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Which is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s

Which is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s and 70s into a half a dozen giants.

anamexis 4y ago
That's all well and good until a "too big to fail" institution fails.
- kelnos 4y ago
  The government, as we saw in 2008, won't allow those banks to fail. That's literally what "too big to fail" means. If the government doesn't have the ability to keep such banks afloat, then we have worse problems.
  - altairprime 4y ago
    By ‘afloat’, do you mean, “keep the depositors whole” or “keep the bank operating” or both? A lot of confusion centers around the assumption that any bailout will be for the bank’s operations, not for the depositor’s deposits. That’s perfectly valid confusion - historically it’s been the latter! - and the FDIC isn’t willing to talk about deposits yet, either.
  - teawrecks 4y ago
    Right, which is literally the argument against a small set of giant "too big to fail" banks.
atdrummond 4y ago
Banks are too big to fail - until they aren’t.
joecasson 4y ago
I don't agree. There are many instances where using a boutique or smaller institution is better for your business to run. My company used to bank with Bank of America. It was awful. They seemed to have no concept of how to work with small business or a tech startup. We moved to another bank (not svb) and it's been a much better experience. Only leveraging the giants of a given industry is not good for innovation nor specialization.
- johnny_canuck 4y ago
  It does seem as though larger banks can only work with entities that fit inside their self-described personas. If you do not align exactly with one of their personas - good luck. At least that is what I have seen here in Canada, I imagine the US is very similar in that regard.
- dannyw 4y ago
  Until your money gets locked up and/or you face a haircut...
  - joecasson 4y ago
    Yes, there is safety in size. But operational capabilities of companies using the big banks would be cut as well. To draw an analogy, should every business owner with physical goods only sell and distribute their goods through Amazon and/or Walmart? Yes, their size provides many benefits, but also has dramatic costs to their business and impacts how customers are served.
mark_l_watson 4y ago
I don’t agree. I diversify by using two small local Credit Unions. I also use a large bank for specific services. Local Credit Unions and small local banks rock.
teawrecks 4y ago
Wait so, you're in favor of the bank being bailed out here? The phrase "too big to fail" doesn't mean it's impossible for it to fail; that's not a thing. It means the govt/public feeling obligated to bail it out when it does fail because the public thinks they're so dependent on it that they're worse off of they let it fail.
azinman2 4y ago
This is a very strange take. You’re arguing for the consolidation of wealth into a few giants? These giants then in turn will own a significant portion of the economy, will be subject to far less competition, will stagnant any given area based on what they’re willing to invest in or what they’re not (as a service and in the economy), make them extremely capable of owning politicians and setting the directions of the country, and enable few to gain the experience and opportunity that comes with going up the banking ladder because few seats exist. Local community banks make it far easier for farmers and coffee shops to get loans. Local community banks keep money locally and grow locally. The consolidation of banks is a problem to avoid, not desire.

Which is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s and 70s into a half a dozen giants.

anamexis 4y ago

That's all well and good until a "too big to fail" institution fails.

kelnos 4y ago
The government, as we saw in 2008, won't allow those banks to fail. That's literally what "too big to fail" means. If the government doesn't have the ability to keep such banks afloat, then we have worse problems.
- altairprime 4y ago
  By ‘afloat’, do you mean, “keep the depositors whole” or “keep the bank operating” or both? A lot of confusion centers around the assumption that any bailout will be for the bank’s operations, not for the depositor’s deposits. That’s perfectly valid confusion - historically it’s been the latter! - and the FDIC isn’t willing to talk about deposits yet, either.
- teawrecks 4y ago
  Right, which is literally the argument against a small set of giant "too big to fail" banks.

atdrummond 4y ago

Banks are too big to fail - until they aren’t.

joecasson 4y ago

I don't agree. There are many instances where using a boutique or smaller institution is better for your business to run. My company used to bank with Bank of America. It was awful. They seemed to have no concept of how to work with small business or a tech startup. We moved to another bank (not svb) and it's been a much better experience. Only leveraging the giants of a given industry is not good for innovation nor specialization.

johnny_canuck 4y ago
It does seem as though larger banks can only work with entities that fit inside their self-described personas. If you do not align exactly with one of their personas - good luck. At least that is what I have seen here in Canada, I imagine the US is very similar in that regard.
dannyw 4y ago
Until your money gets locked up and/or you face a haircut...
- joecasson 4y ago
  Yes, there is safety in size. But operational capabilities of companies using the big banks would be cut as well. To draw an analogy, should every business owner with physical goods only sell and distribute their goods through Amazon and/or Walmart? Yes, their size provides many benefits, but also has dramatic costs to their business and impacts how customers are served.

mark_l_watson 4y ago

I don’t agree. I diversify by using two small local Credit Unions. I also use a large bank for specific services. Local Credit Unions and small local banks rock.

teawrecks 4y ago

Wait so, you're in favor of the bank being bailed out here? The phrase "too big to fail" doesn't mean it's impossible for it to fail; that's not a thing. It means the govt/public feeling obligated to bail it out when it does fail because the public thinks they're so dependent on it that they're worse off of they let it fail.

azinman2 4y ago

This is a very strange take. You’re arguing for the consolidation of wealth into a few giants? These giants then in turn will own a significant portion of the economy, will be subject to far less competition, will stagnant any given area based on what they’re willing to invest in or what they’re not (as a service and in the economy), make them extremely capable of owning politicians and setting the directions of the country, and enable few to gain the experience and opportunity that comes with going up the banking ladder because few seats exist. Local community banks make it far easier for farmers and coffee shops to get loans. Local community banks keep money locally and grow locally. The consolidation of banks is a problem to avoid, not desire.