7 ms·

Serious question: Is it a good idea (ever) to trust a bank's take on a financial crisis?

by pnemonic 4y ago

baldeagle 4y ago
Once you acknowledge their bias, they do know an awful lot about banking.
- deleted 4y ago
  [deleted]
- smcin 4y ago
  Well, their selective take is like a description of a mass shooting that only describes where the bodies ended up, but no discussion of who caused it, or even that bullets might have been involved, let alone which people actually did it: "Households had too much leverage in 2008 : Mortgage debt % potential GDP..." "The Global Financial Crisis was driven by price declines in low-quality assets with poor disclosure leading to a solvency crisis." Drink one finger very time you find a bank mentioning the Glass-Steagall Act, and ten bottles every time you find them admitting they lobbied Congress hard to repeal it. [0] "Why didn’t any Wall Street CEOs (or executives) go to jail after the financial crisis?" (also a list of criminal and civil charges, and which banks got fined) [1] ...and here's some shameless revisionism by Cato [2] ("It wasn't the banks [being allowed to issue the CDOs], it was the securities salesmen who spontaneously invented and sold CDOs"). I must remember that compelling excuse if I ever get busted running a casino in my own living-room. > "In any case, the 2008 financial crisis had precious little to do with Glass‐Steagall, one way or the other. It was caused primarily by bad lending policies, which in turn led to the growth of the subprime market to an extent that neither the lawmakers nor regulatory authorities recognized at the time. The commercial banks and parent holding companies that failed — or had to be sold to other viable financial institutions — did so because underwriting standards were abandoned." [0]: https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/death-glass-steagall-was-carefully-planned-and-highly-consequential https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/de... [1]: https://features.marketplace.org/why-no-ceo-went-jail-after-financial-crisis/ https://features.marketplace.org/why-no-ceo-went-jail-after-... [2]: https://www.cato.org/policy-analysis/repeal-glass-steagall-act-myth-reality# https://www.cato.org/policy-analysis/repeal-glass-steagall-a...
  - JumpCrisscross 4y ago
    Glass-Steagall’s repeal wasn’t proximate to any post-repeal banking crises. (Glass-Steagall wouldn’t have prevented mortgage CDOs.) It certainly wouldn’t have done anything for SVB or Signature.
    - smcin 4y ago
      Re Glass-Steagall and 2008 crisis, Robert Reich and Elizabeth Warren disagree with you [https://robertreich.org/post/124114229225 https://robertreich.org/post/124114229225]. According to you, which legislation prevented the conflict-of-interest in banks writing trillions in subprime mortgages decades prior to 1999? or securities firms selling CDOs backed by subprime MBS? IIUC, the issue in 2008 was never "preventing mortgage CDOs" outright, but preventing the inflated valuations on junk tranches of subprime, i.e. mortgage lenders allowing securities sellers to intentionally create and sell junk with their assets. (and I clearly didn't say Glass-Steagall would have done anything for SVB or Signature; I was saying banks like Chase's selective edit of the chain of events around 2008 was a whitewash because it omitted mention of key events.)
      - JumpCrisscross 4y ago
        > Reich and Elizabeth Warren disagree with you They argue that "nonbanks got their funding from the big banks in the form of lines of credit, mortgages, and repurchase agreements" and if "big banks hadn’t provided them the money, the nonbanks wouldn’t have got into trouble." But nonbank funding channels were already alive, well, and causing chaos in the 1990s (LTCM) and before (S&Ls). Sure, banks juiced the problem. But it didn't start the fire, it didn't bring the fire home and it didn't meaningfully alter the fire's trajectory. And there is no evidence that their large depositors would have sat there if nonbanks offered competitive rates fueled by their nonsense. As we've seen this cycle, banks and nonbanks will chase yield when rates are low and credit is cheap. To argue that e.g. SoftBank wouldn't have SoftBanked if JPMorgan and JPMorgan Securities were separate misses the forest for the trees. > securities firms selling CDOs backed by subprime MBS Bank originates mortgage. Bank sells mortgage to securities firm. Securities firm issues as CDO. Nothing about this requires the lending arm and securities arm be under the same roof. Mortgage CDOs became a thing because of computers, not Glass-Steagall. Proponents of reinstating Glass-Steagall are broadly well intentioned. But there are real financial regulations that have real impact that this discussion crowds out.
- Broken_Hippo 4y ago
  Once you acknowledge their bias, they do know an awful lot about banking Sure, but I really don't. And a lot of other folks are the same. I know they are both biased and have financial incentives to lie or mislead me. As much as I might try, I know I might not be able to parse out the bullshit from the facts. Those facts are gonna stink of the bullshit even if I can verify it. At least with something like a plumber, I can get a second opinion and so on, and I might just be able to take care of the issue myself instead. This just isn't the case with a bank.
  - fijiaarone 4y ago
    Funny, nobody is talking about Bitcoin or Decentralized Finance as a solution (or even a hedge) to this problem.
    - htss2013 4y ago
      Ummm, they are? See Balaji's million dollar bitcoin bet.
hifromLA 4y ago
Honestly this article seems pretty reasonable for the most part. Source matters, but content matters the most imo.
- junofan 4y ago
  One big issue is ignoring causality and hindsight. E.g. author contrasts “low quality” assets of 15 yrs ago with today’s “high quality” assets, ignoring the fact that asset quality was apparent only in hindsight.
kiernanmcgowan 4y ago
In the same way that you should take a software engineer's take on why a a SQL query is slow. They're probably the most knowledgeable person in the room but that doesn't always mean that they're right.
- ipv6ipv4 4y ago
  A software engineer usually doesn't have a financial incentive to lie to you.
  - ununoctium87 4y ago
    Hey, some of us are passionate about paying rent and bills
    - DennisP 4y ago
      Generally I think you'll find it easier to pay rent if you provide accurate reasons for slow sql queries.
      - marginalia_nu 4y ago
        Eeh https://thedailywtf.com/articles/The-Speedup-Loop https://thedailywtf.com/articles/The-Speedup-Loop
  - CatWChainsaw 4y ago
    And yet upon reading your comment I immediately thought, "They 'trust me'. Dumb fucks."
  - deleted 4y ago
    [deleted]
- earleybird 4y ago
  Until you find the devs take on why the SQL query is slow is a hallucination in the LLM sense.
- 4y ago
varelse 4y ago
[dead]

Serious question: Is it a good idea (ever) to trust a bank's take on a financial crisis?

baldeagle 4y ago

Once you acknowledge their bias, they do know an awful lot about banking.

deleted 4y ago
[deleted]
smcin 4y ago
Well, their selective take is like a description of a mass shooting that only describes where the bodies ended up, but no discussion of who caused it, or even that bullets might have been involved, let alone which people actually did it: "Households had too much leverage in 2008 : Mortgage debt % potential GDP..." "The Global Financial Crisis was driven by price declines in low-quality assets with poor disclosure leading to a solvency crisis." Drink one finger very time you find a bank mentioning the Glass-Steagall Act, and ten bottles every time you find them admitting they lobbied Congress hard to repeal it. [0] "Why didn’t any Wall Street CEOs (or executives) go to jail after the financial crisis?" (also a list of criminal and civil charges, and which banks got fined) [1] ...and here's some shameless revisionism by Cato [2] ("It wasn't the banks [being allowed to issue the CDOs], it was the securities salesmen who spontaneously invented and sold CDOs"). I must remember that compelling excuse if I ever get busted running a casino in my own living-room. > "In any case, the 2008 financial crisis had precious little to do with Glass‐Steagall, one way or the other. It was caused primarily by bad lending policies, which in turn led to the growth of the subprime market to an extent that neither the lawmakers nor regulatory authorities recognized at the time. The commercial banks and parent holding companies that failed — or had to be sold to other viable financial institutions — did so because underwriting standards were abandoned." [0]: https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/death-glass-steagall-was-carefully-planned-and-highly-consequential https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/de... [1]: https://features.marketplace.org/why-no-ceo-went-jail-after-financial-crisis/ https://features.marketplace.org/why-no-ceo-went-jail-after-... [2]: https://www.cato.org/policy-analysis/repeal-glass-steagall-act-myth-reality# https://www.cato.org/policy-analysis/repeal-glass-steagall-a...
- JumpCrisscross 4y ago
  Glass-Steagall’s repeal wasn’t proximate to any post-repeal banking crises. (Glass-Steagall wouldn’t have prevented mortgage CDOs.) It certainly wouldn’t have done anything for SVB or Signature.
  - smcin 4y ago
    Re Glass-Steagall and 2008 crisis, Robert Reich and Elizabeth Warren disagree with you [https://robertreich.org/post/124114229225 https://robertreich.org/post/124114229225]. According to you, which legislation prevented the conflict-of-interest in banks writing trillions in subprime mortgages decades prior to 1999? or securities firms selling CDOs backed by subprime MBS? IIUC, the issue in 2008 was never "preventing mortgage CDOs" outright, but preventing the inflated valuations on junk tranches of subprime, i.e. mortgage lenders allowing securities sellers to intentionally create and sell junk with their assets. (and I clearly didn't say Glass-Steagall would have done anything for SVB or Signature; I was saying banks like Chase's selective edit of the chain of events around 2008 was a whitewash because it omitted mention of key events.)
    - JumpCrisscross 4y ago
      > Reich and Elizabeth Warren disagree with you They argue that "nonbanks got their funding from the big banks in the form of lines of credit, mortgages, and repurchase agreements" and if "big banks hadn’t provided them the money, the nonbanks wouldn’t have got into trouble." But nonbank funding channels were already alive, well, and causing chaos in the 1990s (LTCM) and before (S&Ls). Sure, banks juiced the problem. But it didn't start the fire, it didn't bring the fire home and it didn't meaningfully alter the fire's trajectory. And there is no evidence that their large depositors would have sat there if nonbanks offered competitive rates fueled by their nonsense. As we've seen this cycle, banks and nonbanks will chase yield when rates are low and credit is cheap. To argue that e.g. SoftBank wouldn't have SoftBanked if JPMorgan and JPMorgan Securities were separate misses the forest for the trees. > securities firms selling CDOs backed by subprime MBS Bank originates mortgage. Bank sells mortgage to securities firm. Securities firm issues as CDO. Nothing about this requires the lending arm and securities arm be under the same roof. Mortgage CDOs became a thing because of computers, not Glass-Steagall. Proponents of reinstating Glass-Steagall are broadly well intentioned. But there are real financial regulations that have real impact that this discussion crowds out.
Broken_Hippo 4y ago
Once you acknowledge their bias, they do know an awful lot about banking Sure, but I really don't. And a lot of other folks are the same. I know they are both biased and have financial incentives to lie or mislead me. As much as I might try, I know I might not be able to parse out the bullshit from the facts. Those facts are gonna stink of the bullshit even if I can verify it. At least with something like a plumber, I can get a second opinion and so on, and I might just be able to take care of the issue myself instead. This just isn't the case with a bank.
- fijiaarone 4y ago
  Funny, nobody is talking about Bitcoin or Decentralized Finance as a solution (or even a hedge) to this problem.
  - htss2013 4y ago
    Ummm, they are? See Balaji's million dollar bitcoin bet.

hifromLA 4y ago

Honestly this article seems pretty reasonable for the most part. Source matters, but content matters the most imo.

junofan 4y ago
One big issue is ignoring causality and hindsight. E.g. author contrasts “low quality” assets of 15 yrs ago with today’s “high quality” assets, ignoring the fact that asset quality was apparent only in hindsight.

kiernanmcgowan 4y ago

In the same way that you should take a software engineer's take on why a a SQL query is slow. They're probably the most knowledgeable person in the room but that doesn't always mean that they're right.

ipv6ipv4 4y ago
A software engineer usually doesn't have a financial incentive to lie to you.
- ununoctium87 4y ago
  Hey, some of us are passionate about paying rent and bills
  - DennisP 4y ago
    Generally I think you'll find it easier to pay rent if you provide accurate reasons for slow sql queries.
    - marginalia_nu 4y ago
      Eeh https://thedailywtf.com/articles/The-Speedup-Loop https://thedailywtf.com/articles/The-Speedup-Loop
- CatWChainsaw 4y ago
  And yet upon reading your comment I immediately thought, "They 'trust me'. Dumb fucks."
- deleted 4y ago
  [deleted]
earleybird 4y ago
Until you find the devs take on why the SQL query is slow is a hallucination in the LLM sense.
4y ago

varelse 4y ago

[dead]