Interesting to see how two days in, the full bailout of SVB is attracting greater criticism. On the one hand, contagion risk was prevented, but there is a strong perception of moral hazard in the US banking system - and that seems to be hitting the shares of the second tier banks currently outside the regulatory envelope.
The weird nature of this particular failure probably promotes fear that more banks have made the same mistake. That would seem surprising, SVB appears to have had an unusual corporate culture. A bank that size not having a risk officer in place for over a year is stunning.
Not MIT, but an individual with an appointment at MIT, and whose position is an outlier.
FWIW, this appears to be closer to the modern contrarian position, that yes we did recoup the money paid out, but not sufficient to compensate for the risk
Even that doesnt say that they cost tax payers money, only that they should be structured in a way to get even more out of the banks. But all of this misses the indirect costs the fall out from not intervening would have added. It is the standard public health dilemma of how do you demonstrate effectiveness of an intervention when it is designed to prevent something awful happening.
Sure, a more nuanced and comprehensive view of the financial crisis would find it wasnāt free. First, there was all the money Congress spunked on stimulus measures. $700B or so it would not have had to spend if regulators were minding the store better. Second, there is the monetary cost of buying all the assets (so-called quantitative easing), though weāve only begun to feel that cost in inflation, which only occurred after the mad $6T spunkage caused by the pandemic.
Repealing Glass Steegall was very expensive, it should be concluded.
But viewed more narrowly, TARP made money. The government made billions on GM stock, it should also be said.
Ah crap, Credit Suisse in the crosshairs now. That is a step up in potential risk, as Roubini is now saying potentially Lehman level.
I remember seeing the trading warnings in our internal daily trading instructions email back in August 2007, not really realizing at the time the sheer scale of what was about to happen.
I havenāt been following but Credit Suisse seems to have been talked about as having problems since at least last summer although they denied them is this a follow on from that or something new?
I was working at UCF at the time, a LARGE state university. As early as fall 2006 we saw changes in university planning for expenses, including cutting back on planned appointments in my department in preparation for an expected reduction in federal funding that was around the corner due to troubles with the economy.
This was something the university was being up front about, and speaking about as an expectation rather than a risk. I remember having read stuff in national newspapers about the issues in the housing market causing these issues, and so I remember being really confused on how by surprise it seemed to take the country when it happened. Itās something Iāve never been able to square, that me, someone with no economic eductation and only a trivial interest in it was fully aware that something big was coming yet the conventional wisdom seemed to have their eyes closed
It was thought to be both quite regional, and quite sector-specific. In the energy business, oil was knocking on $100. In Canada, CAD was higher than USD. Between those two, our trading desk was roaring. Our budget/expenses were rather generous. As the āstrategyā guy in the group, it was my role to be professionally nervous and work with risk management, but the effect was that when Bear and then Lehman became problems, we were not directly affected and that we were smart, no problems.
what the fuck, how does a Swiss bank need an investor. and now the Saudiās buying up shares swiss banks? looks like theyāre slowly gobbling up the westās infrastructure.
"If we have learned anything from the SVB debacle, it is that bankers, left to themselves, cannot only bring down their own banksāthey can also take the entire financial system with them.
It has been said that war is too important to be left to the generals. That adage seems to also apply to finance. Banking may simply be too important to be left to the bankers."