The 72-hour scramble to save the United States from a banking crisis
washingtonpost.com
washingtonpost.com
A “small business” has -100k/+100k in their bank account.
A tiny $400k run-rate company should have $100k in the bank. Keep in mind we’re talking about expense run-rate not profit.
The guy who owns 14 car dealerships might not have $10 mil in their checking account, but they absolutely have payroll and rent obligations at a level where they’re holding at least a couple million. To say nothing of cash requirements for all that inventory…
Let natural consequences happen. Then adjust based on what is learned from the outcomes-- no pain, no gain.
The society & economy should recognize the pain resulting from irresponsible action,
if only do drive the society & economy to punish those who were so greedily irresponsible.
Stop sheltering the population.
And especially stop sheltering the bankers.
Experiencing consequences is an important part of improvement-- without consequences there is no real impetus to change.
Also see Mother Nature Is Trying to Kill You by Dan Riskin.
See, this always worried me. How do you buy insurance against rising interest rates? Or more precisely, WHERE to you buy insurance against rising rates? If the answer is "from other banks" (which it presumably is), then there is no hedge in any meaningful sense. My reasoning is that it's a closed-loop system. They can't all pay off each other without counterparty default somewhere along the line.
I guess what I'm trying to say that rising interest rates are bad in the sense that it creates losses (be they realised or unrealised) that are systemic to the whole banking system. There needs to be some outside party that can soak up the losses. That outside party is The Fed
You buy what’s called an interest rate swap. And yes, there is always counterparty risk. But that doesn’t mean you can throw your hands in the air and say “risk management isn’t important because you can never fully remove counterparty risk.”
And in the cases of the insolvent banks, it’s not like they did everything in their power to reduce risk. They didn’t. I’m not against having the government support the banks. But I think that, if a bank needs government support, then it should give up its equity to the government to get it.