Comment by zetazzed | Hacker News Reader

Comment by zetazzed | Hacker News Reader

I kept my money in FR even when they were at risk because they have been BY FAR the best financial institution I've ever worked with. They gave me a mortgage rate much better than any other bank was offering. When my appraisal came in a bit lower than was required for my desired loan size, they got an exception. When I need something, I email or text one of the two people there who I know by name and they immediately take care of it. I needed a new ATM card, so I pinged my guy at FR and had a new card the next morning. The web portal is fine - basic but does everything you need and does not bombard you with internal quasi-ads like Bank of America does. When I wanted to set up a particular kind of new account I talked to one of my people there, and they explained how they would do it but basically advised I'd be better off doing it at another bank. They never tried to upsell me or push junk onto me. It's really a nice place to do business. And in the end, though I have a meaningful amount there, it is within the FDIC limits, so a crash should turn into an inconvenience rather than a financial disaster.

> They gave me a mortgage rate much better than any other bank was offering

Isn't this why they got in trouble on the first place?

yup

Not really, no. Like SVB, FRCs problem was just having too high a percent of uninsured deposits (rich customers, basically). When rumors started that they were next, unlike SVB they were actually a healthy, well run bank. But no bank can handle losing more than half their deposits. It killed them.

My understanding is that SVB also invested a significant share of those deposits in bonds which are reasonably conservative, but they bought so many of those bonds at/near the peak of the bond market such that they couldn’t liquidate them to cover withdrawals. Banks are supposed to keep a certain ratio of insured:uninsured deposits as well as liquid:illiquid investments and SVB broke both of these rules and regulators let them do it.

And a reason that banks have had so many withdrawals is that their deposit interest rates have not kept pace with money market rates, so a lot of people, especially if they had a lot of cash in a bank, have been moving their cash to money markets.

But long-term Treasurys are liquid, they just lost value. Be careful not to equate the two.

And bizarrely, capital requirements don't require banks to account for duration risk, which is what screwed SVB (and is screwing a lot of other banks now).

It’s the combination. Either factor by itself might have been ok, but when 80% of depositors are not insured and the bank has a liquidity crunch, it can spiral out of control quickly.

yeah this sounds weird, i was under the impression that every bank will give you the same rate regardless of where you go

That's not my experience and understanding. Rates can vary substantially between Banks. Are from the US?

Today's 30-year Treasury rate is about 3.8% which put the bottom limit and the average 30-year mortgage is 7.5%. This gives about 3.5 percent spread. How much of that you can negotiate back will depend on Bank policy

The spread between interest rates on 12mo. CDs between the two banks I use is over a factor of 100

Yikes regarding the low appraisal waiver... This is the entire point of appraisals - to protect the bank from over-lending and the taxpayer from the moral hazard of having to bail out poorly run banks.

Without knowing the details of why it got waived, it's hard to know whether that was reckless or not. And remember, it wasn't (unrecovered) mortgage defaults that sank FRC.

Do you think the mortgage originators working on commission trying to push deals through are able to assess if waving an appraisal reckless or not? Why even have appraisals?

No, I didn’t argue that straw man.

In Canada where we have a couple large banks and no real choices or competition, that sounds like a dream. Unfortunately it looks like the U.S. is moving rapidly in that direction too. That’s a shame. I can tell you, it’s much worse when a small number of giant companies control the market and lock out competitors.

The credit union system is still fairly strong in this country (at least in my area), but we do seem to be hollowing out the middle between the small credit unions and the massive banks.

This is interesting. Competition aside, I would think that having fewer big banks is worse than many smaller banks because big banks become “too big to fail” such that tax payers end up needing to bail out the bank itself (rather than stopping with the depositors). I’m surprised to hear this is how the Canadian system is set up?

I mean, it's not like the citizens get to decide what is in their best interest.

Even in modern democracies laws are still mostly written, presented, and decided by lobbyists.

Doesn't seem to matter the structure of the government, the people with the money make the rules when leaders integrity can be purchased.

It’s how every country is set up, including the US. Having smaller banks doesn’t affect systemic risk much if there’s still big banks that are too big to fail, and the US has plenty of those.

Even if we lived in a world where big banks didn’t exist, the benefit to systemic risk might be smaller than you’d think, as bank failures tend to be correlated.

This is the case in most of the developed world. 2-5 giants and another few minnows. The US banking sector with thousands of independent banks is unique, at least in the West.

I am also sad about this. They've been very good to us.

Used to bank with First Republic when I lived in CA and always had very good experiences. Unfortunately, in banking, a high degree of customer satisfaction can be a side effect of practices which ultimately land the bank in trouble.

In this case, the high customer satisfaction resulted in additional high net worth customers, which made them more susceptible to a bank run!

Unfortunately, the party of freedom and business decided to roll back financial regulations that allowed a corrupt and incompetent bank (SVB) to run itself out of business and trigger a bank run.

Even a coauthor of the Dodd-Frank act said that the repeal didn't contribute.

> "I don't think that had any effect," said Frank, who retired from Congress in 2012. "I don't think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 billion."

https://markets.businessinsider.com/news/stocks/signature-ba...

Fair point, but reading the story critically, it doesn’t really say what you’re interpreting.

Frank, a board member of another failed bank, certainly has an interest in a position that everything is fine.

Should we bring up 2008-2012 again? Shall we discuss what’s about you happen with subprime mortgages (again) or the current financial issues the country is facing?

This seems like a silly thing to say when it’s the left focusing on getting people into houses or otherwise spending money they can’t afford.

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