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Fire the management. Destroy the stockholders. Protect the depositors.

by AnimalMuppet 3y ago

JumpCrisscross 3y ago
> Fire the management. Destroy the stockholders. Protect the depositors. TL; DR What we did in March 2023.
- AnimalMuppet 3y ago
  That took me a minute. Silicon Valley Bank, I presume? I don't recall the details, but yes, there are historic examples of this being done well.
  - JumpCrisscross 3y ago
    > took me a minute. Silicon Valley Bank, I presume First Republic, SVB, Signature—our nation’s second, third and fourth largest bank failures in its history [1]. (WaMu.) Resolved so smoothly we don’t even talk about it less than a year later. [1] https://en.m.wikipedia.org/wiki/List_of_largest_bank_failures_in_the_United_States https://en.m.wikipedia.org/wiki/List_of_largest_bank_failure...
    - FireBeyond 3y ago
      > Resolved so smoothly we don’t even talk about it less than a year later. Except now with the banks understanding that FDIC will make depositors whole, above and beyond the $250K limits. The only thing this does is increase banks comfort with risk.
      - AnimalMuppet 3y ago
        Not if the managers got fired. Not if the stockholders got wiped out. The stockholders care more about the stockholders than they do about the depositors. This is also true for most of the managers, maybe all of them.
        FireBeyond 3y ago
        Most of SVB's executive team are now working at other banks as executives there. That to me signals that those banks are willing to roll the dice that "maybe we don't take as much risk as they did at SVB, but more than we're doing now".
- marcosdumay 3y ago
  I didn't got the impression your 2023 crisis got anything near that bad. Weren't those banks just sold without the government stepping in?
  - JumpCrisscross 3y ago
    > Weren't those banks just sold without the government stepping in? They were put into receivership under the FDIC before being sold in a structured process [1]. In any other country, and at any time prior to ~2012 in our nation’s history, March 2023 would have been a financial crisis. [1] https://www.fdic.gov/news/press-releases/2023/pr23019.html https://www.fdic.gov/news/press-releases/2023/pr23019.html
generic92034 3y ago
I wonder how much of a deterrent for executives at other banks firing the management really is, in the age of golden parachutes and good old boys networks.
- toomuchtodo 3y ago
  https://www.banking.senate.gov/imo/media/doc/recoup_act_one-pager.pdf https://www.banking.senate.gov/imo/media/doc/recoup_act_one-... https://www.congress.gov/bill/118th-congress/senate-bill/2190 https://www.congress.gov/bill/118th-congress/senate-bill/219...
  - generic92034 3y ago
    Thanks for the links, measures like that might at least cause some concerns. On the other hand individual risk estimation sometimes seems to be completely out of whack when it comes to high level executives.

Fire the management. Destroy the stockholders. Protect the depositors.

JumpCrisscross 3y ago

> Fire the management. Destroy the stockholders. Protect the depositors. TL; DR What we did in March 2023.

AnimalMuppet 3y ago
That took me a minute. Silicon Valley Bank, I presume? I don't recall the details, but yes, there are historic examples of this being done well.
- JumpCrisscross 3y ago
  > took me a minute. Silicon Valley Bank, I presume First Republic, SVB, Signature—our nation’s second, third and fourth largest bank failures in its history [1]. (WaMu.) Resolved so smoothly we don’t even talk about it less than a year later. [1] https://en.m.wikipedia.org/wiki/List_of_largest_bank_failures_in_the_United_States https://en.m.wikipedia.org/wiki/List_of_largest_bank_failure...
  - FireBeyond 3y ago
    > Resolved so smoothly we don’t even talk about it less than a year later. Except now with the banks understanding that FDIC will make depositors whole, above and beyond the $250K limits. The only thing this does is increase banks comfort with risk.
    - AnimalMuppet 3y ago
      Not if the managers got fired. Not if the stockholders got wiped out. The stockholders care more about the stockholders than they do about the depositors. This is also true for most of the managers, maybe all of them.
      - FireBeyond 3y ago
        Most of SVB's executive team are now working at other banks as executives there. That to me signals that those banks are willing to roll the dice that "maybe we don't take as much risk as they did at SVB, but more than we're doing now".
marcosdumay 3y ago
I didn't got the impression your 2023 crisis got anything near that bad. Weren't those banks just sold without the government stepping in?
- JumpCrisscross 3y ago
  > Weren't those banks just sold without the government stepping in? They were put into receivership under the FDIC before being sold in a structured process [1]. In any other country, and at any time prior to ~2012 in our nation’s history, March 2023 would have been a financial crisis. [1] https://www.fdic.gov/news/press-releases/2023/pr23019.html https://www.fdic.gov/news/press-releases/2023/pr23019.html

generic92034 3y ago

I wonder how much of a deterrent for executives at other banks firing the management really is, in the age of golden parachutes and good old boys networks.

toomuchtodo 3y ago
https://www.banking.senate.gov/imo/media/doc/recoup_act_one-pager.pdf https://www.banking.senate.gov/imo/media/doc/recoup_act_one-... https://www.congress.gov/bill/118th-congress/senate-bill/2190 https://www.congress.gov/bill/118th-congress/senate-bill/219...
- generic92034 3y ago
  Thanks for the links, measures like that might at least cause some concerns. On the other hand individual risk estimation sometimes seems to be completely out of whack when it comes to high level executives.