4 ms·

Consider these three pieces of information: 1. There is not a bank in existence in the US that could survive a bank run where 25% or more of the deposits leave

by jmyeet 4y ago

Consider these three pieces of information: 1. There is not a bank in existence in the US that could survive a bank run where 25% or more of the deposits leave. Not even JP Morgan Chase; and 2. There's a lot of evidence to suggest that the bank run on SVB was created by the direct actions of relatively few people, most notably Peter Thiel; and 3. The FDIC usually solves such bank runs by seizing the bank and selling the bank for parts. The banks all actually have more assets than depositor funds. So far at least, all depositor funds have been protected through assets and the FDIC (side note: the FDIC is funded by banks and receives no appropriations from Congress). It's expected that these asset sales are at a significant discount (eg CSFB acquiring UBS for a song although that's Switzerland not hte US obviously). So perhaps we should be asking if these bank runs are being deliberately created to profit from the collapse of smaller banks. In an ideal world, if true, people would end up in prison.

kirbyfan64sos 4y ago
This falls apart a bit when you consider that several larger banks did try to prop up First Republic for a bit, specifically because: > the FDIC is funded by banks and receives no appropriations from Congress So banks going down can certainly cause other banks money, too. That being said, the "significant discount" is usually because, when you acquire the assets, you also acquire the bank's liabilities, and AIUI roughly speaking you're paying the difference between what you gain and what you lose in the process. More specifically, the FDIC helped fund JP Morgan's acquisition of First Republic because, if JP Morgan simply acquired the assets & liabilities directly, they would not be enough liquidity for it to be safe. I.e. acquiring a smaller bank has some advantages but also some downsides, and it also destroys trust in the system which hurts the big banks too...so it's not really something that's exclusively beneficial and definitely not worth trying to trigger intentionally.

by jmyeet 4y ago

kirbyfan64sos 4y ago

This falls apart a bit when you consider that several larger banks did try to prop up First Republic for a bit, specifically because: > the FDIC is funded by banks and receives no appropriations from Congress So banks going down can certainly cause other banks money, too. That being said, the "significant discount" is usually because, when you acquire the assets, you also acquire the bank's liabilities, and AIUI roughly speaking you're paying the difference between what you gain and what you lose in the process. More specifically, the FDIC helped fund JP Morgan's acquisition of First Republic because, if JP Morgan simply acquired the assets & liabilities directly, they would not be enough liquidity for it to be safe. I.e. acquiring a smaller bank has some advantages but also some downsides, and it also destroys trust in the system which hurts the big banks too...so it's not really something that's exclusively beneficial and definitely not worth trying to trigger intentionally.