And now for something really important...SVB failure.

[Why_Yes_I_Do]

Who can forget ol' Billy Bob Clinton easing up the qualifications requirements that ultimately gave us the 2008-2009 bank buster. Not to forget to mention the Wall Streets packaging up the worthless junk into CDS, which pensions and countries took it up the keester on when it all blew up.

That lesson right there brought us the lovely adage of: too big to fail. In this current go round, here we are gobbling up the smaller banks to make just a few behemoth banks. Though now we call it consolidation because of contagion concerns (CBCC).

The part that still bakes my noodle is that the Loony-Left is all of a sudden raving fanatics for the little guys bailing out the rich and consolidating big bank on Wall Street. Are they having an enlightenment or just a typical schizm?

[The_Waco_Kid]

Originally Posted by Why_Yes_I_Do

Who can forget ol' Billy Bob Clinton easing up the qualifications requirements that ultimately gave us the 2008-2009 bank buster. Not to forget to mention the Wall Streets packaging up the worthless junk into CDS, which pensions and countries took it up the keester on when it all blew up.

That lesson right there brought us the lovely adage of: too big to fail. In this current go round, here we are gobbling up the smaller banks to make just a few behemoth banks. Though now we call it consolidation because of contagion concerns (CBCC).

The part that still bakes my noodle is that the Loony-Left is all of a sudden raving fanatics for the little guys bailing out the rich and consolidating big bank on Wall Street. Are they having an enlightenment or just a typical schizm?

exactly! i've posted this many times here and several of our "left handed" posters don't seem to understand it was HUD under Slick Willie Blythe that decided they needed more government backed housing loans to minorities who couldn't actually afford a house. what could go wrong???


bahahahaa

[VitaMan]

Too big to fail

Learn to live with it

[The_Waco_Kid]

Originally Posted by VitaMan

Too big to fail

Learn to live with it

nothing is too big to fail. including this

[VitaMan]

You're wrong, or don't understand the context of how it is used or the meaning.

Planet Earth can fail and it won't make any difference, because everyone will be dead.

The term is used in an economic context.

[Why_Yes_I_Do]

Originally Posted by VitaMan

Too big to fail

Learn to live with it

The Declaration of Independence states otherwise King VM.

In Congress, July 4, 1776
The unanimous Declaration of the thirteen united States of America...
...--That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness...

[VitaMan]

Your post has nothing to do with anything related to the thread

[Why_Yes_I_Do]

Originally Posted by VitaMan

Your post has nothing to do with anything related to the thread

You do know I "quoted" what you said in my response to what you said, which I quoted. Right? In other words - is it your posit that we just have learn to live with your edicts Your Majesty? You got a decree for that? Immasay nyet! We are not in a Communist dictatorship - yet!

The "learning" should have been by the peoples that were uninsured, but you want to bail them out with our money. Where does that epiphany originate?

[VitaMan]

The Declaration of Independence has nothing to do with this thread topic

[eccieuser9500]

Originally Posted by The_Waco_Kid

nothing is too big to fail. including this

There are more territories. The whole damn idea of the USA can fail. As big as it is. Look at France.

Originally Posted by Why_Yes_I_Do

The Declaration of Independence states otherwise King VM.

Yes. Maybe a new form of government is needed. Guess which one.

Originally Posted by VitaMan

The Declaration of Independence has nothing to do with this thread topic

It does. Most certainly. The country was started with washing money. By your profile, you should understand that. That's what is causing the failure. It's the fuckin' bankers and the politicians and the wealthy landowners. They're the fuckin' bad guys. Not the farmers.

Where is the clean . . .

. . . and dirty money?

[VitaMan]

Too big to fail refers to some banks and other entities that would create havoc for the economy if they failed.

The above recent posts have nothing even remotely to do with the thread.

[Texas Contrarian]

Originally Posted by VitaMan

More than 90% of the deposits at SVB were uninsured, according to data collected by Wedbush Securities.

This should help to correct the perception presented in this thread that the bank failed because of other reasons besides a stampede bank run to get deposits out.

And how often does a stampede of frenzied withdrawals occur in a vacuum, absent panic about the angst creating an underlying cause popping up as a catalyst? The concern about the safety of deposits arose as the news broke of SVB's terrible capital ratio deterioration and failed attempt to raise equity. You keep talking about the symptom of the disease; not its underlying cause. That was the point I made earlier, which you obviously missed (or didn't understand).

Originally Posted by the_real_Barleycorn

Savings and Loans...

Indeed, comparisons to the late '90s S&L crisis are certainly not inapt, as there are parallels as well as key differences.

But it's important to understand the underlying causes of that debacle as well.

Originally Posted by the_real_Barleycorn

Anyone remember the Savings and Loan collapse of the 70s and 80s? Most of the assets of the savings and loan industry was tied up in real estate and homes. Senator Metzenbaum pushed a bill that was passed by the democrats reducing the tax write off of the interest. That made real estate worth less than it was before the new law. All of that wealth just disappeared and the savings and loan industry went with it. All because of a law passed because the lefties in Congress didn't like people having that deduction.

However, that ain't it. Way off the mark.

Originally Posted by VitaMan

If you want to research further, review oil markets and prices during that time. That was the main cause of financial problems, and caused real estate values to collapse.

And that ain't, either! The 1981-86 oil price plummet exacerbated the seriousness of the Texas-Oklahoma-Louisiana problems, to be sure. But the S&L meltdown was very much a national problem, and the aforementioned oil price decline was actually an economic stimulus to most of the country during the mid-to-late 1980s. In the aggregate, it wasn't much of a factor.

And, although well-intentioned and containing many good (indeed, probably necessary) provisions, the 1986 tax reform act slammed the CRE loan books of a number of banks and S&Ls very hard, significantly worsening the crisis during the 1987-1991 period.

[the_real_Barleycorn]

Originally Posted by Why_Yes_I_Do

Who can forget ol' Billy Bob Clinton easing up the qualifications requirements that ultimately gave us the 2008-2009 bank buster. Not to forget to mention the Wall Streets packaging up the worthless junk into CDS, which pensions and countries took it up the keester on when it all blew up.

That lesson right there brought us the lovely adage of: too big to fail. In this current go round, here we are gobbling up the smaller banks to make just a few behemoth banks. Though now we call it consolidation because of contagion concerns (CBCC).

The part that still bakes my noodle is that the Loony-Left is all of a sudden raving fanatics for the little guys bailing out the rich and consolidating big bank on Wall Street. Are they having an enlightenment or just a typical schizm?

They've been doing that for years. Remember Quantitative Easing from the Obama years? Take taxpayer money and float the stock market (meaning the corporations and rich). Income redistribution in reverse. Take from the regular people and give to the rich in the form of subsidies.

[the_real_Barleycorn]

Originally Posted by The_Waco_Kid

exactly! i've posted this many times here and several of our "left handed" posters don't seem to understand it was HUD under Slick Willie Blythe that decided they needed more government backed housing loans to minorities who couldn't actually afford a house. what could go wrong???


bahahahaa

Yes, and they enforced this idea by preventing banks from conducting business that required government approval unless the bank was in good standing with the Clintons.
Today, right now, we have money being given to municipalities in order to secure government money that already belongs to them. Just down the street, my town is building a large apartment complex because they had to. Good location, within walking distance of all three levels of schools. What happens when hundreds of more students show up to be educated? The schools (considered to be some very good schools) are going to hit a rock. This Obama-era (and that means Biden too) regulation is going to cause problems for we the people.

[lustylad]

I already tried to debunk your knee-jerk calls for re-regulation in my posts #202 and 203.

Now here's a former Federal Reserve Vice Chairman for supervision who explains it much better than I did:


What Congress Should Ask Regulators in SVB’s Aftermath

Some lawmakers blame a bipartisan 2018 reform law for the bank’s collapse. That’s so nonsensical, it isn’t even wrong.

By Randal K. Quarles
March 27, 2023 6:21 pm ET


Congress will hold hearings this week on lessons from the failure of Silicon Valley Bank. Some lawmakers are calling for the financial stampede that brought down SVB to be followed by a political stampede of new, restrictive laws and regulations. That would be a mistake. We can learn much from this episode, but not if we move heedlessly in reaction to the loudest, most partisan voices.

First, note what the crisis doesn’t teach. Several politicians have called for rolling back the carefully calibrated regulatory changes stemming from the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018—a banking-reform law enacted by strong bipartisan majorities. As Wolfgang Pauli once said of a fellow physicist’s hypothesis, that’s so nonsensical, it isn’t even wrong.

SVB’s failure wasn’t related to regulatory changes. Rather, it was a “textbook case of mismanagement,” as Michael Barr, the Federal Reserve’s Vice Chairman for Supervision, said Monday. The bank failed as the public began to focus on changes in the value of securities in the bank’s “held to maturity” account. The 2018 law didn’t change the capital treatment of such securities. SVB didn’t have a capital shortage—it remained solvent. Instead, it succumbed to a bank run. Thus the focus of any critique should be on liquidity, not capital.

But even applying to SVB the full-strength liquidity rules governing our largest banks wouldn’t have changed its fate. Those rules, first established in 2014 as mandated by Dodd-Frank, impose the toughest restrictions on banks with large amounts of short-term wholesale funding and treat banks funded with deposits from their customers—even uninsured deposits—as being reasonably resistant to runs. That treatment was crafted by the Obama-era regulators and hasn’t been amended.

Another misconception is that the changes in stress testing might have blinded the bank and its examiners to problems. That, too, isn’t right. Banks of all sizes are subject to a range of stress tests, not merely one. Most of these weren’t affected by the 2018 changes—and the longstanding requirement for banks to run tough internal stress tests on their interest-rate-risks remained untouched.

As it has gradually become clear that changes to law, regulation and stress testing weren’t relevant to SVB’s collapse, some critics want to blame changes in the supervisory instructions given by the banking agencies to their field examiners. Yet the only concrete change they point to has been the “guidance on guidance” issued in 2018 and codified in 2021.

This claim is decidedly odd. That project—which was supported and voted for by Martin Gruenberg and Lael Brainard, respectively chairman of the Federal Deposit Insurance Corp. and director of the White House National Economic Council—doesn’t limit any action an agency wants to take. It simply clarifies which actions will be accomplished through regulatory measures and which through supervisory measures. It continues to allow any unsound practice to be reined in by examiners and merely firms up the justifications for the written record. In a world where courts are increasingly ready to invalidate agency action that doesn’t comply with the Administrative Procedure Act, this clarification strengthens bank supervision rather than weakens it.

If the Obama-era regulation didn’t prevent SVB’s failure, the 2018 adjustments didn’t cause it, and the instructions to supervisors continued not only to be strong but focused on the right risks, then what can be done? Must we simply throw up our hands and insure all deposits of any size with the attendant moral hazard—or worse, devise even more unfocused and restrictive regulation, increasing the cost of capital and further slowing economic growth?

I don’t think so. There are some clear lessons, if we filter out the noise and focus on essential questions. Here is what I would ask the bank regulators:

Why didn’t uninsured depositors behave consistent with historical expectations? Many have commented on the concentrated nature of SVB’s customer base in a single industry—the venture-capital and tech sector—and on its susceptibility to fads, enthusiasms and herd behavior. But others have noted that thanks to modern social media and bank technology, we are awash in the perfect flow of imperfect information and can act instantaneously on it. Is the right answer to focus on diversifying banks’ deposit bases, as we have long focused on diversifying their assets? Or do we need to reconsider the longstanding treatment of uninsured customer deposits in both the regulation and supervision of liquidity?

Second, why didn’t the FDIC arrange for a stronger bank to buy SVB the night before it failed? The swift transfer of a failed institution into the hands of a strong buyer usually restores calm without extraordinary regulatory actions, which inevitably confuse incentives and create moral hazard. Were some potential purchasers ruled out at the beginning? Did the FDIC provide enough incentive for an acquisition early on? The system is designed to absorb the failure of a $100 billion bank, but not if the FDIC ties one hand behind its back.

Finally, we should review the lessons of fiscal policy. I cut my teeth on the savings-and-loan crisis 40 years ago, and I see strong similarities in the genesis and development of that debacle. Excessive fiscal stimulus from the Johnson and Nixon administrations baked inflation into the economy. The resulting mismatch of rising short-term liability costs and falling long-term asset values, which accelerated when the Fed began the necessary interest-rate rises to bring inflation under control, doomed the S&Ls. The SVB incident is isolated to a handful of banks, but it is fair to ask the regulators where we might see more pressure in the financial system from the inflation that mismanaged fiscal policy has engendered.

If cool heads and expert analysis had prevailed three weeks ago, SVB’s customers wouldn’t have run from the bank. If cool heads and expert analysis prevail in Congress and at the banking agencies, we can avoid the political stampede to a destructive regulatory response that would do much more damage.

Mr. Quarles is chairman of the Cynosure Group. He served as the Federal Reserve’s vice chairman for supervision, 2017-21.