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It makes perfect sense to focus on events defined in a uniform way across the dataset (in this instance US FDIC insured bank failures). Otherwise what you are d

It makes perfect sense to focus on events defined in a uniform way across the dataset (in this instance US FDIC insured bank failures). Otherwise what you are depicting is an arbitrary collation of events that may have very different causes. What I derive from the visualization (btw Bostock is a genious) are a couple of simple yet still tentative observations: * A new cluster of failures might be forming. The pattern of correlated failure is not new and it may point to similar business models and/or exposure to the same factors. Measurable correlation may also imply some level of contagion. This is defined as one event increasing the chances of another (after conditioning on common factors). But it is anybody's case what the fully developed phenomenon will look like. Three events is still small number statistics. Dont run an AI model on this. * There is at this point a remarkable absence of small bank failures. If this persist it hints that it is actually not the vanilla banking model (and poor risk management) that underlies what is happening, but more idiosyncratic factors that are specific to a few actors. In some sense that would be good news. One thing is for sure. The crisis will be properly visualized.

theteapot 3y ago
> There is at this point a remarkable absence of small bank failures. Not sure it's that remarkable? 1. not adjusted for inflation as others have commented. 2. There are less banks in the US, maybe up to 1/2 as many as in 2008 (https://www.statista.com/statistics/184536/number-of-fdic-insured-us-commercial-bank-institutions/ https://www.statista.com/statistics/184536/number-of-fdic-in...). 3. You may only be seeing the leading edge of something similar to 2008-2010 range - too early to tell.
- nologic01 3y ago
  For a qualitative discussion of what might be happening inflation is a just a nuisance factor. There are other similar factors (e.g the size of the economy is not constant either) that we can ignore for this purpose. The bank size distribution is more relevant but 50% of a large number is still a large number. You'd expect this to somehow show up in the statistics. Timing is indeed a key aspect. The actors involved have quite a bit of discretion and options and it takes time for all these to play out. But if it does transpire that small banks are not as seriously affected as in the last crisis and its more of a "middle class" bank disease this would be a strange new thing.
  - theteapot 3y ago
    > a strange new thing. Indeed. ZIRP was a new thing [1]. My laymen understanding is these big banks got caught out making really stupid (in hindsight anyway) bets interest rate would stay near zero and ran into liquidity issues. Is there a reason small banks wouldn't also make stupid bets like this? Maybe they have less money slushing around that isn't in loans or something. [1]: https://time.com/4180698/nouriel-roubini-global-economy/ https://time.com/4180698/nouriel-roubini-global-economy/
    - nologic01 3y ago
      Its still too early to connect the dots. That all sorts of low-quality bets would be unwound with rising interest rates was indeed a given. But in such an opaque financial system, the surprises can come from any corner. A vanilla bank business model actually benefits from rising rates as this generally widens the spread between their lending and borrowing. So then you have to look at second order effects. According to reports one causal factor is traced to their "low-credit risk" investment portfolios and various combinations of real hedging vs creative accounting for their interest rate sensitive positions. It may be that the really small banks do less of that. In any case the long period or low rates is really not an excuse. Bankers are not extracting rents from society to play being idiots. Managing risks is what they are supposed to be paid for. You don't manage risks by assuming tomorrow will the same as yesterday.

theteapot 3y ago

> There is at this point a remarkable absence of small bank failures. Not sure it's that remarkable? 1. not adjusted for inflation as others have commented. 2. There are less banks in the US, maybe up to 1/2 as many as in 2008 (https://www.statista.com/statistics/184536/number-of-fdic-insured-us-commercial-bank-institutions/ https://www.statista.com/statistics/184536/number-of-fdic-in...). 3. You may only be seeing the leading edge of something similar to 2008-2010 range - too early to tell.

nologic01 3y ago
For a qualitative discussion of what might be happening inflation is a just a nuisance factor. There are other similar factors (e.g the size of the economy is not constant either) that we can ignore for this purpose. The bank size distribution is more relevant but 50% of a large number is still a large number. You'd expect this to somehow show up in the statistics. Timing is indeed a key aspect. The actors involved have quite a bit of discretion and options and it takes time for all these to play out. But if it does transpire that small banks are not as seriously affected as in the last crisis and its more of a "middle class" bank disease this would be a strange new thing.
- theteapot 3y ago
  > a strange new thing. Indeed. ZIRP was a new thing [1]. My laymen understanding is these big banks got caught out making really stupid (in hindsight anyway) bets interest rate would stay near zero and ran into liquidity issues. Is there a reason small banks wouldn't also make stupid bets like this? Maybe they have less money slushing around that isn't in loans or something. [1]: https://time.com/4180698/nouriel-roubini-global-economy/ https://time.com/4180698/nouriel-roubini-global-economy/
  - nologic01 3y ago
    Its still too early to connect the dots. That all sorts of low-quality bets would be unwound with rising interest rates was indeed a given. But in such an opaque financial system, the surprises can come from any corner. A vanilla bank business model actually benefits from rising rates as this generally widens the spread between their lending and borrowing. So then you have to look at second order effects. According to reports one causal factor is traced to their "low-credit risk" investment portfolios and various combinations of real hedging vs creative accounting for their interest rate sensitive positions. It may be that the really small banks do less of that. In any case the long period or low rates is really not an excuse. Bankers are not extracting rents from society to play being idiots. Managing risks is what they are supposed to be paid for. You don't manage risks by assuming tomorrow will the same as yesterday.