5 ms·

While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that to

by pintxo 4y ago

While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that todays hyper-consolidated megabanks are a better implementation of a well regulated market. As most of them nowadays are just too big to fail. So part of the mandatory market forces cannot be used lest you want to generate broad reaching consequences.

bobthepanda 4y ago
I don’t know that they’re actually too big to fail. WaMu failed in 2008 and was handled fairly well for a bank with $300B+ in assets.
- pintxo 4y ago
  In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.
  - Animats 4y ago
    The Economist has pointed that out. Few countries in Europe seem to be set up to do this.
    - bobthepanda 4y ago
      This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
      - ggm 4y ago
        And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.
      - closewith 4y ago
        My(uninformed)impression is that the Directive on deposit guarantee schemes is the rough equivalent of the FDIC in the EU. Is there a serious deficiency in the protections that it offers?
        bobthepanda 4y ago
        The deposit schemes are national and required to cover the branches of their banks in other countries. Pair a big enough bank with a small enough country and you can easily drown the small country. —- There’s also a credibility problem. When the US stress tested its banks, the ones that passed did not fail. When the EU did it, some of the passing banks ended up needing saving, and this happened multiple times, sometimes even with the same bank.
      - dmurray 4y ago
        Europe does not have continent-scale banks. It has a few players who dabble their toes in multiple countries. From a quick investigation I can't see any bank that operates branches in all three of the largest countries (France, Germany and Italy), never mind all 27 member states. And those that do operate in many countries (HSBC must have the most) can have their local subsidiaries insured by the appropriate countries, just as they are insured by the FDIC when they open branches and take deposits in the US.
        bobthepanda 4y ago
        Cross border activity was much higher pre-euro crisis. Cross-border interbank lending is down 40%. https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf
lettergram 4y ago
> While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that todays hyper-consolidated megabanks are a better implementation of a well regulated market. Who do you think runs the FDIC? Former chair: https://en.m.wikipedia.org/wiki/Jelena_McWilliams https://en.m.wikipedia.org/wiki/Jelena_McWilliams > In December of 2021, McWilliams announced her resignation from the FDIC.[11] Following the election of President Joe Biden, Democrats controlled all the seats on the FDIC except for the one she held.[12] She resigned after expressing her frustrations in an essay published in the Wall Street Journal with what she called the erosion of agency norms at the FDIC and a "hostile takeover" by the other directors. The FDIC is a captured entity. It is used as a political weapon and as a weapon for industry since it’s inception. These “inspections” enabled the hostile take over by other banks. The FDIC sells the assets and those assets are purchased by the mega banks for cheap. Who runs the FFIC? Former employees from these mega banks.
- Shank 4y ago
  - dmurray 4y ago
    I work in the financial sector and would never consider I needed to disclose that on HN when discussing something in banking. Also, I work in the technology sector and would never consider I needed to disclose that on HN when discussing, say, Google. Either is just far too big a field to expect that a conflict of interest is inevitable.
    - yieldcrv 4y ago
      This is useful to me because it gives more insight. So, I think your conclusions are wrong as the FDIC was brokering the sells of failing banks for a long time, otherwise people would have actually lost their money above the insurance limit or would have had to wait an unknown amount of time for the insurance reimbursement, and the same result would have occurred with the bigger more capitalized bank getting those customers and consolidating banking anyway. The fire sales are better, but this is just them having the data and getting on the phone to make it happen, Congress never asked them to do that but its a better outcome. I also think the FDIC does too much outside of its congressional mandate, so I can see how it is annoying to deal with as an institution.

by pintxo 4y ago

bobthepanda 4y ago

I don’t know that they’re actually too big to fail. WaMu failed in 2008 and was handled fairly well for a bank with $300B+ in assets.

pintxo 4y ago
In the US maybe, but Europe seems to be deeply afraid of the idea alone to dispose of a failed bank.
- Animats 4y ago
  The Economist has pointed that out. Few countries in Europe seem to be set up to do this.
  - bobthepanda 4y ago
    This is because the EU wants to have a common market but refuses to have a common deposit insurance scheme like the US FDIC, so now they've developed continent-scaled banks without a continent-scaled way to save them. A bunch of the euro crisis government bailouts happened because governments went underwater trying to save their banks.
    - ggm 4y ago
      And also because governments lied about their eligibility to be on the euro gravy train, and other governments were happy to lend them the money for future gain.
    - closewith 4y ago
      My(uninformed)impression is that the Directive on deposit guarantee schemes is the rough equivalent of the FDIC in the EU. Is there a serious deficiency in the protections that it offers?
      - bobthepanda 4y ago
        The deposit schemes are national and required to cover the branches of their banks in other countries. Pair a big enough bank with a small enough country and you can easily drown the small country. —- There’s also a credibility problem. When the US stress tested its banks, the ones that passed did not fail. When the EU did it, some of the passing banks ended up needing saving, and this happened multiple times, sometimes even with the same bank.
    - dmurray 4y ago
      Europe does not have continent-scale banks. It has a few players who dabble their toes in multiple countries. From a quick investigation I can't see any bank that operates branches in all three of the largest countries (France, Germany and Italy), never mind all 27 member states. And those that do operate in many countries (HSBC must have the most) can have their local subsidiaries insured by the appropriate countries, just as they are insured by the FDIC when they open branches and take deposits in the US.
      - bobthepanda 4y ago
        Cross border activity was much higher pre-euro crisis. Cross-border interbank lending is down 40%. https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2130.en.pdf

lettergram 4y ago

> While it sounds astounding that you have hundreds of forced bank closings, this is actually a well regulated market working as it should. I am not sure that todays hyper-consolidated megabanks are a better implementation of a well regulated market. Who do you think runs the FDIC? Former chair: https://en.m.wikipedia.org/wiki/Jelena_McWilliams https://en.m.wikipedia.org/wiki/Jelena_McWilliams > In December of 2021, McWilliams announced her resignation from the FDIC.[11] Following the election of President Joe Biden, Democrats controlled all the seats on the FDIC except for the one she held.[12] She resigned after expressing her frustrations in an essay published in the Wall Street Journal with what she called the erosion of agency norms at the FDIC and a "hostile takeover" by the other directors. The FDIC is a captured entity. It is used as a political weapon and as a weapon for industry since it’s inception. These “inspections” enabled the hostile take over by other banks. The FDIC sells the assets and those assets are purchased by the mega banks for cheap. Who runs the FFIC? Former employees from these mega banks.

Shank 4y ago
- dmurray 4y ago
  I work in the financial sector and would never consider I needed to disclose that on HN when discussing something in banking. Also, I work in the technology sector and would never consider I needed to disclose that on HN when discussing, say, Google. Either is just far too big a field to expect that a conflict of interest is inevitable.
  - yieldcrv 4y ago
    This is useful to me because it gives more insight. So, I think your conclusions are wrong as the FDIC was brokering the sells of failing banks for a long time, otherwise people would have actually lost their money above the insurance limit or would have had to wait an unknown amount of time for the insurance reimbursement, and the same result would have occurred with the bigger more capitalized bank getting those customers and consolidating banking anyway. The fire sales are better, but this is just them having the data and getting on the phone to make it happen, Congress never asked them to do that but its a better outcome. I also think the FDIC does too much outside of its congressional mandate, so I can see how it is annoying to deal with as an institution.