[HN Gopher] SVB Used Former McCarthy Staffers to Weaken Regulati...
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SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC
Author : cratermoon
Score : 273 points
Date : 2023-03-12 16:38 UTC (6 hours ago)
(HTM) web link (theintercept.com)
(TXT) w3m dump (theintercept.com)
| guntreepo wrote:
| Ahh, the schadenfreude. I'm rubbing my hands together in glee at
| the thought of these parasites getting what's coming to them.
| themitigating wrote:
| Regular people will suffer more than anyone rich
| FooBarBizBazz wrote:
| When a bank fails, it's the depositors who get screwed, not the
| CEO. Why would you cheer for that? I understand why you're out
| for blood, but you're not getting the blood you want.
| robswc wrote:
| Yes, I too hate Californians. (do I need an /s?)
| hedora wrote:
| What's coming to them, exactly? A new yacht and 12 months off?
|
| Serious question: Is there any chance of any repercussions for
| the lobbyists, the execs that hired them, or even the people
| that moved the balance sheet into the previously "Illegal!
| Danger! Dragons will eat you!" corner of the risk quadrant?
| jimt1234 wrote:
| Repercussions? That's their jobs!
| BurningFrog wrote:
| There are hard tradeoffs here, and one failed bank doesn't mean
| the wrong choice was made.
|
| As I remember it, the reason for weakening these regulations was
| that Dodd-Frank is/was extremely expensive to comply with, and
| that created a banking sector where only the biggest banks could
| survive and it made no sense to start any new banks.
| themitigating wrote:
| Regulations help but then too much prevents competition. You
| can't win when people are angry mostly due to manipulation
| zainhoda wrote:
| I conducted Dodd-Frank Act Stress Tests for one component of a
| large bank. For a $400B portfolio I was able to do it with a
| team of 4 people including myself plus a $100k/year license to
| Barra and it takes about a week of the whole team's focus.
|
| The thing is, we were already employed by the bank to run risk
| management and the bank already had the subscription to the
| software. So from the bank's perspective it was close to 0
| marginal cost to conduct the stress tests because even if they
| weren't required, we would be doing them anyway as good risk
| management practice.
|
| If a bank says that stress tests are too expensive to run, that
| means that absent regulatory requirements they would perform no
| risk management.
| jszymborski wrote:
| > If a bank says that stress tests are too expensive to run,
| that means that absent regulatory requirements they would
| perform no risk management.
|
| This feels so damn true about almost every megacorp belly-
| aching about regulation.
| johndhi wrote:
| Just chiming in as a lawyer who works for a fairly big
| corporation.
|
| You're imagining a scenario where one set of clearly
| written and fairly interpreted rules applies to your core
| business. You're excluding scenarios where there are fifty
| states and two hundred countries wildly swinging back and
| forth from idiotic legislation drafted to apply to three
| companies (Google, Facebook, Amazon) that is impossible to
| apply to everyone else.
|
| Imo the situation I describe is worthy of belly aching. I
| don't work in finance so I guess theoretically the US
| banking system could be easier to comply with than
| everything else - but I definitely disagree that everything
| else is easy to comply with.
| ryandrake wrote:
| Exactly. But also for smaller companies whining about
| government regulation. The "regulation" is what's
| expensive, not the government part. If they can't afford
| government regulation, they can't afford self-regulation
| either, unless their idea of self-regulation is "do nothing
| and keep the money."
| downrightmike wrote:
| "do nothing and keep the money." That's the best
| definition of deregulation I've seen.
| elcritch wrote:
| Don't forget, receive bailouts if you go bust.
| dspillett wrote:
| _> "do nothing and keep the money."_
|
| Or "do nothing until someone(s) else gets stung/slapped,
| and hope that it _is_ someone /someones else not you, so
| you are around to learn from the mistake".
| kortilla wrote:
| I think your comment is agreeing with what the parent said.
| If you did it for a $400b portfolio that was only a component
| of the bank, it was a large bank.
|
| Hiring a team of 5, paying a $100k/year software license, etc
| are big barriers when you're a small regional bank with $30
| million in deposits.
| roenxi wrote:
| Doing the stress tests isn't where the cost would be coming
| from; the issue is more about the distraction of making sure
| that compliance is in place.
|
| I'd draw an analogy to having breakfast. If we legally
| required people to have breakfast every day, that would
| actually be quite expensive. It'd go from a reflex to
| something that has to be considered, we have to spend a
| little bit of time creating evidence that we had breakfast to
| satisfy the regulator, there'd have to be enforcement where
| parents check on their kids to make sure they have breakfast,
| situations where it doesn't make sense to have breakfast (eg,
| really excessive sleep-ins) now need big reworks to make sure
| that despite that someone rolls out of bed to have breakfast.
| The police would roll in and muck up people's life because
| they skipped breakfast one day due to illness.
|
| It'd be a debacle. It is funny to even imagine what mandatory
| breakfast would look like if we tried to legally enforce it.
| It would be expensive, both in dollar figures and hours of
| lives wasted; no question of it. Just because the act itself
| is cheap and necessary doesn't make legal compliance cheap
| and easy. There is a huge gap between the everyday "should
| do" and the legal "must do".
| cjalmeida wrote:
| That's an incredibly bad analogy. A more apt one would be
| lobbying FAA to give up pilot mandatory rest time for
| regional jets (eg. ERJs) as "they'd be too expensive
| compared flying with wide bodies 777"
| slantedview wrote:
| > the reason for weakening these regulations was that Dodd-
| Frank is/was extremely expensive to comply with
|
| It would be a lot easier for banks to comply with a reinstated
| Glass Steagall law, but banks don't want that either. The
| problem is really just that the banks don't want any
| restrictions, but as this situation shows, restrictions exist
| for good reason.
| PeterisP wrote:
| That is a reasonable reason, but on the other hand, that should
| not justify exempting the 18th largest bank in USA (the Silicon
| Valley Bank; as of 2022 https://en.wikipedia.org/wiki/List_of_l
| argest_banks_in_the_U...) from such regulation.
| gutdcnow wrote:
| [dead]
| kernal wrote:
| [flagged]
| skwirl wrote:
| If SVB collapsed because of corruption in the federal government,
| then that just makes a stronger case for federal institutions
| doing whatever they need to do to make the depositors whole. The
| solution to failing to protect depositors is not to snuff them
| out, it's to make things right.
| ajross wrote:
| Where on earth do you get "corruption in the federal
| government" from that article? It's explicitly saying that they
| were lobbying to _weaken_ regulation. That 's transparently
| circular. You're saying government oversight is bad because the
| government can be convinced not to oversee, in which case we
| get bad results from the lack of oversight!
|
| In this particular case, it's unclear exactly what oversight
| could have prevented the mistakes. We just won't know for a
| while. But... yeah, it seems very much not unreasonable that
| the 2018 Dodd-Frank rollback may be part of the problem.
| OrvalWintermute wrote:
| I think the govt may have been able to help with this issue.
|
| But it would have taken the govt getting into the whole risk
| & diversification & bond laddering & liquidity issues at a
| very granular level. You know, the whole shindig about huge
| risks to the banking sector and responses? That, all over
| again.
|
| I'll say from my perspective they were under-regulated. We
| can't have dumb banks throwing all their deposits into Fixed-
| Income with similar maturities putting their deposits at
| extreme risk of devaluation and interest rate risk with no
| hedging or laddering, and no good response to liquidity
| demands.
|
| I question the professionalism of the bank's investment crew
| given we knew about the interest rate rise several years ago.
| NIRP/ZIRP could never continue indefinitely and they knew it,
| and we knew it.
|
| We knew it!
| skwirl wrote:
| I don't see where you get "government oversight is bad" from
| anything I said. I strongly believe that we should have
| strict government oversight of deposit accounts and that
| people should be able to have faith in the banking system. I
| don't think it's depositors fault that banks lobby to weaken
| this regulation and that the government goes along with it.
|
| I agree that we don't know if the weakened regulations caused
| this - it's possible the regulators already had the tools in
| their belt they needed to prevent this and were asleep at the
| wheel. We will find out eventually.
| ajross wrote:
| OK, I see what you meant now. FWIW: employing the phrase
| "corruption in the federal government" to refer to what was
| clearly lawfully drafted and correctly passed legislation
| marks you as kind of a wingnut, so I interpreted your point
| to be "see? we can't trust the government!" and not "the
| government did something bad".
|
| The fact that the 2018 bill was a bad bill with bad effects
| doesn't make it "corrupt". Congress debated it, congress
| passed it, the president signed it. All that happens in
| public; it's the opposite of "corrupt".
| skwirl wrote:
| I think you would do well to not try to instantly bucket
| people into "my political tribe" or "the enemy political
| tribe." Not only is it lazy and harmful, you just aren't
| good at it. Plenty of people on the left would describe
| the relationship between members of congress and banking
| institutions to be corrupt.
| [deleted]
| pksebben wrote:
| To add; "corrupt" and "legal" are frequently the same
| thing. Corruption is often about misbehaving within the
| confines of laws you wrote specifically to take advantage
| of.
|
| I've started to wonder if we have any other kind,
| frankly.
| InTheArena wrote:
| This seems pretty knee-jerk, especially given, that the current
| glances that the business was probably too conservatively
| managed. The problem here was not holding safe assets - but the
| value of the government bonds depreciating dramatically because
| of the rising interest rates and a flush supply of higher
| interest rates due to massive government deficit spending. It's
| also a reflection of the extremely aggressive mark to market
| rules that have been put in place.
|
| You can make a very solid argument at the risk here is actually
| risk that was forced into these companies by the government.
| Telemakhos wrote:
| I'd not consider that argument solid at all, considering that
| SVIB and Silvergate are the only ones bankrupt, while the other
| banks are solvent.
|
| Instead, I'd look at the concentration of depositors within
| narrow geographic and professional areas and their connections
| to one another, which allows panic to spread faster and enables
| a bank run; other banks have a much broader and diverse set of
| depositors. I'd also look at the foolishness of some of those
| depositors who deposited far too much in one bank instead of
| distributing funds across many banks. Both are errors of over-
| concentration. Retail banking only made up 7% of deposits at
| SVIB; the rest was VC/tech money. That's not by any stretch of
| the imagination like other banks, and that's what caused this
| unique failure, not the same interest rate hikes that all banks
| are exposed to (and which they all account for regularly in
| internal exercises and stress tests like responsible banks do).
| daveguy wrote:
| The business got in trouble with long term mortgage backed
| securities, not government bonds. "The government did it" is a
| bad take on this one. It was the business that chose excessive
| long term illiquid mortgage backed securities vs short to mid
| term government bonds _which would have been a better choice_.
| InTheArena wrote:
| This does not appear to be the case with the numbers coming
| out this morning. It's really the government bonds that have
| the dramatic drop in value, relatively. The write down of the
| government bond assets are significantly higher than the
| write down of the MBS assets.
| pgwhalen wrote:
| I don't think you can make that argument. Buying longed dated
| bonds is done in the pursuit of profit. Nothing stopped SVB
| from buying shorted dated bills with less interest rate risk
| instead.
| djbusby wrote:
| Or don't buy so many long-dated bonds.
| reese_john wrote:
| > You can make a very solid argument at the risk here is
| actually risk that was forced into these companies by the
| government.
|
| I don't think so, this is a failure of proper risk management,
| specifically interest rate risk.
|
| Banks, with a proper risk management system, routinely do
| stress tests to assess their exposure to different scenarios
| and hedge accordingly.
| bequanna wrote:
| > the business was probably too conservatively managed. The
| problem here was not holding safe assets
|
| Duration, duration, duration.
|
| Their failure to recognize this as a risk even with "safe"
| assets is the problem. Hedging interest rate risk is not
| uncommon or difficult.
| asimpletune wrote:
| It was 0% interest rates before then that actually caused
| problems. Raising rates should have happened sooner but trump
| threatened to fire Powell if he did.
| perfecthjrjth wrote:
| Janet Yellen during Obama's second term didn't want to raise
| interest rates to protect Democrats. However, she wanted to
| raise interest rates during Trump. That's why Trump didn't
| renominate her. Why blame Powell here? Blame Janet Yellen,
| when she should have started raising rates under Obama.
| fallingknife wrote:
| Not true. Powell raised rates, and then Trump threatened to
| fire him. Powell continued to raise rates anyway. The Fed
| takes no shit from the president or congress.
|
| edit: HN is rate limiting me, but to see why the commenter
| below is wrong, just zoom out the chart he linked to 5 years
| view.
| throwaway12245 wrote:
| See here for clarification:
| https://tradingeconomics.com/united-states/interest-rate
| Trump was out of office for a long time before fed rates
| started to rise.
|
| Fed was late, should have stomped on inflation early.
| Regnore wrote:
| I wouldn't consider over-investing in assets that are extremely
| volatile from a short-term liquidity perspective
| "conservatively managed". The timeline liquidity of your assets
| is one of many forms of risk that needs to be managed by a
| bank.
| OrvalWintermute wrote:
| The overinvestment into US debt put them at extreme risk for
| interest rate related devaluation, which is exactly what
| happened.
|
| Even if they were going to go heavy with US debt, investment
| professionals normally use bond laddering for with fixed
| income funds to reduce that interest rate risk to the
| portfolio. They did not even do basic laddering!
| onos wrote:
| Can anyone provide a link that carefully outlines this? Eg
| did they just recently buy a ton of ten year bonds? That
| would sound nuts as everyone knows rates are rising right
| now. Would love to see details.
| OrvalWintermute wrote:
| It wouldn't matter even if they weren't of the same
| maturities, since you'd have to buy bonds with better
| interest rates, and you'd want the capital outflow to be
| spaced out.
|
| The mitigation to interest rate risk is by buying them
| spaced out so principal returns are being re-invested at
| changing rates, and you are never tied to a specific
| rate. https://www.investopedia.com/terms/b/bondladder.asp
|
| Here you see https://www.cnn.com/2023/03/11/business/svb-
| bank-collapse-ex... their average yield at 1.79%
| onos wrote:
| Thanks that makes sense. What I was hoping to see was
| links to what specifically they did that was not smart.
| Eg did they really just buy a lot of bonds, not spacing
| it out?
| cm2187 wrote:
| Not managing your interest rate is amateurish for any large
| bank. Every bank treasury has a whole team which only purpose
| is to monitor and manage that risk. They had volatile corporate
| / institutional investor deposits, and took an interest risk
| that assumed their deposits where super stable (i.e. they
| wouldn't have to sell those assets).
| cmsonger wrote:
| I seriously hope that the people asking the government for a
| bailout revisit their past policy positions and offer the same
| empathy to others going forward that they are asking for
| themselves right now.
| bigbillheck wrote:
| And I can hope I spontaneously learn to teleport, it's about as
| likely an outcome.
| Mountain_Skies wrote:
| The tech sector has made themselves one of the most hated
| groups in the country, behind Congress, telecom providers, and
| the media. Doubt they're going to find much sympathy from the
| folks in "flyover country" that the tech sector has gleefully
| been shitting all over for a decade. Perhaps the tech sector
| will have enough political capital to ensure they get to dump
| their losses on the public they loath, but it's going to come
| at a great political cost for those who go along with it.
| indymike wrote:
| > "flyover country" that the tech sector has gleefully been
| shitting all over for a decade
|
| I'm a founder of an Indiana based tech startup. What people
| in flyover states don't like is seeing stuff like Theranos.
| They also don't understand operating businesses for 10 years
| that lose billions. People here do not see the "tech sector"
| as evil: every flyover state has programs to attract and
| create tech sector companies. If anything there is a bit of
| envy combined with a simmering rage when we get bus-rolled
| for not having a great high-tech workforce, when Purdue,
| Notre Dame, IU, and other Midwest universities are cranking
| out fantastic engineering and business management talent that
| gets pulled to the coasts for big starting salaries.
|
| > Perhaps the tech sector will have enough political capital
| to ensure they get to dump their losses on the public they
| loath,
|
| I don't think that is what is being asked for at all. It's
| more of a "fix this before it hurts everyone". The Fed
| raising interest rates too quickly is the root cause of SVBs
| problems, and those rate changes may be doing the same thing
| with the small, community banks that flyover country
| agriculture and manufacturing relies on heavily. Hopefully
| SVB is the end of it... but this situation is not a "tech
| sector" issue. It's a banking problem caused by the Fed
| changing the rules to quickly.
|
| > it's going to come at a great political cost for those who
| go along with it.
|
| Not doing everything that can be done to fix this quickly
| will be politically un-affordable.
| cmsonger wrote:
| As a Purdue grad who spent a decade in Silicon Valley and
| who currently works remote for a FAANG in a state adjacent
| to yours: Didn't go to the coast for the big starting
| salary. Went for the interesting job, the flexibility to
| move to another job without renting a new apartment, and
| the career growth. Best career choice I made.
|
| Good for you starting a tech company outside the tech
| meccas, it's a hard road. Remote work might help you. In an
| remote work world, you are on a level playing field.
|
| As it relates to the SVB bailout. There's a strong
| libertarian streak in SV. While it might be entertaining to
| watch the hypocrisy unfold, I'm pretty certain these folks
| read hackernews and I'd like them to have a bit of self
| reflection about the role of government now that SVB has
| imploded.
| indymike wrote:
| > Good for you starting a tech company outside the tech
| meccas, it's a hard road.
|
| Thanks. I think the hard road is getting easier every
| year. Access to capital is getting better, and as you
| said, remote work has been a game changer for talent.
|
| > I'd like them to have a bit of self reflection about
| the role of government now that SVB has imploded.
|
| What is remarkable is how much government intervention
| went into creating SV. You'd never know from listening to
| the scene. Regardless, I hope that the SVB situation ends
| well for everyone and we can get back to work building
| things that matter.
| dmix wrote:
| Its 100x more Twitter/FB/etc that generated the hate. Most
| people don't know what Theranos is.
| indymike wrote:
| I suspect hating on Twitter/FB/etc is a tech industry
| thing. Most people don't hate big tech. They buy
| iPhones/Androids to keep up on their family and friends
| on Facebook, watch Netflix, find things on Google and buy
| stuff on Amazon.
| themitigating wrote:
| No. Foxnews made the tech sector the most hated groups.
| twblalock wrote:
| How does the tech sector shit all over "flyover country"?
|
| Show examples.
| [deleted]
| joemazerino wrote:
| Sure SVB used lobbyists but that's not the crux of the issue. The
| issue is our governments tax and spend policies are driving up
| rates to an unsustainable amount. SVB is totally at fault, don't
| get me wrong, but this is the house of cards we have built.
| ZachPruckowski wrote:
| Interest rates are where they were in the mid/late 90s
| (https://fred.stlouisfed.org/series/FEDFUNDS). The idea that
| these interest rates are unsustainable/dangerous is just silly.
| If anything, the 2009-2016 and 2020-2021 periods at an interest
| rate of 0% are the anomalies.
| InTheArena wrote:
| The problem is is that the amount of debt is percentage of
| GDP, and therefore the interest rates that we need to pay are
| significantly higher now. This kind of analysis is hopelessly
| naive without taking into account overall macro situation.
| makestuff wrote:
| I always see people say the national debt doesn't matter
| because it isn't like household debt. However, I just fail
| to see how that is true. At some point the can won't be
| able to be kicked down the road anymore. I guess everyone
| is hoping that it won't be during their lifetime.
| admax88qqq wrote:
| Because fundamentally the US government can print money
| to pay US debt.
|
| You can't print money to pay off your household debt.
|
| It's a different beast altogether subject to entirely
| different rules and incentives than household debt.
| fwungy wrote:
| Yes, and we the taxpayers get the privilege of paying
| interest on the money that is printed based on our
| nation's creditworthiness.
|
| The debt can never be paid. It's by design.
| fundad wrote:
| With tax revenue on growing wages.
| InTheArena wrote:
| People still hold to Soviet style, Socialism/communism,
| why would you be surprised if they're still holding on to
| modern monetary theory?
| ZachPruckowski wrote:
| I mean, yeah, that's ultimately a potential problem for the
| federal budget. But that's not what tripped up SVB - long-
| term Treasury prices declined because higher interest rates
| made short-term Treasuries more attractive than long-term
| ones.
| InTheArena wrote:
| Which in turn would not be a problem if the amount of
| data issued didn't swamp at destroy the market for debt
| already on the books...
| [deleted]
| fallingknife wrote:
| Too bad debt/GDP isn't
| https://fred.stlouisfed.org/series/GFDGDPA188S
| hedora wrote:
| What? Low interest rates are literally the government printing
| money. High interest rates are the opposite of government
| spending. Also, this is one of the few places where the
| government can add / remove money to the economy without
| spending taxpayer dollars.
| lettergram wrote:
| Lol somehow always blaming "deregulation" and politicians
|
| I'll tell you what, it's not regulators that caused this. IMO
| Banks need less regulation (and more smaller banks) and need to
| fail more (and have more jail time). It's the banking executives
| and business analysis team at fault here.
|
| Just like it's the startups error for failing to have multiple
| bank accounts.
|
| Some advice, be robust and self reliant. Assume everywhere you
| keep money could / will be stolen.
|
| As an individual, I have 3 bank accounts - 1 large U.S. bank and
| 2 regional (in different regions). Each account has a minimum of
| 1 month living expenses, plus I keep 1 month expenses in cash on
| hand.
|
| I do the same with investments, particularly after the whole "we
| won't let you short sell GameStop" on with firms (but not
| others).
|
| Be robust, that's your job as an individual or founder.
| arrosenberg wrote:
| > IMO Banks need less regulation
|
| > and have more jail time
|
| Regulations are how you get jail time.
| lettergram wrote:
| No, laws (criminal codes) are how you get jail time.
|
| Regulations are rules passed by administrative bodies, those
| rarely, if ever, result in jail time. There's a lot of reason
| for that, but administrative agencies often don't have the
| full authority to send people to prison (I personally don't
| think they should). Instead injured parties should be able to
| bring a suit, and I'm sure they will here.
| arrosenberg wrote:
| That's nitpicking. Regulatory bodies are also created by
| laws. Laws that prescribe criminal penalties for bad
| conduct are still regulatory in nature. Most US
| administrative bodies refer criminal activity to the
| Department of Justice for prosecution. It's all part of the
| same apparatus.
| lmm wrote:
| It's not a nitpick. We have a two-tier justice system and
| regulatory bodies mostly live in the tier that issues
| fines but doesn't send anyone to prison, and this is not
| coincidence.
| robswc wrote:
| >Be robust, that's your job as an individual or founder.
|
| 100%
|
| I learned the hard way not to "trust systems" when it comes to
| important aspects of your life.
|
| In college, I found some transfer requirements confusing. I
| utilized the college's guidance center. They told me they were
| sure that I needed class X, Y and Z. Of course, as it turned
| out, I didn't need _any_ of them. So an entire year and
| thousands wasted. I know mistakes can happen... I know I
| probably should have done the work to check for myself but I
| figured they would know more anyways.
|
| Maybe a priceless lesson in the long run though...
| themitigating wrote:
| Because the threat of punishment stops crime?
| andrewstuart wrote:
| Weaken regulations, trains and banks crash, but hey small
| government, slash the red tape.
| notch898a wrote:
| 0) Make narrow banking illegal
|
| 1) Hold interest rates near zero, inflating the fuck out of the
| economy
|
| 2) Use government to destroy market value of distant maturing
| bonds by holding real interest rates deeply negative and then
| rapidly inverting it. Force people to seek ever more risky
| investments and long term low interest MBS securities just to
| barely not even break even.
|
| 3) Suck all the liquidity out of the market by using fed to
| raise interest rates sharply
|
| 4) Banks fail
|
| 5) "There wasn't enough government intervention, we need more!"
| Karunamon wrote:
| _A_ bank failed, and then only because they were doing unwise
| things with their holdings. Where are all the other failed
| banks as a result of the long-standing fiscal policy?
| notch898a wrote:
| If the bar you're setting is looking for failed banks
| exacerbated by fed policies, look no further than the great
| depression.
|
| Now we could move the goal posts to something else, but the
| question you ask is not hard to find examples of.
|
| > doing unwise things
|
| In retrospect anything that causes a failure is going to be
| characterized as "unwise." You could say the wisest thing
| would be to create a 100% reserve ratio by passing through
| deposits to the central bank, yet it's impossible to get a
| banking license to do that. We're left with various shades
| of unwise.
| Karunamon wrote:
| The problem with blaming the government for this failure
| is that only one bank seems to have been affected. Since
| we are talking about sector wide regulations and policies
| rather than anything that targeted this specific
| institution, it is evidence strongly in favor of the
| problem being with the bank, not with the environment.
| Were this is a problem with law or interest rates or
| something like that, we would expect to see a lot more
| collateral damage.
|
| Instead, the only thing we see is a single bank that
| failed due to voluntarily tying up too much of their
| capital in instruments that cannot be easily liquidated.
| notch898a wrote:
| 1000 people are forced to roll a 10,000 sided dice. They
| roll a '1' and they die.
|
| At the end one person is dead.
|
| Clearly since that one person followed the sector wide
| regulation and polices rather than anything that targeted
| that specific person, it is evidence strongly in favor of
| the problem being with that person, not the dice game.
| Were this a problem with the game or the dice or
| something like that, we would expect to see a lot more
| damage.
|
| Instead, the only thing we see is one person who lost the
| dice game voluntarily rolling the dice at the improper
| starting position and velocity that cannot be easily
| rolled to the correct number.
|
| Clearly this isn't the same, but the logic you've used
| doesn't parse and in any case the full fault is unlikely
| to be fully the fault of government nor the bank. And it
| remains to be seen if the dice game is over...
| Karunamon wrote:
| Yes, it clearly isn't the same. In the first place, we
| are not talking about randomness. Your example is facile
| and your copy and paste sarcasm is both unwelcome and
| against the rules. I'm done here.
| notch898a wrote:
| I see so we're yet again moving the goalposts you set and
| now moving on to additional criteria like whether chance
| was involved. On the contrary, I would say quite a bit of
| uncertainty was involved, especially since a lowest
| uncertainty option was outlawed.
| SmoothBrain12 wrote:
| [flagged]
| hedora wrote:
| In fairness, the train crash had bipartisan support.
| andrewstuart wrote:
| No the train brake regulations were cut by Trump.
|
| https://www.vanityfair.com/news/2023/02/donald-trump-east-
| pa...
| onetimeusename wrote:
| This isn't a good thread to discuss train brake regulations
| since it is about bank regulations. That said, I don't
| believe train brakes would have had much effect on a ~50
| car derailment. This is based on NTSB estimates[1].
|
| [1]: https://www.ntsb.gov/news/events/Documents/2017_cassel
| ton_BM...
| kernal wrote:
| [flagged]
| [deleted]
| billfor wrote:
| Would not have applied to this train even if it were true.
| https://www.factcheck.org/2023/02/ntsb-chair-contradicts-
| pos...
| egberts1 wrote:
| Here are some of Bess Levin's articles on Vanity.
|
| Looks pretty biased to me, not to mention clueless to the
| inner working of NTSB, so it is safe to say that she
| "parrots" narratives.
|
| https://www.vanityfair.com/contributor/bess-
| levin#intcid=inl...
| mjhay wrote:
| Biden could reinstate them by EO, just like how Trump cut
| them. He hasn't though. There is a bipartisan consensus
| that the safety of the rail system is less important than
| rail company profits.
| pessimizer wrote:
| > Biden could reinstate them by EO, just like how Trump
| cut them. He hasn't though.
|
| He probably just hadn't noticed. It couldn't be that he
| allowed to rules changes to continue because some money
| flows towards him, his friends, or his party and his
| party's friends depended on maintaining those changes.
| Biden put a famously competent and experienced person in
| charge of Transportation and he didn't notice the change,
| so how could you expect Biden to?
| jjeaff wrote:
| The secretary of transportation is far too high up the
| chain to know about the minutia of train brake
| regulations. There is a whole federal agency that deals
| with train regulations which is one of the 10 agencies
| that report to the sec of transportation.
| bobby_bbb wrote:
| " There is a bipartisan consensus that the safety of the
| rail system is less important than rail company profits."
|
| Any of us can buy railroad stocks and become - in your
| mind - wealthy. Perhaps the more important value being
| protected was, if the railroads stop working, many of us
| stop eating. Same reason we subsidized food production,
| fuel, etc. Our societies have grown too much to be able
| to go back to life without them, without huge numbers of
| deaths as we adjust.
| [deleted]
| tzs wrote:
| It seems reasonably likely they would have also been cut if
| Clinton had been president, due to the review requirement
| that was built into the regulations themselves.
|
| The 2015 law that required ECP brakes also required before
| they went into effect the government ask the National
| Academy of Sciences (NAS) to review the safety assumptions
| that the regulations had been based on and report whether
| or not those assumptions were correct, and revise or
| rescind the regulations accordingly.
|
| NAS completed that report in early 2017 and it said that it
| was unable to conclude that ECP brakes were safer. There
| simply had not been enough actual tests to generate the
| data needed to reach a conclusion.
|
| Given that NAS report it is hard to see how any
| administration could have justified not rescinding the
| regulation.
| jjeaff wrote:
| Unlikely they would have been cut under Clinton. And I
| don't think the required review you are talking about is
| concerned with safety. It's money. The review that is
| required is actually a financial review that decides if
| the cost of the safety regs in question exceed the cost
| of potential accidents. This analysis had already been
| done. However, the Trump admin had the calculation done
| again, I would assume after putting their own people in
| place and they found that the regulation was too costly.
| Big errors were made in their calculation but they
| claimed that even after fixing the errors, it was too
| costly. So they rolled back the regs.
|
| That being said, the regs in question only applied to
| certain hazard levels and the train that crashed did not
| meet that level because it didn't have enough cars with
| hazardous materials.
| egberts1 wrote:
| Cannot cut something back if the brakes were never mass
| produced.
| leeroyjenkins11 wrote:
| Was there actual evidence that Trump's changes had any
| affect on the derailments? From what I heard they had no
| effect. And last I checked , Biden has been president for 2
| years. If they were vitally important, wouldn't the
| transportation dept worked to add them back?
| [deleted]
| jmyeet wrote:
| The history is more complicated than that.
|
| Obama originally proposed rules for widening the definition
| of hazardous trains and requiring upgraded brakes. This
| version didn't get enacted. It was weakened after a lot of
| lobbying eg trains carrying oil and gas were no longer
| "hazardous".
|
| Trump did remove this rule in 2018.
|
| But we're in 2023 now when Biden was sworn in over 2 years
| ago. Did Biden or Buttigieg re-institute these rules? No.
|
| This problem is beyond politics. Both parties serve
| corporate interests. Republicans just go a little further
| on the deregulation train (pun intended). Look at Biden and
| Congress united behind hobbling the rail workers strike.
| Those rail workers were wanting to strike in part due to
| safety issues.
|
| Buttigieg is a McKinsey alum. He's part of the system that
| creates this problem. Don't think this is just a few bad
| apples. It isn't. It's a systemic problem.
| dave78 wrote:
| This has been directly refuted by NTSB Chair Jennifer
| Homendy. The brake rule in question would not have applied
| to that train either way.
|
| https://twitter.com/JenniferHomendy/status/1626379361027858
| 4...
|
| You're contributing to misinformation by repeating these
| false claims.
| aaomidi wrote:
| And Biden killed the strikes.
|
| Both parties hate the non-rich. One just hates it more and
| is way more obvious about it.
| themitigating wrote:
| Claiming politicans hate the vast majority of people is
| so insane I can't believe I'm seeing it here.
| PeterisP wrote:
| It probably is an exaggeration, and assigning emotion is
| futile and counterproductive; however, I think it's far
| less contentious to note that, however they might
| actually personally feel, both parties regularly vote for
| laws and actions that harm the vast majority of people
| i.e. the non-rich.
| caoilte wrote:
| Political parties aren't people so assigning feelings to
| them is of questionable value, but no more so than
| calling someone insane for doing so.
|
| The underlying fact is that the Republican and Democratic
| Party are both constituted to represent their donors and
| that certain parties (rich individuals being the largest
| such party) enjoy the benefit of giving bi-partisan
| patronage.
| gnulinux wrote:
| Claiming otherwise is being blindfolded. When I look at
| American politics, I can't see any justification other
| than the desire to help 1% and the apathy towards people
| who live paycheck-to-paycheck (or worse). We saw it in
| 70s, 2008, COVID, Student Loan Forgiveness cancellation,
| increasing rent/housing costs, and now seeing it, and
| will always see it. "Hate" is a strong word of course but
| the spirit is absolutely true.
| zmgsabst wrote:
| Calling an argument "insane" isn't a constructive
| comment.
|
| Perhaps you could explain why you don't think that's a
| reasonable interpretation..?
| whitemary wrote:
| And those regulations were opposed by the unions that Biden
| crushed by forcing them back to work.
|
| It's a class conflict, not a partisan one.
| enriquec wrote:
| Its understood that those regulations wouldn't have saved
| the train in Palestine. That's one problem with the
| discourse on the left. I don't favor regulation for the
| sake of regulation - nor cutting it for its own sake.
| There obviously needs to be a rational best-effort cost-
| benefit analysis. Not cheap politics.
| pessimizer wrote:
| > There obviously needs to be a rational best-effort
| cost-benefit analysis.
|
| You don't seriously think there haven't been many? The
| problem is that train companies, governments, and people
| who care about the environment classify and price costs
| and benefits differently, and government was paid to
| adopt train company calculus.
|
| It's not that nobody ever thought of figuring out the
| costs or the benefits of this major, well-known proposed
| change.
| whitemary wrote:
| You really think people are that stupid? Biden and the
| Democrats had their chance either way. They chose to
| crush the unions, so the burden of proof is on them.
| However, since this is politics, nobody is going to
| listen because it's too damn late.
| [deleted]
| EFreethought wrote:
| Deregulation sometimes has bipartisan support.
|
| One difference is that when things start breaking, Democrats
| are willing to reconsider de/regulation, while GOP blames the
| government (even if there had not been inspections for years)
| and doubles down.
|
| Some Dems voted to repeal Glass-Steagall, but more voted to
| keep it. The GOP votes was far more lopsided in favor of
| repeal.
| andirk wrote:
| Bipartisan support from two parties who are usually in the
| hands of Big [name the industry] doesn't negate it in the
| slightest. Sure one is more outwardly against any regulation
| that can negatively affect the ultra rich.
| reso wrote:
| Almost like there is little difference between the major
| parties on economic issues.
| linuxftw wrote:
| It's okay for banks and trains to crash. If you have more than
| $250k in a single bank, you should have insurance on that cash.
|
| If a train spills chemicals, they should be liable for a
| satisfactory resolution, including buying a property that was
| polluted, or paying for the cleanup and any depreciation of the
| property.
| pessimizer wrote:
| They should also be responsible for resurrecting people who
| died and compensating them for the time they missed, and
| unpolluting hopelessly polluted sites before they were
| hopelessly polluted.
|
| At the end of the parable of Job, God gives Job all new sons
| and daughters to replace the sons and daughters that were
| crushed during the game with Satan. I never considered that
| as a thing that made Job whole. In case of devastating and
| prevetable disaster, the train companies will just declare
| bankruptcy and the owners will start new train companies, or
| they'll nationalize themselves and sell to the government at
| an inflated price.
|
| edit: these companies were all formed by groups of insiders
| that were handed state property for free; they have typical
| post-Soviet oligarch origin stories.
| fwungy wrote:
| The train workers were striking to protest safety conditions.
| Biden ordered them back to work.
|
| Do you really think far away rich people are working to make
| things better for you?
| fwungy wrote:
| Republicans are cancer. Democrats are low fat cancer.
| fspeech wrote:
| Other than the focus on governmental regulation we should also
| look at the glaring principal-agent risk. Large shareholders
| (such as the Swedish pension fund) should have asked questions
| about the concentration risks and AOCI losses. Management could
| be loathe to realize the losses earlier due to profit targets.
| Their risk/reward calculation on addressing a mistake could be
| misaligned from the shareholders'.
| jacquesm wrote:
| Pension funds - and municipalities - have no business to take
| the funds that they have been entrusted with outside of the
| country where they reside. The same kind of nonsense led to the
| Icesave debacle.
| hindsightbias wrote:
| Freedom-oriented low-service states would seem to be too good
| a deal to pass up:
|
| https://www.nbcdfw.com/news/local/spanish-company-
| signs-50-y...
| henrydark wrote:
| Is this possible for all countries?
|
| Surely the lowest gdp (maybe per capita) country in the world
| that has pension funds should be eligible to invest these
| funds outside of the country.
|
| A priori, without knowing anything about world economies, we
| shouldn't expect every country with pensions to even have
| local possibilities of investment. There's possibly a country
| where every single tax payer works remotely, or in local
| administration.
| wnevets wrote:
| My favorite quote that I've seen about this entire ordeal is
| "there are no libertarians in a bank run".
| Bloating wrote:
| Libertarians would prefer not to be subjected to the current
| banking system
| wnevets wrote:
| You're right they would want to get rid of the FDIC and the
| insurance it provides
| delfinom wrote:
| Which is weird because it's general operation is funded by
| banks paying premiums. The federal government only pays up
| in event the FDIC uses up it's hundreds of billions it's
| sitting on.
| theFletch wrote:
| The article lost credibility at the beginning of the second
| paragraph for me.
|
| "..second-largest bank collapse in American history and the first
| since the 2008 financial crisis."
| szundi wrote:
| First here means the largest probably
| egberts1 wrote:
| But the ultimate crux is done by the Federal Reserve Board for
| allowing $50+B --> non-bank <-- to skimp on the stress test.
| (emphasis is mine but the key crux). This was done on March 14.
| 2014, which is 4 years earlier.
|
| "Finally, the Board has determined not to impose enhanced
| prudential standards on nonbank financial companies supervised by
| the Board through this final ($50B stress test) rule."
|
| Not seeing any partisan hacks there, unless you count the
| financial ones.
|
| https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-...
| samirillian wrote:
| ELI5?
| LandoCalrissian wrote:
| I can't remember all the specifics, but after the 2008 crash
| banks with a certain levels of holding have to pass stress
| test showing they can survive scenarios like this. I think
| the old limit was 50 billion but go changed to I think 150
| billion which puts SVB below the threshold for the stress
| test.
| CalChris wrote:
| Trump increased this to $250B in 2018. SVB as the 16th
| largest bank in the US at $209B didn't trip this wire
| because the wire was moved.
| egberts1 wrote:
| You missed the part about "non-bank" exempted from ANY
| limit on March 14, 2014 in the FR Notice.
| CalChris wrote:
| "I think the old limit was 50 billion but go changed to I
| think 150 billion which puts SVB below the threshold for
| the stress test."
|
| Maybe the parent post missed that but I was responding to
| that post.
| KRAKRISMOTT wrote:
| Why should non-interest bearing electronic wallets be
| subjects to the same limits? Cash is less of a liability
| for them.
| maxbond wrote:
| Perhaps it'd be better to combine a dollar value with a
| percentile, eg, "each of the top banks representing X% of
| total deposits or with > $YB of deposits"
| cratermoon wrote:
| It appears the emerging consensus among the apologists is that
| SVB failed because the federal government, or the Fed
| specifically, _over-regulated_ them by _making_ them take certain
| positions, then pulled the rug out from under the by raising
| interest rates. In short, it wasn 't the fault of the people
| running the bank.
|
| In other news: https://www.nbcnews.com/business/business-
| news/etsy-delays-p...
| OrvalWintermute wrote:
| I don't think there is any consensus on this issue.
|
| They clearly mismanaged their portfolio, since the Fixed Income
| approach towards interest rate risk is to hedge, and to use
| Bond Laddering, and utilize diversification.
|
| They did the exact opposite at the same time they permitted
| deposits to flow into the bank unchecked. This is a crisis of
| their own making 100%
| downrightmike wrote:
| The Dude who ran SVB into the ground also ran Lehman Bros into
| the ground, just saying, he should not be held responsible at
| some point.
| ursuscamp wrote:
| The entire system is a house of cards. The collateral of the
| system itself is debt (USTs). There is no firm ground to stand on
| after decades of low interest rates. Marginal tweaks to banking
| regulations neither caused nor can fix this.
|
| The Fed is raising rates and we are taking our medicine.
| fwungy wrote:
| The Fed, creates magic money from thin air then lends it to the
| government at interest to sell as T bills. Guess who is on the
| hook for the interest? The US taxpayer.
|
| The Fed is owned by its member banks which are for-profit
| corporations. Imagine paying interest to a third party to
| access your own wealth! That's the USA. There is no technical
| need for the Fed. We were fine without it till 1913. It just
| makes a lot of insiders rich.
| coliveira wrote:
| There is no technical need for any bank, at least in the way
| they operate now. When you get a house loan, you're not
| getting any money, you're transferring the property lien to
| the bank in exchange for cash. It is just a value exchange
| not a real loan, and this could be done by the government.
| This is true for pretty much anything a bank does nowadays,
| they're just exchanging one type of value for cash and
| getting interest on the top of this transaction that takes a
| few minutes to process.
| dmix wrote:
| > The Fed is raising rates and we are taking our medicine.
|
| Taking our medicine would imply there are market consequences.
| It seems the typical gov reaction is some form of bailouts to
| the high end of the market combined with regulation to further
| limit the market to a few giant monopolies.
|
| All the matters to people is not ruffling feathers, a sense of
| security, not about actually solving the root problems that SVB
| took a massive gamble on mortgages and no one seemed to care.
|
| Gov focusing on helping the depositors is fine. But it sounds
| like the vast, vast majority of SVBs depositors will be made
| whole. So that's probably not even necessary. The Yallen stuff
| is most likely about calming the market, not direct
| intervention.
| jimt1234 wrote:
| More/stricter regulation is definitely needed...on drag shows! /s
| FooBarBizBazz wrote:
| Suppose they'd hedged away their interest rate risk. There'd just
| be another party on the other side of those swaps who'd have
| gotten wiped out instead, right?
| tikkun wrote:
| Which groups are working to reduce the impact of $ on laws?
|
| One I've seen is https://represent.us, who else?
| whitemary wrote:
| The capitalist class will always leverage its capital for its
| own interests. It's an inherent fact of capitalism.
|
| The American socialist movement was mostly wiped out during the
| Red Scare.
| olalonde wrote:
| What is capitalist about modern banking? It's probably the
| most regulated industry in existence. Where a practice that
| would normally be regarded as fraudulent anywhere else
| (fractional reserve banking) is not only legal but encouraged
| by government. There's nothing capitalist about it[0].
|
| [0] https://mises.org/power-market/central-banking-socialism
| oivey wrote:
| So you think the government should step in to add
| regulation to ban fractional reserve banking, and that that
| would be more capitalist? Your Mises link doesn't even
| mention the term.
| whitemary wrote:
| A sovereign state in a capitalist society is a capitalist
| state. A capitalist state always serves, in aggregate, the
| interests of the capitalist class. Karl Marx showed us how
| this works 150 years ago and nobody has challenged this
| part of his analysis to my knowledge.
|
| I am familiar with the delusional American libertarian
| fantasies, but that's just ideological denial. They haven't
| done any actual analysis of how a government or state
| works, or who influences it.
| Bloating wrote:
| And every instance of communism has devolved into
| authoritarianism.
|
| I take capitalism, thank you
| kevviiinn wrote:
| Capitalism is just authoritarianism under corporations,
| if you think it's so much better then I've got a bridge
| to sell you
| olalonde wrote:
| I was referring to capitalism as in "free enterprise"
| (not as in "anything that happens in a mostly capitalist
| society"). Many of Marx' central theories were shown to
| be incorrect (e.g. labor theory of value) and personally,
| I don't buy the theory of class struggle (it is probably
| not even a falsifiable theory).
| whitemary wrote:
| I didn't ask what you thought of "many of Marx's central
| theories" and I couldn't care less. I meant exactly what
| I said and I'm right.
| wpietri wrote:
| Sure, but that doesn't mean that we can't fight that. Indeed,
| I think it means we must work ardently against it.
| Capitalism's pretty neat, but it has known failure modes like
| monopoly and corruption.
| whitemary wrote:
| It does mean you can't fight it with little advocacy groups
| or well-meaning think tanks. According to history, you need
| a strong labor movement led by principled socialists.
| JumpCrisscross wrote:
| > _you need a strong labor movement led by principled
| socialists_
|
| The "principled" qualifier works for anything, _e.g._ we
| need a strong bank regulator led by principled felons.
| lmm wrote:
| Ok, so who's out there actually fighting to e.g. legalise
| secondary action? Serious question.
| Bloating wrote:
| Competition does wonders to keep power in check, while
| improving value for consumers. Neither shareholders nor
| organized labor likes that feature.
|
| Almost all monopolies are the result of government
| interference
| Arainach wrote:
| In the absence of regulation, all industries trend
| towards monopolies as big players block out and buy up
| competitors.
|
| Capitalism abhors competition.
| wpietri wrote:
| I think solving problems like corruption takes more than
| one thing, so I think false dichotomies are unhelpful.
| whitemary wrote:
| What you call "corruption" is fundamental capitalism. In
| other words, there has never been and can never be a
| capitalist society without it. Thinking otherwise is
| capitalist utopianism.
|
| "The government" (or state) is part of capitalism. In
| fact, it is a critical component. There could be no
| capitalism without a state to enforce it. Libertarianism
| is not a coherent ideology; it is a disease of the
| intellect.
| wpietri wrote:
| I meant that as corruption from the perspective of the
| governmental system. Which either you knew perfectly well
| or we're talking past one another here, so either way I
| think I'm done.
| throwayyy479087 wrote:
| That won't happen with the current "socialist" movement.
| Socialism is about _all workers_, including those who
| have "chud" opinions. This is the largest group of
| workers, by a lot - White working class, Southern and
| Midwestern dudes.
|
| Look at the Far East and Europe - successful movements
| _do not_ bundle Drag Story Time and Workers Rights.
| Stalin was closer to Nick Fuentes than Biden. Same with
| Mao.
|
| As long as the first issue that the DSA cares about is
| trans rights, the DSA will continue to be a joke at best
| and potentially controlled opposition at worst.
| mjhay wrote:
| None of that will do anything, beyond, at best, chipping at
| some of the most egregious examples. We are a capitalist
| system. Economics and politics are inseparable, and the
| capitalist class has the power.
| Bloating wrote:
| Is separation of economics and politics a benefit of
| authoritarianism? How does that work?
| johnmaguire wrote:
| https://en.wikipedia.org/wiki/Wolf-PAC
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