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Banks on the Brink: 2023 Mini-Crisis


Paxter
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26 minutes ago, Chataya de Fleury said:

What you and other people who like to bemoan “accounting pirates” and such do not realize is that if we did not have things like modern financial instruments, such as securitizations, it would be the 1970s all over again when buying something like a house.

In my musings, below, I’m going to give you an example based on “you” applying for a plain vanilla Agency-eligible Mortgage.

If there were no RMBS market, rather than doing a literal two-minute application for pre-approval on Rocket Mortgage, you would have to schlep loads of financial documents down to your local bank for a financial colonoscopy performed by a loan officer. This would take weeks. Just to get a pre-approval. You might even get questioned on some of your income and expenditures in excruciating detail.

Your mortgage rate would also be much higher than it is now, because that mortgage would not be sold by the bank to generate liquidity.

With all due respect, that's a lot of bullshit.

"Loads of financial documents" ? Generally it's three salary slips and tax returns. All of which can be sent to a banker electronically. Sure, it takes a few weeks for the bank to process the data and offer a loan proposal (about 6 here, on average), but saying it's a "financial colonoscopy" or that you can be "questioned on your income and expenditures in excruciating detail" is a big load of crap. In my experience it's two fifteen-minute interviews with the guy, and one of those interviews isn't even mandatory.
There's actually more paperwork involved to deal with the fucking insurance, because they do want a lot of information on your health history.
As for the mortgage rate being "much higher"? Ha, I call bullcrap on that one too. I got a 100,000€ at 1% fixed interest rate some years ago. Because regulations on fancial fuckery, that's why.

Fact is, finance is a solution to problems that shouldn't exist in the first place, and that are generally solved efficiently in countries that don't overly rely on "modern financial instruments" or are just healthily mistrustful of finance.
But that's a political choice, i.e. whether your country believes it's desirable and/or moral to have some people making money with money.
And of course it's actually not (desirable or moral), because the "market" is really just some twats playing monopoly with everyone's money and then wanting government bailouts whenever they screw up.
That's why France is paralysed right now btw. We don't want complementary pension plans through financial assets, fuck that shit. The good ol' socialistic plans work fine, thank you very much. Get your financial instruments out of our country for fuck's sake.
I wouldn't hate finance so much if it wasn't trying to screw my life up on a regular basis.

 

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Kind of weird that it was faster to resolve a G-SIB (Credit Suisse) than a smaller regional bank (First Republic). It seems that US regulators are looking to the larger banks to orchestrate a solution, whereas the Europeans went down the forced marriage route very quickly. 

FR stock has fallen by 75% in the last 5 days, 90% year to date. 

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3 hours ago, Paxter said:

Kind of weird that it was faster to resolve a G-SIB (Credit Suisse) than a smaller regional bank (First Republic). It seems that US regulators are looking to the larger banks to orchestrate a solution, whereas the Europeans went down the forced marriage route very quickly. 

It was quicker because there just was just another single big bank around in Switzerland. Other options were government taking over, or splitting it up in several parts - speculative investment arm would go bankrupt in a heartbeat, local depots and wealth management would become a successful smaller bank -, or sell it to a foreign big gun, like Blackrock, Barclay's or Deutsche Bank (that one was a joke). Selling abroad would be another political suicide for the government. So they just had to nudge UBS by making an offer they couldn't refuse. In the US, there's half a dozen (or most probably a dozen) banks that could buy First Republic.

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4 minutes ago, Chataya de Fleury said:

I actually am literally not allowed to trade most regional bank stocks - and certain other stocks. 

So, I am not commenting on stock prices, especially individual stocks, so, please take this as a macro comment:

The volatility on a lot of stocks during this particular time is going to be HUGE. 

TARP II time huge?

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14 minutes ago, Chataya de Fleury said:

My personal hope is that we are not living through even more interesting times. As many of us who lived through it well remember, 2008-2009 was terrifying. Fucking terrifying.

You're cute. This is just the beginning. Times will get real interesting when literally hundreds of millions of people are displaced because of the climate crisis while at the same time wars over mineral resources break out all over the world. 

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18 minutes ago, Chataya de Fleury said:

I will be dead by then. 

Everything seems to be moving at an accelerated pace. Don't be shocked when fifty year forecasts are realized in less than twenty, perhaps even much faster than that. It would not shock me if that by 2030 most of our worst fears for 2050 are already a reality and I don't see any evidence across a number of areas that suggests were going to be turning this around anytime soon.

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Banking crises are always terrifying because they're driven by psychology and this type of thing can turn on a dime. While the size and type of this crisis will be different to the GFC I suspect it might have even more pervasive effects if it is concentrated on retail banks etc.

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10 hours ago, Paxter said:

 

  • Inadequate controls; high management turnover; financial reporting irregularities (Credit Suisse)

Every part of the industry fights against this though, where deregulation is always the aim and some governments being complicit in ensuring that the industry doesn't have those controls.

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29 minutes ago, Jeor said:

Banking crises are always terrifying because they're driven by psychology and this type of thing can turn on a dime. While the size and type of this crisis will be different to the GFC I suspect it might have even more pervasive effects if it is concentrated on retail banks etc.

Why do we call these events "Great" when "Horrific" would be more accurate? When California slips into the sea will we tell our kids to remember the Great Earthquake? I mean sure, if you own property east of the fault line, but...

We're funny creatures. 

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3 hours ago, Jeor said:

Banking crises are always terrifying because they're driven by psychology and this type of thing can turn on a dime. While the size and type of this crisis will be different to the GFC I suspect it might have even more pervasive effects if it is concentrated on retail banks etc.

Never ever by corruption, lack of regulation of greed, bad practice, bad decisions, cronyism, deliberate manipulation, law breaking and stupidity.  Never ever have these created the conditions for financial runs and panics.  Never, never, never.

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3 hours ago, Zorral said:

Never ever by corruption, lack of regulation of greed, bad practice, bad decisions, cronyism, deliberate manipulation, law breaking and stupidity.  Never ever have these created the conditions for financial runs and panics.  Never, never, never.

Of course those things create the conditions. I'm saying that once the actual crisis starts, it's driven by psychology and market confidence. Even Credit Suisse, which has been a basketcase for years of bad management etc, only exploded in the end because one Saudi investor said they wouldn't put more money into it after everyone was already on tenterhooks after SVB.

6 hours ago, Tywin et al. said:

Why do we call these events "Great" when "Horrific" would be more accurate? When California slips into the sea will we tell our kids to remember the Great Earthquake? I mean sure, if you own property east of the fault line, but...

We're funny creatures. 

Originally "Great" was a word that just referred to size and didn't have a value judgement on it e.g. great hall, The Great War etc. Obviously the word is much more associated nowadays with connotations of wonderful etc so yes I guess it doesn't sound quite right.

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I always thought GFC was Global Financial Crisis? At least at work that’s what I am referring to.

Great Recession is sometimes used to refer to what came after; a term that was used as a callback to the Depression. It’s nowhere near as widely used as GFC.

Edited by Paxter
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8 hours ago, ThinkerX said:

Alas, your offspring will probably be alive, barring misfortune. 

This is what infuriates me about the continued propping up of Big Oil by our spineless political leadership.

Do these cunts not care about their children and grandchildren?

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42 minutes ago, Paxter said:

Wikipedia disagrees!!

:P

Hey, it’s “Great” in the US because it only happened in the US, it either didn’t affect anyone else or was too insignificant elsewhere! Everywhere else the crisis was Global!

[joking, joking, notjoking, notjoking!]

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