[HN Gopher] Credit Suisse sheds nearly 25%, key backer says no m...
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Credit Suisse sheds nearly 25%, key backer says no more money
Author : intunderflow
Score : 322 points
Date : 2023-03-15 11:59 UTC (11 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| throwawaycs1 wrote:
| Most of the business can't survive without tax payers money in
| one way or another.
| mym1990 wrote:
| Is there anything that China/Russia and friends can do to tip
| this whole thing over?
| steve76 wrote:
| [dead]
| IAmGraydon wrote:
| Sure - invade Taiwan.
| H8crilA wrote:
| I would argue this could tip it the other way around, if
| peacetime allows for such loose monetary policy imagine what
| the wartime would allow for.
| mym1990 wrote:
| How does that impact the banking system? I mean I know it
| would in some ways, but whats are the actual dots being
| connected?
| krona wrote:
| Rapid dedollarization and announcing a new currency (e.g. BRICS
| currency?) Gold purchases suggest some countries are preparing
| for the post-dollar world.
| myth_drannon wrote:
| That's being going on at least since 2008... Zerohedge's
| favorite topic.
| jerf wrote:
| Many things. Many, many things. I have a pet theory that the
| primary thing that has been preventing the Ukraine conflict
| from expanding is precisely that all sides understand the
| economic gun pointed at all the participants, much moreso than
| the military situation. (I can't prove it and I won't even
| argue for it much; I'm calling it a "pet theory" after all. I
| don't even put a huge amount of stock in it myself.) The
| economic damage that could be done by each side is
| theoretically less than an _all-out_ military assault, but in
| terms of cost /benefit, you get a somewhat similar result with
| a much smaller effort in the economic sphere right now.
|
| It's a rather bizarre game theory situation. China in
| particular can easily trigger a huge crisis from what I can
| see. Selling off their treasuries more aggressively would do
| damage. They could also simply stop trading entirely
| unilaterally. Or both. And that's not even my complete list of
| things they could do to tip over the West as a whole.
|
| However, it will hurt them as well. It becomes a super
| complicated analysis of the _relative_ damage of the collapse,
| the probability that the current ruling classes can weather the
| damage, the assessment of the other side going nuclear, the
| true beliefs of the parties about relative military strength...
| I can tell you how the participants are publicly posturing and
| a certain amount of visible public jockeying on the issue (pay
| attention to the BRICS and their posturing and actions around
| non-dollar international currencies), but your guesses about
| the true _internal_ beliefs of all the parties or the
| objectively real situation are as good as mine.
|
| Note this is not unilateral. I think China's economy is
| dangerously precarious too, and the West could probably tip it
| over... but again, that would hurt the West as well, and all
| the previous paragraph applies in both directions.
|
| (And note how I distinguish "posturing" vs. "actions" on the
| non-dollar currencies, because there are both things. And I
| also distinguish "internal beliefs" from "reality" because
| history shows that the two are often detached in decision
| maker's minds. One of the most dangerous situations for war
| historically is when at least one side's opinion is highly
| divergent from reality.)
| another2another wrote:
| >Selling off their treasuries more aggressively would do
| damage
|
| Er, who's gonna buy them? Interest rates have risen
| significantly since they were issued so they would be selling
| at a big discount.
| jerf wrote:
| That's the damage; reducing demand even more. Remember that
| when the United States Treasury is selling their
| treasuries, they're selling into the same market. Crashing
| demand leaves the Treasury unable to raise money. And then
| the second-order effect of this in a derivative-riddled
| market causes its own havoc.
|
| Part of the reason they don't fire this gun is precisely
| that they'd lose out on a lot of value. But then, what do
| they do if the US signals strongly that it is going to go
| ahead and inflate the currency sharply, meaning they're
| only going to get a _de facto_ big discount anyhow?
|
| And I don't mean that as a simple question, where I'm
| implying a certain answer I'm trying to convince you of.
| You have to game this out like a game of chess, where this
| cascades out into a huge decision tree. The tree has gotten
| complicated lately. Taking economic damage to deal your
| enemy a bigger economic blow is getting disturbingly close
| to a rational move lately, in cold global realpolitik
| terms. Would China be willing to bet they could roil the US
| in enough domestic chaos that US leadership would become
| uninterested in stopping their incursion into Taiwan, even
| if it meant taking a hit themselves? I'm not saying the
| answer is "yes". I'm saying "the answer is a lot more
| complicated than it was a decade ago".
| lordfrito wrote:
| > _That 's the damage; reducing demand even more_
|
| Not saying your pet theory is wrong. But it does sound a
| lot like cutting off your nose to spite your enemies
| face.
| jerf wrote:
| The key element you're missing in that analogy is that a
| lot of this failure and damage is going to occur anyhow.
| Economic fragility is baked into the cake. We're looking
| at a down cycle for everyone here. There's no option
| where we all hold hands together in happy harmony and the
| economy just keeps going up for everybody, or likely,
| we'd take it or some approximation of it. In this
| environment, weighing out whether you can cause
| proportionally more damage in your enemy's collapse by
| some action or other becomes distressingly rational.
|
| Contemplate a payout matrix that looks like the
| Prisoner's Dilemma, except the payout for snitching while
| the other player doesn't is _still_ negative, instead of
| zero. If that 's your game theoretic situation,
| complaining that a player took an option with an expected
| negative payout is a null objection. There was no
| alternative. So the game changes.
|
| This is part of why I say it's different than a decade
| ago. We did have some approximation of a hold-hands-and-
| be-happy option and we did take it. One can quibble about
| the details; I'm definitely on team "can was kicked down
| the road" rather than "everything was fixed, hooray", but
| hey, that's debatable.
| lordfrito wrote:
| I get what you're saying.
|
| The Chinese would hurt the US economy by a mass sell-off
| of Treasuries, but they'd be dropping a bomb into their
| own economy as well.
|
| Alternatively, they could ramp-up to some sort of a
| localized/proxy hot conflict, and get their military-
| industrial base firing on all cylinders. It was WWII
| spending that pulled the US out of the depression.
|
| The wikipedia article on war economy [1] says "War is
| often used as a last ditch effort to prevent
| deteriorating economic conditions or currency crises,
| particularly by expanding services and employment".
|
| I find it difficult to believe that any sane nation-state
| would purposely bomb their own economy just to hurt an
| enemy, when a much better option exists economically (war
| footing).
|
| Likely what China would do would be a combination of the
| two.
|
| Still it's food for thought. Our economies are definitely
| intertwined, and there are levers that can be pulled.
|
| [1] https://en.wikipedia.org/wiki/War_economy
| paganel wrote:
| The thing is that both China (during Mao's years) and Russia
| (during the shock therapy of the 1990s) have had to endure
| severe economic hardship, and even so, they didn't break.
| They won't break if the West decides to up the ante even more
| and if it decides to set up a total naval blockade against
| China, let's say.
|
| On the other hand the most that the West had to endure when
| it comes to economic hardship since WW2 were a couple of
| really grim years in the late '40s, followed immediately
| after that by about three decades of sustained economic
| growth. Ideologically they're not set up for economic penury,
| neither their leaders, nor the Western populations
| themselves.
|
| As such, this insistence that the West has on "let's hurt
| them (Russia and China) economically!" is in a fact a
| manifestation of its own insecurities.
| cloverich wrote:
| A weak economy is less able to fund a strong military. If
| the country signals a desire to use their military for
| conquest, it seems relatively sound to sanction the country
| as a means to constrain it first and foremost. I don't
| think the primary goal need be anything more than "make
| military conquest more expensive" and e.g., less likely to
| succeed. It's not hard to imagine what Russia would be
| doing right now if its economy were 10x as strong as it is.
| another2another wrote:
| >both China (during Mao's years) and Russia (during the
| shock therapy of the 1990s) have had to endure severe
| economic hardship
|
| Actually I would argue the exact opposite is true. Russia
| and China have never had it so good, why should they throw
| away all the hard earned advantages they've gained just
| because some 3rd term teddy bear president tells them to?
| golergka wrote:
| Because they are police states and people are disunited
| and afraid.
| JamesSwift wrote:
| Globalization means that China of today and China under Mao
| are not necessarily the same, and can't be viewed through
| the same lens. The internet is a Big Deal in terms of
| providing an outside perspective to willing Chinese looking
| to see what life is like outside of the Great (Fire)Wall.
| That said, you can't apply a western perspective when
| understanding China and the Chinese viewpoint. I spent some
| time over there and was constantly surprised by how the
| Chinese viewed themselves and their government and the
| world, in contrast to how I viewed the same.
| myth_drannon wrote:
| I bet a lot of Russian oligarch's/China's money is parked at
| Credit Suisse. They will be quiet as a mouse.
| mym1990 wrote:
| It's clear that Russia is getting more and more adversarial,
| the question is where is the line where money matters less
| than ensuing pure global chaos. New oligarchs and
| billionaires will be made in a new world.
| yalogin wrote:
| Isn't Credit Suisse the bank that laundered and legitimized all
| the money from the drug cartels? They kept getting slaps on the
| wrist for a bunch of atrocities and bad choices and now finally
| they are seeing some repercussions of those choices?
| throwntoday wrote:
| Not stating an opinion but isn't that more of an issue with
| countries that choose to do business with Switzerland?
|
| Swiss banking privacy and their grey/black practices are
| sovereign decisions they have every right to make but it
| appears that countries are willing to turn a blind eye to it.
| We could wax on about morality but the real issue here is it's
| tolerated by the rest of the world so they have little pressure
| to change.
| mike_hearn wrote:
| Switzerland doesn't have any unusual banking privacy laws
| anymore, those were abolished a long time ago. The US imposes
| crippling sanctions on any country that doesn't implement the
| same financial crime / tax information laws as themselves, so
| Switzerland came into compliance with US policy on that.
| omgomgomgomg wrote:
| Former banker here, familiar with Swiss practices.
|
| They have done so much more bad things, things not mentioned in
| this thread.
|
| And after the US intervened, they carried on with the same,
| just even more sophisticated.
|
| How Swiss banking has a good name should be beyond anyone.
| Assume it is all careful, decade long marketing and PR stuff.
|
| I in details know about some internal things regarding employee
| conduct which is Holywood material worthy.
| _trampeltier wrote:
| I think lately it was more HSBC who laundered money for
| cartels.
| samstave wrote:
| [flagged]
| WelcomeShorty wrote:
| Except proton I guess?
| mantas wrote:
| Proton is Swiss only in shell company registration.
| Development and management is not Swiss.
| 8o8o8o8o8 wrote:
| Proton is run out of Israel, which is probably worse than
| being Swiss.
| FormerBandmate wrote:
| No, it isn't. A vendor that provided DDOS protection used
| to be but no longer is
| bragr wrote:
| Not to pile on the the crazy person's thread, but it would
| not be unprecedented if Proton is actually a honeypot
| controlled by foreign intelligence agencies and would not
| be the first such Swiss company:
| https://en.wikipedia.org/wiki/Crypto_AG
| gmiller123456 wrote:
| What about the knives for their army? Certainly the
| fingernail file isn't corrupt?
| 01100011 wrote:
| Yeah. they're right up there with JP Morgan Chase and Deutsche
| Bank: https://www.thestreet.com/investing/jpmorgan-jpm-
| deutsche-ba...
| mike_hearn wrote:
| You might also be thinking of HSBC [1] or Wachovia [2] or
| possibly one of several Australian banks [3] or maybe this
| European bank [4] or this one [5], or indeed Credit Suisse.
|
| The thing to know about money laundering is that the rules are
| basically set by the USA, and after the 9/11 attacks the US
| made money laundering a strict liability crime. It means you
| can be found guilty of it even if you didn't know you were
| doing it, made extensive efforts to ensure you didn't and even
| if the actual violations were made by someone else not
| yourself. And money laundering is defined as moving money on
| the behalf of criminals, _or not doing enough to realize you
| were doing so_. How much is doing enough? That 's subjective,
| up to the regulators and they are allowed to do things like
| tell you you're doing enough then later change their mind and
| prosecute you for it.
|
| Because it's impossible to successfully comply with such a
| moving target, every large bank in the world is constantly
| being fined for AML violations. It doesn't mean much about any
| specific bank to say it's been fined for that. If it was
| possible to actually comply, there'd be no crime that involved
| any financial component any more i.e. no drug trade or fraud,
| because the banks would always detect it, suspend the accounts,
| report the owners and seize the money.
|
| Clearly these crimes do still exist because banks don't have
| enough information to reliably beat all criminals. They don't
| have police powers, so the most they can do is rely on
| heuristics. It's especially tough in parts of the world where
| cartels may have unlimited budgets to beat your systems,
| corrupt your employees, corrupt government employees or
| threaten your staff with having their arms chopped off if they
| don't help out. AML regulations don't recognize these problems
| as legitimate however, meaning you as a banker can be
| prosecuted and jailed for up to 20 years because someone,
| somewhere else in your organization, wasn't suspicious enough
| about some activity and report it in a timely manner.
|
| That's why it feels like banks are always "getting away with
| it". Governments, even the US government, can't actually
| enforce the laws as written because if they did then the entire
| financial industry would collapse overnight from mass staff
| exodus. This was the very real risk that led to HSBC being
| fined rather than directly prosecuting the staff. There was
| apparently a big fight inside the US Gov about this between the
| Justice Dept and the Treasury, with (I think) the former
| wanting prosecutions and the latter pushing for no
| prosecutions. The Treasury knew that prosecutions could succeed
| and if they did, there'd be a very different and much worse
| kind of bank run.
|
| To me, it doesn't seem reasonable to expect bankers to achieve
| what the world's police forces and intelligence agencies never
| could. But the public doesn't really understand these dynamics.
| Whenever they read about banks laundering money, they think
| it's bankers who are knowingly taking part in organized crime
| and so demand punitive action. Governments can then blame the
| banks for crime whilst simultaneously taking some billions of
| dollars from them for the general budget. In the short term
| it's a win for them. The true cost is somewhat subtle and long
| term, in things like innocent people being unable to get bank
| accounts, or finding it very difficult, and a general feeling
| of society being rigged in favor of the bankers who never seem
| to be punished for their claimed crimes. The fix would be a mix
| of changes to AML rules and the PATRIOT Act, transforming the
| system into something a lot more mechanical and objective. It
| might make some crime a bit easier, but that can be
| counterbalanced by e.g. increased funding to the police.
|
| [1] https://www.learnsignal.com/blog/hsbc-money-
| laundering/#:~:t....
|
| [2] https://www.theguardian.com/world/2011/apr/03/us-bank-
| mexico...
|
| [3] https://www.vice.com/en/article/g5bkyq/drug-cartels-used-
| aus...
|
| [4] https://money.cnn.com/2018/02/08/news/rabobank-mexico-
| drug-m...
|
| [5] https://www.newyorker.com/news/news-desk/the-fincen-files-
| sh...
| BoiledCabbage wrote:
| While a lot of text written out, this is an _extremely_ weak
| argument.
|
| It boils down to "they can't do it perfectly so they
| shouldn't try at all".
|
| And the exact opposite of defense in depth.
|
| Tons of places people will cast a blind eye to things that
| they know are illegal if they can profit off it. Banking is
| absolutely one of those areas where there are huge incentives
| to do so, as it requires no effort and is easy to profit off
| of criminality.
|
| This law says we're not going to allow you to be part of the
| broader global system while knowingly profiting off of
| criminality. Yes you may not catch 100% of it, but you sure
| have to thoroughly try to eliminate it. And there will be
| financial punishments to ensure you're not doing it just in
| name only.
|
| This is exactly what we _want_ in our financial system.
|
| I really don't understand the motivation behind your post.
| "Let's eliminate a great law for crime prevention because it
| doesn't prevent 100% of crime?" That makes no sense.
| infamouscow wrote:
| I think the question is whether there's any evidence these
| laws have mitigated or prevented _anything_.
|
| After 20 years there should be a vast body of evidence to
| justify the second, third, and fourth order effects these
| pernicious laws have had on society. Rather than looking at
| the facts, we keep pointing to nonsense perpetuating the
| existence of a self-licking ice cream cone. It's easier to
| put your head in the sand and ignore or downplay legitimate
| grievances when the rules you impose on everyone (and
| enforced at gunpoint) objectively has zero positive
| outcomes and a litany of negative outcomes.
|
| I'm sure the TSA confiscated a lot of leatherman multi-
| tools at the airport, but that isn't a benchmark for their
| success. Take a guess how many terror plots have been
| foiled by the FBI/DHS/TSA versus random people over the
| same time span -- or how many caught by random people were
| _already_ a person of interest by FBI /DHS/TSA.
| mike_hearn wrote:
| _> "Let's eliminate a great law for crime prevention
| because it doesn't prevent 100% of crime?" That makes no
| sense._
|
| It makes no sense because that's not what my post says. In
| the final paragraph it advocates for a reform of AML law,
| not total abolition.
|
| _> This law says we 're not going to allow you to be part
| of the broader global system while knowingly profiting off
| of criminality_
|
| No it doesn't, please read my post again. Your statement
| would be correct if you deleted the word "knowingly". AML
| laws can jail bankers if they provide services to
| criminals, even if they didn't know of their criminal
| nature and even if they did actually make extensive efforts
| to "know their customer". In fact it can jail them even if
| there was no actual crime happening at all, simply for
| procedural reporting failures.
| BoiledCabbage wrote:
| > The fix would be a mix of changes to AML rules and the
| PATRIOT Act, transforming the system into something a lot
| more mechanical and objective. It might make some crime a
| bit easier, but that can be counterbalanced by e.g.
| increased funding to the police.
|
| Without a real suggestion of what to replace it with, all
| I'm really hearing is get "rid of it and magic some some
| other solution."
|
| Transforming it into something more mechanical and
| objective? Taking a pop culture related concept (a bit
| contrived compared to what actually happens) of "banks
| must report all transactions over $10k." Mechanical and
| objective. So now criminals do transfers in $9k amounts.
| And we sit around waiting for a new law to be passed to
| catch this loop hole while criminality runs wild
| laundering. Then the new law passes, they spend 1 week to
| circumvent it and we wait around for another law to pass.
|
| It's like trying to legislate what specific exploits a
| company needs to have patched to say they prevented
| hackers. Then a new exploit comes out, it isn't in the
| law and that's used until the law catches up. It's
| useless.
|
| The solution is recommend/require best practices and
| _also_ require that companies are responsibility for the
| security of their systems. Meaning they need to stay on
| top of things in earnest, and not just say we have those
| 5 legally mandated patches so we did our part.
|
| Current security is a mess - and I guarantee if companies
| did have the equivalent banking laundering laws applied
| for security, all of a sudden a lot of companies would be
| interested in "provably safe" technology. Instead of
| today's world of essentially "do what's convenient for
| security, but nothing that will inconvenience our profits
| too much."
| mike_hearn wrote:
| My post was pretty long already. A complete proposal for
| reforming AML laws would be a book sized topic.
|
| Structuring is a good example of an AML rule that makes
| no sense any more. The goal was to try and build a
| database of transactions that might be vaguely relevant
| to crime (large cash transactions) but it was phrased in
| an odd way with a per-transaction limit triggering a
| report to the federal government, probably to deal with
| the limitations of paper based banking at the time. Due
| to this poor lawmaking - whether forced or not - of
| course criminals just started making deposits of $9,999
| each time to avoid the reporting and this was addressed
| with yet more terrible law, specifying a suspicious
| transaction pattern whose only definition is "you should
| know it when you see it". Then they threaten bankers with
| jail if they don't see it. What if the two sides disagree
| on knowing-it-when-they-see-it? Well, the bankers always
| lose. This is hardly upholding the core principles of the
| justice system and only raised the difficulty for
| organized crime by a small amount, essentially just
| requiring the bring-up of front companies so they could
| deposit large amounts of cash without appearing to be
| suspicious.
|
| Structuring rules could be abolished entirely. Since that
| time computers and databases got a lot more powerful, and
| so now in reality the US monitors all financial
| transactions of any size regardless of the SAR rules.
| They just do it via semi-secret programmes at the
| Treasury (TFTP), CIA and NSA. Arguably they shouldn't and
| an ideal system would abolish all those things, with
| FinCEN being folded into the FBI and it being the only
| agency that engages in financial forensics. Reporting in
| turn could simply be eliminated and replaced with a
| system in which the investigative agencies submit
| database queries to banks, and those queries are then
| approved by bank staff if they are complying with the
| rules that constrain police activity. This would bring it
| into line with how other requests for information (are
| supposed to) work in the modern era.
|
| You could also go further and state that there's nothing
| special about finance and that as fishing expeditions
| aren't allowed in classical law enforcement, transaction
| reporting should be eliminated entirely. That would be
| consistent with other areas of law, but is presumably too
| radical for you.
|
| _> It 's like trying to legislate what specific exploits
| a company needs to have patched to say they prevented
| hackers. Then a new exploit comes out, it isn't in the
| law and that's used until the law catches up. It's
| useless._
|
| Yes, and AML is like passing a law that says "don't get
| hacked, if you do you go to jail for a couple of decades
| if a regulator thinks you didn't make enough effort".
| What counts as enough effort? What even counts as getting
| hacked? They won't tell you these things and in reality
| it depends on what the press says. If such a law were
| passed and then actually enforced you'd just see people
| refusing to work in the computing industry because no
| salary is worth that kind of risk.
| credit_guy wrote:
| That was not my experience. I worked a lot with various
| banking regulators (Fed, OCC, NFA, British PRA, a bit of SEC,
| FDIC and probably a few I don't remember now), although not
| on AML matters. My experience was that before being slapped
| with a Consent Order, you get warnings. They are either
| Matters Requiring Attention (MRA) or Matters Requiring
| Immediate Attention (MRIA). It is highly improbable the
| regulators just hit you with something out of the blue, just
| because they feel like that.
| atmosx wrote:
| Wow, this is the best comment I've read in a while. I was one
| of those ppl who thought that bankers were "getting away with
| it" but I can clearly see your point here.
|
| Thanks for putting the time to answer.
| mike_hearn wrote:
| You're welcome!
| listenallyall wrote:
| Agreed, great explanation. Also worth noting that US
| government has forced many industries other than banks to
| somehow detect, report and/or catch money-laundering
| activity, while also lacking police power. Any time you
| hear KYC (Know your customer), anti-money-laundering is
| essentially the reason.
| A4ET8a8uTh0 wrote:
| << Governments, even the US government, can't actually
| enforce the laws as written because if they did then the
| entire financial industry would collapse overnight from mass
| staff exodus.
|
| This.
|
| Treasury recently had to send a note via remarks to indicate
| to banks that 'derisking' resulting defensive SAR filing may
| be overdoing it. Naturally, some regulators will question
| every instance SAR was not filed so the banks are in weird
| "punching bag" position.
| notch898a wrote:
| A shocking idea would be to prosecute the source of the ill
| gotten gains, or the underlying crime, rather than imposing
| these AML externalities on other actors. After all, something
| is not money laundering if the funds were legitimate to begin
| with.
| nikanj wrote:
| Alas prosecuting dictators and government officials in
| third-world countries doesn't really happen, and the only
| way to prevent them stealing the nation's wealth is to
| block the transfers
| notch898a wrote:
| I take issue with the idea that AML as currently
| implemented is the "only way" and also with the
| characterization you've made that what we did stopped the
| stealing.
| WalterBright wrote:
| A modern principle of US justice is it's always someone
| else's fault.
| logicalmonster wrote:
| > A shocking idea would be to prosecute the source of the
| ill gotten gains, or the underlying crime, rather than
| imposing these AML externalities on other actors.
|
| Of course. But there's 2 big problems with that from a
| government's perspective.
|
| 1) Prosecuting actual criminals would require hard work:
| real investigation without having an automatic sneak peak
| into everybody's finances is hard.
|
| 2) This wouldn't give the government any extra power.
| mtlmtlmtlmtl wrote:
| Yep. I went and quickly looked them up on Wikipedia. They have
| a list of controversies so long that the outline of the
| "controversies" subheading won't even fit on my phone screen.
|
| Drug cartel money, strong ties to the Russian oligarchy, forex
| manipulation, corrupt dealings with African governments,
| destruction of records, tax fraud.
|
| The list is extensive to say the least.
| thefounder wrote:
| >> Drug cartel money, strong ties to the Russian oligarchy,
| forex manipulation, corrupt dealings with African
| governments, destruction of records, tax fraud.
|
| Sounds like HSBC
| samstave wrote:
| Precisely why HSBC bought UK SVB
|
| They need to protect their laundering clients.
|
| HSBC is an extension of the UK laundering fraud arm of Yee
| Olde Kingdom.
|
| Expect much fuckery afoot.
| mtlmtlmtlmtl wrote:
| If anyone is interested in digging into this more, read
| up on the City of London. Not to be confused with London,
| the capital of England, the City of London is effectively
| a weird de facto tax haven nationstate embedded in
| London.
| odiroot wrote:
| And Deutsche Bank.
| saiya-jin wrote:
| As you write, you have no real clue about banking. Let me
| tell you, all that you wrote, and more, much more, can be
| said about every single big bank out there, anywhere.
|
| How do I know this - I work for one of those, not (and never)
| CS. Since I started ours is rather spot clean from what I can
| see (but IT is very far from those who make similar
| decisions), what I see is regulatory downfall from their
| fuckups 15-30 years ago. Some of it was outright amoral
| criminal behavior, but most was due to bad processes and way
| too much incompetence in ie KYC checks. Too much focus on
| current cash flow, way too few questions about where the
| money came from. That's thing of the past in regulated
| markets (but then you have the whole universe of tax havens,
| some also in US or conveniently around)
| mtlmtlmtlmtl wrote:
| Thanks for the inside perspective, very helpful. There's no
| doubt that corruption in banking was a complete free for
| all in the past during times of intense financial
| deregulation, and that regulated markets have improved
| their vigilance markedly since then. It makes sense that
| for banks such as yours, there might be a sort of echo of
| the past in scandals being outed presently. And a lot of
| those cases are more wilful ignorance and poor due
| diligence as you say
|
| Of course CS is in a tax haven, and their dirty laundry
| generally seems much fresher and much more deliberate than
| negligent. E.g attempting to help cover up assets of
| Russian oligarchs under sanctions after the Russian
| invasion of Ukraine.
|
| And the Credit Suisse leaks last year revealed just how
| much dirty money flows through the bank still to this day.
| curiousgal wrote:
| I am more than 100% confident that those controversies have
| nothing to do with the current mess. CS is failing not
| because it laundered cartel money, it is failing because it
| didn't manage risks properly, namely Archegos and Greensill.
| You guys make it sound like the universes punishes those who
| do bad things which is laughable.
| timmytokyo wrote:
| It's not exactly surprising that a company known for its
| extensive dealings with corrupt actors is also bad at
| managing risk.
| mtlmtlmtlmtl wrote:
| Yeah this makes sense. One of the cases where A causes
| both B and C.
|
| People willing to take part in criminal activities are
| almost definitionally less risk averse. You're risking
| fines, loss of reputation, prison, unemployability,
| destitution.
|
| Not then surprising that those same people would be more
| willing to take undue financial risk, all the while maybe
| closing an eye to some red flags.
| riffraff wrote:
| > It's not exactly surprising that a company known for
| its extensive dealings with corrupt actors is also bad at
| managing risk.
|
| HSBC is just as evil, and is doing well enough that they
| just acquired the UK branch of SVB
|
| https://www.icij.org/investigations/fincen-files/hsbc-
| moved-...
| HorizonXP wrote:
| FTX bought Voyager when they went down.
|
| Acquisitions != health
| IG_Semmelweiss wrote:
| Its well known that acquisitions are a great way to hide
| fraud, too. Number of studies on that front.
|
| Another (usual) reason is when a company lacks clear
| avenues for growth so they are looking to buy some growtg
| mtlmtlmtlmtl wrote:
| They're both on the list too, and it seems based on a
| cursory glance that shady dealings were involved in both
| cases.
|
| I was just confirming the notion that they're a very shady
| bank. I'm not qualified to say whether the shadyness is the
| primary cause of their downfall, but it doesn't seem
| outside the realm of possibility to me.
|
| And sure, anyone can reduce any view down to a laughable
| caricature. Good job, I guess.
| simplotek wrote:
| > The list is extensive to say the least.
|
| Sometimes I wonder if the Swiss newfound love for a weirdly
| biased neutrality, which goes to the extent of destroying
| their own military gear instead of selling it to Ukraine, is
| rooted in appeasing certain Russians who stashed their
| fortunes in financial institutions such as Credit Suisse.
| lobochrome wrote:
| _newfound_
| skybrian wrote:
| It seems like a lot of it would be due to adverse
| selection, and that's not something new. Lots of people
| don't need Swiss bank accounts. What are the
| characteristics of people who do?
|
| Being Swiss is a good reason to want a Swiss bank account.
| Rich foreigners might be a little suspicious?
|
| It's somewhat similar to who really needs cryptocurrency,
| except you don't get the enthusiasts or small accounts,
| either.
|
| Maybe look at who unmoderated "free speech" forums become
| popular with. Or who needs to use Tor.
| 99_00 wrote:
| The country is 1/3 German, 1/3 french, 1/3 Italian.
|
| Given European history their options are neutrality or
| extream internal strife.
|
| You are overusing your Ukraine conflict lens when viewing
| the world.
| pjc50 wrote:
| > newfound love for a weirdly biased neutrality
|
| Switzerland has _always_ been aggressively neutral to the
| extent of annoying the rest of Europe, not just during WW2
| but all the way back to the Hundred Years War.
| SilasX wrote:
| You mean the Thirty Years' War (1618-1648)?
| holgerschurig wrote:
| Not even that. Swiss neutrality started during/after
| Vienna Congress, 1814/1815.
|
| https://de.wikipedia.org/wiki/Neutralit%C3%A4t_der_Schwei
| z
| simplotek wrote:
| > Switzerland has always been aggressively neutral (...)
|
| No, I don't buy it. This time around they went to the
| extent of refusing to sell ammo for their own weapons
| arguing they'd be used in a war.
|
| They are outright destroying their arms industry by
| arguing that they cannot even be used by their owners to
| defend themselves.
|
| This goes way deeper than this neutrality scapegoate.
| wahern wrote:
| Over the past 30 years Switzerland had pulled back from
| its neutrality stance somewhat, participating in European
| organizations much more than it historically had over the
| past 150 years. So if you only understand Swiss
| neutrality in the context of the recent era, it may seem
| odd. But from a longer perspective it's more a regression
| to the mean.
|
| As we leave the post-Cold War era into a more uncertain
| and conflict prone[1] future, it's entirely unsurprising
| they'd retreat. Or perhaps another way of looking at it
| is that it's been awhile since Swiss neutrality was truly
| tested, and perhaps people had assumed more of a change
| than there really was.
|
| [1] As between major powers and also, at least regarding
| immigration and trade, within the West. Conflict never
| really dissipated much across the rest of the world.
| holgerschurig wrote:
| > No, I don't buy it.
|
| Well, we can read it up. The "hundred years war" date is
| of course wrong, they have neutrality since 1814/1815. If
| you cannot read german, use google-translate or DeepL: ht
| tps://de.wikipedia.org/wiki/Neutralit%C3%A4t_der_Schweiz
|
| > This time around they went to the extent of refusing to
| sell ammo for their own weapons arguing they'd be used in
| a war.
|
| Well, even Germany did this before 24st February 2022,
| and it never was neutral.
|
| In the case of Switzerland, the neutrality is in their
| constitution. Neither the government nor the parliament
| can change it. It needs a public vote of the ca. 6
| million people large electorate. Germany had it much
| easier, the "don't export to crisis regions" wasn't in
| constitution. And, truth be told, it was never followed
| through 100% (e.g. why would one export military ships to
| Saudi-Arabia, which is in war with Yemen?).
|
| > They are outright destroying their arms industry
|
| Yes, they do it. For me, this sounds that they like their
| neutrality more than money --- however, people usually
| assume more sinister motives. Like that Switzerland is
| somehow getting black money from russian Oligarchs.
|
| To me, this sounds entirely implausible --- or if it
| happens, than in a similar scale as in EU countries.
| First, as said, the neutrality is in the hands of the
| electorate. Russian Oligarchs cannot smear 6 million
| people. Second, it is well known that Switzerland
| implemented all 9 sanction packets of the EU. They even
| seized russian assets, about 8 billion EUR. That is more
| than can be said of some EU countries!
|
| So, if they still do business with Oligarchs, then only
| because these Oligarchs aren't in one of the 9 lists of
| sanctioned entities the EU created. In that case, we
| should blame both Switzerland and the EU.
|
| Apropos "swiss liking neutrality": i read that in May
| 2022 there was a representative poll. It turned out that
| 85% of the swiss liked the neutrality and don't want it
| to change.
| edgyquant wrote:
| Switzerland didn't exist during the Hundred Years' War
| and they weren't neutral until fairly recently in
| comparison
| gilleain wrote:
| Hundred Years War -
| https://en.m.wikipedia.org/wiki/Hundred_Years%27_War
| started 1337.
|
| Switzerland - https://en.m.wikipedia.org/wiki/Switzerland
| founded 1291
| duxup wrote:
| "Neutrality" sounds simple, but I think it turns out to be
| nearly impossible.
| holgerschurig wrote:
| Well, if you wonder, I can help you. What you think might
| be plausible on first sight, but really isn't.
|
| * the neutrality isn't "newfound", they have it since the
| Vienna Congress 1814/1815
|
| * back then the big powers of Europe feared that
| Switzerland will join one of their opponents, so it was
| dictated to Switzerland originally
|
| * but later, when Switzerland saw how the countries
| surrounding them got demolished again and again in each
| war, they actually adopted it. It is now in their
| constitution, article 185.
|
| * Switzerland is a direct democracy. The constitution
| cannot be changed by the government. And not even by the
| parliament. Only a public vote of all the electorate can
| change it.
|
| * the swiss electorate is about 6 million people large
|
| * the swiss banking sector only employs about 89'000 people
|
| So, what can we learn from this? Your postulation is, in
| all likelihood, wrong. Why would normal people, like
| Carpenters, Farmers, Teachers, Nurses vote for neutrality
| to "appease certain Russians" ? They have no benefit from
| this.
|
| Also, Switzerland isn't the only (current) neutral country
| in Europe. We have Austria, Ireland and some smaller ones,
| like Liechtenstein. We used to have also Portugal, Sweden
| or Belgium there --- is any of these current or previously
| neutral countries linked with money laundering? I don't
| think so. Therefore we can even dismiss that somehow money
| laundering is linked to neutrality.
|
| If anything, then something else in the swiss law system is
| responsible: their banking secret laws. One can still open
| an anonymous "number account" at swiss banks. It's not
| cheap, but that is just one more reason why it attracts tax
| evaders and criminals.
|
| And finally, that today Switzerland is specially linked to
| Oligarchs needs a proof. Why? Simply because Switzerland
| implemented all of the nine sanction packets of the EU.
| Despite not being in the EU. So Switzerland, like any other
| EU country, sanctions the Russian state, certain russian
| companies, certain russian individuals. Including some
| people one would classify as "Oligarch". All of them?
| Probably not. But then again ... this would be a problem of
| the EU, by not adding them to the sanction lists yet.
| selimthegrim wrote:
| Also Finland and Sweden until recently
| mr_00ff00 wrote:
| I think you are thinking too specifically. Neutrality is to
| appease all the rich that have stashed their fortunes. If
| most of the world condemned the US or China for an
| aggressive act, I would expect them to act the same.
|
| If they take a side, they lose the fortunes of more than
| just Russians. Anyone who is controversial and has money in
| Switzerland will realize it's no longer safe in the event
| the world exposes their bad deeds.
| holgerschurig wrote:
| > Neutrality is to appease all the rich that have stashed
| their fortunes.
|
| How did you get to this conclusion?
|
| * Switzerland has neutrality since the Vienna Congress
| 1814/1815, more than 200 years
|
| * they weren't really rich back then
|
| * instead, big powers of Europe feared that Switzerland
| will join one of their opponents, so it was dictated to
| Switzerland originally
|
| * later, when Switzerland saw how the countries
| surrounding them got demolished again and again in each
| war, they actually adopted it. It is now in their
| constitution, article 185.
|
| * the consitution can only be changed by the electorate
| of Switzerland (about 6 mio people), not the government
| or the parliament
|
| So why would these 6 million people add / keep neutrality
| "to appease the rich" ? Not all swiss people are rich. In
| the southern french parts the risk to sink into poverty
| is even higher than in some parts of Germany!
|
| Maybe a not-so-swiss centric view can shed more light on
| your (wrong) hypothesis:
|
| In Europe Switzerland isn't the only (current) neutral
| country. We have Austria, Ireland and some smaller ones,
| like Liechtenstein. We used to have also Portugal, Sweden
| or Belgium in the neutral camp. Are they all known to
| "appease the rich" ? I doubt. Except if your idea of not
| appeasing rich people is having a government form like
| Soviet Russia, GDR, or Yugoslavia.
| mr_00ff00 wrote:
| This comment feels like it's more directed at the comment
| above mine than mine.
|
| I'm not implying that is where Swiss neutrality comes
| from, more making a counter point that IF they are
| staying neutral (currently) to protect fortunes then it's
| not just to protect Russians.
|
| I wasn't making a statement about its history. Banking in
| Switzerland I realize is fairly recent. I am not even
| saying that's definitely what they are currently doing.
| spandrew wrote:
| Your initial assertion that Swiss is neutral to make
| money is not accurate. Historically it was to prevent
| casualties in wars between France and... whoever else.
| This has enabled it to be the bank of anyone trying to
| escape prying eyes - but that is a byproduct of their
| neutrality; not the purpose of it.
| trompetenaccoun wrote:
| Your comments are not contradictory, it feels you're both
| just looking at different corners of the same picture.
| like you mention yourself "they weren't really rich back
| then", now they are. How did they get so rich?
| folli wrote:
| Mostly industrialization and export of machinery and
| (later) pharmaceuticals. Banking is less of a relevant
| factor for Switzerland's GDP than most people realize. If
| I remember correctly even the insurance business (which
| is also considered financial industry) is larger than
| banking.
| _a_a_a_ wrote:
| With money.
| simplotek wrote:
| > If they take a side (...)
|
| No one expects Switzerland to pick a side. They just
| expect their arms industry to honor their agreements and
| their government to be fiscally responsible and sell
| their retired gear back to it's manufacturers.
|
| Switzerland is instead clearly picking Russia's side by
| doing all at its reach to stop Ukraine from defending
| itself against Russia's invasion and genocide of the
| Ukrainian people, and have the audacity of calling that
| neutrality.
| exoque wrote:
| >No one expects Switzerland to pick a side. They just
| expect their arms industry to honor their agreements and
| their government to be fiscally responsible and sell
| their retired gear back to it's manufacturers.
|
| Can you provide a link which proves that switzerland has
| an obligation to sell its under licence in switzerland
| produced tanks which still are part of its military
| (reserve) to anyone? Thanks.
| reissbaker wrote:
| During the Holocaust, the Swiss "neutrality" included
| wholesale theft of Jewish depositors bank accounts --
| which they finally admitted to in the 1990s _but still
| refused to pay any of it back to the survivors_ until an
| American lawsuit forced them to -- so color me
| unsurprised.
| Swenrekcah wrote:
| > destroying their own military gear instead of selling it
| to Ukraine
|
| What?
| mocko wrote:
| That sounded so nuts I had to look it up. Turns out they
| really are! https://www.lemonde.fr/en/international/artic
| le/2023/03/13/s...
| mtlmtlmtlmtl wrote:
| Truly a perplexing country.
|
| It's kind of easy to be neutral when you're landlocked
| inside NATO, I guess. No reason to even join. Neutrality
| didn't quite work out that way for Norway in WW2...
|
| Great cheese down there though, gotta give them that.
| TechBro8615 wrote:
| > It's kind of easy to be neutral when you're landlocked
| inside NATO
|
| I guess you think that NATO is why the Swiss people added
| a neutrality clause to the constitution of the Swiss
| Confederation during the Restoration in 1815?
| mtlmtlmtlmtl wrote:
| Only in the bizarro world where I make laughably false
| statements so you can point it out to feel clever.
|
| No, the NATO part is only commenting on current events.
|
| The reason they weren't invaded during WW2 was mainly
| that they had a strong military in a very mountainous
| country with next to no strategic or material importance
| to Hitler. Just not worth the trouble. If Hitler saw a
| strategic reason to invade Switzerland he would have; he
| had no reservations about ignoring neutrality.
|
| I figured all this was obvious given knowledge about
| basic history and geography, and that it didn't need to
| be spelled out that I know NATO didn't exist during or
| before WW2
| ClumsyPilot wrote:
| Britain was offered tp buy them back, and they didn't
| want it.
|
| Those systems are 'unsupported', they are like iphone 4 -
| noone produces spare parts or ammunition any more for
| them. Theybare basically useless
| throwaway32627 wrote:
| This story is really stupid journalism, Switzerland is
| blocking re-export of useful stuff but this one is a non-
| story. The gear that is being destroyed is old stuff
| (this model (B) has been decommissioned in GB in the
| 90ties despite what Le monde days (they did use still
| model (C) which is a more modern system ) for which there
| are no spare parts anymore and nobody except the Swiss
| knows how to operate. GB has the right to get it back if
| they want, by contract, and neutrality doesn't block it.
| They have been informed that Switzerland wants to dispose
| it long time ago but they didn't ask for it back. This
| probably because the gear is useless given how old and
| broken it is and clearly the Swiss army cannot teach the
| Ukrainians how use it without breaking international law
| (specifically the Hague convention). There are probably
| for GB much more effective ways to help the Ukrainians
| than sending them garbage.
|
| Source (in French):
| https://www.rts.ch/info/suisse/13861370-les-systemes-de-
| defe...
| favaq wrote:
| The American Hawk looks with disbelief at someone who
| wants _less_ war, not _more._
| simplotek wrote:
| You don't have less war by stopping victims from
| defending themselves. You just get to improve the odds
| that the attacker is successful.
| listenallyall wrote:
| You have "less war" when one side dominates and the other
| surrenders quickly. Two evenly-matched sides can continue
| fighting for decades.
| yadaeno wrote:
| That worked with Poland in 1939 until Hitler decided to
| continue and attack the rest of Europe.
| Swenrekcah wrote:
| I was merely surprised by this, but the position that one
| has to want war in order to want to support Ukrainian
| defence in this unprovoked war of aggression is at best
| naive.
|
| Also I'm not American, why would you think so?
| ummonk wrote:
| Damming water to Crimea and shelling civilians in Donbas
| for 8 years is hardly "unprovoked". It might not be
| sufficient justification for such a deadly and
| destructive invasion but it's certainly provocation.
| distances wrote:
| So Ukraine should now provide water to lands occupied by
| their enemy? The Russian narrative gets more ridiculous
| every day!
| older wrote:
| Russian propaganda bingo in only one comment. Impressive.
| moffkalast wrote:
| People have been calling them "Credit Sus" which I think is
| quite warranted.
| gonzo41 wrote:
| The best quip I saw was some saying they'd changed their
| name from Credit Suisse to Debit Suisse.
| popcalc wrote:
| https://shop.litquidity.co/products/mug-debit-suisse
|
| My type of impulse buy
| mtlmtlmtlmtl wrote:
| That is one wicked burn rate.
| rvz wrote:
| _Yes_. [0] [1]
|
| Alongside all the other banks that allowed trillions of dollars
| worth of illicit and laundered funds to criminals, drug
| cartels, etc. Unquestioned.
|
| Seems like the crime on the banking networks pays more than the
| fines, since both the banks and the regulators get a profit
| either way helping process transactions from criminals.
|
| [0] https://www.buzzfeednews.com/article/jasonleopold/fincen-
| fil...
|
| [1] https://www.nytimes.com/2020/09/20/business/fincen-banks-
| sus...
| briantakita wrote:
| The entire financial system is built on fraudulent activity.
| HSBC started by laundering money for opium drug dealers into
| China, regular scandals, revolving door regulators, etc. The
| biggest surprise is how the system has not collapsed yet. It
| would not surprise me if the can is kicked further down the
| road after some people get a hair cut. It would also not
| surprise me if the multi polar world goes back to commodity
| backed currencies...e.g. gold & oil.
| thom wrote:
| Well yes, but so did HSBC, Barclays and presumably all the
| other banks. So, reasons to be cheerful.
| ummonk wrote:
| If anything it's the opposite issue that could be the nail in
| the coffin - wealthy Chinese are pulling their money out after
| Switzerland decided to adopt sanctions against Russians.
| PreInternet01 wrote:
| Or, as Matt Levine put it in his most recent newsletter (https://
| web.archive.org/web/20230314194552/https://www.bloom...): "Not
| now Credit Suisse!"
|
| CS has been tethering on the brink of bankruptcy for a good while
| now -- interesting to see if this will finally push them over or
| not. The Swiss would _not_ be amused for such a stalwart of the
| banking business to disappear, but...
| nikanj wrote:
| Looks like archive.org has added an anti-bot wall, and poor old
| me on my iphone don't qualify as human
| elric wrote:
| Now there's a nice bit of irony .. archive.org doesn't
| respect robots.txt, is nearly impossible to block, but has an
| anti-bot wall?
| misssocrates wrote:
| If know the right people on the inside they'll scrub the
| archive for you.
|
| https://web.archive.org/web/20230000000000*/https://twitter
| ....
| bombcar wrote:
| That is when you have to go to the Deep Archives(tm)
| (completely distinct from the Depp Archives(r)).
| kibwen wrote:
| Firefox reader mode bypassed the anti-bot wall for me.
| marton78 wrote:
| Firefox reader mode to the rescue!
| neonate wrote:
| https://archive.ph/PABDC
| dieselgate wrote:
| Oh cool, was gonna mention the similar topic. As a rarity I'm
| viewing on a laptop right now and the anti-bot wall still
| doesn't process after holding. I believe this is Bloomberg
| specific feature as well - just wondering if others have the
| same problem on wayback but seems from my data points it'd be
| universal across devices. Thanks to the person below to post
| another link, will give that a shot
| choeger wrote:
| Nice try, Chat-GPT, nice try!
| [deleted]
| pearjuice wrote:
| This comes after news that there were "material weaknesses" found
| in their financial reporting the last few years. They also failed
| to "design and maintain an effective risk assessment process to
| identify and analyze the risk of material misstatements".
| Finishing it off with massive outflows of customer funds - larger
| than anticipated - which has "exacerbated and may continue to
| exacerbate liquidity risk". Will they survive?
|
| (source: https://www.cnbc.com/2023/03/14/credit-suisse-finds-
| material...)
| TacticalCoder wrote:
| Something I wonder is... With $1.3 trillion assets under
| management, is it safe to say that Credit Suisse's situation has
| nothing to do with Bitcoin?
|
| I'm asking because about 15 years after the last big financial
| crisis, one of the systemic bank risking default and potentially
| in need of a bail out reminds me of a headline from 2008:
|
| _" (The Times 03/Jan/2009) Chancellor on brink of second bailout
| for banks"_
| once_inc wrote:
| It isn't. Bitcoin isn't nearly big enough to cause systemic
| problems of banks, especially since most banks either don't
| have legal access to it, or because they don't see it as a
| valuable investment.
|
| Please note that while Bitcoin is mostly built to counter
| _central_ banking, it also heavily encroaches on the
| traditional yield generating business that banks serve to the
| people: storing wealth. With bitcoin, (excepting mining fees)
| you don 't have to pay for storage or services. You don't run a
| counterparty risk, and you can keep a moderate level of
| privacy.
| anigbrowl wrote:
| Swiss National Bank says they'll cover CS.
| https://www.semafor.com/article/03/15/2023/credit-suisse-ban...
| pphysch wrote:
| Chance that this is just part of a campaign to short CS? What
| makes CS different from other major global banks?
| yehudalouis wrote:
| My guess would be that that SNB's backstop and liquidity
| assistance is a way to bail them out before the inevitable
| collapse. It may make the medicine go down easier, as CS's
| collapse looks likely. Upon their demise, SNB can then say "well,
| great thing we had that backstop, huh!" rather than needing to
| find the political capital to get a bailout through.
|
| Just a guess.
| anonu wrote:
| Right now you can buy the whole company for $10bn. Seems cheap.
| Their building on Madison square Park in NYC is probably worth a
| $1bn
| opportune wrote:
| Wish I could have bought SVB for $10, their building in Palo
| Alto has to be worth at least half as much!
| jeron wrote:
| Credit Suisse was a real estate play all along. Was Neumann
| involved?
| vishnugupta wrote:
| Yeah but then you immediately own all their debt and
| liabilities. Which is why SVB UK was sold to HSBC for 1 pound
| because they were willing to take on all its debt.
| petercooper wrote:
| I don't know about the rest of the world, but this "sold the
| business for PS1" isn't uncommon in the UK:
| https://www.bbc.co.uk/news/business-44250900
| hn_throwaway_99 wrote:
| Folks need to understand the difference between market cap and
| enterprise value. To buy a company, you don't only have to buy
| the shares of stock, you also have to assume all their
| liabilities.
|
| True, liabilities _should_ be less than assets. But that 's why
| banks are freaking out in the first place.
| twblalock wrote:
| One of the things that made it harder to convince other banks
| to buy SVB is the memory of 2008 when banks who bought other
| banks inherited all their liabilities and lawsuits.
|
| > Why isn't Dimon buying S.V.B.? He has complained about the
| headaches of buying Bear Stearns and Washington Mutual at the
| government's behest in 2008, having spent years fighting
| litigation and paying fines for those firms' bad behavior.
| Bank executives who were around back then remember that.
|
| https://marginalrevolution.com/marginalrevolution/2023/03/se.
| ..
|
| It's good to want banks to be punished for causing problems,
| but if that punishment also applies to people who try to
| rescue the bank, then nobody is going to try to solve the
| problems.
| DubiousPusher wrote:
| > One of the things that made it harder to convince other
| banks to buy SVB is the memory of 2008 when banks who
| bought other banks inherited all their liabilities and
| lawsuits.
|
| Also, no Hank Paulson there with a shotgun to get the job
| done this time.
| roundandround wrote:
| Ah, but you don't have to actually assume liabilities, you
| can only lose as much as the purchase price.. So buying a
| company with 10 billion in debt and 10 billion in cash for $1
| isn't $1 overpriced. It is an opportunity to take a 10
| billion bet with "heads I win, tails I walk away chuckling."
| adastra22 wrote:
| That's not how it works. You assume the liabilities too.
| TechBro8615 wrote:
| If you purchase all of a company's stock, assuming that
| confers you 100% of voting rights, then you do "own" the
| company by most definitions, and certainly by the definitions
| that creditors would use when they demand their money back
| from your liabilities. In practice, once you own all those
| shares, you control the board of directors and can vote on
| how to handle liabilities, for example by using mechanisms
| like leveraged buyouts to (legally) shift liabilities to a
| new entity.
|
| The trouble is that to purchase 100% of shares of a company,
| someone has to sell those shares to you. Just because the
| stock tanks to $0.01 doesn't mean the board members will sell
| you all of their shares and voting rights. They don't have to
| accept your offer.
| tener wrote:
| For the public company: you pretty much can just buy it,
| barring stuff such as poison pills or regulatory approvals.
| triceratops wrote:
| Buy it sell the building immediately, transfer the money to
| one of your other companies, then file for bankruptcy.
|
| /s in case anyone was wondering.
| abm53 wrote:
| Can you explain what you mean by "assume all their
| liabilities" in practical terms?
| [deleted]
| Arrath wrote:
| You want to buy Bob's Delicatessen, a business which makes
| a tidy profit with their storefront schlepping sandwiches
| to the local cube farm dwellers.
|
| Bob's Deli has a number of on-going costs, like the lease
| for their storefront, contracts with suppliers to deliver
| goods, maybe a business loan from a local bank that got
| them going in the first place.
|
| These are all liabilities that you, the new buyer, must
| take on. You can't just rule from on high and say these
| business deals were with the old Bob's Deli and go away
| with the purchase. An example of a purchaser
| (apparently/allegedly) trying to say that former
| liabilities no longer apply: Disney buying up Fox, or
| Lucasfilm, and saying they no longer have to pay royalties
| out to authors who wrote novelizations of films, or
| expanded universe properties[1]
|
| [1]https://www.theverge.com/2020/11/19/21578621/disney-
| alan-dea...
| lastofthemojito wrote:
| Or, more recently, Elon Musk deciding that liabilities
| that Twitter took on before he purchased it no longer
| apply to Twitter under his ownership:
|
| https://arstechnica.com/tech-policy/2023/01/twitters-
| landlor...
|
| https://www.nytimes.com/2023/02/03/technology/twitter-
| elon-m...
| bombcar wrote:
| A company exists, and it has a loan on a building that it
| uses.
|
| It does nothing else, the building is worth $100m and the
| loan amount is $95m.
|
| So the company is worth $5m (the difference) and you could
| buy it for about that much (ignore whatever the company
| might DO with the building).
|
| But now the real estate market crashed, the building could
| only be sold for $80m, but the loan is still $95m. Now the
| company is worth -$15m. So you could buy it for a dollar,
| but you still have a building worth less than the loan on
| it.
| curiousllama wrote:
| They owe folks money. If you buy them, then you owe those
| folks that money. So you'll have to pay the purchase price,
| and then pay the company's debts.
| dndn1 wrote:
| How is this the case whenever apparently Credit Suisse
| investors are not made to pay Credit Suisse debts?
|
| E.g. Saudi National Bank, who announced no more cash to
| CS
| anonu wrote:
| Practically: CS may owe money, CS may get sued, CS still
| needs to pay suppliers and people...
| plaguuuuuu wrote:
| buy company
|
| pilfer physical assets by selling them to companies you
| control
|
| wait for company to go bankrupt anyway
| popcalc wrote:
| You might make a great Hungarian politician...
| tgma wrote:
| Has assets? Sure. Has liabilities?
| scottyah wrote:
| Just buy their assets like Disney
| <https://www.newsweek.com/star-wars-writer-says-disney-
| refusi...>
| samstave wrote:
| Goog bought their manhattan building for 1BN
| ta988 wrote:
| The investor may just not be able to inject more legally. There
| are limits.
| alex_suzuki wrote:
| That is actually the case. The Saudis claim "regulatory
| reasons" prevent them from taking a >10% stake.
| duxup wrote:
| I believe that is exactly what they are saying.
| mikece wrote:
| So... move assets to Bitcoin or not?
| codehalo wrote:
| Might not be the best place to ask. The commitment here to the
| legacy banking system is titanic.
| weego wrote:
| I didn't realise the feature set of crypto currencies had
| superceeded that of banking systems.
| 39 wrote:
| Why would it need to?
| svachalek wrote:
| Banking systems need on average 10-15 years to crumble
| under the weight of their own corruption. Crypto can do it
| in 4, which seems like a fairly dramatic improvement in
| efficiency.
| codehalo wrote:
| In the case of crypto, you might be confusing crumbling
| with weeding out. The long lived scams from traditional
| finance have a shorter shelf life there.
| lordfrito wrote:
| Wait... failing quickly (and more often) is a good
| thing?? This is the future of finance?
|
| Move fast and break things, indeed.
|
| I'll take long term stability.
|
| At least the customers/depositors in SVB are being made
| whole. Investors are screwed.
|
| Crypto is pretty much the opposite, just a bunch of
| rugpulls and missing money, customers screwed
| throwawayapples wrote:
| Took me a second, but rofl -- comment of the day (even if
| I disagree)
| [deleted]
| pjkundert wrote:
| Titanic...
| eCa wrote:
| An unfortunate metaphor. Judging from the first sentence I
| assume it's pre-iceberg-Titanic we're talking about.
| ceejayoz wrote:
| Bitcoin has, thus far, marched pretty much in lock step with
| the stock market. There's little reason to think that's going
| to suddenly change.
| eddsh1994 wrote:
| If you bought when SVB announced problems last week you'd be
| up 25%
| [deleted]
| largepeepee wrote:
| And if you bought bought regional banks at the bottom a few
| days ago you'd be up 500% on shares alone.
|
| If you want to gamble, might as well buy real banks instead
| of fake banks anyway.
| Crusoe123 wrote:
| And if you bought a few days before that you'd be at 0%
| ceejayoz wrote:
| Sure, and if I'd played 03 10 24 46 63 04 in the PowerBall
| on Monday I'd be a millionaire. It's not a great long-term
| banking strategy, though.
|
| The alleged promise of Bitcoin in various uses like an
| inflation hedge during economic turmoil have not borne
| fruit.
| ogogmad wrote:
| Why did you decide to do your comparison against that
| totally arbitrary point in time? Basically, anyone can play
| the game you're playing. Objectively, from its All Time
| High, BTC is down 70% - and has moved in lockstep with
| other over-valued meme stocks.
|
| I can't even --
| eddsh1994 wrote:
| I rarely buy stocks or crypto but when there's bad news
| on banks I buy crypto and when people are crazy negative
| about something I tend to invest there too. For example
| when the airlines crashed during Covid in the US. It's a
| pretty simple strategy but I'm green most of the time :)
| lamontcg wrote:
| It is funny that the knee jerk reaction to the FDIC
| guaranteeing all depositors at SVB is to panic and run to
| bitcoin.
| lordfrito wrote:
| I think the "run" to bitcoin can be mostly attributed to
| people bailing on stablecoins as there's no guarantee they
| can be converted to dollars. If your stablecoin can't be
| cashed, but can be converted to BTC, then BTC looks better by
| comparison.
|
| What's the point of converting BTC to dollars anything? I
| thought bitcoin was the future. I mean you don't see a lot of
| people fretting that we can't convert dollars to Zimbabwe
| bucks. Why are crypto people so hung up on convertibility to
| the fiat dollar?
| lamontcg wrote:
| And the people who comment "BTC is up 30% since SVB" are
| making their argument centered around $USD value of BTC.
|
| Whatever happened to "1 BTC = 1 BTC" do they not teach that
| to kids these days?
| lordfrito wrote:
| My theory is that BTC and "the crypto space" are mostly
| about dollars. They use FOMO talk (future of finance) to
| disguise that they really just want to sell you garbage
| and collect USD.
|
| I remember several years ago someone in finance posted
| here about how they were looking into ways BTC could be
| packaged into a traditional security that could be
| bought/sold in TradFi. After spending a year on it, he
| and his team came to two conclusions.
|
| 1) KYC made it really hard to do
|
| and
|
| 2) everyone they talked to was more interested in getting
| USD than holding onto BTC
|
| Point 2 stuck out to me. No one wants BTC. It's about
| get-rick-quick and cash out to USD.
|
| That's why everyone talks about the price of BTC relative
| to dollars. It's all that really matters to them.
|
| If my theory is correct, then the shuttering of the major
| on/off ramps between USD and BTC will force crypto into
| an endgame followed by a crash.
| lamontcg wrote:
| The endgame is probably when people need to raise capital
| because their business ventures in the real world are
| crashing and burning, and they actually take the
| available exits and drain the cash out of the system.
| Blocking offramps may actually do the ecosystem a favor
| (similar to coinbase always suspending withdrawals
| whenever crypto goes down).
| lordfrito wrote:
| Agreed.
|
| When that happens we're going to finally see what a
| bitcoin is truly worth.
|
| In some ways answering that question _is_ the very favor
| the ecosystem has needed all along.
| golergka wrote:
| We're not yet at the point when crypto does look a lot safer
| than bank deposits. But we might get there soon.
| pjkundert wrote:
| In Canada, we most _certainly_ are.
| nytesky wrote:
| What? Canada had one of the safest banking systems in the
| world and didn't need bailouts in 2008? Now crypto seems
| safer, why?
| progrus wrote:
| For one thing, the government can't freeze the accounts
| of its opposition, like Trudeau did with the trucker
| protest.
| ceejayoz wrote:
| Sure they can, and did.
|
| https://www.vice.com/en/article/jgmnpd/the-freedom-
| convoy-bi...
|
| Many cryptocurrencies even build the functionality in
| directly. Tether, for example, can blacklist tokens:
| https://www.coindesk.com/business/2022/11/10/tether-
| freezes-...
| progrus wrote:
| We're talking about future bitcoin world, not the past.
|
| > Many truckers now can't cash out their donated bitcoin
| due to financial sanctions, with some of the bitcoins
| being seized from NobodyCaribou by the authorities.
|
| "What are you saying, that I can convert bitcoin to
| dollars with impunity?"
|
| "No, Neo - I'm saying that when you're ready, you won't
| have to."
| ceejayoz wrote:
| If you want to say something's not possible, the fact
| that it happened in the past is something you have to
| reckon with. What changes in "future bitcoin world"
| prevent these seizures?
| progrus wrote:
| Expanded with details. If a fully functioning,
| sufficiently-decentralized crypto economy can be
| bootstrapped (meaning go to gas station, fill up your
| car, all with bitcoin), the government no longer has this
| ability.
|
| There is no one on earth who can "freeze" a bitcoin
| wallet, and beyond that point it's put up or shut up.
|
| Spoiler alert: In the US, thanks to our second amendment,
| the government will shut up in such a situation.
| Waterluvian wrote:
| I was expecting a cliff in the chart but you can't even see it.
| They've been consistently shedding value for a year now.
| mupuff1234 wrote:
| Way over a year, since 2008.
| yolo3000 wrote:
| Where do these massive outflows of customer funds go? Do these
| customers see the risk of collapse before everybody else and move
| the money to another bank, or.. ?
| icecap12 wrote:
| There are multiple places. For sure other banks. JPM and other
| "too-big-to-fail" banks received billions of dollars in deposit
| inflows over the last few days[0].
|
| But for me personally, I've been moving cash to US Treasury
| bonds, and based on recent bond prices, so have others. Short
| term treasuries were nearing a 5.1% yield as of early last
| week, and now are below 5% due to demand.
|
| Last fall, I moved cash to HYSA accounts for a higher yield,
| because my bank was still paying 0.05% interest, presumably
| because they were loaded with low-yield treasuries and
| mortgage-backed securities.
|
| In general, a bank is not a great place to park tons of money,
| at least that's what I've learned. I'm tired of getting screwed
| by them. What the media calls "faith in the banking system" I
| call getting bent over. Of course there are valid uses for
| banks, especially in business. But I'm done parking large
| amounts of cash there.
|
| [0] https://www.reuters.com/business/finance/jpmorgan-other-
| big-...
| IAmGraydon wrote:
| Good luck when Congress fails to agree on the debt ceiling
| issue in June, defaults on treasuries and government bonds
| become nearly worthless.
| grey-area wrote:
| Why go for a hard default when they can soft default (as
| now), and nobody cares?
|
| Yes republicans in Congress will try to force a crisis, no
| it won't actually mean government bonds become worthless.
| ericpauley wrote:
| Most everything is eventually wrapped treasuries. If the US
| government defaults you have far bigger worries.
| xeromal wrote:
| That scenario is a can of beans and hunting deer with my
| 30-06 kind of situation if it really gets that bad.
| icecap12 wrote:
| The situation you've described has never happened. Out of
| all the options, it is considered the safest. People forget
| that the dollar is backed by the ultimate currency -
| military force.
| revscat wrote:
| There is a possibility that members of Congress are
| actively seeking to undermine the financial strength of
| the United States, and to do so will not vote to raise
| the debt ceiling. Weakening the federal government is
| their goal, conservative social issues are merely
| justifications.
|
| I'm not sure what relevance you think the military has
| here in this situation.
| rootusrootus wrote:
| There are just a few members of Congress that meet that
| description, however. They only wield a lot of power when
| the rest of Congress is divided neatly into two nearly
| equal parts. The moment actual default becomes a real
| possibility, the mainstream members of both political
| parties will briefly form a consensus and kick that can
| down the road a ways. Just like they always have. Not too
| far, mind you, because it must remain something they can
| argue about periodically.
|
| The bad part, of course, is they likely won't do that
| until we've already done _some_ damage to our
| credibility.
| inglor_cz wrote:
| I have heard similar speculations in the Bush era. At the
| end of the day, it never happens.
| mastax wrote:
| If you're going to hold until maturity, I don't see how the
| debt ceiling affects you significantly (any more than it
| would affect the entire asset market). The treasury will
| pay you eventually, likely within days.
|
| If you are holding 10 year treasuries and were planning on
| selling them on the secondary market in July, yeah that
| could be very bad.
| oblio wrote:
| > Short term treasuries were nearing a 5.1% yield as of early
| last week, and now are below 5% due to demand.
|
| How short term are we talking about?
| pclmulqdq wrote:
| The 4 week is yielding 4.5% as of the last auction. These
| rates are all annualized, by the way, so you aren't getting
| a 4.5% bonus after a week.
| cypherpunks01 wrote:
| Short term duration is generally considered 1 year or
| under. The Treasury sells bills for 4, 8, 13, 17, 26, and
| 52 weeks.
| gadders wrote:
| How are you holding those bonds? Are you getting physical
| certificates and putting them in a safe/safety deposit box?
| If they're held electronically in a custody account at a bank
| that goes bust then I'm not sure you will be much better off.
| mywittyname wrote:
| Not the OP, but I assume they are holding them in
| TreasuryDirect.gov.
| berkle4455 wrote:
| Very unlikely, TreasuryDirect is so horrible to use, only
| if you must like I-Bonds. You just go into your brokerage
| and buy them on the secondary or even through auctions.
| TD Ameritrade and Vanguard brokerage accounts make this
| extremely easy. You can also sell your bonds whenever you
| want instead of waiting til maturity this way.
| dragontamer wrote:
| > TreasuryDirect is so horrible to use
|
| Sure its horrible to use. But it does the job, and is
| directly part of US Treasury auctions, so the prices are
| provably fair.
|
| Brokerages will skim off a bit off the top when they sell
| you a treasury. In contrast, TreasuryDirect is direct-
| from-auction, with the fairest prices possible.
|
| ------------
|
| Besides, its not like a notarized snail-mail form is that
| hard to accomplish. Back in the day, that was the only
| way to get any official business done.
|
| Your local bank probably has a notary on hand to sign the
| appropriate form. If not, look up your Yellow Pages for
| the nearest notary.
| akiselev wrote:
| _> If not, look up your Yellow Pages for the nearest
| notary_
|
| My Yellow what?
| salawat wrote:
| Yellow Pages. It's called a phone directory. Before the
| internet we printed up large lists of local people and
| businesses.
|
| Yellow Pages is the local business directory.
|
| If you're one of todays 10000, congrats!
| rk1987 wrote:
| Clearly you're living in different world.
|
| I've been trying to open treasury account for last 2-3
| months. Having a notarized form is such a big blocker if
| you have a 9-5 day job.
|
| The reward of getting few % higher return is not enough
| to figure out notary for me.
| dragontamer wrote:
| I just checked Google, and there's a bunch of online
| Notaries. So I really don't expect anyone to trip up over
| this step.
|
| I personally go to the bank somewhat regularly to pick up
| $5 and $1 bills. It wasn't that hard for me to have a
| notary form also signed for Treasury Direct access.
|
| -------
|
| Besides, there's a chance that you can get everything
| done online with Treasury Direct. It just so happened
| that there was some kind of issue that required me to
| send in a notarized form proving my identity and such.
|
| But using a notary is kind of basic "adulting" skills.
| There are other government forms that require a notary.
| (Passports and such).
| gadders wrote:
| The point I was trying to make, though, is that TD
| Ameritrade or Vanguard aren't any more immune to going
| bankrupt than a bank is.
| berkle4455 wrote:
| A) A brokerage isn't a bank
|
| B) It wouldn't matter anyway you still own the shares of
| stocks or the bonds. They don't magically disappear if
| the entity fails.
|
| C) Additionally there's SIPC
| gadders wrote:
| >>B) It wouldn't matter anyway you still own the shares
| of stocks or the bonds. They don't magically disappear if
| the entity fails.
|
| They don't disappear, but how can you get them in a hurry
| if your custodian fails?
| TacticalCoder wrote:
| > How are you holding those bonds?
|
| Can't bonds like these just be hold in custody at the bank,
| like stocks? They're property title no? Should my bank in
| the EU go bust, AFAIK, my stocks are mine. Isn't that the
| case for short-term US treasuries?
|
| As for physical certificates, didn't the entire world move
| to digital certificates about 20 years ago? I remember my
| family having those old physical certificates where you'd
| cut some pieces of the paper out of them and then you'd go
| at the bank to get your dividends. And there wasn't much
| security: you stole these and they were literally yours,
| with nobody who could verify who they belonged to. These
| physical "bearer" certificates have been the plot of a
| great many movies but I think it's now (mostly?) a thing of
| the past?
| gadders wrote:
| My point is, if your bank goes bust, how long will it
| take you to get your stocks or shares back?
|
| Supposing whatever caused your bank/broker/custodian to
| go bust was also causing the value of your
| bonds/stocks/whatever to drop and you wanted to sell
| asap. How fast do you think you could do that?
| cm2187 wrote:
| You bank is likely more stable than your broker.
| HPsquared wrote:
| That's a double whammy.
|
| If you hold a large amount of cash in a low-yielding bank
| account, you not only get less yield but are also exposed to
| the possibility of bank failure (which is itself increased by
| the increase in treasury yields).
| pjc50 wrote:
| Banks never were great for yield, only as a place to route
| all your payments through, and even that is done badly in the
| US system as compared to Faster Payments.
| justinzollars wrote:
| One could think of the outflows as natural. Fed policy was
| draining liquidity from the system, through QT and interest
| rate increases. In startup world, fundraising slowed and
| startups were burning through capital vis-a-vis bank withdraws.
| ingenieros wrote:
| Dubai perhaps? With all the sanctions in place there's very few
| places where oligarchs can safely store their money.
| https://www.cnbc.com/2022/04/27/credit-suisse-document-shred...
| rluhar wrote:
| TLDR - Credit Suisse has been a sh*t show for over a decade. This
| has been coming for a while.
|
| Credit Suisse is in investment banking and wealth management. It
| does not have a significant retail presence (EDIT - outside of
| Switzerland). Credit Suisse has also had a number of accounting,
| risk management, and other scandals over the last few years. They
| were bailed out late last year by a fund linked with Saudi Arabia
| who took a ~10% stake in the company. Today, they (the Saudi
| fund) refused to inject more capital and the shares have
| collapsed.
| esja wrote:
| What? CS has a massive retail bank. It's their most profitable
| division and has existed for 150+ years.
| rluhar wrote:
| Wealth Management is not the same as retail banking.
|
| "The Wealth Management division offers comprehensive wealth
| management and investment solutions and tailored financing
| and advisory services to ultra- high-net-worth (UHNW) and
| high- net-worth (HNW) individuals and external asset
| managers"
|
| Reference: https://www.credit-suisse.com/about-us/en/our-
| company/struct...
| esja wrote:
| How is that relevant? You said: "It does not have a
| significant retail presence." Meanwhile, CS does have a
| massive retail presence, in Switzerland, and has done for
| 150+ years.
| rluhar wrote:
| Fair enough. I stand corrected. Thank you.
| [deleted]
| rscho wrote:
| Credit Suisse has a major retail presence in Switzerland, at
| least.
| stephenitis wrote:
| Any predictions on if they'll just let this bank implode
| naturally?
|
| I feel like we are close on the verge of a event that sets off
| the recession. It feels like the banking sector is going to be
| the fuse again.
| theandrewbailey wrote:
| The fuse has already been lit. Three charges have gone off, and
| more will follow. Some columns are gone, but the structure
| isn't in free fall yet. Can't stop it now.
| MrMan wrote:
| do you know what you are talking about or are you just being
| dramatic
| rootsudo wrote:
| That's what the newscycle and everyone else is spinning it as.
| So, most likely it's just a slow moving crash that we're
| witnessing but it already happened.
| tootie wrote:
| I think a relevant question is who is "they" in this case.
| We've talked endlessly about the US Treasury and the Fed, but
| CS is based in Switzerland. A country with a long and storied
| history of banking independence. The US and EU aren't going to
| stand by and do nothing since our businesses likely have major
| exposure but one would hope the Swiss would deal with this
| appropriately.
| esja wrote:
| CS operates in 50+ countries. All the largest entities have
| resolution/winddown plans agreed with their regulators. In
| reality they probably won't be used because the SNB and Fed
| will fear contagion.
| config_yml wrote:
| The resolution process is outlined by FINMA, this was all
| defined after 2008 and the bailout of UBS:
| https://www.finma.ch/en/enforcement/recovery-and-
| resolution/...
| esja wrote:
| Yes, but the SNB and FINMA (and the Federal government)
| will try many other things before it comes to that.
| esja wrote:
| Not a chance of a natural implosion. CS is one of a very small
| number of globally systemically important banks.
| seydor wrote:
| We are all globally systemic. We are the world. We are the
| children
| gjvc wrote:
| haha.
| neximo64 wrote:
| CS stopped being globally systemically important a decade
| ago. More and more so by selling off pieces of the bank the
| past few years
| IAmGraydon wrote:
| >CS stopped being globally systemically important a decade
| ago.
|
| I don't know if you've looked at the market this morning,
| but it disagrees with you.
| tootie wrote:
| They've dropped in the rankings but still have over $1T
| AUM. Far bigger than SVB.
| Scoundreller wrote:
| I think the AUM comparison is something everyone needs to
| be careful of. Vanguard has a lot of AUM from me (from my
| point of view anyway), but it's (hopefully) 100% passed
| through to security issuing organizations. They only get
| to rake a fraction of a percent from me for their
| operations.
|
| Wayyyyy different than a bank with $billions in checking
| and savings accounts where they can do ??? with it.
| resource0x wrote:
| Wikipedia disagrees with you. CS is listed among 30 global
| systemically important banks. https://en.wikipedia.org/wiki
| /List_of_systemically_important...
| moffkalast wrote:
| Ah now well if Wikipedia says it then it must be true.
| esja wrote:
| You could always ask the Financial Stability Board:
|
| https://www.fsb.org/2022/11/2022-list-of-global-
| systemically...
| ramblerman wrote:
| As opposed to "that guy on the internet board said so" ?
| DiogenesKynikos wrote:
| Wikipedia is also "that guy on the internet board."
| ramblerman wrote:
| Lol, that's a very pessimistic take.
|
| 1. Wikipedia articles are generally not single author
|
| 2. they list sources for their important claims
|
| Such as in this case - The top 30 claim comes from the
| Financial Stability Board, which they linked to [1]
|
| [1] https://www.fsb.org/wp-content/uploads/P211122.pdf
| DiogenesKynikos wrote:
| Wikipedia is okay for some topics, particularly if
| they're completely uncontroversial and lots of people
| edit the article (note: both conditions are necessary,
| just one is insufficient).
|
| However, for anything even remotely controversial,
| Wikipedia is a real crapshoot. A lot of subjects are
| controlled by motivated cabals of editors. They may list
| sources, but there's no guarantee that those sources are
| representative, chosen in an unbiased way, etc.
|
| If you know how the sausage is made, your trust in
| Wikipedia will plummet.
| hn_throwaway_99 wrote:
| Thanks for this. My biggest pet peeve is "Wikipedia is
| just some random dudes" given that it's so trivially easy
| to see where Wikipedia sources their info.
| ChainOfFools wrote:
| Where Wikipedia _says_ it gets its references from. You
| still have to double check that the links work, the
| content hasn't changed, and that the actual reference is
| referring to statements that actually agree with the
| argument or context ( to say nothing of the facts) in the
| corresponding wiki text.
|
| If there's ever a good use for an AI in Wikipedia it
| would be vetting citations for at least a first order
| correspondence with text indexing the citation and
| flagging things that seem to diverge beyond some
| threshold.
| revscat wrote:
| They are more likely to speak the truth than some random
| cynic on HN.
| esja wrote:
| They are a bit less important than they once were in terms
| of volume, but they are still _massively_ interconnected
| with the rest of the system. There is zero chance they're
| just left to implode without governments and central banks
| stepping in.
| madaxe_again wrote:
| No, the taxpayers will foot the bill. Can't have bank CEOs
| missing out on their hundred million dollar compensation, that
| would ruin the system! It'll just be 2008 all over again - the
| people who screwed up will be rewarded, everyone else will be
| punished.
| celestialcheese wrote:
| Swiss govt is signaling they will backstop it.
| https://www.ft.com/content/0324c5a6-cecd-4fb3-85b3-7cdc99a33...
| Havoc wrote:
| Of course not. Why would you put in your own money when you know
| taxpayer will...
|
| That future expectation created is part of the price paid when
| you bail out entities.
| chiefalchemist wrote:
| So the market was expecting the investor to exceed their
| regulator limit? That doesn't make sense. What am I missing?
| Rexxar wrote:
| Or the majority of market participants were not aware of this
| limit.
| lordnacho wrote:
| The investor is basically an extension of the Saudi state, so
| it's not unthinkable that if they wanted to, there would be an
| exception made.
| asah wrote:
| ...or another entity spun-up to make this investment.
| cm2187 wrote:
| I suspect it has more to do with accounting standards. After
| a certain % ownership you need to consolidate the entity in
| your group, which from a regulatory capital point of view
| means consolidating all of the RWAs while not getting credit
| for all the capital in the entity.
| pestatije wrote:
| It might be that it's not a forbidden limit but a limit with
| strings attached
| [deleted]
| sschueller wrote:
| Most Swiss have written off this pile of garbage a long time ago.
| I also don't think anyone would give them a bailout. Scandal
| after scandal, they occur so frequently you aomost expect the
| next one to be in tomorrow's paper.
| resource0x wrote:
| Swiss National Bank designates CS as systemically important:
|
| QUOTE:
|
| " Global systemically important banks:
|
| - Credit Suisse
|
| - UBS
|
| "
|
| There are only 2 banks in this category. Source:
| https://www.finma.ch/en/enforcement/recovery-and-resolution/...
|
| Expect a bailout :-)
| sschueller wrote:
| If the taxpayer is going to have to bailout CS then I will
| demand that CS becomes property of the state. I consider the
| SNB part of the state so if this is going to cost the SNB a
| large sum I will not be happy.
|
| Also what were all the stress tests for and the new liquidity
| requirements that Swiss banks had to follow unlike SVB etc.?
|
| Edit: According to the media the bank does not have any
| liquidity problem but a reputation problem. There has been so
| much bad news in the last few years that people just don't
| trust CS. However according to the FINMA the bank is stable
| and worst case they would get liquidity from the SNB.
|
| The regulators are considering possibly splitting off the
| Swiss part of CS and some other scenarios.
| onlyrealcuzzo wrote:
| With what money?
|
| An entire year's worth of Swiss tax revenue couldn't cover
| this bailout...
| arez wrote:
| you can just print money, no need to have any revenue as a
| state. States are run different than a household
| onlyrealcuzzo wrote:
| Not really - they'd need to print $200B - which is 1/4th
| of GDP.
|
| That would match what the US printed during the pandemic
| ($5.2T) adjusted to the size of the economy. You would
| expect to get similar devaluation of the currency.
|
| And for what?
|
| Credit Suisse has been one of the worst banks in the
| world for a decade.
|
| They only employ 26k people in Switzerland (0.5% of the
| workforce).
| resource0x wrote:
| If they don't bail it out, we will have Financial Crisis
| 2.0. Just the magnitude of derivatives portfolio of CS is
| enough to accomplish that. Panic ensues. Contagion will
| engulf other big banks, starting with DB. Will DB be
| allowed to fail too?
|
| But if they do bail out, then other national banks will
| have to quickly bail out their banks, too. Almost every
| bank in the world will have to be bailed out.
|
| Neither option is good.
| TacticalCoder wrote:
| > And for what?
|
| The definition of a "systemic" bank is one that, should
| it fall, could take the _world 's entire financial system
| down with it_.
|
| So the "for what" would be: to prevent the world's entire
| financial system from crumbling.
|
| Should one systemic bank fall and make all the other
| systemic ones fall like dominoes then it's definitely not
| unthinkable that there'd be logistics issues and very
| likely famine in some places and probably civil war in
| several countries. Politicians may not care much: but
| they care about getting re-elected. And the whole system
| crumbling and famine and civil war means politicians not
| getting re-elected.
|
| I mean... Take a small player like SVB: it's not even on
| the list of systemic banks. A measly $177 bn AuM: that's
| literally one order of magnitude smaller than Credit
| Suisse.
|
| And yet everybody was whining and crying for SVB deposits
| to be saved and the goverment came to the rescue.
| kurthr wrote:
| For many economies that's a possibility, but the Swiss
| Franc has a much larger circulation than proportional to
| economic fundamentals (like the pound and dollar). That
| has to do with the perceived stability of the currency.
| Normally, a run on a currency doesn't work because it's
| locally used, but as seen in the collapse of the pound in
| 92 that made Soros a household name, it could. That would
| force much higher interest rates in Switzerland (or
| politically unacceptable inflation).
| pjc50 wrote:
| > much higher interest rates
|
| Last time I looked Swiss rates were -0.75%, so I don't
| think having to go back to positive rates would be an
| unspeakable horror.
| madaxe_again wrote:
| Yeah, but they'll just blame immigrants, which will make
| it politically acceptable. Worked in the U.K. last time
| around, and Switzerland is increasingly xenophobic,
| particularly the older generation, who hold the power and
| the votes.
| saiya-jin wrote:
| You mean the country that has by far the highest
| immigrants : citizens ratio in whole Europe? Nationalism
| is rising on whole continent for quite some time, Swiss
| expect others to respect their rules and way of life. If
| that's a mountain too tall to climb for some then they
| struggle.
|
| Swiss are type of general population that when given
| choice if to have 4 weeks of fully paid vacation or 6,
| they vote for 4 due to negative impact on employers.
| Given similar voting freedom to british population gave
| us brexit. I wouldn't compare them if I were you
| madaxe_again wrote:
| The more one believes oneself or one's countrymen to be
| immune to such forces, the more likely said forces are to
| prevail.
| acomjean wrote:
| They could start selling ammo again?
|
| https://www.nytimes.com/2023/03/12/world/europe/swiss-
| neutra...
| bootsmann wrote:
| UBS got bailed out in 2008, the state even made a hefty
| profit from it.
| steponlego wrote:
| DB is next. The math is just so bad there, and has been for a
| decade now, that it's inevitable.
| latchkey wrote:
| Someone on HN mentioned yesterday that CS is being priced in at a
| 10% chance of failing in the CDS market. I wonder how much this
| increases after this news.
|
| https://news.ycombinator.com/item?id=35152175
| eunos wrote:
| Close to 40%
| https://twitter.com/Schuldensuehner/status/16359445610747453...
| downrightmike wrote:
| I think it is more like chance of rain ie: 100% chance of 40%
| of CS failing
| lightbendover wrote:
| All will fail eventually.
| rr888 wrote:
| The problem with all these banks disappearing is that there are
| continuously fewer and fewer choices left. Eventually there will
| be a handful of megabanks and nothing else. I guess this is
| happening in every industry these days.
| dgb23 wrote:
| Is that really true?
|
| There are also new banks popping up here and there that grow
| very rapidly due to a more software/tech focus.
|
| And there are smaller more specialized banks that have been
| doing well (in Switzerland). There is at least one very
| recognizable co-op bank here and another one with a focus on
| sustainability.
| [deleted]
| red-iron-pine wrote:
| there was a time when the government had the guts to actually
| regulate and break things up.
|
| capitalism works when there is competition, otherwise it's just
| an oligarchy with ever-worsening terms and conditions.
| bumby wrote:
| For the conspiratorially minded, this is a feature, not a bug.
| The theory is that the creation of the current central banking
| system was, in part, to wrest power from the growing influence
| of regional banks back to the megabanks.
| checkcircuits wrote:
| It's not a theory nor is it a conspiracy insofar as it is
| lacking evidence. The collapse during the great depression
| was used to sell the fallibility of the small banks. Senator
| Aldrich took the bill written by the wealthiest bankers in
| America straight to congress to form the fed.
|
| It's relatively well known in fact [0]. Once you realize that
| was the intention to begin with the structure of modern
| banking starts to make a lot of sense.
|
| [0] https://www.federalreservehistory.org/essays/jekyll-
| island-c...
| ulrikhansen54 wrote:
| New ones will emerge (eventually)
| nindalf wrote:
| This is a consequence of computers + internet. 2 ways in
| particular:
|
| 1. Large organisations become unwieldy - computers help track
| and tame that complexity.
|
| 2. Geographically distributed organisations have trouble
| communicating and can be outcompeted in a region by a company
| focussing on that region. The internet helps reduce the
| friction in communication.
|
| Once both of these started getting adopted in the 90s and 00s,
| big companies became more competitive relative to smaller ones.
| dd36 wrote:
| And the lack of antitrust enforcement in the last 40 years.
| hirako2000 wrote:
| And the increase of lobbies and their increasing efficacy
| in getting tailored legislation adopted. Arguably as
| politics has become more and more a business. Not just in
| the U. S
| yamtaddle wrote:
| Pretty sure it's mostly a regulatory thing.
|
| The East India Company was pretty big and operated globally.
| And they didn't even have electricity. Ditto the Catholic
| Church.
| hotpotamus wrote:
| Monopolies and robber barons are hardly a new phenomenon. In
| fact, I've seen the term "robber baron" derided as an
| anachronism. I suppose oligarch or plutocrat are the modern
| terms. Nevertheless, economics 101 (literally I had to sit
| through this in freshman intro economics) will tell you about
| forces that drive businesses towards consolidation.
| bryanlarsen wrote:
| Matt Yglesias makes the case that the answer is more megabanks.
|
| https://www.slowboring.com/p/america-needs-more-giant-banks
| bannedbybros wrote:
| [dead]
| lettergram wrote:
| Banking is an industry where it's not difficult to break up.
|
| (1) ensuring only $250k should ensure capital is spread
|
| (2) the above hasn't been happening, so people are moving to
| big banks because the government bails them out
|
| (3) regulations are such that smaller banks have to go through
| an insane amount of work to get to a "big bank". Basically the
| big players have a moat. They'll get bigger because they
| control / design regulation. It helps consolidation. Smaller
| banks can't enter
|
| (4) it doesn't help some (maybe all) of these big banks are
| also board members of the fed. For instance Jamie Dimon of JP
| Morgan [1] where they funnel support to their corporations
|
| (5) to fix, there's a lot of options. (a) Simple one is to
| limit the amount of assets a bank can hold. They currently only
| do that for the smaller banks (not the big ones) (b) audit the
| fed directed by congress (there's a lot of inner dealing there)
| (c) create a graduated tax based on asset (as it increases
| systemic risk) (d) good old fashion anti-trust breakups
|
| [1]
| https://www.newyorkfed.org/newsevents/news/aboutthefed/2010/...
| duxup wrote:
| Is this an issue with specific types of banks?
|
| In the US the variety of consumer banks seems very healthy.
| Granted I understand there are different types and things are
| different elsewhere.
| wil421 wrote:
| Exactly, I still bank at BoA due to convenience and it being
| my longest open account but any bank service I need is first
| run by my Credit Union.
| duxup wrote:
| I switched to all credit union now. Works great for me.
| samch wrote:
| We do the exact same thing. BofA is a convenience for us,
| but our credit union is a safe haven with better rates,
| better service, and less risk.
| Scoundreller wrote:
| I'm sorta the opposite, I still use my out-of-town credit
| union. Best investment for my life: been getting $5 every
| year on my initial $5 share (got in as a child) for a few
| decades now.
|
| Have a line of credit with a big bank that I don't really
| use, but means there's a bank everywhere I can walk into if
| I needed a large amount of cash or a bank draft, and I pay
| it off the same day.
| ren_engineer wrote:
| don't worry, just buy your Federal Reserve CBDC and keep up
| your social credit score so they don't unperson you with no
| recourse.
|
| End game is the Fed tracking everything you do financially via
| their digital currency, this is almost classic Hegelian
| dialectic where you now have a manufactured crisis to get
| people begging for CBDC
| jcadam wrote:
| CBDC will be easier to implement if we can kill all these
| pesky small and medium sized banks...
| checkcircuits wrote:
| If you paid attention the last week or so there have been a
| lot of accounts here promoting the fed bank as a solution.
|
| You are correct and I agree with your assessment for what
| it's worth. Dozens of banks collapsing has two outcomes.
| Centralization into TBTF banks or a fed bank. Given the
| desire to manipulate currency further with CBDC I would
| suspect the modern money "theorists" in congress are
| salivating.
| Eddy_Viscosity2 wrote:
| That is the end goal, all things to be owned by a single
| person. They win capitalism.
| johnbellone wrote:
| Taco Bell.
| SheddingPattern wrote:
| Credit Suisse is a top 50 bank while SVB doesnt even make the
| top 100. SVB dissapearing leads to a lack of choice. Credit
| Suisse may pose a genuine global systemic risk.
| pjc50 wrote:
| https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/...
| claims that there were 4,706 banks reporting to FDIC at the end
| of last year. If anything there are too many banks and too few
| big internet companies, given that you can fit the five that
| matter into one acronym.
| mattnewton wrote:
| I'm not sure it's fair to compare regional banks to FAANG if
| that's what you mean? There are plenty of "internet"
| companies that don't fit into FAANG just as there are only a
| few mega banks on the scale of FAANG. Or I misunderstood?
| piva00 wrote:
| Corporate consolidation has been going strong since the late
| 90s/early 2000s, at least in my lifetime I saw the dwindling
| number of actual independent companies, the vast majority of
| big companies I was a customer during my lifetime have
| coalesced into some large conglomerate-ish... And in multiple
| countries, it really feels it's happening everywhere, even
| though seems more prominent in the USA.
| kibwen wrote:
| This is a natural consequence of markets (and proof that
| economies of scale work). On a long enough timeline, they
| trend towards consolidation. This is why constant government
| intervention is necessary, to break up monopolies and restore
| competition. A government that refuses to engage in trust-
| busting is broken.
| mughinn wrote:
| I'd argue it's the opposite, government intervention and
| existence explicitly favors the biggest players and nudges
| the market into oligopolies and monopolies
| comte7092 wrote:
| Are you disagreeing with parent comment? I'm having a
| hard time parsing.
|
| Are you claiming that economies of scale don't exist, or
| that they are trivial to the composition of markets?
| mughinn wrote:
| I'm claiming we need less government intervention
| comte7092 wrote:
| I guess that's my question.
|
| Are you arguing that, if markets are left alone,
| economies of scale are more or less irrelevant, and we
| wouldn't see consolidation in banking?
|
| Seems like a dubious claim to me. More driven by ideology
| rather than evidence.
| mughinn wrote:
| Economies of scale aren't the only thing that matters
|
| Banking is already one of the most regulated industries,
| regulation takes out smaller companies and leaves out
| only the ones that are big enough.
|
| It seems to me way more dubious to claim that more
| regulations would solve this problem in an already
| incredibly regulated industry
| comte7092 wrote:
| Regulations by and large _have_ solved the problem.
|
| Bank failures were incredibly common in 19th and early
| 20th century America. Today they are next to non
| existent.
|
| Again, take a step back from the ideology and look at the
| evidence. The count of bank failures before 1930s era
| regulations vs post speaks to the effectiveness of
| government intervention.
| mughinn wrote:
| Bank failure is a different problem than bank
| consolidation, of course it would happen less when you
| don't allow small banks to exist and just give money to
| the ones that do so that they don't fail, making them
| richer and protecting them from their mistakes
| prottog wrote:
| That's a bit of a circular argument, since there are
| radically fewer banks now than there were in the past.
| Just in the last 20 years the number of banks in the US
| was cut down in half; and back in the 1930s, there were
| almost four times as many banks as we have now. Fewer
| banks mean fewer bank failures.
|
| A fairer comparison perhaps would be to see how many
| dollars of deposits (in some adjusted manner, like per
| capita, percentage of GDP, or percentage of circulating
| money) were imperiled as a result of bank failures back
| then versus now? A hundred banks failing in the 19th
| century each serving a few thousand customers each would
| be a much smaller impact than, for example, the
| hypothetical failure of Bank of America.
| grokgrok wrote:
| That's how we get wonderful things like the East
| Palestine Disaster. Let's deregulate biotech! Coming up
| next after Shark Week -- Lab Leak Week! Let's deregulate
| environmental pollutants! You don't need clean drinking
| water! /s
| mughinn wrote:
| It's really easy to say something dumb, but it's hard to
| actually think about the subject.
|
| I don't really know what happened in East Palestine, but
| I haven't found anyone saying it was because of
| deregulation
| ClumsyPilot wrote:
| then you havent looked
| prottog wrote:
| Diseconomies of scale also exist and are very real, and I
| theorize that many organizations try to overcome it by
| applying political pressures on smaller peers.
| frandroid wrote:
| It's also the result of a low tax and low interest rate
| environment. When you can borrow money for free, or
| functionally for less than your rate of profit, why
| wouldn't you buy out your competitors?
| robertlagrant wrote:
| > This is why constant government intervention is
| necessary, to break up monopolies and restore competition.
| A government that refuses to engage in trust-busting is
| broken.
|
| Conversely, more regulations mean more monopolies due to
| larger first-mover advantages, and the only viable route is
| to build until you get bought by a parent company who can
| sort out the admin.
|
| Constant government intervention isn't what makes
| competition. It being worth it to start and build a company
| without, in the slim chance you make it, being a verbal and
| financial punching bag for future politicians, is.
| kibwen wrote:
| The fact that economies of scale exist means that even
| unregulated markets will consolidate. Regulation is an
| orthogonal concept. On the spectrum of market
| competitiveness, one extreme end (perfect competition) is
| an unstable state, and the other extreme end (monopoly)
| is a stable state. As consumers we benefit from
| competition, but free markets abhor competition.
| _Something_ needs to intervene to reintroduce
| competitiveness into monopolized markets, and that
| something is going to be indistinguishable from a
| government.
| robertlagrant wrote:
| I agree that even less regulated industries have
| monopolies, you're right, but those will tend to be
| companies that either have a natural monopoly (e.g. they
| own some land) or are so competitively priced enough for
| their customers that there's no obvious way to create a
| competitor that can take market share from them. I don't
| see either of those situations being improved by constant
| government interference.
| hedora wrote:
| I'm not so sure. The US has markets that are resistant
| against consolidation.
|
| I think this is a natural consequence of letting the
| biggest companies control the politicians that set the
| rules.
|
| (What you say is true for pure free markets, but the
| banking industry is incredibly regulated, and the
| government routinely picks winners and losers in it.)
| Supermancho wrote:
| > The US has markets that are resistant against
| consolidation.
|
| I don't see why they are special and the trends are
| clear, despite the claim. If govt regulation results in a
| few winners who have played by the rules and are seen as
| more reliable or it's free market monopolists (or duo,
| etc), the result is the same.
| javier2 wrote:
| Banking as well as food industry. Almost all of food industry
| seems to be captured by a couple of mega conglomerates.
| Scoundreller wrote:
| Here's the best article I found on that topic:
| https://www.theguardian.com/environment/ng-
| interactive/2021/...
|
| At least banking has credit unions everywhere, although the
| ones around me in Canada are also consolidating rapidly.
| WillAdams wrote:
| At least credit unions remove the profit motive --- I
| wish that there was a similar movement to farmer's co-
| operatives, or setups like "Southern States", which is a
| farmer-owned co-operative for supplies.
| DeathArrow wrote:
| With time they'll all fusion into one mega-corp.
| lsllc wrote:
| Zorg Industries
| cyann wrote:
| Brawndo
| dr_dshiv wrote:
| Semi--Automated Luxury Communism, Inc
| antibasilisk wrote:
| More like Communo-Capitalism, i.e: quasi-communism
| operating within a nominally capitalist system
| red-iron-pine wrote:
| that's called socialism
| antibasilisk wrote:
| It would be a type of socialism, as is the case with any
| variant of communism
| dgb23 wrote:
| Socialism is a _very_ broad term that ranges from anarcho
| syndicalism and libertarian socialism to democratic
| socialism, market socialism and many others. The key
| commonality of these is that you have some form of worker
| owned economy AKA you have some say and direct
| responsibility in all aspects of life, including your
| work.
|
| What is described here is some variant of state
| capitalism or state monopoly capitalism, which is an
| extremely controversial form in socialist circles:
| https://en.wikipedia.org/wiki/State_capitalism
| fsagx wrote:
| Omni Consumer Products
| imhoguy wrote:
| E Corp
| hugs wrote:
| Googlezon (From the short film Epic 2014)
| pjc50 wrote:
| Chaebol.
| lsllc wrote:
| Mr. Lee's Greater Hong Kong
| orangepurple wrote:
| And people are still joking about the New World Order and
| One World Government
| mtlmtlmtlmtl wrote:
| The Earth Corporate.
|
| Or E[vil]-corp for short.
|
| Edit: I realised a missed opportunity for a Mr. Robot
| reference.
| favaq wrote:
| Maibatsu Corporation
| altgeek wrote:
| Weyland-Yutani
| doitLP wrote:
| Buy-n-Large
| bannedbybros wrote:
| [dead]
| spariev wrote:
| Tessier-Ashpool
| [deleted]
| DeathArrow wrote:
| You can always buy crypto. :D
| ClumsyPilot wrote:
| I've had enough malaria,'maybe its time to try ebola
| pixelpoet wrote:
| No way, crypto is a scam and Ponzi scheme! Totally unlike
| banks getting bailed out with taxpayer money and giving exec
| bonuses etc.
| Red_Leaves_Flyy wrote:
| Ownership, conversions, and transfers suck. To get similar
| utility out of crypto as banks one must sacrifice the
| decentralized features.
| Karunamon wrote:
| I get that buying your groceries and morning coffee with
| crypto probably isn't happening anytime soon, but why do
| you single out those three things? I don't get what you
| mean by ownership, conversions are automated and easy
| (things like Uniswap), and transfers are as straightforward
| as transferring money could possibly be (insert recipient,
| insert amount, hit send). What do you mean?
| cjbgkagh wrote:
| In accounting; the Big 8 -> the Big 5 -> the Big 4. EY is
| looking a bit precarious as they seem to be the goto firm for
| fraudulent companies so we may end up with the Big 3.
| losvedir wrote:
| I feel like we're missing a key part of banking infrastructure:
| somewhere to just park cash.
|
| Start-ups who raise a Series A aren't looking to earn 1% on it
| - it seems silly that they can't really do anything with it
| that doesn't take on risk, and that FDIC insurance for just
| storing cash only goes up to a low amount.
|
| Sure, in the old days when money was physical and there were
| costs involved in storing it and transporting it that makes
| sense. But these days, I feel like I'd like to just be able to
| have an account straight at the Federal Reserve or something,
| which doesn't earn any interest, but lets me keep my cash
| sitting there without any risk of a run or anything like that.
|
| But generally, I don't think I really need a bank. I want
| somewhere to temporarily store any amount of cash (Federal
| Reserve), and somewhere else that I can invest what I want, if
| I'm looking for a return, with some risk, on my money. Neither
| of those are really roles of a bank, right?
| dilyevsky wrote:
| Our HOA's noname bank has a cash deposit sweep where they
| automatically loadbalance reserve cash between many banks so
| it stays under fdic limit. Done that for years. But what do i
| know I'm just an hoa board member not a unicorn startup cfo
| -\\_(tsu)_/-
| cduzz wrote:
| You sure about that?
|
| If you have an account with noname for $3,000k and noname
| has 12 accounts with localcorp1-localcorp12 each of $250k
| -- and noname goes poof, what happens?
|
| I think, according to the preSVB rules, you get $250k from
| FDIC and then get a very strong claim to $2,750k from the
| rest of noname's assets (if no BigBank steps in to buy the
| part of noname you're connected to).
|
| https://www.fdic.gov/consumers/banking/facts/priority.html
|
| You'll (probably) get your money back, but after how much
| time?
| dragonwriter wrote:
| Brokered deposits are insured in the depositor (not
| brokers) name. If they still happen to be over the $250K
| limit, they are historically the _least_ likely accounts
| to get full value back in a failure, but as long as there
| is less than the insurance limit per bank, they are fully
| covered.
| dilyevsky wrote:
| When I look at acc statement it shows a list of
| completely different banks each with <250K. If our bank
| goes bust I presume we get our first 250K that are
| sitting in the bank itself as soon as FDIC takes over
| which is enough for operations and will need to contact
| other banks for our money. It's more like a brokerage
| account than a regular deposit.
| cduzz wrote:
| I'd give those other banks a call and ask.
|
| Also, per FDIC rules, the 250k is per party attached to
| the account, so at least for a married couple it seems to
| be $500k per account.
|
| But hey, I'm sure it'll all be fine and we won't need to
| worry about the fine print.
| dragonwriter wrote:
| > Also, per FDIC rules, the 250k is per party attached to
| the account, so at least for a married couple it seems to
| be $500k per account.
|
| Its per owner per account class, but what constitutes an
| owner varies by account class, and, IIRC, many class by
| definition have a single owner.
|
| But, yeah, you can double your coverage in simple
| directly-owned accounts as a married couple by splitting
| funds between maxed out single accounts ($250K) for each
| party and a maxed out joint account ($500K) for a total
| of $1M in coverage, because single and joint accounts are
| separate categories.
| Arainach wrote:
| It's a lot easier to split $1M between four banks than to
| split $300M between 1200.
|
| Side note: what HOA needs more than $250K in reserves? I'm
| all for a rainy day fund but I'd be asking for a reduction
| in dues...
| rr888 wrote:
| Our HOA has upcoming $1.5mil bill coming for a big job.
| ClumsyPilot wrote:
| > It's a lot easier to split $1M between four banks than
| to split $300M between 1200
|
| If you tens of millions in cash, that money shoupd be
| managed proffeshionally. And anyway, why should
| preserving that money be anyone's problem other than the
| owner's?
|
| There is no such thing as 'sace money' in the world. It
| just doesn't exist.
|
| We as a society spend more effort making sure money is
| safe than we do making sure children are safe/not hungry.
|
| A person walking outside cant be safe from getting hit by
| a car, a child cant be safe from getting an ilness, plant
| machinery cant be safe from breakdown, a city can't be
| safe from being hit by an earthquake.
|
| There is no person or asset that is safe.
|
| why should money be safe?
| fourmajor wrote:
| reserves are for more than a rainy day fund. They're also
| for saving up for predicted maintenance needs. For
| instance, say the HOA is responsible for the roofs of all
| the residences (like if the residences are condos). It's
| a somewhat predictable and high expense that you can map
| out to 10 years down the line or something. Then you save
| up for it in your reserves.
| gshubert17 wrote:
| > reserves are for more than a rainy day fund.
|
| Exactly. Many HOAs are now required to get periodic
| reserve studies that calculate predicted maintenance
| costs going out sometimes 30 years. Association Reserves
| did our study (<300 homes) and calculated we needed $1.4M
| to be 100% funded. Our HOA policies require only 60%,
| which we think reduces the risk of special assessments to
| a very low level, but that's still a lot of money.
| Association Reserves believes that property values in
| HOAs with high percentage reserves can be 5-10% higher
| than low percentage (<40%) reserves.
| dilyevsky wrote:
| > what HOA needs more than $250K in reserves? I'm all for
| a rainy day fund but I'd be asking for a reduction in
| dues...
|
| Leftover from suing the builder for improper
| waterproofing. We're spending that. Turns out
| retrofitting waterproofing costs a lot of money!
| [deleted]
| qqqwerty wrote:
| SVB offered a sweep account. Turns out it does not cover
| the lawyer fees that one will incur when trying to figure
| out how to recover those accounts. Maybe your HOA should
| hire a CFO -\\_(tsu)_/-
| dilyevsky wrote:
| We have all that infra. Part of the reason why hoa fees
| are just ridiculous these days
| andrewmcwatters wrote:
| > Sure, in the old days when money was physical and there
| were costs involved in storing it and transporting it that
| makes sense.
|
| ???
|
| This never stopped being the case.
|
| Banks receive deposits and make loans. They are core pieces
| of modern banking. They play a role in increasing the
| monetary supply through debt servicing.
| HDThoreaun wrote:
| The government doesn't want you to "just park cash" because
| it makes monetary policy difficult and loans more expensive.
| Predictable and cheap credit is an necessary part of a
| functioning modern economy so the Fed incentivizes(forces)
| banks to use deposits to make loans.
| dgacmu wrote:
| Sure they can. You cycle it through very short term
| treasuries - weekly buys of 4 week t-bills if you really want
| to be conservative about your cash availability. And if even
| that is too spicy for you, buy shorter-out t-bills on the
| market to keep your average maturity lower.
|
| (This mirrors some of the primary strategies used by money
| market funds, but a startup is in a better position because
| they can probably accurately forecast their cash needs a week
| or a month out.)
| qqqwerty wrote:
| That is not what they are asking for. Investing in t-bills
| either requires an account with Treasury direct, or some
| other brokerage. If you manage the t-bills yourself, then
| you have to manually initiate the transfers, which has risk
| of both human error (if you forget to transfer, or input
| the wrong amount) and counter-party risk (if the brokerage
| fails, you may not have access to your funds for a while).
| And for many companies the day-to-day operations require
| more than $250k in an account just to be able to clear
| payroll and invoices, so even if they put their reserves in
| t-bills, their primary account is still at risk.
|
| Small startups and business can easily end up with cash in
| the multi-millions. We are talking about companies with a
| handful of employees, too small to warrant a full time
| financial focused position. As the OP mentioned, there is
| zero reasons we can't have a zero risk depositor account.
| And I think most folks would be happy to pay a small fee
| for the service, but fees should not be necessary as the
| provider can still get overnight rates. But the only reason
| we don't have one right now is because the government
| doesn't want to interfere with the banks ability to make
| money off of our deposits.
|
| EDIT: For some extra context, I know someone that had a
| swap account at SVB. In theory they were protected, but
| they still lost access to their funds for multiple days,
| which can be very problematic for a business. And on top of
| that it wasn't (and still isn't) clear how one would
| recover swap accounts, so they spent the weekend reaching
| out to lawyers. At this point they have probably spent a
| week of time sorting this mess out. They are a small
| biotech focused on finding cures for diseases and have zero
| interest/resources for financial engineering. And for
| companies that typically only have 1-2 years of runway,
| loosing a week of productivity is a huge distraction.
| Gwypaas wrote:
| Put it in a money market fund and periodically withdraw.
| Use an insured cash sweep.
|
| It is economics 101. Even a regular citizen doing a once-
| in-a-decade housing deal has to be wary of it.
| qqqwerty wrote:
| > It is economics 101.
|
| Please explain to me what happens to a sweep account when
| the primary bank fails. Asking for a friend, who quite
| literally tried to get an answer to this over the
| weekend. Also, I asked this question in the Mercury
| thread where the founders were responding to questions
| and got no answer.
|
| And apologies, but I added an edit before I saw your
| comment. But in that edit, I explain how the sweep
| account was of little comfort during this SVB debacle. If
| they had needed to make payroll on Friday, they would
| have missed it. And while the FDIC has restored access to
| 100% of funds thanks to the intervention, it is still
| unclear how and when they would have gotten access to the
| sweep accounts in the case of no intervention.
| Gwypaas wrote:
| Of course, any single point of failure is risky.
| dgacmu wrote:
| I don't know, but I can tell you that my attorneys were
| pretty optimistic about the state of what would happen
| for the sweep accounts at SVB that invested in external
| money market funds before there was a resolution. But
| they're attorneys, so they're not going to commit to a
| hard answer unless you're paying them, and this was a
| general information call.
| jameshart wrote:
| You should probably read patio11's _The Alchemy of Deposits_
| - https://www.bitsaboutmoney.com/archive/the-alchemy-of-
| deposi...
| giantg2 wrote:
| For most of us, a bank is a place to just park cash. Most
| people are well under the $250k insurance. It seems the
| government is willing to cover depositors above that amount
| now too (SVB).
| analyst74 wrote:
| What if the federal reserve goes down? Or just that US dollar
| goes down in value.
|
| Even if you only do business within the US, exchange risk is
| baked into your supply chain and inflation.
| gshubert17 wrote:
| The Federal Reserve Bank's current balance sheet (as of
| last Thursday,
| https://www.federalreserve.gov/releases/h41/current/h41.htm
| ) shows they hold $4.5 trillion in Treasury notes and bonds
| and $2.6 trillion in MBS (mortgage-backed securities) out
| of a total of $8.3 trillion. The first two numbers are face
| value not market value.
|
| If market value is 10% less than face value for these
| securities on average, then the Fed would have unrealized
| losses of about $700 billion. But the Fed doesn't have the
| same insolvency or liquidity risks that ordinary commercial
| banks do.
|
| The US dollar would go down in value if there were more
| dollar sellers than buyers. That would happen if those with
| dollars had something else to buy. The Us dollar index is
| up a bit today, so far. I'd imagine at the moment that a
| run on the dollar would be unlikely. But there could be
| some combination of circumstances . . .
| marvin wrote:
| I don't think this is missing at all. It's literally just
| what a bank does. Historically, a bog standard, straight-up
| boring old school _bank_. No fancy investment banking, no
| crazy growth strategy, no risky lending to maximize returns,
| no emperor 's-new-clothes financial fashion tricks that we
| must do now because everyone else does them.
|
| I worked for many years at a bank that did just that. We
| happened to be able to offer significantly lower deposit
| rates than our competition, because we had very low exposure
| to the kind of banking that risks government takeover due to
| surprising repricing events.
|
| Wealthy customers too lazy or otherwise unable to spread
| deposits around to stay below the deposit guarantees chose us
| to an overwhelming degree, in spite of competition that
| offered better rates.
|
| Granted, it's in Europe. Don't know if there's stuff in the
| US environment that makes this harder.
| rrrrrrrrrrrryan wrote:
| There are a few full-reserve banks, (as opposed to fractional
| reserve banks), where your money is not gambled with at all,
| but nobody uses them because nobody wants to pay money to
| have a bank account.
|
| There are Massachusetts banks insured by the DIF (the
| inspiration for the FDIC) that has insurance for deposits
| over 250k, but at that point you're kind of putting more
| faith in the state of Massachusetts than the U.S. government.
|
| > Start-ups who raise a Series A aren't looking to earn 1% on
| it - it seems silly that they can't really do anything with
| it that doesn't take on risk, and that FDIC insurance for
| just storing cash only goes up to a low amount.
|
| If this is what they're looking for, they should probably
| just be banking with a SIB [1]. Wells Fargo and Bank of
| America might pay laughably low interest rates on their
| accounts, and deposits might technically only be insured up
| to 250k, but the U.S. government cannot and will not let
| these banks fail under any circumstances because they would
| drag the entire U.S. economy down with them.
|
| [1] https://en.wikipedia.org/wiki/List_of_systemically_import
| ant...
| lottin wrote:
| Banks make money from loans. A bank that didn't make loans
| would have to make money from deposits by charging a large
| fee to its depositors, and compete for deposits with other
| banks that don't charge a fee.
| lovecg wrote:
| Any bank that tries that would have to charge a fee to cover
| costs and will quickly lose business to the other "banks"
| that don't do that.
|
| The fundamental lie here is allowing banks to tell you you
| have "cash" deposited and "available" with them. If the
| online app showed the truth - how your $10k you deposited
| turned into some shares in mortgage backed securities or
| whatnot, the alternative "just pay to park some cash" might
| be able to survive.
|
| I have the same pet peeve about Amazon being able to tell you
| that you "buy" a Kindle book instead of buying a revocable
| license to read it temporarily.
|
| It's all false advertising really and it's eroding
| competition and consumer trust.
| krisoft wrote:
| > Any bank that tries that would have to charge a fee to
| cover costs and will quickly lose business to the other
| "banks" that don't do that.
|
| There is this saying that if you are not paying for it you
| are the product. Curious that people only apply it for
| search and email services.
| SilasX wrote:
| >The fundamental lie here is allowing banks to tell you you
| have "cash" deposited and "available" with them. If the
| online app showed the truth - how your $10k you deposited
| turned into some shares in mortgage backed securities or
| whatnot, the alternative "just pay to park some cash" might
| be able to survive.
|
| That's basically what bond mutual funds are (including
| money market mutual funds, which closely simulate savings
| accounts via $1 share price), and they seem to have a
| market.
| jameshart wrote:
| It's not a _lie_.
|
| Certainly for up to $250,000 deposited at an FDIC insured
| institution, it is absolutely true that you can assume that
| you have cash deposited and available. If at any time the
| bank gets itself into a position where they can't make good
| on that, FDIC will fix it so you still have your cash.
|
| That is precisely the mechanism that the federal Government
| makes available that gives you a place to park your cash.
| bombcar wrote:
| As a note, this is one reason to still keep some paper
| checks around for your FDIC accounts.
|
| Because when SVB closed on Friday and reopened on Monday,
| you could have still used a paper check during that time
| and it would be honored; but online access may have been
| shut off.
| saurik wrote:
| The operations fee required for that company posited to
| have just raised its series A to park its fat stacks of
| cash is going to be negligible (as it should be constant
| for any size of account).
| lovecg wrote:
| Well the other side of the equation is it would be very
| very tempting to do something with all that cash. Like
| "let's fire the CEO who doesn't go for it" tempting. I
| don't see this working without regulation.
| saurik wrote:
| The problem for the startup is they are already doing
| something super risky and so want to be 100% conservative
| with the cash used to finance their operations. The last
| thing their investors want to hear is "so yeah, you
| wanted us to shoot for the moon with your money, but we
| didn't want to lose out on a couple percent of interest
| so we invested it in the market and that's down 20% right
| now so we're having to wait a bit to execute part of our
| strategy as we expect that to go back up soon".
|
| Like, the problem is that the mental model of this money
| is wrong: there needs to be a place where a company that
| intends to take a bunch of money in and then spend it
| over the course of a few years can do that without it
| causing everyone a bunch of issues as those deposits were
| supposedly backing loans to still other people (such as
| that story with the hashicorp people that was posted here
| yesterday with the Chase bank branch that failed to
| understand that a startup's goal is to lose money, not
| invest it).
| jameshart wrote:
| The Federal Reserve doesn't want to be in the business of
| managing all the infrastructure of _payments_.
|
| Banks offer a deposit product that lets you do useful things
| like 'get your salary paid directly into your account from
| your employer's account', and 'use a debit card to authorize
| transferring a couple of bucks to Starbucks's account'.
| bombcar wrote:
| > The Federal Reserve doesn't want to be in the business of
| managing all the infrastructure of payments.
|
| I mean they're trying to work with it: https://www.federalr
| eserve.gov/paymentsystems/fednow_about.h...
| jameshart wrote:
| Fair - although still _through_ depository banks.
| mike_hearn wrote:
| This is actually what CDBC proposals are about, at least
| originally. The idea is that by making the computing
| infrastructure of the central bank scale up and out,
| companies and even individuals can directly hold and transfer
| "hard money" i.e. money directly issued by the central bank,
| without needing an intermediary bank.
|
| When I was last tangentially involved in such projects it was
| quite unclear how they thought this would interact with
| monetary policy. Narrow banks could easily be created today
| without any new IT systems, but generally, governments are
| unwilling to do what it takes to enable them for political
| and financial reasons. At some level it's another obfuscated
| way of raising revenue without explicitly raising taxes: they
| force people to deposit money in banks, force banks to lend
| those deposits to "low risk" counterparties like themselves
| giving them more money to spend on vote-winning policies,
| then if the banks go under they either print the money to
| bail them out (taxation via inflation), or force banks to
| charge the depositors (taxation with the banks as
| collectors), thus hiding the true nature of what's happening.
|
| To get banks with zero risk deposits is therefore not really
| an infrastructure problem - banks could easily just park cash
| with the CB and then charge fees for administration of things
| like the websites, the branches and so on. The problem is to
| convince governments to reduce their spending levels to the
| point where they can eliminate the rules forcing banks to
| loan them money, which in turn would allow narrow
| banks/accounts to appear, and that in turn would allow them
| to start removing the guarantee on deposits. In such a system
| people who wanted ROI would have to explicitly move some
| deposits into funds that expose the liquidity risks and
| requirements, and which can be left to collapse without a
| bailout if they make big losses.
|
| Unfortunately governments are currently stuck in a local
| minima. Although everyone can see that bank runs are bad, and
| that they're also easy to eliminate, doing so would require
| people to believe that the government will _not_ bail out
| depositors at a fractional reserve bank if there 's a run.
| For as long as people suspect the government's commitment to
| the policy is weak, the winning move is to keep banking with
| a fractional reserve bank and pocket the zero-risk interest
| yields. The suckers who put their money in a safer place will
| end up poorer than those who put their money into a bank that
| later collapses.
| andy_ppp wrote:
| > I feel like we're missing a key part of banking
| infrastructure: somewhere to just park cash.
|
| We're going to need a bigger mattress...
| Night_Thastus wrote:
| The better bet in your case is a Credit Union. Something
| local and not very large.
|
| They're smaller organizations with far less overhead and no
| stupid fees for every little thing.
|
| Perfect for just storing money if that's all you need.
| ghiculescu wrote:
| Don't read this: https://www.chicagobooth.edu/review/safest-
| bank-fed-wont-san...
|
| It will make you angry.
| PaywallBuster wrote:
| Many banks offer "money market" accounts, wouldn't it be
| similar?
|
| https://en.wikipedia.org/wiki/Money_market_account
| ursuscamp wrote:
| Custodia in Wyoming has been going through this same thing,
| recently. They tried to start a 100% reserve bank. The Fed
| has been ignoring their application for a Master Account
| for two or three years, until just recently, they were told
| on the side to withdraw the application or it would be
| formally denied.
|
| Then, according to the CEO of the bank, the Fed leaked to
| the press.
| Eupraxias wrote:
| Great read. What conclusions should we draw? What should we
| do, if "money is no longer money"?
|
| It seems like most normal people operate as though money...
| is money. What should change in the way most normal people
| do what they do with... whatever it's called now?
| toomuchtodo wrote:
| Sign up with a brokerage. Use their cash management
| account. Confirm its FDIC limits (many cover $1M+ with
| sweep functionality). If you exceed those limits,
| consider investing excess cash or cash equivalents in
| treasuries or money market funds that solely hold short
| dated government backed securities. This is what a Narrow
| Bank would do with demand deposits. Treasuries are backed
| by the Fed and the full faith and credit of the US gov;
| they are considered risk free.
|
| Tada! You have replicated narrow bank functionality. None
| of us have enough pull to change Fed fractional reserve
| and banking regulatory policy unfortunately. If you can't
| change the wind, adjust your sails.
|
| If you don't mind your deposits being exposed to
| fractional reserve lending and FDIC insurance, CDARS:
| https://www.intrafinetworkdeposits.com/ To my knowledge,
| it can provide at least $50M in FDIC coverage with sweeps
| under the hood, although someone on HN mentioned the
| other day the limit might be more. Ask your financial
| services institution what their limit is.
|
| (not investing advice, educational purposes only)
| HDThoreaun wrote:
| brokers lend cash sitting in accounts.
| kccqzy wrote:
| Can they lend treasuries sitting in accounts, if you
| don't have a margin account?
| HDThoreaun wrote:
| No, but treasuries lose value if interest rates increase.
| kccqzy wrote:
| Then hold short term treasuries. Problem solved.
| toomuchtodo wrote:
| Brokers only lend out of specific core cash accounts
| (FCASH at Fidelity, for example). Whether you hold cash
| in those account types is your choice, it isn't
| mandatory.
|
| https://www.fidelity.com/mutual-funds/fidelity-
| funds/money-m...
| michaelt wrote:
| _> Tada! You have replicated narrow bank functionality._
|
| Brokerages will issue checks and debit cards now?
| bombcar wrote:
| Yup! Most just do it via a small internal FDIC bank (it's
| easier for them to have a bank for other reasons anyway):
|
| https://www.tdameritrade.com/investment-products/cash-
| soluti...
|
| https://www.fidelity.com/cash-management/atm-debit-card
|
| Even vanguard can do it, but they don't LIKE to:
| https://investor.vanguard.com/investor-resources-
| education/f...
| prottog wrote:
| Many do, but even if they didn't, it's free to ACH money
| to your real bank checking account every now and then
| that you can spend and write checks with.
| toomuchtodo wrote:
| My brokerage issues checks, debit cards, and offers both
| inbound and outbound wires at no charge. Check with
| yours!
| mym1990 wrote:
| But what is the competitive advantage to be had between a
| regional bank and a megabank? I kind of love my megabank(and
| there are quite a few megabanks too). I can expect a branch to
| be in a foreign country, it provides a pretty great mobile user
| experience, it is well capitalized, the in person customer
| service has been great as well.
|
| Is it that less competition allows for companies like Wells
| Fargo to take advantage of their customers on a large scale? Is
| it that regional ones can provide fewer fees?
| haarts wrote:
| Where are you banking?!?
| mym1990 wrote:
| It might have something to do with me being on the more
| chill side of things when it comes to customer service or
| other issues popping up. I'm pretty non-confrontational. I
| was also on the front lines of customer service for a
| while, those people have to deal with a lot, so I don't
| like to pile on.
| wayne wrote:
| Examples: (1) One reason SVB did well is it understood
| startups. If your startup just raised a large round and
| needed a small loan, you were more than good for the money,
| but most banks would scoff because your business didn't have
| a long record of profits. (2) The "simple" thing of having a
| no-fee, no-minimum checking account with a convenient ATM you
| can use without fees is something we can take for granted in
| larger metro ares; in many places your local regional bank
| may be your only choice.
| mym1990 wrote:
| Why would a startup need a small loan after raising a large
| round?
| eddsh1994 wrote:
| Before the money is actually in the bank but is reliable
| because SVB partners with the VC firm responsible for
| leading the round who vouches?
| hedora wrote:
| - Corporate expense cards
|
| - Amortizing real estate costs into the future to get to
| a stable cash flow.
|
| - Rainy day funds
|
| (The last one is a risk to the lender, but can be low
| risk and profitable on average for the lender, as that
| part of SVB was.)
| [deleted]
| hedora wrote:
| In the current system, a loan underwriting office can screw
| up and deny a loan, and it is no big deal. With one big bank,
| the same error means someone will never be able to buy a
| house/car/etc.
|
| Also, not all banks offer all products. Many of the big
| megabanks product portfolios are missing fairly common
| financial instruments
| Red_Leaves_Flyy wrote:
| Capitalism 101 explains that the consolidation of capital is
| necessary to maximize the capital extracted from customers.
| Basing our entire economy on a few average people handling
| the assets of billions is bound to go disastrously wrong. As
| we have seen cyclically for decades now. Does a bank exist
| that hasn't knowingly laundered organized crime money, paid
| bribes, or otherwise engaged in substantial white collar
| crime? I cannot find one.
|
| Credit unions are superior and their disparate ownership
| structure is a key reason why.
| mym1990 wrote:
| Capital is only one side of the coin, competition is the
| other. Competition ultimately drives capital distribution.
| Red_Leaves_Flyy wrote:
| >"The unbridled, competitive free markets that the Right
| cherishes don't exist today. They are a myth."
| Furthermore, "The Left attacks the grotesque capitalism
| we see today, as if that were the true manifestation of
| the essence of capitalism rather than the distorted
| version it has become."
|
| https://www.cato.org/regulation/fall-2019/myth-capitalism
|
| I'll posit that this am academic flight of fancy or
| distinction without a material difference. The fact is
| there's no meaningful competition in the American
| economy, whether it's called capitalism or socialism for
| the rich and debt peonage for the rest.
| specialist wrote:
| > _maximize the capital extracted_
|
| Cause and effect may be the reverse.
|
| Capitalism simplifies and commodifies, to extract more of
| the surplus.
|
| Consolidation is often rationalized with the goal to
| "reduce redundancies" (and passing the "savings" onto
| consumers, naturally).
| Red_Leaves_Flyy wrote:
| It's an ouroboros, a cancer. One leads to the other and
| back again until everything has been extracted and the
| house of cards collapses in on itself and the survivors
| fight over the scraps to repeat these mistakes over
| again. The sooner mindless growth is reigned in and
| economic targets are forcibly aligned with reality,
| involving hard reality checks for very powerful and very
| despicable (subject of many articles trending on HN this
| past week) the better we'll all be.
| jerf wrote:
| The one I hear about the most is service. Large, do-it-all
| banks don't have a lot of motivation to care about you and
| your $100,000 bank account & half-a-million mortgage. They've
| got corporate accounts to service against which yours is a
| mere rounding error. A smaller local bank will find you to be
| big, valuable customer to keep around.
|
| This is a general economic principle. To put it into an HN
| context, this is why Google, Amazon, Facebook, Microsoft, and
| such aren't the only tech companies. When they sit down to
| spend a dollar, they do an analysis and put it into the place
| that will make $1.60 (tech companies still have absurd return
| ratios compared to the rest of the world even after the last
| year). It doesn't make any sense for them to put it where
| they will make $1.30. It doesn't matter how big they get or
| how much money they have, that analysis always holds true.
|
| This is why Google shuts down so many things. Even being
| profitable isn't enough for them, it has to be wildly
| profitable and at scale to compete with "making ads better".
| It is also why it is perfectly rational to be distrustful of
| anything Google puts out and fear it being shut down. It is
| not a transient corporate culture thing, it is a systemic
| issue with where their profit comes from. And yet it is
| rational for them to float out various things as probes to
| see if there's some huge profit for them to tap into, even as
| total long shots.
|
| Meanwhile, other smaller companies can happily survive and
| thrive on that $1 -> $1.30 return, and then themselves be too
| big to worry about a $1->$1.13 that a startup may thrive on.
|
| There are some other reasons why One Big Company isn't
| actually a practical outcome, but this is one of them, and
| the one relevant to this discussion. It applies to tech
| companies. It applies to the retail industry; this is why
| Wal-Mart and the fancy boutique downtown import shop can
| still coexist, even today. It applies to the auto industry,
| which is why your local auto dealer may service a local
| business' 10-car fleet but there will be another company
| servicing huge fleets. And it applies to banks.
|
| This does not mean a large bank is _obligated_ to be
| negligent of you, it just mean that there 's a pretty strong
| pressure that is hard for them to resist. Strong internal
| leadership may push the consumer branch to be friendly as a
| sort of advertising mechanism for the rest of their bank,
| because you never know what individual will be in charge of
| directing a large corporate account in the future. But
| they'll be vulnerable to the next MBA to come along and cut
| that cost and boost short term profits, and who will have
| moved up before the long term costs come in.
| [deleted]
| SenHeng wrote:
| As someone that lives in a rural community, the national mega
| bank wouldn't offer me a mortgage because they didn't
| understand the local market, whereas the regional bank was
| the one most people living here got their mortgages from.
|
| Particularly business loans.
| chadash wrote:
| I'll add another example. I have a friend who lives in the
| Boston area and bought an old home about 10 years ago with
| the intention to gut renovate it. He didn't have enough
| cash to pay for the renovations without a loan, but the
| likes of Chase, Wells Fargo and Bank of America generally
| don't want to deal with mortgage loans like this, because
| 1) it's a different workflow... the bank gives you money
| piecemeal as construction proceeds rather than all at once
| and 2) the bank is basically fronting you the money based
| on what your home is going to worth when it is done.
|
| For example, say I buy a home for $400k and gut renovate it
| for $200k. Let's say that the specific renovations are
| going to improve the value of the home, but it's hard to
| know by how much. If I go to Chase, they will gladly lend
| me 80% of the $400k ($320k). But Then I need an $80k down
| payment + $200k for renovations, or $280k cash on hand to
| make this work.
|
| If I go to a smaller bank that doesn't do things as
| algorithmically and knows the local market, they might say
| "hey, we're gonna give you the $320k down payment and then
| we think that in that area of Boston and based on what you
| are doing, the house is going to be worth $150k more when
| you finish renovations, so we're gonna finance 80% of that
| $150k as well ($120k). You are still going to need to prove
| that you have your $80k down payment + $30k (20% of $150k)
| + $50k (the difference between what renovations cost and
| what they will add to value of home), or $160k total. So in
| this example, I need to have $160k in the bank if I want to
| make this whole transaction work with Regional Bank X,
| whereas with Chase, I need $280k.
| gizmo wrote:
| A different take on your anecdote is that your friend
| goes to a big bank and they're willing to take a 20% down
| payment which gives your friend 5x leverage on the
| mortgage. Your friend says: "that's not good enough! I
| need more leverage because I also need money for
| renovations!". But big bank says "absolutely not, that's
| irresponsible."
|
| Your anecdote presumes that the small bank is right and
| the big bank is wrong. I'm not so sure.
| ClumsyPilot wrote:
| There is nlan easy way to know: big bank didn't do the
| math and come to a dofferent conclusion, they jusy
| decided they don't want to deal with the problem.
|
| Also, whay does 'right' even mean in this case? They lost
| the customer. Unless customer default on the loan, they
| won't be 'right'
| p_j_w wrote:
| >They lost the customer. Unless customer default on the
| loan, they won't be 'right'
|
| This isn't how banks work. They put in place rules that
| they consistently adhere to when they decide if they're
| going to give out a loan to someone or not. The real
| answer is that if consistently allowing that type of loan
| would make them more money than it would cost, then they
| won't be right.
| CydeWeys wrote:
| It's not more leverage after the additional money loaned
| is plowed back into the home's equity by way of the
| renovations, however. The bank simply needs some way to
| enforce that the additional money loaned is actually
| being used for this purpose, and that the renovations are
| of the 'widely acceptable' type.
| ericmay wrote:
| Genuine question is that more to do with the regional
| bank knowing the market or more to do with JPMorgan Chase
| having more stringent regulatory requirements and
| controls? Maybe a little of both?
| izacus wrote:
| "stringent regulatory controls" might be controling for
| issues in US when you're trying to get mortgage in Asia.
| floatrock wrote:
| Seems more like a long-tail thing... mega banks take all
| the standard things that can be bundled into
| megasecurities, let someone else worry about all the
| things that don't fit into a standard box.
| TheOtherHobbes wrote:
| MegaBanks have automated procedures which are more about
| automated bureaucracy than regulations.
|
| If Computer Says No, nothing is happening. But Computer
| lacks any sense of context or local variation. By
| definition decisions are based on national stats which
| average a lot of behaviour.
|
| Smaller banks have people - who are probably experts -
| making contextual loan decisions. Someone's good
| character and work ethic - or lack of - is going to
| influence the decision.
|
| This doesn't make decisions infallible, but it's the
| difference between small-focus rigid decision making, and
| broad-focus community-dependent decision making.
|
| It's also why so many people are caught in the rental
| trap. Many of them are perfectly able to afford a
| mortgage, but they don't match the bureaucratic criteria
| on some relatively minor point, and so Computer Says No.
|
| It's _also_ why credit scoring is so slanted. I have a
| perfect payment record, but no loan history because it 's
| more than six years since I paid off all my debts. If I
| apply for a credit card I'll be marked down because I
| don't have a large existing credit limit.
|
| This is deliberate policy, because lenders don't want
| people like me who will pay off the balance in full every
| month. They want borrowers who won't. This prioritises
| immediate profitability - until the loan book blows up
| with a wave of defaults during a recession, because these
| borrowers _are inherently riskier._
| chadash wrote:
| Both. It isn't worth JP Morgan's time to understand the
| different neighborhoods in Boston. Their computer model
| is their computer model. But think about where you live.
| I'm sure you can tell me that certain streets are
| desirable and certain streets much less so. Maybe there
| is a block nearby with particularly nice foliage that
| makes it look good. Information that you wouldn't know by
| looking at a map. A regional lender might be tuned-in to
| things like that in a way that a megabank won't be,
| because it's not worth their time to get to know each and
| every neighborhood.
| mym1990 wrote:
| Ah yes, interesting perspectives all around, thanks!
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