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SVB and Signature banks both failed, their shareholders walked away with nothing. This does not encourage risk-taking on the part of the banks.
by phailhaus 4y ago
SVB and Signature banks both failed, their shareholders walked away with nothing. This does not encourage risk-taking on the part of the banks.
- paxys 4y agoWhy doesn't it? This bank may have failed. Their next one may not. They are playing with house money, and have limited time in the casino. Betting big is the optimal strategy.
- NotYourLawyer 4y agoShareholders aren’t the ones deciding the bank’s risk tolerance.
- spaceman_2020 4y agoThere is a long lag between taking on excessive risk and failure. In that period, your excessive risk taking will likely show excessive growth, which will likely lead to stronger stock prices. If you’re a banking exec, your salary is linked to stock performance. You can easily run up 5-8 years before the whole edifice crumbles, pocketing fat bonuses in the interim. Who cares if Joe Shareholder gets left with nothing at the end? You and all your exec buddies can make off like bandits in the interim.
- perryizgr8 4y ago> their shareholders walked away with nothing Not true. The shareholders and executives walked away with millions in stock grants and bonuses for about a decade, benefitting from their strategies that led to the bank's downfall. If they are fined their entire earnings in the last 10 years then I would consider them walking off "with nothing". So will they do this again in a similar situation? Of course! There are millions to be made!