5 ms·

Banks used to fail all of the time with depositors losing assets. This caused a lot of problems, so we enacted some regulation. Now banks still fail (several

by loumf 13y ago

Banks used to fail all of the time with depositors losing assets. This caused a lot of problems, so we enacted some regulation. Now banks still fail (several weekly, without much notice), but depositors have mandated insurance. Are you against that?

drcode 13y ago
If depositors didn't have mandated insurance, they would pay more attention to the credit-worthiness of the bank they work with, and we might have avoided the 2008 debacle.
- gknoy 13y ago
  It seems that the health of the bank is something which is actively obfuscated. Saying "buyer beware" is like telling people that they should be responsible to make sure that the cars they buy are safe enough, or to make sure that the restaurants they eat at have clean enough standards in the kitchens. That's the entire point of regulatory inspections: No one can afford to be attentive to that level of detail or be an expert in everything.
  - drcode 13y ago
    I agree people cannot be attentive to everything. HOWEVER, people can be a lot more attentive now then they could ten years ago (for example, online reviews of cars/restaurants/etc) and in ten years they will be able to be even more attentive. If we do things that foster attentiveness, everyone will be better off.
    - dragonwriter 13y ago
      > HOWEVER, people can be a lot more attentive now then they could ten years ago (for example, online reviews of cars/restaurants/etc) Its a good thing online reviews are reliable sources of information with transparent provenance that neither the company itself nor its competitors spend substantial efforts loading with false-flag propaganda. Or, at least, that's a good thing in whatever alternate universe it is true in.
- imgabe 13y ago
  If depositors didn't have mandated insurance, they would have magically had the time and inclination to learn about credit default swaps and see the dangers in the system that many people who do that for a living were unaware of?
  - drcode 13y ago
    Sure: If I didn't have mandated insurance, I would bank with the bank that maintained a high fractional reserve- It's obvious to anyone that you'd want to do this. Banks that handled credit default swaps surprise had the lowest fractional reserves.
    - imgabe 13y ago
      Of course. Next time I'm choosing a bank I'll be sure to pay close attention to the part of their brochure where they say what their fractional reserve is.
      - drcode 13y ago
        You don't have to, because of FDIC insurance... ...and now you know why things went to hell in 2008.
        imgabe 13y ago
        That's a completely different take on the financial crisis than anything else I've read. The history of the financial industry is one of the industry finding ways around existing regulation, over-leveraging itself, and then crashing. Financial panics were a common occurrence before there were regulations. You're saying that less regulation would create a more stable system, but that historically has not been the case. In other words, for what you're proposing, we tried it and it didn't work.
        drcode 13y ago
        Actually, we sorta tried this between 1850 and 1920, which is pretty much the highest GDP growth time period in the history of the US.
- smtddr 13y ago
  There is no way I have enough time in my life to fully understand how the banking system works to judge their worth. And I suspect those in power prefer that the masses don't have that understanding either. I barely understand how my Honda Civic works.
  - drcode 13y ago
    You can't look online and find info from more knowledgeable people on whether the Honda Civic is a good car?
    - deleted 13y ago
      [deleted]
    - smtddr 13y ago
      Sure I could do that. That's how I ended up with a Honda Civic. I can also ask my friends if they like Bank Of America or CitiBank or whatever; but to truly understand the health of a bank... I'd need a degree or something.
      - drcode 13y ago
        No, you just go to a bank that maintains 100% fractional reserves (if you don't wan't to take on additional risk) No degree required.
        smtddr 13y ago
        Easier said that done apparently... http://www.ronpaulforums.com/showthread.php?148961-Any-Full-Reserve-Banks&s=217681f16d69f4b47677d503901cb123 http://www.ronpaulforums.com/showthread.php?148961-Any-Full-... I'm having trouble understanding how such a bank would be profitable; assuming banks need to be profitable to justify their existence.
        drcode 13y ago
        They're not profitable because of the existence of fdic insurance.
- npizzolato 13y ago
  The fact that people still kept funds in Mt. Gox is proof enough of the absurdity of this position.
  - drcode 13y ago
    I didn't keep my funds in Mt. Gox, due to the risks involved. It's hard for me to judge from my position whether others who did used bad judgement or simply were unlucky while taking a calculated risk.
- notahacker 13y ago
  The average consumer doesn't understand banking well enough to realise they'd receive a better interest/fee/overdraft/etc structure at half a dozen other banks that actively market their more favourable interest/fee/overdraft structure, never mind well enough to understand the bank's exposure to complex toxic assets that couldn't be grasped by professionals paid orders of magnitude more than them specifically to quantify that risk.
  - drcode 13y ago
    Why not just use a bank that doesn't do any outside investing and keeps all the money inside the bank? Then you don't need any "experts". (To answer my own question: These types of banks don't exist because FDIC insurance makes them unprofitable)
- josephlord 13y ago
  The bond holders and shareholders didn't have insurance nor did the counter parties (mostly other banks)[0] but didn't effectively assess the risks despite thousands of analysts between them. How could/should a retail investor with a few hundred or thousand dollars assessed the bank's creditworthiness? A few analysts, economists and traders saw it coming but most did not. [0] I know they were largely bailed out but there was no promise in advance (and we probably agree that they shouldn't have been bailed out to the extent that they were.
  - drcode 13y ago
    Simple: You go to a bank that isn't taking these risks to begin with. (Such banks don't exist now because FDIC insurance means there's no money in creating such a bank.)
    - josephlord 13y ago
      Even in such a case how do you evaluate the quality of the loans leant?
- dragonwriter 13y ago
  > If depositors didn't have mandated insurance, they would pay more attention to the credit-worthiness of the bank they work with, and we might have avoided the 2008 debacle. Or, more likely, the 2008 debacle (a consequence, in large parts, of removing regulations that addressed contributing causes of the 1929 debacle) would have looked more like the 1929 debacle (since you then would have also removed a regulation designed to mitigate the effect of events like the 1929 debacle). The absence of regulation of credit-worthiness of banks doesn't give the average depositor either the time, inclination, or skill to evaluate the credit-worthiness of banks, especially when, as was actually the case in the 2008 debacle, information relevant to that is actively being concealed under many layers of obfuscation.
thrill 13y ago
Yes I'm against mandated insurance. Some enterprising group of young people will be able to make a decent living evaluating the viability of bitcoin (and dogecoin, etc) exchanges and selling the information in a monthly email. So much win. So little compulsion.

by loumf 13y ago

drcode 13y ago

If depositors didn't have mandated insurance, they would pay more attention to the credit-worthiness of the bank they work with, and we might have avoided the 2008 debacle.

gknoy 13y ago
It seems that the health of the bank is something which is actively obfuscated. Saying "buyer beware" is like telling people that they should be responsible to make sure that the cars they buy are safe enough, or to make sure that the restaurants they eat at have clean enough standards in the kitchens. That's the entire point of regulatory inspections: No one can afford to be attentive to that level of detail or be an expert in everything.
- drcode 13y ago
  I agree people cannot be attentive to everything. HOWEVER, people can be a lot more attentive now then they could ten years ago (for example, online reviews of cars/restaurants/etc) and in ten years they will be able to be even more attentive. If we do things that foster attentiveness, everyone will be better off.
  - dragonwriter 13y ago
    > HOWEVER, people can be a lot more attentive now then they could ten years ago (for example, online reviews of cars/restaurants/etc) Its a good thing online reviews are reliable sources of information with transparent provenance that neither the company itself nor its competitors spend substantial efforts loading with false-flag propaganda. Or, at least, that's a good thing in whatever alternate universe it is true in.
imgabe 13y ago
If depositors didn't have mandated insurance, they would have magically had the time and inclination to learn about credit default swaps and see the dangers in the system that many people who do that for a living were unaware of?
- drcode 13y ago
  Sure: If I didn't have mandated insurance, I would bank with the bank that maintained a high fractional reserve- It's obvious to anyone that you'd want to do this. Banks that handled credit default swaps surprise had the lowest fractional reserves.
  - imgabe 13y ago
    Of course. Next time I'm choosing a bank I'll be sure to pay close attention to the part of their brochure where they say what their fractional reserve is.
    - drcode 13y ago
      You don't have to, because of FDIC insurance... ...and now you know why things went to hell in 2008.
      - imgabe 13y ago
        That's a completely different take on the financial crisis than anything else I've read. The history of the financial industry is one of the industry finding ways around existing regulation, over-leveraging itself, and then crashing. Financial panics were a common occurrence before there were regulations. You're saying that less regulation would create a more stable system, but that historically has not been the case. In other words, for what you're proposing, we tried it and it didn't work.
        drcode 13y ago
        Actually, we sorta tried this between 1850 and 1920, which is pretty much the highest GDP growth time period in the history of the US.
smtddr 13y ago
There is no way I have enough time in my life to fully understand how the banking system works to judge their worth. And I suspect those in power prefer that the masses don't have that understanding either. I barely understand how my Honda Civic works.
- drcode 13y ago
  You can't look online and find info from more knowledgeable people on whether the Honda Civic is a good car?
  - deleted 13y ago
    [deleted]
  - smtddr 13y ago
    Sure I could do that. That's how I ended up with a Honda Civic. I can also ask my friends if they like Bank Of America or CitiBank or whatever; but to truly understand the health of a bank... I'd need a degree or something.
    - drcode 13y ago
      No, you just go to a bank that maintains 100% fractional reserves (if you don't wan't to take on additional risk) No degree required.
      - smtddr 13y ago
        Easier said that done apparently... http://www.ronpaulforums.com/showthread.php?148961-Any-Full-Reserve-Banks&s=217681f16d69f4b47677d503901cb123 http://www.ronpaulforums.com/showthread.php?148961-Any-Full-... I'm having trouble understanding how such a bank would be profitable; assuming banks need to be profitable to justify their existence.
        drcode 13y ago
        They're not profitable because of the existence of fdic insurance.
npizzolato 13y ago
The fact that people still kept funds in Mt. Gox is proof enough of the absurdity of this position.
- drcode 13y ago
  I didn't keep my funds in Mt. Gox, due to the risks involved. It's hard for me to judge from my position whether others who did used bad judgement or simply were unlucky while taking a calculated risk.
notahacker 13y ago
The average consumer doesn't understand banking well enough to realise they'd receive a better interest/fee/overdraft/etc structure at half a dozen other banks that actively market their more favourable interest/fee/overdraft structure, never mind well enough to understand the bank's exposure to complex toxic assets that couldn't be grasped by professionals paid orders of magnitude more than them specifically to quantify that risk.
- drcode 13y ago
  Why not just use a bank that doesn't do any outside investing and keeps all the money inside the bank? Then you don't need any "experts". (To answer my own question: These types of banks don't exist because FDIC insurance makes them unprofitable)
josephlord 13y ago
The bond holders and shareholders didn't have insurance nor did the counter parties (mostly other banks)[0] but didn't effectively assess the risks despite thousands of analysts between them. How could/should a retail investor with a few hundred or thousand dollars assessed the bank's creditworthiness? A few analysts, economists and traders saw it coming but most did not. [0] I know they were largely bailed out but there was no promise in advance (and we probably agree that they shouldn't have been bailed out to the extent that they were.
- drcode 13y ago
  Simple: You go to a bank that isn't taking these risks to begin with. (Such banks don't exist now because FDIC insurance means there's no money in creating such a bank.)
  - josephlord 13y ago
    Even in such a case how do you evaluate the quality of the loans leant?
dragonwriter 13y ago
> If depositors didn't have mandated insurance, they would pay more attention to the credit-worthiness of the bank they work with, and we might have avoided the 2008 debacle. Or, more likely, the 2008 debacle (a consequence, in large parts, of removing regulations that addressed contributing causes of the 1929 debacle) would have looked more like the 1929 debacle (since you then would have also removed a regulation designed to mitigate the effect of events like the 1929 debacle). The absence of regulation of credit-worthiness of banks doesn't give the average depositor either the time, inclination, or skill to evaluate the credit-worthiness of banks, especially when, as was actually the case in the 2008 debacle, information relevant to that is actively being concealed under many layers of obfuscation.

thrill 13y ago

Yes I'm against mandated insurance. Some enterprising group of young people will be able to make a decent living evaluating the viability of bitcoin (and dogecoin, etc) exchanges and selling the information in a monthly email. So much win. So little compulsion.