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Given Apple is just inches away from becoming a chartered bank, & Buffet is one of their largest shareholders, I wonder if he wants this punishment also directe

Given Apple is just inches away from becoming a chartered bank, & Buffet is one of their largest shareholders, I wonder if he wants this punishment also directed towards Apples way too?

scoofy 3y ago
If Apple's bank defaults on it's customers deposits, I'm pretty sure he would. He's talking about tying the executives compensation to bank outcomes. It's called skin-in-the-game, and it's a value he's espoused for his entire career. The point is that moral-hazard is a big part of why these banks collapse. Executive compensation is tied to the value of the company on the way up, but not on the way down... which obviously creates a dynamic where executives are willing to take massive risks because they're basically playing with their investors' money.
- YeBanKo 3y ago
  Apple’s savings account is with Goldman Sachs, balance is limited to 250k and it is FDIC insured up to 250k. It seems like they are playing it safe: an existing bank with FDIC limits, but better integrated into UI and Apple ecosystem. It seems irrelevant to banking executives’ fuck ups.
  - scoofy 3y ago
    Woah... This is an extremely naive view of "banking safety." FDIC limits provide absolutely zero protections for bank investors. Buffett isn't worried about the customers, he's worried about these investors (himself). Executives can still trivially crash a bank, bankrupting investors, by putting their own earnings targets above what are long-run, safe strategies. This is the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
    - YeBanKo 3y ago
      He invested in Apple, not Goldman Sachs. If the latter defaults on deposits, it a damage to reputation damage, sure. But again, cap on balance and FDIC insurance should ensure that customers would get their money back and it probably would not even affect other services.
      - scoofy 3y ago
        Ahh... yes, I see now, fair point

Given Apple is just inches away from becoming a chartered bank, & Buffet is one of their largest shareholders, I wonder if he wants this punishment also directed towards Apples way too?

scoofy 3y ago

If Apple's bank defaults on it's customers deposits, I'm pretty sure he would. He's talking about tying the executives compensation to bank outcomes. It's called skin-in-the-game, and it's a value he's espoused for his entire career. The point is that moral-hazard is a big part of why these banks collapse. Executive compensation is tied to the value of the company on the way up, but not on the way down... which obviously creates a dynamic where executives are willing to take massive risks because they're basically playing with their investors' money.

YeBanKo 3y ago
Apple’s savings account is with Goldman Sachs, balance is limited to 250k and it is FDIC insured up to 250k. It seems like they are playing it safe: an existing bank with FDIC limits, but better integrated into UI and Apple ecosystem. It seems irrelevant to banking executives’ fuck ups.
- scoofy 3y ago
  Woah... This is an extremely naive view of "banking safety." FDIC limits provide absolutely zero protections for bank investors. Buffett isn't worried about the customers, he's worried about these investors (himself). Executives can still trivially crash a bank, bankrupting investors, by putting their own earnings targets above what are long-run, safe strategies. This is the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
  - YeBanKo 3y ago
    He invested in Apple, not Goldman Sachs. If the latter defaults on deposits, it a damage to reputation damage, sure. But again, cap on balance and FDIC insurance should ensure that customers would get their money back and it probably would not even affect other services.
    - scoofy 3y ago
      Ahh... yes, I see now, fair point