SVB Bank Collapse in the US

errrr.... MAYBE.......
538 US bank failures since 2008
0 Canadian bank failures. Canada being a model for onerous bank regulation. Canadian banks make a lot less profit than American banks, but they don't cost the taxpayer/depositor nearly as much.

When was the last Canadian bank failure?

Regulation protects against unmitigated risk, it doesn't protect stupid.

doesn't protect stupid.

 
This failure in no way connected to regulatory reform, this bank failed because their investments were poorly diversified.

The catalyst was inflation, which is largely a political creation. US govt and many other followers like Canada, flooded the markets with cash. Too much cash with too little supply ignited inflation. Then they cooled inflation by jacking interest rates.

When a bank sees a run, their cash gets depleted do they sell assets. SVG was unbalanced, too much in govt bonds. Bonds values dropped as fast as interest rates rise, so SVG got kilked as they liquidated bonds at a loss.

Regulation protects against unmitigated risk, it doesn't protect stupid.

Part of those regulations govern risk management - "stress testing".

Inflation may have prompted this, and poor management (and greed) led to poor risk management, but the existence of a low-interest-rate environment should have prompted a "stress-test" of what happens if interest rates rise and what should be done to protect against that (i.e. hold more shorter-term bonds, even at a lower nominal interest rate, because they're less vulnerable to increases in interest rates).

It is not possible to have 100% protection from risk, but the Canadian banking system survived the global financial crisis, and as a shareholder of some Canadian banks - correction, ESPECIALLY as a shareholder of some Canadian banks - I am okay with that. Lower profits ... but survives and doesn't need a bailout.
 
What year was the last canadian bank failure ?


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Just about 100 years ago I believe...

On June 4, 1996, about 2,600 Canadians discovered that their savings were not immediately available from their financial institution. They had entrusted a total of $42 million in deposits to Calgary-based Security Home Mortgage Corporation, which had closed its doors for good.

 
Chartered CDN banks are insured to a max of 100k per customer, you can have more cash in multiple banks but if you’re in trust companies , credit unions and securities companies, best of luck


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This failure in no way connected to regulatory reform, this bank failed because their investments were poorly diversified.

Your statement isn't based in reality - LOTS of experts disagree.


“I agree that the 2018 deregulation contributed to the problem,” Michael Ohlrogge, associate professor at the New York University School of Law, told us via email. “Basically, the deregulation made it more likely that we would have a crisis such as this, and more likely that it would be worse in the event that it did happen. One of the key reasons for this is that the 2018 deregulation reduced the amount of shareholder money that banks need to use to finance their asset acquisitions. Banks are required to have minimum amounts of shareholder money funding their assets so that if those assets drop in value, there is enough of a ‘cushion’ of shareholder value to take losses, before those losses take a hit out of depositor recoveries. So, without the 2018 deregulation, it is likely that SVB would have had a larger buffer of shareholder money to absorb losses, making it less likely that there would have been a panic in the first place, and given that there was a panic, the losses to depositors likely would have been less.

“That being said, it would not be accurate to say that there is no chance this crisis would have occurred were it not for the 2018 deregulation,” Ohlrogge said. “The 2018 changes just made it more likely to occur.”

Coles Notes version: It might still have happened, yes, but wouldn't have been as disastrous. It might not have happened at all.

To say that it was in "no way connected" is simply disingenuous.
 
After my wife died last year i discovered she had a big pile of BMO shares. (42 years with the bank) It's a little scary watching the stocks drop lately, down about 10k. But it's long term. It'll come back.
 
Your statement isn't based in reality - LOTS of experts disagree.


“I agree that the 2018 deregulation contributed to the problem,” Michael Ohlrogge, associate professor at the New York University School of Law, told us via email. “Basically, the deregulation made it more likely that we would have a crisis such as this, and more likely that it would be worse in the event that it did happen. One of the key reasons for this is that the 2018 deregulation reduced the amount of shareholder money that banks need to use to finance their asset acquisitions. Banks are required to have minimum amounts of shareholder money funding their assets so that if those assets drop in value, there is enough of a ‘cushion’ of shareholder value to take losses, before those losses take a hit out of depositor recoveries. So, without the 2018 deregulation, it is likely that SVB would have had a larger buffer of shareholder money to absorb losses, making it less likely that there would have been a panic in the first place, and given that there was a panic, the losses to depositors likely would have been less.

“That being said, it would not be accurate to say that there is no chance this crisis would have occurred were it not for the 2018 deregulation,” Ohlrogge said. “The 2018 changes just made it more likely to occur.”

Coles Notes version: It might still have happened, yes, but wouldn't have been as disastrous. It might not have happened at all.

To say that it was in "no way connected" is simply disingenuous.
Hypothetical, and probably more of a making/taking a jab at Republicans. When a bank has a run, it's shareholder's equity drops like a bomb, having 25% to dilute would make the collapse about 1 second later. See if Ohlrogge can apply his maybe-maybe not pondering to Credit Suisse?

Bottom line is deregulation allowed smaller banks in small markets to flourish which on balance does a lot more for the economy than onerous regulation.

Stupidity and weak management killed these banks. Regulation doesn't pretend to protect against those things.
 
They are actually... (According to some people, and I believe so too...)
While I am ok with bailing out depositors somewhat, everybody knows there is a 250K limit, I would give peter thiel a cheque for 250k and he would lose 49.75M. Anyone that has 50M deposited at a single bank can afford to lose much of it (they wont be happy but it will barely change their life). He made a bad decision, he lost. For functional companies with employees banking there, 250k is a useless level of protection and I would be ok with a higher backstop (maybe covered by higher fees for those accounts flowing through to the fund).
 
I'm of with backstopping depositors... not investors. Investors need to be savvier and more diligent than depositors.

If you fail to support depositors, you banking distemper becomes untrustworthy.
 
Hypothetical, and probably more of a making/taking a jab at Republicans

I knew you'd say that....because *everyone* on the right is saying the same thing.

But not based in reality either. That's the main reason I linked to the website I linked to actually, is because it's politically centred.


Facts are facts regardless if they don't fit your desired political viewpoints. I'd suggest actually reading the story I linked to above in it's entirety, not just dismissing it as a "democratic hack-job" because you support the US Right.

Stupidity and weak management killed these banks. Regulation doesn't pretend to protect against those things.

Actually, protecting against companies making reckless, dangerous, stupid, or greedy (amongst other things) decisions is exactly one of the things regulations do.

Can you imagine the automotive industry without regulations? Companies would be pumping out maximum profit total shitboxes that don't adhere to any standards for crash safety, rollover safety, etc etc etc. Go take a look at how a lot of cars made in India fare in crash testing if you want to see a mostly unregulated auto industry in all it's glory. Anyone remember the Pinto? Regulations ensure that sort of fiery death **** doesn't happen much anymore.

The trucking industry? It's bad as it is with all the regulations it currently has...can you imagine if it was a free for all?

Aviation? The safest mode of transportation in the world because it's HIGHLY regulated.

Electrical? Do you care that things you buy and plug in don't have a habit of killing you, and the wires in your house don't have a habit of catching on fire and buringin your house down? You can thank regulations.

Water systems? (Walkerton, anyone? New regulations were put into place to replace weak ones that actually killed a lot of people...)

I could go on...and on....and on. Our whole society is glued together with regulations that make our lives better and safer. Including banks. And the reality our banks are more regulated than US banks is one of the reasons why we magically don't seem to have these problems while the USA has, on average, a bank failure every 3 days. Think about that.

EVERY THREE DAYS.

Want even more sobering numbers? Look at the list of all the USA banks that have failed dating back a few decades....

So yes, I'll have to respectfully disagree on your statement that regulations don't work or don't "protect against those things"
 
I'm of with backstopping depositors... not investors. Investors need to be savvier and more diligent than depositors.

If you fail to support depositors, you banking distemper becomes untrustworthy.
To a limit imo. If the entire world knows you are protecting 250k and you backstop 50M to an individual, you have ruined the whole system. An individual has zero incentive to spread risk as precedent says policy and practice are uncorrelated. Change the premium and up to backstop to 50M if you want to go this route.
 
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Fun fact: Trump also stripped away a few pretty large impending safety specific regulations on railways related to improving braking systems, track inspections, and management of hazardous materials as well as improving staffing levels.

Anyone hear of a kinda big deal train disaster in the USA recently?

Yeah.

Yes, there's debate about if it would have prevented the current 2 major accidents including the Ohio environmental disaster as some of the Obama era regulations hadn't yet come into force (and now never will unless they're reinstated), but they sure as hell would have likely had a positive effect against another similar accident in the years ahead once they had come into force.

So is the solution here....LESS regulations?
 
While I am ok with bailing out depositors somewhat, everybody knows there is a 250K limit, I would give peter thiel a cheque for 250k and he would lose 49.75M. Anyone that has 50M deposited at a single bank can afford to lose much of it (they wont be happy but it will barely change their life). He made a bad decision, he lost. For functional companies with employees banking there, 250k is a useless level of protection and I would be ok with a higher backstop (maybe covered by higher fees for those accounts flowing through to the fund).
I agree with that, absolutely. I just wanted to point out the definition of bailing out...
 

What a "Center" Rating Means​

Sources with an AllSides Media Bias Rating of Center either do not show much predictable media bias, display a balance of articles with left and right biases, or equally balance left and right perspectives.

Center doesn't mean better! A Center media bias rating does not necessarily mean a source is totally unbiased, neutral, perfectly reasonable, or credible, just as Left and Right don't necessarily mean extreme, wrong, unreasonable, or not credible. AllSides encourages people to read outlets across the political spectrum.

I will assume we don't need to dissect this statement in it's entirety.
 
What a "Center" Rating Means

One could split hairs endlessly on media bias, and (apparently, even) on the websites that define levels of bias.

But I'll stand by my assessment based on the facts and choice of outlet that provided the related information. And most importantly, my argument that regulations work. If you feel differently, I'm all ears.
 
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