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There are hard tradeoffs here, and one failed bank doesn't mean the wrong choice was made. As I remember it, the reason for weakening these regulations was tha
by BurningFrog 4y ago
There are hard tradeoffs here, and one failed bank doesn't mean the wrong choice was made.
As I remember it, the reason for weakening these regulations was that Dodd-Frank is/was extremely expensive to comply with, and that created a banking sector where only the biggest banks could survive and it made no sense to start any new banks.
- themitigating 4y agoRegulations help but then too much prevents competition. You can't win when people are angry mostly due to manipulation
- PeterisP 4y agoThat is a reasonable reason, but on the other hand, that should not justify exempting the 18th largest bank in USA (the Silicon Valley Bank; as of 2022 https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_United_States https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_U...) from such regulation.
- BurningFrog 4y agoYeah, it may well be that the threshold wasn't calibrated properly.
- zainhoda 4y agoI conducted Dodd-Frank Act Stress Tests for one component of a large bank. For a $400B portfolio I was able to do it with a team of 4 people including myself plus a $100k/year license to Barra and it takes about a week of the whole team’s focus. The thing is, we were already employed by the bank to run risk management and the bank already had the subscription to the software. So from the bank’s perspective it was close to 0 marginal cost to conduct the stress tests because even if they weren’t required, we would be doing them anyway as good risk management practice. If a bank says that stress tests are too expensive to run, that means that absent regulatory requirements they would perform no risk management.
- jszymborski 4y ago> If a bank says that stress tests are too expensive to run, that means that absent regulatory requirements they would perform no risk management. This feels so damn true about almost every megacorp belly-aching about regulation.
- ryandrake 4y agoExactly. But also for smaller companies whining about government regulation. The “regulation” is what’s expensive, not the government part. If they can’t afford government regulation, they can’t afford self-regulation either, unless their idea of self-regulation is “do nothing and keep the money.”
- downrightmike 4y ago“do nothing and keep the money.” That's the best definition of deregulation I've seen.
- elcritch 4y agoDon't forget, receive bailouts if you go bust.
- dspillett 4y ago> “do nothing and keep the money.” Or “do nothing until someone(s) else gets stung/slapped, and hope that it is someone/someones else not you, so you are around to learn from the mistake”.
- johndhi 4y agoJust chiming in as a lawyer who works for a fairly big corporation. You're imagining a scenario where one set of clearly written and fairly interpreted rules applies to your core business. You're excluding scenarios where there are fifty states and two hundred countries wildly swinging back and forth from idiotic legislation drafted to apply to three companies (Google, Facebook, Amazon) that is impossible to apply to everyone else. Imo the situation I describe is worthy of belly aching. I don't work in finance so I guess theoretically the US banking system could be easier to comply with than everything else - but I definitely disagree that everything else is easy to comply with.
- slantedview 4y ago> the reason for weakening these regulations was that Dodd-Frank is/was extremely expensive to comply with It would be a lot easier for banks to comply with a reinstated Glass Steagall law, but banks don't want that either. The problem is really just that the banks don't want any restrictions, but as this situation shows, restrictions exist for good reason.