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I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist" I'm not sure what the best solution is here, but making the b
by passwordoops 3y ago
I've said it before, I'll say it again - "too big to fail" should be recast as "too big to exist"
I'm not sure what the best solution is here, but making the big banks even bigger is not it. This is just going to make the banking system more concentrated and no concentrated market is good for anyone. Least of all because the past decade+ has set the precedent that the banks will be bailed out... If they're big enough
- nonethewiser 3y ago> This is just going to make the banking system more concentrated More concentrated. More highly regulated. Closer to being absorbed by the state. I'm not saying that's necessarily going to happen someday. But that is the direction it is (and has been) moving.
- brianmcc 3y agoAlso closer to absorbing the state. I'm not a tin foil hat person, but corporations growing larger than nation states just doesn't seem remotely far fetched. Which corporation will be first to sit at the UN table?
- nonethewiser 3y agoBut who is creating the regulation? The answer to that is funny. It is literally the state, which is to my point, but it is also shaped by the banks, which is to your point.
- RestlessMind 3y ago> But who is creating the regulation? You know who writes our laws? Lobbyists. Politicians are not the ones drafting the bill. They merely take the drafts produced by lobbyists and then pass them. Do you also know who runs various government agencies tasked with regulating different sectors? Again, it is a revolving door for private sector execs. > It is literally the state True, but the state is, to a large extent, influenced by corporations.
- metajon 3y agoOr there is a new term that subsumes them both: the "regime." And with this small substitution, and a slight modification to the source material we see that the "absorption" may already be complete.
- digging 3y agoWhen corporations write the laws that regulate them, and they buy the politicians who will enact those laws, the line around what defines "the state" is a bit fuzzy. (And that's not speculative, it happens all the time.)
- jjk166 3y agohttps://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture
- nilptr 3y agoA corporation and a monarchy aren't all that different. I dunno why people think the idea of a corporation being the state is so wild.
- wheelerof4te 3y agoEver heard the term "CorpoNation"? I did, in a old RTS game called Metal Fatigue. Was pretty fun for a while.
- kneebonian 3y agoObviously either ComStar or the Spacing Guild. But don't worry that doesn't happen until after we have a butlerian jihad.
- capableweb 3y ago> Closer to being absorbed by the state. Or the opposite.
- deleted 3y ago[deleted]
- chiefalchemist 3y agoRemember circa 2008 how "leader" after "leader" said that eight big banks was too few and that seven was a step in the wrong direction? Remember that? Apparently, no one remembers. Or it was simply more political / leadership theatre of tell the proles one thing while doing the opposite. Perhaps both. People complain about "the democracy" and they often falsely name names. It easy to blame a symptom when you don't understand the problem. And yet those same people are silent about the banks, power, cronie capitalism, etc. Many are in denial. Others are able to control the narrative. In either case you can't solve root problems when you're not even willing to address them.
- deleted 3y ago[deleted]
- mjburgess 3y agoWell, I think we've discovered banking is a "public utility" -- things which are too big to fail.
- landoftheice 3y ago[dead]
- jghn 3y agothat’s fine, but if we’re going that way then people shouldn’t be getting rich running them by socializing the risk and not the profits
- SllX 3y agoOr we can just not socialize the risks to lenders. I mean that’s always an option.
- WillAdams 3y agoFine, then they should be non-profit credit unions.
- sclarisse 3y agoNo, they’ll be replaced by something like The People’s Ledger, as proposed by Comptroller of the Currency nominee, Saule Omarova, in her paper of the same name. (She was nominated by President Biden in 2021. Not just a random kook!) Under such a regime all banks will put customer funds at the Fed, which will be the sole entity to allocate credit, with banks as mere customer service frontends. It will use that power to allocate credit to advance nakedly political goals, with much less attention paid to minutae like risk, ability to repay, and other pesky economic concerns the free market would elevate. We’re already forgiving student loans; watch the People’s Ledger forgive mortgages!! And when that bank fails it will just fall back on moneyprinting.
- deleted 3y ago[deleted]
- aqme28 3y agoYeah it seems obviously risky. A small bank gets a little insolvent and so it gets absorbed by a larger bank. This system works fine when there’s a larger bank to absorb them, but it’s obviously untenable. What happens when the largest bank needs saving?
- worldsayshi 3y agoIt gets absorbed by the government?
- ImHereToVote 3y agoRobin Williams had a fairly accurate depiction of what happens. https://www.youtube.com/watch?v=etQeFJ2lbbo https://www.youtube.com/watch?v=etQeFJ2lbbo
- aqme28 3y agoFeels more like this Futurama bit: https://youtu.be/0SYpUSjSgFg?t=66 https://youtu.be/0SYpUSjSgFg?t=66
- bullfightonmars 3y ago> Just like daddy puts in his drink every morning ... and then he gets mad.
- __MatrixMan__ 3y agoPeople stop accepting dollars. It's about time for something new anyway.
- ant6n 3y agoBut if theres only one bank left and theres a bank run, where would people panic-transfer their money? It cannot go anywhere else! …see, the one big bank cannot fail.
- lobochrome 3y agoFed accounts for everyone.
- singleshot_ 3y agoSo many people in this thread want a narrow bank and so few of them have treasurydirect accounts. It makes me wonder if maybe I’m the one who is missing something?
- gonzo41 3y agoKinda makes sense for the government open a commonwealth bank of sorts and allow people to hold deposits against the government directly. Cut's out a layer of rent seeking markets.
- lockhouse 3y agoHard disagree, the federal government already has too much power. Giving them that sort of access and direct control over personal financial assets would be widely abused. The government and those who work for them are not your friends. The power you give them can and will be abused and will never be returned to the people without great difficulty and probably bloodshed.
- passwordoops 3y agoThing is neither are the oligarchs who run the financial system. Take a look at the labor struggles of the early 1900s in the US - that wasn't people struggling against a government using their army, it was people struggling against private ownership turning hired militias against their employees. The problem is concentrated power. Whether it's government or private, concentrated power in anything is bad
- lockhouse 3y agoYes but in theory the banks are under the pressure of competition. Anything that is moved under the umbrella of the federal government essentially becomes a monopoly. I can switch banks in less than an hour, it takes months to years to switch countries.
- passwordoops 3y agoLike in theory Google and Microsoft are competing? Or CVS and Walgreens? Or Boeing and Lockheed? Or Visa and MasterCard? Oligopolies are arranged monopolies with the further disadvantage of not being subject to the freedoms and rights set out by the constitution. Unless they are broken up, we'll eventually be in a place where things are worse than under government control
- vkou 3y ago... Except that the too-big-to-fail banks are under more stricter capitalization rules than the banks that are failing right now, which is why the small-medium capitalization banks are going through a bloodbath.
- WeylandYutani 3y agoI listened to an interview with an expert who explained that the US specifically lobbied that small banks are exempt from Basel 3 regulations. Europe doesn't have 5000 banks they all merged decades ago.
- RandomLensman 3y agoEU has about 5000 banks as well, I think
- bradleyjg 3y agoBanking is fundamentally broken. People want zero risk, demand deposits that pay interest. There’s no business model that can provide that. It would be perfectly possible for a business to provide zero risk demand deposits—-but the business would have to charge customers for its custodial operations rather than making money by writing loans. Of course because we live in times where no one can tell the people that what they want is impossible and ridiculous, we instead have a house of cards with various parts of the government (including parts we pretend aren’t the government) eating the risks.
- runnerup 3y agoPeople aren’t demanding deposit accounts that pay interest. The banks with the most deposits are providing 0.01% interest. People are still sticking their money there more than they put in banks which are offering >3% APR.
- femiagbabiaka 3y agoExactly right. People want reliability and stability from "household names" and they're go to banks that are offering fundamentally worse products[1] in order to get it. 1: At least in savings. The larger companies have insane credit card deals.
- Invictus0 3y agoThat's because high yield bank accounts are a phenomenon of the last 6 months and retail by and large hasn't got the message yet. 0.01 is not likely to last forever, and the TBTF banks are losing deposits.
- mint2 3y agoWalked by a chase branch, they had some advertisement for a 4% cd. So Apparently the big banks are starting to feel the account drain. Also brokered cds from the likes of Wells Fargo and similar can be 5%. Big banks definitely are starting to feel it
- debacle 3y ago> I'm not sure what the best solution is here Stop letting banks write the regulations?
- skeeter2020 3y agoWell you now have JP Morgan Chase with almost 2.5 TRILLION dollars in deposits, and the current regulators have essentially punted on this issue to the next administration. If they have a liquidity crisis the western world will essentially end.
- epolanski 3y agoAin't that too dramatic? Yes, I can imagine such a huge bank to cause deep troubles in financial markets and real economy and this impacting the livelihood of people all around the globe. But saying that "western world" will essentially end when it didn't in face of world wars, grave epidemics and plagues, etc seems definitely too dramatic.
- deleted 3y ago[deleted]
- ehvatum 3y ago> If they have a liquidity crisis the western world will essentially end. Already had one in 2008. Thankfully, our currency’s value is notional and the fed can print more until such time as the bank run ends.
- candiddevmike 3y agoAre we still waiting for the 2008 bank run to end then?
- akira2501 3y ago> Thankfully, our currency’s value is notional and the fed can print more until such time as the bank run ends. It's value is not notional. If you make more currency then all currency in circulation now has less value. "Quantitative Easing" is simply a way of taxing you after the fact. Worse still if bonds are involved. Now it's a way of taxing your children before they're even born.
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- 2OEH8eoCRo0 3y agoIt's a fuzzy boundary. I agree in theory but where is the line where something is too big? We encourage companies to grow as large as possible and hope that competition will provide the counter friction. The only fail-safe is the government trust busting on a case by case basis which might not be optimal. Are there any regulations that could provide economic incentives to small businesses and make it increasingly difficult for large companies to grow larger? Wealth going in one direction is not a very stable system.
- passwordoops 3y agoThe regulations already exist - don't buy the competition and don't use your market power to undercut the competition. Simple and worked excellently in the post-WW2 boom years. But regulators stopped enforcing those regulations in the 1980s because of "efficiency" and each administration after Reagan doubled down. Luckily some politicians are starting to see the error of their ways and listening to thinkers like Matt Stoller: https://mattstoller.substack.com/ https://mattstoller.substack.com/
- deleted 3y ago[deleted]
- 2OEH8eoCRo0 3y agoThat's my point. The govt can choose to not do anything which is how we got here which makes it not a great fail-safe. Perhaps strengthen the laws we have and make it more imperative and easy for the government to act?
- danaris 3y agoWhile I fully support this, I think it's important to bear in mind that a) what constitutes anticompetitive activity or otherwise warrants antitrust action is likely to always be at least somewhat subjective, and require human judgement, meaning that motivated humans can choose not to do it in many cases, and b) depending on the degree to which the government is captured by a party that actively works against antitrust laws and believes that bigger[0] is always better, and on how long said capture lasts, it doesn't matter what laws we put in place now. Laws can be changed by the government. We're not going to be able to make a foolproof system just by making better laws on this one issue. If we believe strongly in antitrust with teeth, we also need to be committed to supporting politicians who favor it, and political and governmental systems that prevent a vocal minority from seizing control of the engines of power, consistently for the rest of our lives. [0] Bigger payouts for their friends, that is, which means bigger kickbacks now and bigger paychecks later when they go to work for said friends
- wheelerof4te 3y agoAs if the entire end goal of capitalism wasn't monopolization of every single product and service. Welcome to reality where "competition" and "free market" are just buzz words meant to fool the naive populace.
- krunck 3y agoIf banks are going to be private then the regulation of them needs to be the inverse of what it is now. Regulation now is: You can do anything you want except X,Y, and Z. It should really be: You can only do A, B, and C and in the ways we tell you.
- deleted 3y ago[deleted]
- JumpCrisscross 3y ago> "too big to fail" should be recast as "too big to exist" Was SVB too big to fail? Signature? Apparently! TBTF is now a popular concept more than a legal one. We need explicit universal deposit insurance along with the rules that make that guarantee tenable. I also think experiments in narrow banking, e.g. permitting each state to charter a narrow bank open to its residents and guaranteed against losses (e.g. due to fraud) by its own treasury to access a special type of reserve account, need to commence.
- ChadNauseam 3y agoSVB did fail, with basically no repercussions to the economy as a whole. Under what interpretation was it too big to fail?
- evancox100 3y agoYa but the uninsured depositors were still bailed out, so I think it's a little more complicated than that. The FDIC insurance fund is predicated on any one bank (and their customers) being small enough that if you wipe out the uninsured deposits, the system as a whole will be ok. That was arguably not the case, or at least regulators didn't want to take that risk for SVB or Signature.
- mbesto 3y agoThe solution is simple, the implications are not: Eliminate the Fed. Banks eliminate inherent risk by being backstopped by the fed. A simple example of how this works is FDIC insurance. If a bank had all of its depositors holding $250k or less, it could essentially lend out all of that money with very little risk of getting sued by their depositors.
- anigbrowl 3y agoEnd the Fed people seem to think a catchy bumper sticker is an argument. Why was the Fed established in the first place? Because people were sick of bank runs and periodic financial panics. Do incumbents in such a system leverage their status, leading to new kinds of abuses? Arguably yes. That said, SVB was a member bank of the Federal Reserve and it didn't help their shareholders when the market decided that they were over-exposed. Looking at your assertion from the opposite direction, if you don't trust the Federal Reserve, why would you trust a smaller bank to do a better job? Sure, it's in their long-term interest to self-regulate and operate prudently, but history is full of people acting irrationally because of greed, myopia, confirmation bias etc. The fed at least exhibits moderate transparency of structure and operation - risk is distributed across a set of reserve banks, and the membership and balance sheets of the regional reserve banks are open to scrutiny.
- mbesto 3y agoI don't disagree with anything you said. People want an answer to "I'm not sure what the best solution is here, but making the big banks even bigger is not it." And that's what it basically boils down to. You don't want big banks? Eliminate the Fed.