pnc.com/insights/corporate-institutional/gain-market-insight/the-upside-down-of-negative-interest-rates.html https://www.pnc.com/insights/corporate-institutional/gain-ma...
- deleted 7y ago
  [deleted]

toomuchtodo 7y ago

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Interesting time to be waiving reserve requirements of banks.

bluGill 7y ago
If a bank had reserves before now is the time to use them. In a few months they need to rebuild those reserves for whatever is next.
- toomuchtodo 7y ago
  If they didn't use them before, why would they use them now? Pushing the string. Can't fix fiscal policy issues with monetary policy. Helicopter money is all that's left, but that requires a functioning legislature, so we’ve already lost.
  - spsful 7y ago
    They didn't use them before because it would have been illegal. The Fed has mandated a 10% liquidity for all major banks. See: https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
    - toomuchtodo 7y ago
      Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. You need something like the US Gov’s SBA loan program or similar, to lend directly to businesses that are in jeopardy of default or failure. This is beyond the risk profile of traditional retail bank lending (although you’re probably near junk bond or hedge fund territory; at this scale though, those venues are inadequate). The Fed is attempting to inject liquidity in the wrong spot of the economy. If you’re shooting for something like “TARP for Main Street”, this is a suboptimal path based on the incentives and historical behaviors of these regulated entities. Get the money velocity back up to speed ASAP. Edit: We could’ve had the infra in place to plug into banking, credit, and IRS data for companies, to enable rapid analysis, decisioning, and funding of operating accounts in times of crisis as part of the US Treasury Dept. Perhaps next time.
      - lbotos 7y ago
        > Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. If you are a bank in fractional reserve banking, who had a 10% capital requirement that is now lifted, you just got 10% more money to use to make money when it is getting increasingly hard for everyone to make money. And you think banks are gonna say, "nah, we wanna stay safe, we'll just sit on our hands"? I agree with you that monetary policy is not enough, we also need fiscal policy. That said we can't say the Fed isn't trying to do their part.
        toomuchtodo 7y ago
        I work in financial services (although that doesn’t mean you should trust my opinion any more than you otherwise might; I also do not work at a bank). I am absolutely telling you, based on my research, banks will sit on that cash and not lend it out in an appreciable amount. Did banks lend more in negative interest rate policy environments? It does not appear so based on reports from the very central banks who put those policies into place [1]. Banks want (mostly) safe returns. “Borrow at 3, lend at 6, at the golf course by 3”, as the saying goes. You need action by an institution that prioritizes rapid injections of cash to accelerate monetary velocity over conservative lending practices, and where saving the economy (and we are clearly at the precipice as indicated by how fast the Fed is moving) takes precedence over appeasing shareholders. Disclaimer: My opinions are my own, and in no way, shape, or form that of any employer past, present, or future. [1] https://www.pnc.com/insights/corporate-institutional/gain-market-insight/the-upside-down-of-negative-interest-rates.html https://www.pnc.com/insights/corporate-institutional/gain-ma...
deleted 7y ago
[deleted]