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Comment by jacquesm | Hacker News Reader

Interesting reading. The bit that really jumped out at me was this: "Saudi National Bank — the Swiss bank’s largest shareholder" -> so here we have part of the problem, with all of these banks owning all or some of each other it is no wonder that when one of them gets into trouble the others are immediately discounted on the stock market. Not only do they get indirectly affected because they likely engage in similar practices, they also are interlinked through various stock holdings. And the solution here? More such linkage! Why didn't the Swiss government or the Swiss national bank end up owning it? Instead it is now - again - part of another such complex.

You have to wonder how long it will be before UBS will have to be rescued.

Another random thought: If even the Swiss can't keep it together financially we're in real trouble.

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I'm no expert in the field, but my understanding is that CS was, in fact, rather too big for the nation of Switzerland to bail out. Their two biggest banks (CS and UBS) do an awful lot of non-Swiss business, so that is possible for them in a way that it would not be for a nation like the U.S.A. So, they made UBS take it (all accounts are that UBS was not interested until the Swiss government told them that yes they were interested).

Also, UBS has more skill at running a bank than the Swiss government, although arguably the Swiss government might have had more skill at running a bank than Credit Suisse.

> If even the Swiss can't keep it together financially we're in real trouble.

The Swiss banking industry has been overrated for a long time.

In this case it's not like a competent, sensibly run bank failed. Credit Suisse had a track record of being pretty terrible.

Not just pretty terrible, but criminal and corrupt pretty terrible.

https://www.firstpost.com/explainers/from-cocaine-money-laun...

“Crime doesn’t pay” - Credit Suisse, probably

Incompetent criminals don't get paid. And you don't hear about the competent ones.

> If even the Swiss can't keep it together financially we're in real trouble.

Eventually all financialized systems go the way of the dodo bird.

The Republic of Genoa is the classic example for this, as they had made their fortunes via trade (including slave trade) starting with the 1200s, but by the 1500s almost all of their wealth-creation had started to rely on providing "financial" services. And then they crashed. I'm also of the opinion that the UK's problems are caused by the same phenomenon, that's why they have never quite recovered from the 2008-2010 global financial crisis.

Afaik Switzerland is not yet a fully financialized economic system but it's certainly up there. The future will be interesting for them.

Finance and investing is largely based on trust in the future. I wonder if a long enough period of stability makes us too comfortable with taking risk and bad investments, only to expose us to massive downside far enough down the line. Then the inevitable black swan event happens, and finance/investment based wealth gets wiped out.

It doesn't help that the mind set a successful trader or banker needs is how to maximize their own net worth - not how to build a long term stable and profitable business.

"Finance and investing" are basically just gambling. You might as well bet on horses, dogs, cards, or crypto.

Money is neither a thing nor a limited resource. Money is a political tool certain groups use to ration power and accountability. It used to be based on scarce objects, but now it's pure abstraction.

An important part of that is making sure insiders have special opportunities and backstops most of us don't. For the real insiders it's a rigged house. And for the most inside of the insiders it's impossible to lose more than token amounts.

You can be sure that whatever happens to banking, there will be people whose gambles will somehow miraculously be made whole while the rest of us are told "Oh dear, suddenly there is no money. Again."

Gambling means you have guaranteed net negative return because you’re against the house and the rules of the house are designed in such a way, mathematically speaking.

Trading mortgages, financing a building, betting that an airline will have a bad quarter after the first WW lockdowns of covid, can have a net positive return. you are playing player vs player and you bet and structure the trades trying to get the odds in your favor.

they’re two different things, you just seem ignorant.

not to mention other uses of finance such as edging. farmers, companies of sll kinds, even countries, want and should edge their wipe outs and black swan events type of risks for example. and a Citedel will happily underwrite your options.

> Afaik Switzerland is not yet a fully financialized economic system but it's certainly up there. The future will be interesting for them.

Too late. I can't find the data at the moment, but deposits in Swiss banks are more than 400% of GDP. (The US's economy is about the least reliant on financials, with deposits at slightly more than 100% of GDP.)

Found the data, from Swiss National Bank itself. Switzerland's banking assets are 520% of national GDP, compared to US's about 120% GDP. <https://www.snb.ch/en/mmr/reference/stabrep_2022/source/stab...>

That's another common Matt Levine (the article author) theme that very large index funds are a weird form of insider trading.

I subscribe to his email mailing list which is literally his articles from the website without the infinite ads and requirement for registration and subscription.

Is there a good article of his to start with on that?

I've never heard of that theme and I'm intrigued.

Can't find it because he has so many articles but there was one that talks about how ESG makes sense from an index fund owning oil point of view because it's an excuse for the fund managers to basically coordinate collusion among the oil companies. If they all have the same shareholders then those shareholders can tell of them to produce less oil and the price will increase. The usual concern of defecting is taken care of because of the collusion. If one of the companies doesn't produce less the fund managers can vote them out for not being "ESG" enough.

https://ritholtz.com/2020/07/should-index-funds-be-illegal-2...

Thanks. That's a fascinating idea.

I've always found it odd that a person can buy stocks in both Microsoft and Google, for example, or both Coca-Cola and PepsiCo at the same time.

For regular non-filthy-rich people it won't affect anything, but it is very interesting to think about with institutional investing. What does it mean when competitors have some level of shared ownership?

> Why didn't the Swiss government or the Swiss national bank end up owning it?

The Swiss don’t want to own half a trillion francs of specialised liabilities. There is zero precedent for a nationalised investment bank of all things.

> There is zero precedent for a nationalised investment bank of all things.

Aren't large state holding companies and sovereign wealth funds (Norway, Singapore, ME/Gulf countries) a special case of national investment banks?

> large state holding companies and sovereign wealth funds (Norway, Singapore, ME/Gulf countries) a special case of national investment banks

With respect to the latter, no. They’re less levered. And they’re principals. Investment banks are levered, mostly sell-side beasts with highly-specialised, highly-compensated (and similarly lucrative) staff with a penchant for blowing up.

> Why didn't the Swiss government or the Swiss national bank end up owning it?

This was the plan B which would happen if UBS would reject the deal.

"all these banks owning each others": Which other banks? This is fairly unusual as the capital treatment of equity ownership is very punitive. Banks shareholders typically aren't banks.

That quote isn't what I wrote. And the relevant bank is mentioned just prior to the bit you quoted. And now they have a new shareholder: UBS. Which is also a bank.

>Another random thought: If even the Swiss can't keep it together financially we're in real trouble.

The Swiss government(and the SNB) could have easily saved Credit Suisse, but the politicians lacked the backbone to do so. They panicked at the first sign of trouble. Saving the bank was important for Switzerland’s image in the financial world, but it seems that they no longer care about their own country.

By letting a 167-year-old bank fail instead of simply buying it for 16 billion, they lost a lot of trust.

> The Swiss government(and the SNB) could have easily saved Credit Suisse, but the politicians lacked the backbone to do so. They panicked at the first sign of trouble. Saving the bank was important for Switzerland’s image in the financial world, but it seems that they no longer care about their own country.

All your assertions here fly in the face of reported facts. Anyone you talk to in the banking and finance industry would tell you that the failure of CS isn’t a recent thing, and there was no “panic at the first sign of trouble”, which would be YEARS ago. if widely circulated rumors (more reliable than your baseless assertions) are to be believed, the Swiss government basically forced UBS to save the failing bank.

And why didn’t UBS want to buy CS at a discount? Because their liabilities are likely way more than the value gained from buying it.

CS is a branding liability, the trust in the name is abysmal, as withdrawals shows

Well they could just bought the brand name then? The rest of the balance sheet doesen't seem to be worth that much when you balance everything and the executives were clearly a huge net negative...

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