Re:Savings and Loan Crisis 1980–1989
by jmyeet on Monday May 01, 2023 @06:56PM
(#35780448)
> The parallels with today's banking problems are eerie.
No, no they're not. Not even close. Please read up about this before propagating outright falsehoods.
The S&L industry in the 1980s was doing FTX type nonsense: using depositor funds for very risky investments. This worked great when the markets were going up. Not so much when the market crashed in 1987.
Banks now are holding excess liquidity and funds they otherwise can't lend out (within their risk limits) in US government bonds. The problem is they took long term bonds for slightly higher yield at a time when interest rates were near-zero. And then interest rates went up and created a loss if it were realized. Many companies have been undone by this kind of penny-pinching. It's bad risk management.
Even in the case of SVB, it had more assets than depositor funds and despite the vast majority of deposits (by value) being uninsured, every depositor got their money back and it cost the taxpayer nothing.
No, no they're not. Not even close. Please read up about this before propagating outright falsehoods.
The S&L industry in the 1980s was doing FTX type nonsense: using depositor funds for very risky investments. This worked great when the markets were going up. Not so much when the market crashed in 1987.
Banks now are holding excess liquidity and funds they otherwise can't lend out (within their risk limits) in US government bonds. The problem is they took long term bonds for slightly higher yield at a time when interest rates were near-zero. And then interest rates went up and created a loss if it were realized. Many companies have been undone by this kind of penny-pinching. It's bad risk management.
Even in the case of SVB, it had more assets than depositor funds and despite the vast majority of deposits (by value) being uninsured, every depositor got their money back and it cost the taxpayer nothing.