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Its not fractional. Its 0%, see FDIC website on monetary policy. Also, the executives from those banks received compensation packages and structured equity sal

by than3 3y ago

Its not fractional. Its 0%, see FDIC website on monetary policy. Also, the executives from those banks received compensation packages and structured equity sales prior to the banks failing. They did make out like bandits, and congress was looking at options to claw it back, but nothing was ever finalized. Retirement funds which were invested heavily in index weighted stocks took the biggest hit net worth wise.

JumpCrisscross 3y ago
> Its not fractional. It’s 0%, see FDIC website on monetary policy. This is nonsense. Reserve requirements were deprecated in favour of finer-grained capital and liquidity requirements [1]. They serve the same purpose, but with a broader consideration than reserve requirements’ “is it a reserve” binary test. Banks’ ability to create money is still constrained by their capital requirements. We are on a fractional reserve system. [1] https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf 1993
- than3 3y ago
  What's nonsense is Basel III using market capitalization as fulfilling capital reserves. Those asset classes are heavily collateralized. If you want to get technical, what really happens when you convert the same underlying asset to be collaterilized multiple times and aggregate it in a single security or several steps removed so no one is the wiser?
  - JumpCrisscross 3y ago
    > Basel III utilizing leveraged market capitalization as fulfilling capital reserves Are you referring to SLR? In America, this is a second test [1]. Also, this is a total non sequitur. [1] https://www.newyorkfed.org/medialibrary/media/banking/international/10-08-15-Tilghman-Hill.pdf https://www.newyorkfed.org/medialibrary/media/banking/intern...
    - than3 3y ago
      Yes, that is insufficient, reporting is opaque, and creates many more additional threats to the health of the banking sector. Bank of International Settlements has a more accurate rundown. Most of the requirements are only applied to G-Sibs, which are only classified as such if they hold over 200 or 250B in assets (off the top of my head). If you were paying attention to what happened with FRC, that was a trial run of things to come. There's an option's mechanism to cause the market maker to create synthetic shares. In volatility spikes they have two options to recoup losses, write/sell options and receive preferential treatment for clearing in receivership, or purchase shares. The latter in the face of significant shorting in addition to gamma squeeze causes a short squeeze (Gamestop), the former causes aggregate indebtness violations forcing delisting within 30-60 days which aren't usually announced (FRC). Market mechanics say when there are more sellers than buyers the price goes down. If you can indirectly trigger more shares than are in existence being sold, the market can be tanked at a profit with sufficiently obfuscated capital. Anytime you have over a 100% leverage ratio, its no longer fractional. Given the complexity of collateralization and the lack of any single clearing house for collateralized debt. You have no way of proving that the underlying capital reserve won't suddenly vanish in a contagion crisis. At any time there are tens of thousands of floating contracts that influence the market capitalization/stock price.
      - JumpCrisscross 3y ago
        > Most of the requirements are only applied to G-Sibs All banks are subject to capital requirements. Large banks have extra testing; that doesn’t mean “most” capital requirements are waived for small banks. > an option's mechanism to cause the market maker to create synthetic shares Former options market maker. All market makers can do this, it’s called naked shorting, and it has little to nothing to do with capital requirements in general. > you have no way of proving that the underlying capital reserve won't suddenly vanish in a contagion crisis Capital isn’t cash in a vault. It’s risk-weighted assets minus liabilities. Public equities are heavily weighted; that disincentivises using them significantly for capital. The only proof one needs that capital won’t vanish is the Fed’s discount window. > Anytime you have over a 100% leverage ratio, its no longer fractional This is the definition of fractional reserve. 10% reserve requirement means 9 parts debt to 1 part reserves, a 900% debt ratio.

by than3 3y ago

JumpCrisscross 3y ago

> Its not fractional. It’s 0%, see FDIC website on monetary policy. This is nonsense. Reserve requirements were deprecated in favour of finer-grained capital and liquidity requirements [1]. They serve the same purpose, but with a broader consideration than reserve requirements’ “is it a reserve” binary test. Banks’ ability to create money is still constrained by their capital requirements. We are on a fractional reserve system. [1] https://www.federalreserve.gov/monetarypolicy/0693lead.pdf https://www.federalreserve.gov/monetarypolicy/0693lead.pdf 1993

than3 3y ago
What's nonsense is Basel III using market capitalization as fulfilling capital reserves. Those asset classes are heavily collateralized. If you want to get technical, what really happens when you convert the same underlying asset to be collaterilized multiple times and aggregate it in a single security or several steps removed so no one is the wiser?
- JumpCrisscross 3y ago
  > Basel III utilizing leveraged market capitalization as fulfilling capital reserves Are you referring to SLR? In America, this is a second test [1]. Also, this is a total non sequitur. [1] https://www.newyorkfed.org/medialibrary/media/banking/international/10-08-15-Tilghman-Hill.pdf https://www.newyorkfed.org/medialibrary/media/banking/intern...
  - than3 3y ago
    Yes, that is insufficient, reporting is opaque, and creates many more additional threats to the health of the banking sector. Bank of International Settlements has a more accurate rundown. Most of the requirements are only applied to G-Sibs, which are only classified as such if they hold over 200 or 250B in assets (off the top of my head). If you were paying attention to what happened with FRC, that was a trial run of things to come. There's an option's mechanism to cause the market maker to create synthetic shares. In volatility spikes they have two options to recoup losses, write/sell options and receive preferential treatment for clearing in receivership, or purchase shares. The latter in the face of significant shorting in addition to gamma squeeze causes a short squeeze (Gamestop), the former causes aggregate indebtness violations forcing delisting within 30-60 days which aren't usually announced (FRC). Market mechanics say when there are more sellers than buyers the price goes down. If you can indirectly trigger more shares than are in existence being sold, the market can be tanked at a profit with sufficiently obfuscated capital. Anytime you have over a 100% leverage ratio, its no longer fractional. Given the complexity of collateralization and the lack of any single clearing house for collateralized debt. You have no way of proving that the underlying capital reserve won't suddenly vanish in a contagion crisis. At any time there are tens of thousands of floating contracts that influence the market capitalization/stock price.
    - JumpCrisscross 3y ago
      > Most of the requirements are only applied to G-Sibs All banks are subject to capital requirements. Large banks have extra testing; that doesn’t mean “most” capital requirements are waived for small banks. > an option's mechanism to cause the market maker to create synthetic shares Former options market maker. All market makers can do this, it’s called naked shorting, and it has little to nothing to do with capital requirements in general. > you have no way of proving that the underlying capital reserve won't suddenly vanish in a contagion crisis Capital isn’t cash in a vault. It’s risk-weighted assets minus liabilities. Public equities are heavily weighted; that disincentivises using them significantly for capital. The only proof one needs that capital won’t vanish is the Fed’s discount window. > Anytime you have over a 100% leverage ratio, its no longer fractional This is the definition of fractional reserve. 10% reserve requirement means 9 parts debt to 1 part reserves, a 900% debt ratio.