The fucking owners of capital seem bound and determined to destroy their own system.
Why would GDP(a lagging indicator) and a current event(a wave of banks over the last two week) be mutually exclusive?
You also seem to have overlooked some significant details and context. To date there have been four bank rescues not two - Signature Bank, First Republic, SVB and Credit Suisse.
The Credit Suisse collapse resulted in 17 billion in AT1 bonds being written down.[1].
SVB’s uninsured deposits(anything over 250k) accounted for 94% of its total deposits and the FDIC took the extraordinary step of insuring those deposit after the fact.
We witnessed the US Treasury Secretary this week suggest that the government would backstop all uninsured deposits at smaller banks.[2]. She then later had to walk that back.
The First Republic rescue saw three of the largest US banks depositing 30 billion dollars into it in order to prop it up.
[1] https://www.reuters.com/business/finance/credit-suisse-write...
[2] https://www.reuters.com/markets/us/treasurys-yellen-says-com...
Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders. All the bank's equity would have been wiped out sure (and it was anyways) but losses to depositors would likely be slim to none. If folks lost anything it would worst case have been like a 5-10% haircut, not 100% of un-insured deposits.
The FDIC was using this as an opportunity to say "we've got your back no matter what" to reassure the public.
It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position.
> The first republic rescue saw three of the largest US banks depositing 30 billion dollars to prop it up.
The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses - which are an issue if folks are trying to withdraw since they can't be liquidated for face value. However if they're held to maturity there's no loss. So the Fed provided a facility where banks can borrow against the maturity value of long-term debt instead of market value.
That makes the problem basically solved.
Do you realize how many tech companies used SVB as their primary banking facility? There were plenty of companies who would not have made pay role. So yes real regular people would have been affected.
>"It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position."
The FDIC invoked a "systemic risk exception" in order to make SVB and Signature Bank depositors whole. Federal law requires the FDIC to resolve failed banks by choosing the method the least costly to the Deposit Insurance Fund. Here "resolved" means making only insured depositors whole. The only exception to this is the systemic risk exception. This is law not just some shit you can make up.
>"The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses "
Uh no, the issue that is that there's a lot of uncertainty. I don't think nobody really knows the extent of it at this point because a lot of midsize banks haven't really been under strong regulatory scrutiny until very recently. A crisis of confidence is still a crisis. A crisis of confidence is precisely what causes a run on banks.
All depositors had $250k guaranteed at the bat. But sure maybe that’s short for 2 weeks of payroll for many companies.
Well FDIC was already cash payout warrants against the size of of their deposit assets (something like 50% would be available). If you need more than 50% of available cash to make payroll, you were already a dead firm walking.
With liquid assets like long term treasuries, they could have been liquidated quickly, and at worst most companies would have seen a 10-15% haircut.
A haircut hurts. But running a business includes all sorts of risks. You could have a lawsuit. You could have a fire. Your cloud provider could shutdown. They knew about the risk of being uninsured (since many companies have corporate treasurers who manage multiple banks and portfolio of treasury bills to manage bank risk), and this was just the one risk their company faced that came to fruition.
If you reread the thread and the context of what I was responding to it was the OP stating "It's not clear anyone would have lost anything at all ..."
Perhaps you are well-off but losing a pay check for couple of weeks has real consequences for lots of people.
They're arguing that companies could already make payroll just fine with access to half their balance. A 100% guarantee was not necessary.
That is a very interesting question. I agree it is not clear, but it is not in ' not clear' status due to some legalistic formality. It is unclear, because it would appear treasuries around the world[1] are basically making up rules as they go. It does not inspire confidence.
The question is definitely open and I honestly do not know the answer.
[1]https://www.marketwatch.com/story/contracts-are-made-to-be-h...
When IndyMac Bank failed in the 2008 financial crisis, the FDIC paid uninsured depositors 50 cents of every dollar[1][2][3]. I would say that very much of "this day and age."
From the FDIC's IndyMac Resolution:
"If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B. This means that you will eventually recover some of your uninsured funds. The FDIC declared a 50% advance dividend for uninsured deposits."[2]
It's bizarre to argue that what was literally an exceptional decision(SRE) by the FDIC could not have been otherwise.
[1] https://www.ocregister.com/2009/07/13/indymac-customers-stil...
[2] https://www.fdic.gov/resources/resolutions/bank-failures/fai...
[3] https://www.brookings.edu/2023/03/21/how-does-deposit-insura...
And after that banking rules became a lot stricter to reduce the risk of this happening again.
That's kind of the point, 2008 isn't "this day and age."
Except that Dodd-Frank legislation was continuously chipped away at, ultimately resulting in the 2018 "Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018."[1].
This 2018 bit of legislation is notable in that it completely loosened the regulatory regime and oversight of small and midsize banks - the exact profile of institutions being discussed here!
Specifically this new legislation reduced the number of banks that were subject to stronger federal oversight. Under the Dodd-Frank legislation, banks with assets of more than $50 billion were subject to stress tests and higher capital requirements.
The newer 2018 legislation contained a section that basically eliminated that stronger regulation for banks with assets between $50 billion and $100 billion and moved the goal posts of "discretionary oversight" out to financial institutions with assets between $100 billion and $250 billion instead.
It's fascinating that you are arguing points without seeming to have an understanding of all that has changed since Dodd/Frank 13 year ago. You seem to be completely unaware of the developments since 2018 i.e the exact things that enabled the developments of the last two weeks.
[1] https://www.investopedia.com/terms/d/dodd-frank-financial-re...
so when I said two and a half banks with two rescued it was actually two and a half banks with two and a half rescued.
feels to me like even less of a banking crisis.
Exactly. Jeff Snyder pointed out that folks were puzzled over this exact thing in the 08-09 timeframe. And in fact, Janet Yellen talked about why it wasn’t a contradiction. She seems to have forgotten her own analysis, though.
Well yeah, everything worked out fine for them last time they did. Some got very rich. Why not try again?
Nah. These disruptions are a means to an ends. That is, shifting still more wealth to the top. Follow that graph. Everything else is a means to that ends or a distraction.
It's because they imply hubris, arrogance, control.
Let's just realize that we all have a lot less control over our environment than we think we do, and some things are just forces beyond anyone's control.
but the idea that rich people are acting in a manner to maintain/increase their wealth aint exactly a conspiracy theory.
This is the correct statement and it's not a conspiracy theory, it's a banality.
The question becomes identifying zero sum games and finding optimal solutions for the public at large.
Read something like Anarchy - the East India Company. Sheer luck got them to where they ended up, despite them being a) a literal "conspiracy" (a corporation) and b) bumbling fools on repeated occasions.
What's the pattern?
That's the pattern.
I think it's more likely that every person at every link in the chain is following some incentive: financial experts within banks are saying whatever they think will get governments to stop putting up interest rates (we're in a banking crisis), journalists are repeating interesting and dramatic news from their sources (that we're in a banking crisis), their editors are careful not to block an important message (that we're in a banking crisis), and so on.
The net effect is possibly going to be moving wealth to the top, but if you take a conspiratorial view, the solution seems like it's "find the shadowy council working behind the scenes and force them to stop". If it's just distributed rational decision-making you have to take a systems-level view of what the incentives are and work to change the overall behaviour of everyone, which is a much more complicated problem.
No conspiracy theories required.
It's a distraction to point fingers at left or right.
Close willing coordination between a whole bank or a whole newspaper is less believable. Small-scale coordination is possible, yeah: PR firms pitching articles, revolving-door hiring, conflicts of interest, bias upstream in academia, or even an editor meeting a banker for golf and squashing a story; these things are all believable. These are not the same as a statement like "the news media is helping shift wealth to the top", or at least they have many caveats.
I hate the implications of dated mental models.
Like entities with like goals are going to take like actions. There doesn't have to be back room top-secret coordination.
FFF starlings do it. Starlings!!!
>Let's just realize that we all have a lot less control over our environment than we think we do
Do the privately run secretive organization that sets the time value of money and the people that influence it not have "control"?
To be clear, I'm talking about the central bank.
Fed is 98% talk and 2% action.
I disagree. Any organization that can unilaterally set interest rates and add infinite assets to its balance sheet (two actions capable of moving the largest markets significantly) has tremendous amounts of control over the economy.
The vast majority of people are just unaware how much of an impact monetary policy has on their behavior.
The business cycle is a well-documented fact of the economy, caused by basic microeconomics. The busts have as good a reason to be there as do the booms.
Plus the business cycle has booms which are on average much longer than the busts, an angle which conspiracy theorists frequently choose to ignore.
The business cycle is not a conspiracy theory, thinking the business cycle is somehow "made" or "artificial" or "controlled" is a conspiracy theory.
What happened after 2007/ 2008?
What happened during / after Covid?
There is zero reason to imply any of those things. The data speaks for itself.
The data points to wealth redistribution but the causes are larger than some dark cabals. Globalization is the biggest one and globalization is such a huge topic not even 1000 CEO out together could begin to understand it.
As a personal anecdote:
In the wake of 2008 massive layoffs flooded the market driving down costs for... not necessarily skilled but educated labor. Target for instance suddenly decided that being an ETL required a college degree, a requirement that they relaxed in 2021.
I'm aware creating a public justification for creating a mass of unemployed skilled (read: otherwise expensive) laborers is in their benefit. It's just that the public face of this is destroying their own systems then claiming literally any and everything other than their own actions are at fault while simultaneously positioning themselves to benefit from any attempt at preventing economic disaster.
"Remember the great resignation? Good! You shouldn't! Now damn you proles, don't you forget that you can't remember it."
As for your last paragraph, it's about control. Regardless of what's being "destroyed", they are creating more wealth and power, and the majority of that goes to the top. Again, this isn't opinion. It's the data.
The Public's fault is believing what they hear instead of watching what is happening. Actions speak louder than words. Or they should.