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> It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. I don't get it. Doesn't the unlim

by bko 4y ago

> It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. I don't get it. Doesn't the unlimited FDIC insurance encourage mega-banks? If funds were only insured up to 250k, wouldn't that just mean we would have to spread money across multiple banks. And sure some banks would be wiped out but new better banks would take their place. It's not a closed system Banks used to fail and be smaller failures. Now we removed almost all failures except when we have a failure its huge: Total number of bank failures: 512 2023 1 2022 0 2021 0 2020 4 2019 4 2018 0 2017 8 2016 5 2015 8 2014 18 2013 24 2012 51 2011 92 2010 157 2009 140 https://www.bankrate.com/banking/list-of-failed-banks/ https://www.bankrate.com/banking/list-of-failed-banks/

phil21 4y ago
Number of banks failed is less useful info than total size of the banks that failed. So far this year we are looking a lot closer to 2009 than 2020[0]. [0] https://static01.nyt.com/images/2023/03/10/business/bank-failures-silicon-valley-collapse-promo/bank-failures-silicon-valley-collapse-promo-videoSixteenByNine3000.png https://static01.nyt.com/images/2023/03/10/business/bank-fai... Edit: wrong image linked
- bko 4y ago
  Here's an infographic and wiki. It's like forest fires, we shouldn't build fragility into the system by removing all risk and then rely on regulations to mitigate it. Hasn't worked in the past and will lead to more consolidation and bigger fires in the future. Remember in 08 the answer was to combine a bunch of banks and since then we've had no new banks created (besides Ally which was a spin off of an auto workers pension fund if i remember) https://en.m.wikipedia.org/wiki/List_of_largest_U.S._bank_failures https://en.m.wikipedia.org/wiki/List_of_largest_U.S._bank_fa... https://old.reddit.com/r/dataisbeautiful/comments/11p3555/oc_size_of_bank_failures_since_2000/ https://old.reddit.com/r/dataisbeautiful/comments/11p3555/oc...
  - phil21 4y ago
    I certainly don't agree with it. I totally agree all this sort of can-kicking does is make the explosion an order of magnitude larger down the line.
  - BlueTemplar 4y ago
    « QE1 QE2, the lender of last resort is you QE3 QE4, increase M1 even more! 𝅘𝅥𝅯 » https://youtu.be/CzvQxQYKO88?t=255 https://youtu.be/CzvQxQYKO88?t=255
- kimburgess 4y ago
  For some more fairly excellent data viz: https://yarn.pranshum.com/banks https://yarn.pranshum.com/banks.
- Retric 4y ago
  That estimate is misleading as SV failed after people pulled 45 billion out. It wasn’t a 200 billion dollar bank when it failed and people didn’t lose 200 billion dollars. We are at ~1.3 bank failures per month in 2023 which is much closer to 2020’s 0.3/month than 2009’s 11.7 banks failing per month. That IMO says more about the rest of the year than the size of the banks that failed.
  - epgui 4y ago
    The parent comment just made the point that you need to normalize for the size of the bank, not for the number of banks per year. Your comment takes the annual frequency and divides it by 12 to get an average monthly frequency, adding nothing to the argument of the grandparent comment.
    - Retric 4y ago
      They suggested you should normalize for the size of the bank but didn’t support it. They even used non inflation adjusted numbers. Maximum assets under control don’t correlate with actual losses especially when people pulled money out before the collapse. It’s a completely meaningless number on it’s own.
      - phil21 4y ago
        Certainly very valid criticisms. To be fair, I specifically was trying to ballpark it and this graph does not contain the Signature failure yet so I think it is a fair representation of this particular metric. I also think it's a good point that a dollar is not necessarily equal to another dollar in this context. But the same can be said for individual banks as well.
        Retric 4y ago
        That’s fair, I do think it’s reasonable to compare losses or the size of bailouts. But we just don’t have that info yet.
- heisenbit 4y ago
  And that graph is now missing Signature Bank with another 110B assets. We are getting into 2008 territory and the first quarter is not yet behind us.
yzmtf2008 4y ago
Let me put it this way. I put the majority of my cash in one of the smaller banks. The news that has transpired in the past few days had me mulling moving those funds to a larger bank, likely Chase (one of the too big to fail ones). Even with the FDIC guarantees, I was not at all confident that : 1. they actually had the funds to cover _many_ bank runs; and 2. it won’t take weeks if not months for me to recover my funds, if my bank fails. It’s entirely possibly that these lines of thoughts will motivate many more people to consider this exact move, putting even more stress in the system.
- ericpauley 4y ago
  The FDIC is backed by the full faith and credit of the US government. If a bank fails, your insured deposits will be made while, usually the next business day.
  - twblalock 4y ago
    That's true, but many people will still freak out anyway.
  - randomname11 4y ago
    [flagged]
    - brianwawok 4y ago
      Not sure what that means. When has the US government not paid their FDIC money?
      - fredophile 4y ago
        The US government has a debt limit. The government is going to run out of options for not exceeding that limit in a few months unless it is raised. There are people in congress suggesting that they should let the limit get hit. If the debt limit is hit, do you e pectin the government to be able to pay out FDIC money in a timely manner?
btilly 4y ago
That article is already out of date. Signature Bank also failed today. I suspect that Signature Bank's failure is tied to their crypto activity. But the sight of 2 banks failing while there was an ongoing run on at least one more bank does seem like the kind of thing that could start a panic.
- BlueTemplar 4y ago
  I thought Signature bank failed even before that ? Bank Runs! What's Going On? – Patrick Boyle : https://www.youtube.com/watch?v=kxcwn7xoXhU https://www.youtube.com/watch?v=kxcwn7xoXhU
tareqak 4y ago
According to the AP, there was a second bank failure today (Sunday) and there was a risk of a third: > In a sign of how fast the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. > Also Sunday, another beleaguered bank, First Republic Bank, announced that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase. https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e https://apnews.com/article/silicon-valley-bank-bailout-yelle...
twblalock 4y ago
The entire regulatory system encourages mega-banks. The entire “too big to fail” concept encourages it. Complex regulations benefit those who can afford the legal costs of compliance. Dodd-Frank probably made this outcome more likely. The role of the government in letting this happen has been under-covered so far. Weren’t they supposed to be overseeing things, stress-testing banks, etc? Regulators either were not looking, or were looking but did not notice. Regardless, there is not much sense to the argument that the government is “stepping in” tonight, because it was always involved.
- heisenbit 4y ago
  Has nothing to do with flooding the world with cheap money which chased unrealistic yields. Systemic excess liquidity when deposited needs excess assets to balance. Assets which were bought at inflated prices. The question now is only how much will this house of cards collapse.
e63f67dd-065b 4y ago
Imagine you’re a business owner. Would you rather bank with Local Community Bank, the failure of which will essentially kill your business, due to haircuts on uninsured deposits that’ll annihilate your working capital, or will you bank with Chase, the failure of which forces government action to cover depositors because the economy is a goner otherwise?
- TedDoesntTalk 4y ago
  Local Community Bank has free checking and few fees. Does Chase? That’s what they look at, not existential questions about the longevity of the bank.
  - brianwawok 4y ago
    Chase charges money to have an account if you are poor. If you have money, and logically could more easily afford to pay bank fees, it’s free. Most of the big guys work like this. At a certain wallet size you get a free personal advisor who will help manage your wealth.
    - TedDoesntTalk 4y ago
      > free personal advisor They take 1% of the money they manage. And then they invest it in their own funds, taking more fees there. They are not free.
      - brianwawok 4y ago
        I mean, duh ;P
- rmilk 4y ago
  But isn’t your CFO planning for financial risk? Do you have hazard insurance on your leased offices, what happens if one of your key employees is unavailable, a large customer is late on payment, you get hit by supply chain issues, etc. You can’t seriously tell me that the CFO who is responsible for corporate finance at these SVB customers didn’t realize a business checking or savings account is not fully guaranteed? It’s in every single bank brochure and statement. If that’s that case, they need to suffer the consequences of poor contingency planning.
alborzb 4y ago
> 2023 1 I'm not sure how 100% accurate that list is considering that it only lists SVB for 2023, but not Signature bank, NY that failed on the same day[1]. [1] https://home.treasury.gov/news/press-releases/jy1337 https://home.treasury.gov/news/press-releases/jy1337

by bko 4y ago

phil21 4y ago

Number of banks failed is less useful info than total size of the banks that failed. So far this year we are looking a lot closer to 2009 than 2020[0]. [0] https://static01.nyt.com/images/2023/03/10/business/bank-failures-silicon-valley-collapse-promo/bank-failures-silicon-valley-collapse-promo-videoSixteenByNine3000.png https://static01.nyt.com/images/2023/03/10/business/bank-fai... Edit: wrong image linked

bko 4y ago
Here's an infographic and wiki. It's like forest fires, we shouldn't build fragility into the system by removing all risk and then rely on regulations to mitigate it. Hasn't worked in the past and will lead to more consolidation and bigger fires in the future. Remember in 08 the answer was to combine a bunch of banks and since then we've had no new banks created (besides Ally which was a spin off of an auto workers pension fund if i remember) https://en.m.wikipedia.org/wiki/List_of_largest_U.S._bank_failures https://en.m.wikipedia.org/wiki/List_of_largest_U.S._bank_fa... https://old.reddit.com/r/dataisbeautiful/comments/11p3555/oc_size_of_bank_failures_since_2000/ https://old.reddit.com/r/dataisbeautiful/comments/11p3555/oc...
- phil21 4y ago
  I certainly don't agree with it. I totally agree all this sort of can-kicking does is make the explosion an order of magnitude larger down the line.
- BlueTemplar 4y ago
  « QE1 QE2, the lender of last resort is you QE3 QE4, increase M1 even more! 𝅘𝅥𝅯 » https://youtu.be/CzvQxQYKO88?t=255 https://youtu.be/CzvQxQYKO88?t=255
kimburgess 4y ago
For some more fairly excellent data viz: https://yarn.pranshum.com/banks https://yarn.pranshum.com/banks.
Retric 4y ago
That estimate is misleading as SV failed after people pulled 45 billion out. It wasn’t a 200 billion dollar bank when it failed and people didn’t lose 200 billion dollars. We are at ~1.3 bank failures per month in 2023 which is much closer to 2020’s 0.3/month than 2009’s 11.7 banks failing per month. That IMO says more about the rest of the year than the size of the banks that failed.
- epgui 4y ago
  The parent comment just made the point that you need to normalize for the size of the bank, not for the number of banks per year. Your comment takes the annual frequency and divides it by 12 to get an average monthly frequency, adding nothing to the argument of the grandparent comment.
  - Retric 4y ago
    They suggested you should normalize for the size of the bank but didn’t support it. They even used non inflation adjusted numbers. Maximum assets under control don’t correlate with actual losses especially when people pulled money out before the collapse. It’s a completely meaningless number on it’s own.
    - phil21 4y ago
      Certainly very valid criticisms. To be fair, I specifically was trying to ballpark it and this graph does not contain the Signature failure yet so I think it is a fair representation of this particular metric. I also think it's a good point that a dollar is not necessarily equal to another dollar in this context. But the same can be said for individual banks as well.
      - Retric 4y ago
        That’s fair, I do think it’s reasonable to compare losses or the size of bailouts. But we just don’t have that info yet.
heisenbit 4y ago
And that graph is now missing Signature Bank with another 110B assets. We are getting into 2008 territory and the first quarter is not yet behind us.

yzmtf2008 4y ago

Let me put it this way. I put the majority of my cash in one of the smaller banks. The news that has transpired in the past few days had me mulling moving those funds to a larger bank, likely Chase (one of the too big to fail ones). Even with the FDIC guarantees, I was not at all confident that : 1. they actually had the funds to cover _many_ bank runs; and 2. it won’t take weeks if not months for me to recover my funds, if my bank fails. It’s entirely possibly that these lines of thoughts will motivate many more people to consider this exact move, putting even more stress in the system.

ericpauley 4y ago
The FDIC is backed by the full faith and credit of the US government. If a bank fails, your insured deposits will be made while, usually the next business day.
- twblalock 4y ago
  That's true, but many people will still freak out anyway.
- randomname11 4y ago
  [flagged]
  - brianwawok 4y ago
    Not sure what that means. When has the US government not paid their FDIC money?
    - fredophile 4y ago
      The US government has a debt limit. The government is going to run out of options for not exceeding that limit in a few months unless it is raised. There are people in congress suggesting that they should let the limit get hit. If the debt limit is hit, do you e pectin the government to be able to pay out FDIC money in a timely manner?

btilly 4y ago

That article is already out of date. Signature Bank also failed today. I suspect that Signature Bank's failure is tied to their crypto activity. But the sight of 2 banks failing while there was an ongoing run on at least one more bank does seem like the kind of thing that could start a panic.

BlueTemplar 4y ago
I thought Signature bank failed even before that ? Bank Runs! What's Going On? – Patrick Boyle : https://www.youtube.com/watch?v=kxcwn7xoXhU https://www.youtube.com/watch?v=kxcwn7xoXhU

tareqak 4y ago

According to the AP, there was a second bank failure today (Sunday) and there was a risk of a third: > In a sign of how fast the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. > Also Sunday, another beleaguered bank, First Republic Bank, announced that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase. https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e https://apnews.com/article/silicon-valley-bank-bailout-yelle...

twblalock 4y ago

The entire regulatory system encourages mega-banks. The entire “too big to fail” concept encourages it. Complex regulations benefit those who can afford the legal costs of compliance. Dodd-Frank probably made this outcome more likely. The role of the government in letting this happen has been under-covered so far. Weren’t they supposed to be overseeing things, stress-testing banks, etc? Regulators either were not looking, or were looking but did not notice. Regardless, there is not much sense to the argument that the government is “stepping in” tonight, because it was always involved.

heisenbit 4y ago
Has nothing to do with flooding the world with cheap money which chased unrealistic yields. Systemic excess liquidity when deposited needs excess assets to balance. Assets which were bought at inflated prices. The question now is only how much will this house of cards collapse.

e63f67dd-065b 4y ago

Imagine you’re a business owner. Would you rather bank with Local Community Bank, the failure of which will essentially kill your business, due to haircuts on uninsured deposits that’ll annihilate your working capital, or will you bank with Chase, the failure of which forces government action to cover depositors because the economy is a goner otherwise?

TedDoesntTalk 4y ago
Local Community Bank has free checking and few fees. Does Chase? That’s what they look at, not existential questions about the longevity of the bank.
- brianwawok 4y ago
  Chase charges money to have an account if you are poor. If you have money, and logically could more easily afford to pay bank fees, it’s free. Most of the big guys work like this. At a certain wallet size you get a free personal advisor who will help manage your wealth.
  - TedDoesntTalk 4y ago
    > free personal advisor They take 1% of the money they manage. And then they invest it in their own funds, taking more fees there. They are not free.
    - brianwawok 4y ago
      I mean, duh ;P
rmilk 4y ago
But isn’t your CFO planning for financial risk? Do you have hazard insurance on your leased offices, what happens if one of your key employees is unavailable, a large customer is late on payment, you get hit by supply chain issues, etc. You can’t seriously tell me that the CFO who is responsible for corporate finance at these SVB customers didn’t realize a business checking or savings account is not fully guaranteed? It’s in every single bank brochure and statement. If that’s that case, they need to suffer the consequences of poor contingency planning.

alborzb 4y ago

> 2023 1 I'm not sure how 100% accurate that list is considering that it only lists SVB for 2023, but not Signature bank, NY that failed on the same day[1]. [1] https://home.treasury.gov/news/press-releases/jy1337 https://home.treasury.gov/news/press-releases/jy1337