4 ms·

The just solution here is to let CS fail, and jail the executives if they find evidence of fraud or other crimes. Make the depositors and bond holders whole to

The just solution here is to let CS fail, and jail the executives if they find evidence of fraud or other crimes. Make the depositors and bond holders whole to prevent contagion.

oblvious-earth 4y ago
In practice wouldn't this just mean part nationalizing the bank so you can keep paying the salaries of all the various bank tellers, IT staff, and accountants to allow the depositors and bond holders to withdraw their money. Given the retail bank is highly profitable wouldn't it make sense to then keep the whole thing going and figure out how to re-privatize it at a later date?
- cm2187 4y ago
  Not the least because on paper at least it looks healthy. It has capital and liquidity ratios in line with other major banks. It has a profitability problems but had started laying off thousand of staff already, so that was more a share price problem than credit risk problem. But bank runs don't look at financials.
david927 4y ago
But if you make depositors whole, we'll have to switch to banks as custodial accounts. These private companies can't make huge profits off of deposits in good times and be, essentially, insured by tax payers in bad times.
- akira2501 4y ago
  > we'll have to switch to banks as custodial accounts. Isn't that effectively what Glass-Steagall, a law passed after one of our previous massive failures, mandated? > These private companies can't make huge profits off of deposits in good times If they were, then why were interest rates so low? Either way, I figure the river of low interest government money was what made them so profitable, and now that this tap is turned off, the reason they're immediately failing. > insured by tax payers in bad times. If deposits equated to profits, then what is the current source of "stress?"
sschueller 4y ago
It would cause a global financial crisis. Similar to what happened when the US let Lehman Brothers fail.
- david927 4y ago
  > It would cause a global financial crisis That's coming in any case. The water is out for miles.
- jimbob45 4y ago
  Okay but the CS name and brand is worth mud now. No one is ever going to bank with them again after this? How is propping them up meaningfully different than letting them die?
  - sschueller 4y ago
    By the state taking over you are giving the bank what it needs which is new trust. The top management will be replaced and the state will not only guarantee the assets but also give the bank the trust it needs. The SNB tried to just give them money but as you said the name is so toxic at this point you need new management which is either UBS taking control or the state.
  - cm2187 4y ago
    What about RBS in the UK, or Credit Lyonnais in France. People still bank with them.
  - cowl 4y ago
    It will continue to be used by the same customers. Swiss Nationals who don't have much choice and the tax evadors /drug lords/dictators who again chose it because they don't have many options. The legend of the Swiss Bankink System was based on this later type of customer because as quality of day to day service for normal people or business they have fallen far behind.
TrainedMonkey 4y ago
Not an expert, but the scary thing here are all the secondary and tertiary side effects of having a huge financial institution fail. For example lowered confidence in the banking system and Swiss are known for their banking.
- ornornor 4y ago
  Which isn’t great, not for individuals and dictators. Because of the EU, more info is shared. And they’re also very dated. Wire transfers are next day only (minutes to hours in the EU), Apple Pay only arrived a couple years ago… There is much better banking in all fronts to be had elsewhere. But nationals are forced to use national banks.
bluecalm 4y ago
Deposits - ok. Bond holders though? Why would you do that? The whole deal with buying bonds is that you get 0 if the issuer goes bust.
steve76 4y ago
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The just solution here is to let CS fail, and jail the executives if they find evidence of fraud or other crimes. Make the depositors and bond holders whole to prevent contagion.

oblvious-earth 4y ago

In practice wouldn't this just mean part nationalizing the bank so you can keep paying the salaries of all the various bank tellers, IT staff, and accountants to allow the depositors and bond holders to withdraw their money. Given the retail bank is highly profitable wouldn't it make sense to then keep the whole thing going and figure out how to re-privatize it at a later date?

cm2187 4y ago
Not the least because on paper at least it looks healthy. It has capital and liquidity ratios in line with other major banks. It has a profitability problems but had started laying off thousand of staff already, so that was more a share price problem than credit risk problem. But bank runs don't look at financials.

david927 4y ago

But if you make depositors whole, we'll have to switch to banks as custodial accounts. These private companies can't make huge profits off of deposits in good times and be, essentially, insured by tax payers in bad times.

akira2501 4y ago
> we'll have to switch to banks as custodial accounts. Isn't that effectively what Glass-Steagall, a law passed after one of our previous massive failures, mandated? > These private companies can't make huge profits off of deposits in good times If they were, then why were interest rates so low? Either way, I figure the river of low interest government money was what made them so profitable, and now that this tap is turned off, the reason they're immediately failing. > insured by tax payers in bad times. If deposits equated to profits, then what is the current source of "stress?"

sschueller 4y ago

It would cause a global financial crisis. Similar to what happened when the US let Lehman Brothers fail.

david927 4y ago
> It would cause a global financial crisis That's coming in any case. The water is out for miles.
jimbob45 4y ago
Okay but the CS name and brand is worth mud now. No one is ever going to bank with them again after this? How is propping them up meaningfully different than letting them die?
- sschueller 4y ago
  By the state taking over you are giving the bank what it needs which is new trust. The top management will be replaced and the state will not only guarantee the assets but also give the bank the trust it needs. The SNB tried to just give them money but as you said the name is so toxic at this point you need new management which is either UBS taking control or the state.
- cm2187 4y ago
  What about RBS in the UK, or Credit Lyonnais in France. People still bank with them.
- cowl 4y ago
  It will continue to be used by the same customers. Swiss Nationals who don't have much choice and the tax evadors /drug lords/dictators who again chose it because they don't have many options. The legend of the Swiss Bankink System was based on this later type of customer because as quality of day to day service for normal people or business they have fallen far behind.

TrainedMonkey 4y ago

Not an expert, but the scary thing here are all the secondary and tertiary side effects of having a huge financial institution fail. For example lowered confidence in the banking system and Swiss are known for their banking.

ornornor 4y ago
Which isn’t great, not for individuals and dictators. Because of the EU, more info is shared. And they’re also very dated. Wire transfers are next day only (minutes to hours in the EU), Apple Pay only arrived a couple years ago… There is much better banking in all fronts to be had elsewhere. But nationals are forced to use national banks.

bluecalm 4y ago

Deposits - ok. Bond holders though? Why would you do that? The whole deal with buying bonds is that you get 0 if the issuer goes bust.

steve76 4y ago

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