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Interestingly, the big banks today are some of the best run financial institutions in history. The real garbage in today's banking sector is in the mid-cap bank

Interestingly, the big banks today are some of the best run financial institutions in history. The real garbage in today's banking sector is in the mid-cap banks who went heavy into commercial real estate loans.

Bratmon 1y ago
Saving this for next time the big banks fail and demand a government bailout.
- mhh__ 1y ago
  I don't know what it would be, e.g. pretty major dislocations go untouched because the banks can't deploy capital into them like repo in 2019. It's quite possible that the drive towards central clearing kills someone e.g. by warehousing too much in one place/lack of discretion in margin requirements for a central house etc
Spooky23 1y ago
Agreed. In my city some midrange bank is financing a new commercial office space - the surrounding blocks are practically vacant. That whole category is practically useless for much anything other than allowing chinese people to get cash out of china.
digdugdirk 1y ago
Out of curiosity - what is the definition of a "well run financial institution"? I could imagine plenty of well run criminal organizations that make all sorts of profit via a combination of human trafficking and protection rackets. But is there an industry recognized understanding of what the best run financial institution would be?
- missedthecue 1y ago
  Extremely low leverage, diversified portfolios, lots of cash on the balance sheet, and large amounts of stable free cash flow. Citi which is probably the crappiest of the US megacap banks used to be levered 50:1, today it is only 12:1 and prints $10-$15B a year. This isn't just me the internet rando saying this. Steve Eisman (the character the big short is based on) has been covering the large banks for 30 years and said on his podcast that for the first time in his career he sees no problems in those banks.
orwin 1y ago
US banks managed to lobby recently to be able to hide their restructured loan rate, again, so while your sentence is true, given the hate for regulation in the US, do you reckon it will not last? Banking regulation drawn under Obama one are the main reason why US big banks financial are sane and not over-leveraged. I bet those will disappear slowly, then all at once. Given no one seems to be working on obvious insider trading cases (AMD weird trade pattern just before OpenAI announcement), I'm not sure the annual stress tests will even be looked at next year.
- Spooky23 1y ago
  My anecdata - I’m not based in NYC, and I’ve interviewed a half dozen excellent candidates purged from FINRA. That place has been set aflame. SEC is worse from what I’ve been told.
imtringued 1y ago
Credit Suisse wasn't a mid-cap bank.
- missedthecue 1y ago
  Not a US bank, and their market cap in 2019 was only $35B

Bratmon 1y ago

Saving this for next time the big banks fail and demand a government bailout.

mhh__ 1y ago
I don't know what it would be, e.g. pretty major dislocations go untouched because the banks can't deploy capital into them like repo in 2019. It's quite possible that the drive towards central clearing kills someone e.g. by warehousing too much in one place/lack of discretion in margin requirements for a central house etc

Spooky23 1y ago

Agreed. In my city some midrange bank is financing a new commercial office space - the surrounding blocks are practically vacant. That whole category is practically useless for much anything other than allowing chinese people to get cash out of china.

digdugdirk 1y ago

Out of curiosity - what is the definition of a "well run financial institution"? I could imagine plenty of well run criminal organizations that make all sorts of profit via a combination of human trafficking and protection rackets. But is there an industry recognized understanding of what the best run financial institution would be?

missedthecue 1y ago
Extremely low leverage, diversified portfolios, lots of cash on the balance sheet, and large amounts of stable free cash flow. Citi which is probably the crappiest of the US megacap banks used to be levered 50:1, today it is only 12:1 and prints $10-$15B a year. This isn't just me the internet rando saying this. Steve Eisman (the character the big short is based on) has been covering the large banks for 30 years and said on his podcast that for the first time in his career he sees no problems in those banks.

orwin 1y ago

US banks managed to lobby recently to be able to hide their restructured loan rate, again, so while your sentence is true, given the hate for regulation in the US, do you reckon it will not last? Banking regulation drawn under Obama one are the main reason why US big banks financial are sane and not over-leveraged. I bet those will disappear slowly, then all at once. Given no one seems to be working on obvious insider trading cases (AMD weird trade pattern just before OpenAI announcement), I'm not sure the annual stress tests will even be looked at next year.

Spooky23 1y ago
My anecdata - I’m not based in NYC, and I’ve interviewed a half dozen excellent candidates purged from FINRA. That place has been set aflame. SEC is worse from what I’ve been told.

imtringued 1y ago

Credit Suisse wasn't a mid-cap bank.

missedthecue 1y ago
Not a US bank, and their market cap in 2019 was only $35B