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Its clear they are trying to prevent a bigger meltdown here. But this is probably not the end of it…

by tacker2000 4y ago

nkozyra 4y ago
If there's an extended meltdown I think it has larger ramifications, since this isn't about solvency but instead about people fundamentally not understanding and/or trusting how banks do business.
- FollowingTheDao 4y ago
  > this isn't about solvency but instead about people fundamentally not understanding and/or trusting how banks do business. No, solvency is exactly what this is about: https://www.cnn.com/2023/03/15/investing/first-republic-downgrade/index.html https://www.cnn.com/2023/03/15/investing/first-republic-down... "First Republic Bank’s credit rating was downgraded on Wednesday by both Fitch Ratings and S&P Global Ratings on concerns that depositors could pull their cash despite the federal intervention. " Solvency means you are able to pay your debts. Banks cannot pay their debts, ever. Banks are never solvent, they are always in debt. They make it appear they are solvent, on paper. They are only solvent in the future, not in the present. This is they myth of banking that people do not understand or appreciate and that always puts the economy at risk. It was the FED raising rates that pushed their solvency further out into the future.
  - ceejayoz 4y ago
    > They are only solvent in the future, not in the present. That's what solvency means. You're mixing up solvency (long-term) and liquidity (short-term).
    - FollowingTheDao 4y ago
      The GP did not use the term liquid, they used the term solvent.
      - ceejayoz 4y ago
        I quoted you, not them.
        FollowingTheDao 4y ago
        I did not use the term liquidity. But if you are not liquid you are insolvent. I mean, why is it banks get to use these terms to hide debt and the average person does not? If I have huge credit card debt that I cannot payoff in time the bank does not excuse me for my "liquidity", they say I am a risk and charge me higher interest rates.
        ceejayoz 4y ago
        > I did not use the term liquidity. You showed a misunderstanding of the difference between solvency and liquidity. > But if you are not liquid you are insolvent. No, you're not. I am not liquid enough to pay off my mortgage. I remain solvent. > If I have huge credit card debt that I cannot payoff in time the bank does not excuse me for my "liquidity", they say I am a risk and charge me higher interest rates. Now you're confusing both solvency and liquidity for a third thing. If you can't make your minimum credit card payment, you now have a liquidity crisis (which will result in a late payment fee and penalty APR), and potentially a solvency one (which may result in bankruptcy).
        lamontcg 4y ago
        There's both cash insolvency and balance sheet insolvency.
    - hallway_monitor 4y ago
      Oh, because solvents turn things to liquid over time! I get it now!
  - kaashif 4y ago
    > It was the FED raising rates that pushed their solvency further out into the future. Not wholly on topic, but why do some people capitalize "Fed" as "FED"?
jacquesm 4y ago
They are trying to prevent further regulation of the banking industry. The money involved is essentially small change compared to the price of regulation.

Its clear they are trying to prevent a bigger meltdown here. But this is probably not the end of it…

If there's an extended meltdown I think it has larger ramifications, since this isn't about solvency but instead about people fundamentally not understanding and/or trusting how banks do business.

FollowingTheDao 4y ago
> this isn't about solvency but instead about people fundamentally not understanding and/or trusting how banks do business. No, solvency is exactly what this is about: https://www.cnn.com/2023/03/15/investing/first-republic-downgrade/index.html https://www.cnn.com/2023/03/15/investing/first-republic-down... "First Republic Bank’s credit rating was downgraded on Wednesday by both Fitch Ratings and S&P Global Ratings on concerns that depositors could pull their cash despite the federal intervention. " Solvency means you are able to pay your debts. Banks cannot pay their debts, ever. Banks are never solvent, they are always in debt. They make it appear they are solvent, on paper. They are only solvent in the future, not in the present. This is they myth of banking that people do not understand or appreciate and that always puts the economy at risk. It was the FED raising rates that pushed their solvency further out into the future.
- ceejayoz 4y ago
  > They are only solvent in the future, not in the present. That's what solvency means. You're mixing up solvency (long-term) and liquidity (short-term).
  - FollowingTheDao 4y ago
    The GP did not use the term liquid, they used the term solvent.
    - ceejayoz 4y ago
      I quoted you, not them.
      - FollowingTheDao 4y ago
        I did not use the term liquidity. But if you are not liquid you are insolvent. I mean, why is it banks get to use these terms to hide debt and the average person does not? If I have huge credit card debt that I cannot payoff in time the bank does not excuse me for my "liquidity", they say I am a risk and charge me higher interest rates.
        ceejayoz 4y ago
        > I did not use the term liquidity. You showed a misunderstanding of the difference between solvency and liquidity. > But if you are not liquid you are insolvent. No, you're not. I am not liquid enough to pay off my mortgage. I remain solvent. > If I have huge credit card debt that I cannot payoff in time the bank does not excuse me for my "liquidity", they say I am a risk and charge me higher interest rates. Now you're confusing both solvency and liquidity for a third thing. If you can't make your minimum credit card payment, you now have a liquidity crisis (which will result in a late payment fee and penalty APR), and potentially a solvency one (which may result in bankruptcy).
        lamontcg 4y ago
        There's both cash insolvency and balance sheet insolvency.
  - hallway_monitor 4y ago
    Oh, because solvents turn things to liquid over time! I get it now!
- kaashif 4y ago
  > It was the FED raising rates that pushed their solvency further out into the future. Not wholly on topic, but why do some people capitalize "Fed" as "FED"?

jacquesm 4y ago

They are trying to prevent further regulation of the banking industry. The money involved is essentially small change compared to the price of regulation.