Email or username:

Password:

Forgot your password?
Darius's posts Post Back to profile
Top-level
22

@darius whoa. Darius, is this quote unironic? It seems to me that the current turmoil beautifully highlights the efficacy of banking regulators—they can’t prevent the forest from getting dry over the summer, they can’t predict which tree is gonna catch fire first, but when the conflagration happens, like now and like in the SNL crises of the 90s (and the oil bank collapses in TX and OK in the 80s, and 2008, and 2020), they step in quickly and clean up the mess.

If the conventional wisdom is that banking regulators have failed, that’s deeply concerning to me.

17 Mar 2023 at 17:12 | Wall-to-wall | Open on octodon.social
3 comments
Darius Kazemi

@22 His claim is that deposit insurance does not really work anymore, which is super, super alarming.

17 Mar 2023 at 17:22 | Open on friend.camp
Darius Kazemi

@22 also he's saying these banks created "classic S&L balance sheets just waiting to explode under the watchful eye of hundreds of federal and state regulators" - like, the responsibility is to do more than just wait for the mess and clean it up when the (evidently, to these experts) obvious outcome is a mess will be happening very shortly

17 Mar 2023 at 17:26 | Open on friend.camp
22

@darius that is an alarming claim to make and sigh I can see why someone (I’m choosing to imagine Calvin from Calvin and Hobbes) could claim that and then smirk while an adult stammers and tries to explain why that’s ok. I’ll try, and forgive me if I’m mansplaining stuff you know, trying to make sure I understand myself, here goes—yes it seems unfair that the FDIC backstopped all deposits (even beyond the 250k insured limit), but the fact is that banking regulators are so freaking good that if they’d done their usual, even those above-the-limit depositors would have gotten back say 95% of their uninsured deposits. That would have taken a few days max. But to avoid panic and contagion, FDIC Treasury et al. chose to write a blank check for all deposits at the cost of being on the hook for that 5%-ish. So. It’s not a big deal—FDIC insurance isn’t broken, moral hazard isn’t running rampant, and maybe I’m misinterpreting the author (I apologize I’ve tried to summon the spoons to read yet another take and, lol, tomorrow I promise).

I will stammer and also try to explain why I don’t think the analogy to the SNL crisis is apt, because back then the banks owned risky shit that was priced wrong—strong echoes of 2008, The Big Short, “vampire squid” etc. Regulators improve with each bout of instability. So SVB’s assets weren’t bad. They weren’t unique. (In a macro sense. Sure they had a lot of startup warrants that most other banks lacked but those were microscopic.) Rising interest rates have put all banks in a pinch and they’re working out how to fix it. Some will do it well and others less well, and when any of them are unfortunate enough to be the target of a bank run, they will go into FDIC receivership and society will continue.

Not sure if that was remotely helpful to anyone but me 😅 thanks for giving me the prompt to try and sort out my own thoughts 🙇

@darius that is an alarming claim to make and sigh I can see why someone (I’m choosing to imagine Calvin from Calvin and Hobbes) could claim that and then smirk while an adult stammers and tries to explain why that’s ok. I’ll try, and forgive me if I’m mansplaining stuff you know, trying to make sure I understand myself, here goes—yes it seems unfair that the FDIC backstopped all deposits (even beyond the 250k insured limit), but the fact is that banking regulators are so freaking good that if they’d...

17 Mar 2023 at 17:48 | Open on octodon.social
Go Up