Even if you want certain people to get hurt by this (and there is definitely a baying mob that seems to want to cause as much suffering as possible because they just don't like certain classes of people), keep in mind that this could cause a 2008-style recession that hurts everyone.
Who do you think gets hurt more by an economic downturn? The billionaires who lose millions and end up still being rich, or the working people who lose their jobs and can't afford housing? This isn't a theoretical question, we know the answer because it happened before.
Eventually I suppose they'll be right, but primarily as a result of one of those broken clock coincidences ...
People are not rational. Homo economicus is a myth.
That is incorrect, spite is seeking the deliberate harm of another. It’s possible for spite to include hurting yourself to inflict it, but that’s not in any way necessary.
Is everyone getting hurt ideal? No. But that’s a different question than is it justice.
IMO this is what happened during 2008. The government tried to minimize harm at the expense of justice, and people are angry because they don’t realize how bad it could have been.
That's called "capitalism". Socialism has nothing to do with it.
Please try not to muddle basic terminology like this. It makes discourse harder for everyone.
Please stop trying to redefine basic terminology to suit your agenda.
https://www.merriam-webster.com/dictionary/crony%20capitalis...
I argue that usage of the term "crony capitalism" is itself a form of capitalist ideology.
Yet a Marxist site is used as an unbiased source. Oh, the irony.
You're welcome to present a capitalist site as a source for the definition you prefer, and I'd be happy to discuss that.
Just don't use a dictionary, please! It's the wrong tool for the job here, regardless of political leanings.
The socio-economic system where social relations are based on commodities for exchange, in particular private ownership of the means of production and on the exploitation of wage labour.
Wage labour is the labour process in capitalist society: the owners of the means of production (the bourgeoisie) buy the labour power of those who do not own the means of production (the proletariat), and use it to increase the value of their property (capital). In pre-capitalist societies, the labour of the producers was rendered to the ruling class by traditional obligations or sheer force, rather than as a “free” act of purchase and sale as in capitalist society.
Value is increased through the appropriation of surplus value from wage labour. In societies which produce beyond the necessary level of subsistence, there is a social surplus, i.e. people produce more than they need for immediate reproduction. In capitalism, surplus value is appropriated by the capitalist class by extending the working day beyond necessary labour time. That extra labour is used by the capitalist for profit; used in whatever ways they choose.
The main classes under capitalism are the proletariat (the sellers of labour power) and the bourgeoisie (the buyers of labour power). The value of every product is divided between wages and profit, and there is an irreconcilable class struggle over the division of this product.
There is no singular definition of capitalism, but many others would differ on the distinction you've drawn from earlier posts. E.g., a system based on the reinvestment of excess profits does not necessarily equate to crony-capitalism. It seems your issue is with the person using the word "socialism" to describe a social ill of crony capitalism. But there is a distinction there that is being muddled in the conversation.
I think you're confusing "free market" USAmerican right-Libertarian ideology with capitalism itself.
Capitalism, simply put, is defined as private ownership over the means of production, and the people who have that ownership are called the capitalist class. None of that precludes any sort of collusion.
Where does capitalism define "non cronyism" as a central tenet? Can you point to a working example of "non-crony" capitalism?
>By that same logic, tyrannical despots could be argued as a stated goal of socialism.
A central tenet of socialism is that is rejects despotism and tyranny. Supporters of socialism explicitly reject tyrannical behavior and seek to root it out if it appears.
On the other hand, capitalists cheer every time they wield state power to enrich themselves and excuse it as "just business".
It’s no different than saying “dictatorial socialism”. The fact that a rather simple distinction has to be explained multiple times by multiple people becomes a chore and a Sisyphean task when it is clear someone doesn’t want to acknowledge the difference.
It's possible to be a rational maximiser of something other than profit.
You are glad that rich execs play Heads they win and Tails they dont lose game at the expense of the taxpayer?
Heads I win, Tails I dont lose.
You also ignored that govt/Fed keeps printing more money, so the taxpayer ultimately loses with inflation.
The government's intervention creates moral hazard: those that played with fire got burnt, and those who didn't didn't, but those who didn't get burnt were positioning themselves to take advantage of the opportunities that the crispy bodies would have generated.
But the government swooped in and saved the crispies, without penalty to them, at the cost of those who had proper risk-adjusted positioning.
We see this time and time again. The government is changing the rules after the game is over to change the losers to winners. It's nonsense.
The banks left standing will be made to cover the deposits, insured or not, of other banks. It is rather remarkable and I'm not entirely certain it'll work - at what point the special assessment could be unsustainable. Presumably this special assessment isn't instant, and FDIC could just use accounting to make it politically and legally valid to consider it as a non-public and industry financed private bailout.
shrug will it work? I don't know. It really better.
The need to be able to field questions like these is why I feel we need open-source economic simultion packages. Does anyone think that people in the individual Fed reserve banks are running anything other than flat spreadsheets to model the financial system? Theyneed to develop economic modeling scripts (at minimum!) a field which is in its infancy. The datascience & modeling capability in HN would eclipse the forecasting power of an econometrics-focused Fed statistical modeling group.
I briefly collaborated with a talented individual behind the Threadneedle economic simulation package. I'd like to see a python library devoted to economic modeling w/ classes for central banks, investent & retail banks, applied into umpteen think tanks' different competing models.
Who had the former CFO of Lehman Brothers just before it collapsed on their executive team? These people will continue to fail upwards with taxpayer support as they always do.
See you in ten years when he's involved in the next one.
USA doesn't have laws like this, do you?
* As the gp said, it's done. The guarantee isn't new, it's how thing are done now. The Fed is not changing things by doing this, the Fed is doing things as they are expected to be done. Anything else would be changing things, anything else would panic people. Is the Fed "scrappy"? IDK, the "scrappy" efforts to stop crises began with the "plunge prevention team" in the 1990s and have continued more systematically since then, if you want to call that scrappy.
* As to whether there are black marks on people - only the companies who can whether to hire these people later can decide that. Financial companies hire people who've done time for financial fraud so it's questionable what sort of "black marks" the Fed could give if it wanted to (People mention the Lehman guy but was Lehman really worse than the others in 2008 or just a scapegoat - like fricken Martha Stewart. Was that guy involved in excess or just a random manager? I recall he was now managing a stock subsidiary that's being spun-off whole. But still).
I don't get it. Doesn't the unlimited FDIC insurance encourage mega-banks? If funds were only insured up to 250k, wouldn't that just mean we would have to spread money across multiple banks. And sure some banks would be wiped out but new better banks would take their place. It's not a closed system
Banks used to fail and be smaller failures. Now we removed almost all failures except when we have a failure its huge:
Total number of bank failures: 512
2023 1
2022 0
2021 0
2020 4
2019 4
2018 0
2017 8
2016 5
2015 8
2014 18
2013 24
2012 51
2011 92
2010 157
2009 140
I put the majority of my cash in one of the smaller banks. The news that has transpired in the past few days had me mulling moving those funds to a larger bank, likely Chase (one of the too big to fail ones).
Even with the FDIC guarantees, I was not at all confident that :
1. they actually had the funds to cover _many_ bank runs; and
2. it won’t take weeks if not months for me to recover my funds, if my bank fails.
It’s entirely possibly that these lines of thoughts will motivate many more people to consider this exact move, putting even more stress in the system.
So far this year we are looking a lot closer to 2009 than 2020[0].
[0] https://static01.nyt.com/images/2023/03/10/business/bank-fai...
Edit: wrong image linked
It's like forest fires, we shouldn't build fragility into the system by removing all risk and then rely on regulations to mitigate it. Hasn't worked in the past and will lead to more consolidation and bigger fires in the future. Remember in 08 the answer was to combine a bunch of banks and since then we've had no new banks created (besides Ally which was a spin off of an auto workers pension fund if i remember)
https://en.m.wikipedia.org/wiki/List_of_largest_U.S._bank_fa...
https://old.reddit.com/r/dataisbeautiful/comments/11p3555/oc...
QE3 QE4, increase M1 even more! 𝅘𝅥𝅯 »
We are at ~1.3 bank failures per month in 2023 which is much closer to 2020’s 0.3/month than 2009’s 11.7 banks failing per month.
Your comment takes the annual frequency and divides it by 12 to get an average monthly frequency, adding nothing to the argument of the grandparent comment.
Maximum assets under control don’t correlate with actual losses especially when people pulled money out before the collapse. It’s a completely meaningless number.
I also think it's a good point that a dollar is not necessarily equal to another dollar in this context. But the same can be said for individual banks as well.
I suspect that Signature Bank's failure is tied to their crypto activity. But the sight of 2 banks failing while there was an ongoing run on at least one more bank does seem like the kind of thing that could start a panic.
Bank Runs! What's Going On? – Patrick Boyle :
> In a sign of how fast the financial bleeding was occurring, regulators announced that New York-based Signature Bank had also failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history.
> Also Sunday, another beleaguered bank, First Republic Bank, announced that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase.
https://apnews.com/article/silicon-valley-bank-bailout-yelle...
The role of the government in letting this happen has been under-covered so far. Weren’t they supposed to be overseeing things, stress-testing banks, etc? Regulators either were not looking, or were looking but did not notice. Regardless, there is not much sense to the argument that the government is “stepping in” tonight, because it was always involved.
Most of the big guys work like this. At a certain wallet size you get a free personal advisor who will help manage your wealth.
They take 1% of the money they manage. And then they invest it in their own funds, taking more fees there. They are not free.
You can’t seriously tell me that the CFO who is responsible for corporate finance at these SVB customers didn’t realize a business checking or savings account is not fully guaranteed? It’s in every single bank brochure and statement. If that’s that case, they need to suffer the consequences of poor contingency planning.
Additionally many startups had covenants in their financing agreements with investors that required keeping funds in SVB so they didn't have a choice.
Moreover, both startups and VCs are literally the groups that celebrate risk taking and disruption. This is it, this is the flip side of risk, the definition of risk is that you might loose. But somehow, when they loose, due to risk taking, then suddenly they want extra bail outs and help.
I'm not sure how 100% accurate that list is considering that it only lists SVB for 2023, but not Signature bank, NY that failed on the same day[1].
Not typical consumers, right? Typical bank consumers have < $250k in their account, and thus there's no reason for them to cause a run.
Plus, even if the "typical" consumers don't freak out, businesses might. There are a lot of businesses with accounts over the FDIC limit. Only about 60% of bank deposits in the US are insured.
If the US government is unable to cover those claims then you have much bigger problems to worry about.
I doubt those VTI transactions are each of a single share, which is the only way the 3.67M number you cite would match VTI's trading history.
But nobody's mind was ever changed about Bitcoin on an HN comment thread, so let's just leave it at that.
Later the small customer may move that BTC to self-custody, which could be an on-chain transaction or LN or other side chain with more transaction capacity.
It'll look not very much unlike Canadian domestic banking which has the "big 5" of banks: TD, CIBC, RBC, BMO, Scotiabank.
But instead, with Wells Fargo, Citibank, BOA, etc.
And everything else is really quite tiny in comparison.
I think everyone knew that already. Since 2008 at least.
It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. A domino effect is very hard to prevent when it's based entirely on consumer confidence and those consumers can very easily create a bank run on literally anything if they freak out.