WSJ has been trying to fetch the word "Richcession" into existence for a few months now. Broader point is that the bad economics of this particular moment are tilted much more towards the 1%, rather than the 99%. Know the last time the word "anti-trust" was used in a state of the union speech? 2023. Know the time before that? 1979. If I were a democratic strategist, and I were looking to not give the former Tea Party any fuckin' leverage in this moment, I would let the banks eat shit. Each and every one of them. I would throw them into receivership, I would pay out my FDIC deposits on that tiny splinter faction of America that has less than two hundred and fucking fifty thousand dollars in their checking account and I would dare the Republicans to defend Chinese venture capital at the expense of medicaid and student loans. There aren't any laws being broken here, just bad decisions. Capitalism is the freedom to make bad decisions. Schumpeter called it "creative destruction" and it's the same thing that let Uber briefly out-price taxis, that let AirBnB briefly out-price hotels. You only have to look back fifteen years to see what happens when you don't make banks face consequences. You lose Congress and you sow dragon's teeth. Since a thunderous amount of bailout money went to people who didn't need it, who put it in banks that didn't need it, who shored it up with assets that they knew would suck, this is just financial Ouruboros. let the bodies hit the floor
Looks like they're bailing it out anyway, but with some lipservice about how it's other banks paying and not the taxpayer. Gotta socialize the losses https://home.treasury.gov/news/press-releases/jy1337 edit: at least it seems like they're not bailing out investors as well which is nice
I’m having trouble squaring that circle. “Depositors made whole. No taxpayer money will be used.” Um, what? You’d think they’d elaborate a bit. Edit: This from the WSJ is thin but plausible I guess: The government’s bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said any losses to the government’s fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn’t bear any losses.
right, that "special assessment" sounds suspiciously like a roundabout tax
Socialized losses. It fixes the liquidity problem because these banks deposits are 100% guaranteed but does nothing to fix the solvency problem that’s going to pop up eventually. There are a bunch of banks that are now effectively insolvent with no mechanism to force a liquidation. Moral hazard 2.0. Also everyone now pays more for insurance on fdic not doing their job.
This is worth your time. The shenanigans last time basically involved bullying JP Morgan into buying Bear Stearns, followed by Lehman eating shit, followed by everyone recognizing that all these deck chair games were meaningless while AIG ate shit. This movie? This movie is about AIG. See, the proletariat loves thinking in "Big Short" terms because of course they do, that's why it exists. Big Short is about some scrappy traders that bet big who won the lottery, American Carnage is very much off-screen. TBTF and Margin Call are about clever people within their expertise who made the wrong calls despite all the information in the world and they know we're all fucked and their only rational choice is to fuck everyone else more. Big Short is 100% "look how clever our scrappers are" while the movies the traders worship are fucking horror movies. You can't avoid the slasher if you have to go camping in the woods. Because here's the problem: There isn't enough policy in the world to stave off systemic collapse, there never has been, there never will be, so all these ostensibly dispassionate regulators have to engage in horse-trading in order to keep the music going and historically? It delays the inevitable for anywhere from a few days to a few months. As of this writing, we are 21 hours past the Treasury's bid deadline for Silicon Valley Bank. Someone was supposed to swoop in, scoop up their assets and make everyone whole and all I can see is that PNC isn't someone. You've got an ocean liner. It's got 2200 passengers. It's got lifeboats for 900. You just hit an iceberg. Do you immediately begin the rational, calculating process of figuring out which 1300 passengers are designated drowners so you can get the other 900 to sea? Or do you rearrange some deck chairs and cue the band so people panic less while you get your loved ones and family afloat? We're all busy cosplaying Jack and Rose while the Treasury is doing everything they can to put off drawing straws. The 14-lifeboat idea was signed off by everyone, we all agreed it was better than nothing, and then we diligently planned on not hitting an iceberg, and here we are.
the real problem is a bit back. The long and the short of it is that banks' casino moves busted the house and the result was the Great Depression. Glass Steagall, in a nutshell, says "you can be a player or you can be the house, you can't be both" - you are either a "thrift", (place people put their money for safe keeping) or an "investment bank", (place people put their money to make it grow.) Dodd-Frank, on the other hand, recognized that thrifts starve to death under perpetually low interest rates. But rather than, you know, raise interest rates to the point where companies couldn't buy each other out for two six packs and a promise, Dodd-Frank allowed thrifts to be investment banks. The upside of this is that banks made a fuckton of money. The downside of this is that banks made a fuckton of money by doing risky shit, the more risky shit they did the more money they made, the more money they made the higher their stock price went up, the higher their stock price went up the easier they could finance buying each other out, the more they financed buying each other out the more the bond market grew, the more the bond market grew the riskier everything got, the riskier everything got the more likely the banks were to bust again. - Paul Wellstone Wellstone, of course, was dead within three years. I'm sure it was nothing.''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''
Did you read that book?! Is it crackpot or is there a there there? Of course G-S was the thing that should have been reinstated instead of Dodd-Frank, but the stranglehold that the banks have on Washington just ensures that we get what we get and we don't throw a fit, as I tell my 3 year old.
Hell nah. I'm an Ockham's Razor kinda guy and Paul Wellstone's death was a secular tragedy... but if it was arranged, it was arranged better than most. Ultimately it doesn't matter. He died, things sucked, as Harari points out, history is generally written by the biggest dicks who commit the most atrocities. I point out to my kid that we're all equal but some are more equal than others and that if you aren't very carefully making sure you're on the right side of the trade you're likely to fall victim to everyone else doing the exact same thing. It's pretty funny to me that SIVB is the biggest crash since Washington Mutual, since Washington Mutual ate shit by going neck-deep in dumb mortgages and risky loans while their credit card department also lobbied like mutherfuckers to make bankruptcy debt harder to disburse. On the one hand they really wanted unsecured loans to be forever while on the other hand they generated secured loans well past their collateral. End result? People walking away from their underwater mortgages so they could make their credit card payments and WaMu ate shit. It's the shareholder conundrum - when you conduct business one quarter at a time and your pathway to advancement is "impact" rather than "consistency" you're gonna crash the train every time.Did you read that book?! Is it crackpot or is there a there there?
also, if it was a 100% insurance, banks would have to either take 0% risk and offer 0% interest, or the money to make it up will keep coming from taxpayers i don't really care how silicon companies are doing so would rather not the second one, and the first seems to dilute what a bank is able to do by a lot edit: just saw your other post - yea it's scummy they can pick and choose when they're allowed to ignore the limit