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• Thread: 55 Goods vs 12 No Goods

1. Economist
   5034
   

   The elites always win. they create bubbles, profit from them, then the system crashes and then society gives them powers to solve a crisis they created. IN the process, again giving themselves a payout. They always win either way. They did the same thing during covid.

   Agree that this is the best solution. Federal reserve is a massive j0ke. Cl0wns forgot they are fighting inflation somehow.
   

   The cheap mortgages / high asset prices during covid were shifted to banks and now the artificially low rates experienced are destroying the banks, but then they get bailed out. So this was all a massive wealth transfer to capital owners / wealthy.

   1 week ago # QUOTE 4 Volod 0 Vlad !

2. Economist
   f3ab
   

   That's what the Federal Reserve was originally created for. There's a reason the 1910 Jekyll Island meeting was held in secret. Henry Ford once quipped that if everyday people understood how the Fed really worked there would be a rev0lution before the next morning.

   The elites always win. they create bubbles, profit from them, then the system crashes and then society gives them powers to solve a crisis they created. IN the process, again giving themselves a payout. They always win either way. They did the same thing during covid.

   Agree that this is the best solution. Federal reserve is a massive j0ke. Cl0wns forgot they are fighting inflation somehow.
   

   The cheap mortgages / high asset prices during covid were shifted to banks and now the artificially low rates experienced are destroying the banks, but then they get bailed out. So this was all a massive wealth transfer to capital owners / wealthy.

   1 week ago # QUOTE 2 Volod 0 Vlad !

3. Economist
   28bc
   

   That's what the Federal Reserve was originally created for. There's a reason the 1910 Jekyll Island meeting was held in secret. Henry Ford once quipped that if everyday people understood how the Fed really worked there would be a rev0lution before the next morning

   But that bill was never passed right, a different one was? And that one was altered to the point of being unrecognizable in the 1930s?

   1 week ago # QUOTE 0 Volod 0 Vlad !

4. Economist
   a378
   

   Everything is being exposed, from the central banking system to law enforcement to political leaders. NWO

   1 week ago # QUOTE 1 Volod 0 Vlad !

5. Economist
   53db
   

   Large depositors need to take a haircut when a bank fails or else they will be incentivized to put their money in the riskiest bank possible in the future.

   Eurobro here. I don't get this attitude. If equity holders loose their money and depositors are shielded, what's the issue? Risk management is equity holders business, they affect the management. It's a good signal, strengthen it or loose your equity. What else is needed. What's the upside of depositors taking a hit?
   

   That's a very archaic understanding of banking. I thought we were past the "deposited create credit" way of thinking. Deposits don't "vote" by selecting banks, implying "I'll park my money here because it's a safe bank." Most deposits get "created" when a bank grants a loan on the active side and adds a bookkeeping entry on the passive as a deposit. So it's not about depositors "disciplining" the bank. Most of the deposit money is there because that was the bank that granted them loans. Not because they were considering 3 banks and decided "this one provides me with the best mix of return and safety." There's little return incentive linked to deposits. This is why it is better to discipline the equity holders and to insure the depositors. Is there a paper that links deposit insurance schemes to the risk-taking behaviour of banks? Probably not because deposit insurance schemes do not spare the equity holders who are the ultimate leverage pushers when it comes to bank asset management.

   1 week ago # QUOTE 1 Volod 3 Vlad !

6. Economist
   2556
   

   Good points

   1 week ago # QUOTE 0 Volod 0 Vlad !

7. Economist
   5d3b
   

   Eurobro here. I don't get this attitude. If equity holders loose their money and depositors are shielded, what's the issue? Risk management is equity holders business, they affect the management. It's a good signal, strengthen it or loose your equity. What else is needed. What's the upside of depositors taking a hit?

   I agree with this. Could make another point. If SVB depositors taken a haircut, there would have been a run on a lot of other financial institutions in the US, and also internationally, including in Europe. Financial markets all over the world would have been absolutely smashed. On the one hand, Europe suffered no ill effects from this. On the other, they benefitted not having a world financial crisis.

   1 week ago # QUOTE 0 Volod 0 Vlad !

8. Economist
   cf8d
   

   As a person tied into the european "regulation" scene (I'm not sure if OP understands who is the regulator in this case), this is absolutely the first I've ever heard of this. Don't even know why its a fuss considering that the company could mostly cover all its obligations if it structured its maturities in a different way and a big bank could have easily stepped in and bought out SVB to scoop up what has been a very profitable bank. You guys do know that the bank's problem was mostly its difficulty to match it short term obligations, right?

   This thread might be Boris sponsored as I don't see anyone around here crying about this.

   1 week ago # QUOTE 0 Volod 0 Vlad !

9. Economist
   c991
   

   OP was quoting from an article which appeared in the FT. All anon sources in the article of course.

   As a person tied into the european "regulation" scene (I'm not sure if OP understands who is the regulator in this case), this is absolutely the first I've ever heard of this. Don't even know why its a fuss considering that the company could mostly cover all its obligations if it structured its maturities in a different way and a big bank could have easily stepped in and bought out SVB to scoop up what has been a very profitable bank. You guys do know that the bank's problem was mostly its difficulty to match it short term obligations, right?
   This thread might be Boris sponsored as I don't see anyone around here crying about this.

   1 week ago # QUOTE 0 Volod 0 Vlad !

10. Enoch
    Rep: 96

    Most deposits get "created" when a bank grants a loan on the active side and adds a bookkeeping entry on the passive as a deposit. So it's not about depositors "disciplining" the bank. Most of the deposit money is there because that was the bank that granted them loans.

    That may be correct in general, but I think it is missing an important aspect of this particular bank.

    Specifically, SVB had a clause in its loan contracts that prohibited their clients from holding their money in any other bank.

    Here is a quote from the Financial Times:

    But, according to one venture capitalist backer of dozens of US climate start-ups, SVB deliberately kept these companies away from other potential backers. It did this by inserting thorny clauses into loan deals that prevented start-ups from holding deposits anywhere else — but that also had the effect of hiking SVB’s concentration risks.

    “Either they [start-ups] had all their cash with SVB or none of their cash there, which obviously I think is in part what led to the panic leading up to the weekend,” Lindsay Luger, co-founder of climate tech venture investor Energy Impact Partners (EIP), which manages $2.5bn, told me yesterday during a panel at NYU’s event.

    “Lots of our companies actually tried to negotiate away that clause, but it was the largest lender to the space,” Luger said. “They offered very competitive terms. And so there wasn’t much room for negotiation.” A large proportion of the EIP’s 75 portfolio companies banked with SVB.

    https://www.ft.com/content/4db235c6-3be7-4173-9b68-d9c7d0dcb8bc

    There are lots of things a company with enough cash to exceed the FDIC limit can do to ensure its assets are protected, such as participating in a cash sweep program that spreads its money across many different banks or a money market fund. SVB prevented their clients from doing that. They insisted that all the money must be with them.

    One might argue that this clause in SVB's loan contracts is a major contributor to their abnormally large numbers of uninsured depositors, and the ultimate cause of their collapse.

    SVB would not have been able to include this predatory, and ultimately destabilizing, clause in their contracts if their clients, en masse, had rejected it. But rather than saying, "I will never sign a loan contract with a requirement like that. Keep your money. I will get a loan from a normal bank with normal terms." Instead, the firms took a calculated risk, and decided that the haircut they might take on their deposits if SVB ever failed was justified by the better loan terms SVB was offering them, and they chose to get the loan from SVB.

    In finance, when an entity takes a calculated risk, and is compensated for that risk (as SVB's clients were in this case, by cheaper loans), then if that bet moves against them, we allow them to eat the losses.

    Here, we didn't do that. These firms (the depositors) engaged in an activity (deposit concentration) that contributed to instability in the banking sector, and they profited from this activity (via cheaper loans). Then, when the consequences of their poor decisions threatened to bite them, we socialized their losses across all the other banks that were behaving appropriately, offering normal loan covenants and interest rates.

    So from the depositors' perspective, they had private gains and socialized losses from engaging in an activity that is ultimately detrimental to society. That incentivizes poor behavior in the future.

    1 week ago # QUOTE 1 Volod 0 Vlad !

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