I don't think it is uncommon that actions we take to avoid a short-term loss come back to haunt us and so it is in this case. Pretending, in 2009, the losses in value were not real because they had not been realized led us to this happening in 2023. Likewise, bailing out banks once before set a precedent for a bailout of some sort now, though gov may not want to call it that. Protecting deposits over $250k will come back to haunt us at some point, even if only when the gov refuses to do it in some future case and they loses a lawsuit brought on the basis of precedent.
Let's smooth things over as best we can and also prevent responsible individuals from taking responsibility. No banker went to jail as a result of the 2008 crisis, though lots of people lost their homes.
It's definitely a bailout since the $250k rule is being overridden.
And I think you make a great point that we are still suffering from the failure to prosecute those responsible for breaking the law in the 2008 crisis.
We will repeat the mistake here. Maybe this bank failure is a matter of bad strategy and not illegal activity, but I'm sure the top decision-makers will not really suffer for it. Oh, they might lose high-paying jobs, but do they really need them? I suspect their lifestyles will not change.
Thanks for this, David. As a non-accountant, non-banker, I only catch the general sense of what is happening and what has happened. The networks report a politicized version. Do you have a recommendation for books that chart this history in clear terms?
I can't think of a specific book. But I can recommend Matt Levine's almost daily writing at Bloomberg. His writing is a pleasure, he has a great sense of humor, and he does a great job of explaining complex financial phenomena.
A good explainer. Thanks! (Good footnote too!)
Read it 3x. Does it make sense to me? Sort of. I hope and pray SVB is an anomaly.
I don't think it is uncommon that actions we take to avoid a short-term loss come back to haunt us and so it is in this case. Pretending, in 2009, the losses in value were not real because they had not been realized led us to this happening in 2023. Likewise, bailing out banks once before set a precedent for a bailout of some sort now, though gov may not want to call it that. Protecting deposits over $250k will come back to haunt us at some point, even if only when the gov refuses to do it in some future case and they loses a lawsuit brought on the basis of precedent.
Let's smooth things over as best we can and also prevent responsible individuals from taking responsibility. No banker went to jail as a result of the 2008 crisis, though lots of people lost their homes.
It's definitely a bailout since the $250k rule is being overridden.
And I think you make a great point that we are still suffering from the failure to prosecute those responsible for breaking the law in the 2008 crisis.
We will repeat the mistake here. Maybe this bank failure is a matter of bad strategy and not illegal activity, but I'm sure the top decision-makers will not really suffer for it. Oh, they might lose high-paying jobs, but do they really need them? I suspect their lifestyles will not change.
Thanks for this, David. As a non-accountant, non-banker, I only catch the general sense of what is happening and what has happened. The networks report a politicized version. Do you have a recommendation for books that chart this history in clear terms?
I can't think of a specific book. But I can recommend Matt Levine's almost daily writing at Bloomberg. His writing is a pleasure, he has a great sense of humor, and he does a great job of explaining complex financial phenomena.