[HN Gopher] UBS agrees to buy Credit Suisse
___________________________________________________________________
UBS agrees to buy Credit Suisse
Author : nairboon
Score : 280 points
Date : 2023-03-19 17:11 UTC (5 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| worrycue wrote:
| Man, this was more serious than I thought. They rushed to get the
| whole thing done during the weekend and pushed it through
| bypassing all the shareholders.
|
| This year is getting worse by the minute. Insane inflation
| killing many industries. AI threatening to take jobs - and
| probably actually taking a few art jobs. Now cascading bank runs
| and the end of one of the oldest banks in the world as an
| independent entity.
| neuronic wrote:
| This is hyperbole at its finest. Can you name a few industries
| that have been killed?
|
| Which artists and writers aside from pretentious copy cats are
| getting replaced by AI?
| worrycue wrote:
| China's exports I heard are down and shipping containers are
| actually piling up at their ports.
|
| I feel artists selling "generic art" for pictures in lobbies
| and homes are probably going to be out of a job.
| curiousObject wrote:
| "Piling up" should be visible. Is there photo or satellite
| evidence of that?
| thebradbain wrote:
| The vast majority of artists don't make a living selling
| the "generic art" that enthusiasts are so sure AI will
| disrupt (and if they do, certainly not individual pieces to
| hotels/coffee shops/etc, but bulk licensing through
| agencies)
|
| At most it would be replacing one licensing middleman for
| another.
| m3kw9 wrote:
| You lost me when you say AI threatening to take jobs as one of
| the comparables
| benjaminwootton wrote:
| In the space of 12 weeks, AI seems to have come from nowhere
| to now having the skills to replace lots of knowledge workers
| and creatives. Though there is some way to go, I think it's
| pretty bleak and scary for employment prospects.
| baq wrote:
| What a week right?
| rvz wrote:
| It is just the beginning. It can affect even some
| 'Systemically important banks'. Perhaps CS was the unsafest
| SIB of them all.
|
| They are 'Too big to fail' until they fail.
| koolba wrote:
| The week is just starting...
| layer8 wrote:
| Not in Europe: https://c.tadst.com/gfx/1200x675/map--first-
| day-of-the-week....
| tempsy wrote:
| ...what industries are being killed by "insane inflation"?
|
| ironically long duration tech stocks and crypto have been
| surging all year and outperforming basically every other sector
| worrycue wrote:
| I heard shipping containers have been piling up at China's
| ports and China exports are way down - with quite a few
| factory suspending operations. Supposedly the US stopped
| buying because inflation means people focus on the
| necessities like food.
| marcosdumay wrote:
| Container movement has been erratic since 2020. I would
| look deeper before inferring causes for piles of them.
| (Once you actually get evidence of piles of them, because
| it seems you don't have that yet.)
|
| There are many people that track actual goods. It's better
| than looking for a proxy.
| ChuckMcM wrote:
| The thought experiment then is to ask "What mechanisms
| connect Chinese exports with inflation?"
|
| To get a better understanding of that, one might "rewind"
| time to look back at what those containers were carrying
| when there was a container shortage.
|
| Since containers are a mechanism for moving goods, one
| might look at supply and demand of goods to try to
| understand what that relationship is.
|
| Historically, when supplies are tight, retailers order the
| same order from multiple suppliers in the hope that one of
| them will come through. This typically results in adding
| production capacity to meet this "shadow" demand (there are
| orders for 300 widgets but the retailer on the other end
| really only wants 100 widgets, they have just ordered 100
| from three different distributors who each passed on that
| order to the factory).
|
| When the factories ramp up to cover that shadow demand,
| they put a lot of product into the distribution channel but
| retailer cancels their other two orders after one is
| filled. As a result there is now 2x the "demand" level
| sitting in distribution. The next time the retailer orders,
| their orders are satisfied out of existing stock.
|
| Until the distributors have worked through this "excess"
| they don't order anything from the factories and the
| factories have nothing to do and don't need to ship
| anything so the containers sit there empty.
|
| This "boom" and "bust" cycle is an oscillation that occurs
| in systems that are not critically damped (a term from
| systems analysis). During the 2020/2021 years a lot of
| demand was unmet and we had the "supply chain crisis." Once
| things ramped up, it is expected to have an "over supply"
| crisis.
| cwilkes wrote:
| If people stopped buying then inflation would go down
| dramatically.
| lotsofpulp wrote:
| Prices may stay the same if supply goes down in concert
| with demand.
| rabbit_1 wrote:
| Likely because multinational firms have been steadily
| shifting their supply chain and manufacturing out of China
| JUNGLEISMASSIVE wrote:
| [dead]
| egwor wrote:
| Just take note that mergers of CS and UBS have been discussed a
| few times over the past 20 years. Don't be fooled into thinking
| that there wasn't a lot of planning/analysis already done for
| this. In fact it might even have happened the other way around
| in 2008 and again there was no doubt planning for that too!
| lolive wrote:
| Didn't all the plans lead to the conclusion that it was a bad
| deal for UBS?
| egwor wrote:
| Yeah, but they'll have at least thought out how this could
| work.
| NotYourLawyer wrote:
| > Regulator Finma said about 16 billion francs of Credit Suisse
| bonds will become worthless to ensure private investors help
| shoulder the costs.
|
| That's a funny way of saying "we're gonna punish everyone who
| previously lent money to CS."
| fancyfredbot wrote:
| That's the risk you take when you lend money. It's why you get
| paid interest.
| s1artibartfast wrote:
| I don't think that is a fair take.
|
| When you lend you expect to be paid back unless there is
| bankruptcy, and then you expect get a place in line for the
| assets.
|
| The situation where someone else gets to buy the assets out,
| leaving behind the debt seems unorthodox.
| blitzar wrote:
| > When you lend you expect to be paid back unless there is
| bankruptcy, and then you expect get a place in line for the
| assets.
|
| They speedran the bankruptcy, hand wringing and
| liquidation. The line was formed and all the money has
| already been handed out.
| s1artibartfast wrote:
| Surely you see how that might be concerning from the
| perspective of the parties that would normally be
| involved in the bankruptcy. It seems like some liquidity
| lenders to the bank are being pulled through on the deal
| and some are not
| blitzar wrote:
| > lenders to the bank are being pulled through on the
| deal and some are not
|
| No lenders or shareholders are in the room at all -
| shareholders dont get a say on if they want to sell their
| shares that were worth 7 billion on friday for 2 billion
| either.
| s1artibartfast wrote:
| I'm pretty sure that governmental loans are being
| respected.
|
| Would you be upset if you loan me 10B on thursday, Bob
| lends me 10B on Friday, then Monday the Bob says the
| business will be sold to UBS who will honor his loans but
| not yours?
| paganel wrote:
| The issue is that neither you, nor Bob, are government
| entities, morals/ethics work differently for them (for
| the governments, that is).
| blitzar wrote:
| Interbank loans, which will be far larger than the
| government or shareholder or bondholder liabilities, will
| almost certainly be respected as well.
|
| > if you loan me 10B on thursday, Bob lends me 10B on
| Friday, then Monday the Bob says the business will be
| sold to UBS who will honor his loans but not yours
|
| In your example, Bob is getting back 2bn of his 10bn and
| I am getting back 0. The term of neither agreement are
| being respected, people are just being told you get what
| you get and if you dont like it you can have less.
| Everyone has been served up a shit sandwich for dinner.
| fancyfredbot wrote:
| Yes I agree it's unorthodox. Something big must have
| happened. Possibly CS became undercapitalised or was about
| to, in a way which would have taken out shareholders and
| forced bondholders to take a haircut, which is why the
| central bank have to indemnify UBS against future losses?
| but I don't know. The details will come out.
| jsemrau wrote:
| While it might not be fair this is commonly referred to as
| Market Risk for investors. Failures like SVB or CS are rare
| which makes them so much more painful.
| CamouflagedKiwi wrote:
| No, you get paid interest because money now has less value
| than money in the future. Hence why you pay interest to a
| bank on a loan or mortgage, but if you fail to repay they
| don't just write it off saying "oh at least we got some
| interest!"
| bidirectional wrote:
| The US government gets to pay x% interest because they can
| theoretically always service a debt denominated in USD.
| Every other borrower in USD pays (x+y)%, where y amongst
| other things represents the risk that they will default.
| hristov wrote:
| It is very strange that the bondholders are wiped out, while
| the shareholders get 2 billion. The bondholders should have a
| superior claim to any recovery to the shareholders. It is true
| that the shareholders are getting only 10% of the share price
| they had a mere week ago and much less of the price years ago,
| but still they are getting something.
|
| This question was asked at the end of the press conference, the
| answer (in english translation) sounded like garbled nonsense.
| rr808 wrote:
| Yeah it doesn't sound right, its not as if the company went
| bankrupt or was shut down.
| kgwgk wrote:
| > It is very strange that the bondholders are wiped out
|
| They are not. The holders of some particular kind of bond
| designed to be wiped out when some capital thresholds are
| triggered are wiped out. (It may be debatable if what
| happened here was or not a trigger event though.)
| DueDilligence wrote:
| [dead]
| noja wrote:
| Making an even bigger bank is no fix, it's a workaround.
| sschueller wrote:
| https://archive.ph/0ETzn
| jesterman wrote:
| Not sure why, but that link isn't loading for me.
| https://archive.is/0ETzn
| sschueller wrote:
| The Swiss Bundesrat (Alain Berset and Karin Keller-Sutter), Finma
| (Marlene Amstad), SNB (Thomas Jordan), UBS Group (Colm Kelleher)
| and CS (Axel Lehmann) will give a media conference at 19:30 Swiss
| time.
|
| The fact that UBS is present should more or less confirm that
| there is a deal between CS and UBS.
|
| Latest reports also state that the SNB is going to be providing
| 100B in liquidity to UBS if they need it.
|
| https://www.youtube.com/watch?v=gmT0-w_0Ex4
| trosi wrote:
| Wow, I did not expect that to happen basically overnight. I guess
| FINMA and the Swiss government were really fed up with the CS
| shenanigans.
| ericpauley wrote:
| > institution known for Swiss stability
|
| Hah!
|
| https://en.wikipedia.org/wiki/Credit_Suisse#Controversies
| waynesonfire wrote:
| good riddance.
| Covzire wrote:
| Interesting ongoing Twitter space with several Financial Industry
| veterans discussing this. Going as of 1:30 Central and will
| probably go at least another 2 hours. Mario usually gets some
| fairly large names to show up.
|
| https://twitter.com/MarioNawfal
| bluecalm wrote:
| Pretty scary that our financial system can't take a few weeks of
| deliberation and the deal needs to rushed during the weekend.
|
| Instead of general ranting I would like to learn who exactly goes
| bust if we allow the uncertainty for a few weeks? Is it more than
| just a gift to shareholders and market speculators?
| fancyfredbot wrote:
| CS probably goes bust as everyone pulls their money out, and
| has to sell all of their assets at fire sale prices. If they
| lose more than their capital buffer then people may not get
| their money back. That then has knock on effects which are
| harder to predict but might include other small banks with
| exposure to CS (and in the worst case, even other large banks).
| s-xyz wrote:
| Just writing down here as a memoir looking back at this news in
| 10 years, as we look back now on the fall of Lehman in 2008 - we
| can say that "we were there..."
| surfsvammel wrote:
| I thought UBS explicitly said they did not want to buy CS.
| gimmeThaBeet wrote:
| They probably didn't snd still don't. If JPM buying Bear Sterns
| is any metric, I would be worried that the government would
| 'ask' me to rescue another bank, and then take me to court over
| it for the next decade.
|
| It's understandable people are mad at the banks and don't want
| taxpayer money propping up for-profit institutions. But what is
| the rationale for coaxing companies into taking risks at their
| behest that they basically know is going to be worse than you
| think going in?
| GenerWork wrote:
| They probably didn't/don't want to. I assume that there was a
| fair bit of arm twisting behind the scenes.
| rspoerri wrote:
| They will be secured with 9B CHF in case the losses are
| bigger then some unknown number.
| drexlspivey wrote:
| They don't want CS to go under either
| mnadkvlb wrote:
| I am a bit surprised and a bit unhappy that last week SNB said
| they gave a credit line to credit suisse after which i put a bit
| of money. And in one day after that, they did this merger without
| a shareholders vote. I would have honestly been happier as a
| swiss taxpayer and investor in both UBS and CS to lose my money
| in CS and let this piece of junk fail instead of bundling it to
| ubs now. Now i get UBS share to ratio 22.48 CS shares to 1 UBS.
| First thing every investor (including me) in UBS will do tomorrow
| is to get out of UBS, so even though currently i get say .74 chf
| per share, i won't be surprised if UBS is down 20% tomorrow or
| even 50 or who knows how much.
|
| I would have been happier, if they just nationalized the bank and
| unwound it, even if i got less pennies per dollar invested or
| even zero. Now we will get another bank that will be holding the
| baggage. Amazing :|
| baq wrote:
| Buying CS last week was quite literally buying a lottery
| ticket... UBS though, yeah.
| lvl102 wrote:
| Exactly this. They took one toxic bank and made it into a
| bigger one. No one wants to hold UBS after this.
| benjaminwootton wrote:
| Any bet on these banks was very speculative.
|
| You had a huge upside if things worked out.
|
| Instead, you predictably lost the bet and still got paid some
| compensation in the fire sale.
|
| Not a bad play and not a bad outcome if you went in with your
| eyes open.
| mnadkvlb wrote:
| I fully agree, no question about the risk. I would honestly
| have the investors lose it than depositors.
|
| The thing i am unhappy about, to reiterate myself, is
| bundling CS to UBS. I am invested in UBS as well, and guess
| what, i will lose way more on that investment due to this
| forced merger.
|
| If the govt. just unwound the assets slowly, it won't affect
| a relatively healthy bank, which was saved in 2008.
|
| I hope i am wrong, but i feel like ubs prices are gonna fall
| like a knife at the opening tomorrow, unless the SNB starts
| buying it.
| paganel wrote:
| From a distance (I don't live in Switzerland and I'm not
| invested in any shares) this looks like a drowning man (CS)
| risking to drown its own "saviour" (UBS).
| JumpCrisscross wrote:
| Bondholders in an otherwise well-capitalised bank being wiped
| will be interesting. It makes sense. But it also means you
| should dump bank debt, even if the bank is safe, if they're
| vulnerable to idiot Saudis mouthing off.
| blitzar wrote:
| This changes the maths on the pricing of a lot of the bank
| bonds - CS had $17bn worth ... and a market cap of _only_
| 10bn a few months ago.
|
| https://www.reuters.com/business/finance/credit-suisse-
| write...
| mnadkvlb wrote:
| This is what blows my mind, i did not expect that. Normally
| would have expected to get the last crumbs to stockholders.
| This whole spiel honestly feels super rushed and done in
| panic.
|
| Of course, I can't blame anyone. Its easy for me to say
| anything chilling on a couch behind a screen. Cant imagine
| the stress the regulators and board went through to get
| this out before monday morning to plug the disaster waiting
| to happen if CS just went belly up blocking businesses and
| everyone involved with CS.
|
| Lets hope this stops soon.
| JumpCrisscross wrote:
| Didn't think about the inversion in paying off Credit
| Suisse shareholders. The entire EU CoCo scheme may have
| just unraveled.
| blitzar wrote:
| Cocos should have converted to shares, which would have
| probably doubled / trebbled / more the float, then the
| proceeds of the sale disbursed. Either way would have
| been ~10c in the dollar for all parties? Either way a
| CoCo is not the same product (from the perspective of a
| buyer) as it was assumed to be last week.
|
| It does look a bit like they have just done the full
| cycle of insolvency to bankruptcy to selling off the
| pieces and distributing the proceeds in a 48 hour window.
| UBS are (effectively) not buying "Credit Suisse", they
| are buying the post bankruptcy assets (which somehow had
| a market cap of ~7bn at the close of market trading and
| Friday).
| JumpCrisscross wrote:
| Does Switzerland not have receivership? The American
| model of freezing the bank and then dealing with non-
| depositors later seems such a better model.
| blitzar wrote:
| I assume the intention is to reassure the market, but it
| actually looks like blind panic.
| blitzar wrote:
| My mate told me there was a scruffy looking dog in the 4:15
| that was a sure thing, the bookies had it at 750-1 but still,
| what would they know right?
|
| I am a bit surprised and a bit unhappy that the 10k I bet on
| that mutt turned out to be a losing bet. Why didn't someone
| warn me?
| awesomegoat_com wrote:
| I agree with the sentiment.
|
| But on the other hand, I think CS brand and culture is more
| toxic than its balance sheet.
|
| I would like to be in the paratroopers squad cleaning the CS.
| nairboon wrote:
| I've heard the same thing 15 years ago, when they bailed out UBS.
| Now, here we are again. They're even invoking emergency law to
| ship this deal.
|
| We ought to amend the constitution, in two ways: clawbacks for
| variable compensation in too-big-to-fail banks and add such
| irresponsible behavior to the criminal code.
|
| It is time for prison for those responsible for this fiasco.
| 67m67m67m wrote:
| Do you mean the American constitution? Do you have any IDEA
| what the process is even like to get an amendment in? This
| suggestion with the knowledge of that process is completely
| absurd. It will never happen.
|
| Also, one nations constitution isn't going to prevent this
| issue with another nations bank lol.
| sofixa wrote:
| Why would they be talking about the American constitution?
| This is a matter between two Swiss banks and Swiss
| authorities.
| Mesopropithecus wrote:
| Just wanted to mention that amending the Swiss constitution
| is near trivial, one could start there :).
| nairboon wrote:
| No, this is about the Swiss constitution. 100k signatures are
| required to initiate a vote about it. That is quite doable.
| sofixa wrote:
| Neither of those two things have a place in the Swiss
| constitution. One is a criminal matter for the Swiss Criminal
| Code, and the other is just a banking regulations update.
| nairboon wrote:
| The only way to change the later is by putting it in the
| constitution in the first place. It's not nice, but it would
| work. What has the parliament done in the past 15 years?
| Nothing of substance, otherwise we wouldn't be in the same
| situation again.
| underlines wrote:
| Livestream in English/German with Swiss Govt., Finma, National
| Bank, UBS Group and CreditSuisse right now:
|
| https://www.20min.ch/story/jetzt-informiert-der-bundesrat-ue...
| majic wrote:
| https://www.youtube.com/live/dpXYOUyMPOc?feature=share Direct
| youtube link
| vault wrote:
| This video is 1 month old
| TheBlight wrote:
| "to End Crisis" ah it's over is it?
| skyfoxxy wrote:
| Hahaha that part got me too. What a hopeful BS headline
| golem14 wrote:
| "thus solving the problem once and for all"
|
| https://www.youtube.com/watch?v=0SYpUSjSgFg
| xyst wrote:
| Moral hazards. All of them. This isn't the first time. It won't
| be the last time.
| adamski007 wrote:
| What a deal UBS is making... Always keep some money aside during
| a crisis, and be preparer to make some very very good deal !
| benjaminwootton wrote:
| Yes, they are acquiring a whale of a company at a low price
| with a lot of government support behind the deal. Imagine how
| it must feel to acquire your biggest rival in these
| circumstances.
| jmyeet wrote:
| Oh great, more corporate consolidation. That'll be great for
| consumers.
|
| Frankly I prefer the US solution of seizing a bank and stripping
| it for parts.
| sixhobbits wrote:
| Anyone have more information on the "emergency measures" that the
| Swiss govt used to skip the 6-week shareholder approval period?
| Couldn't find more information in English apart from the fact
| that they were being used and it seems very unlike Switzerland
| which has a reputation for very slow moving politics in general.
| sschueller wrote:
| I assume that will be asked and answered at the press
| conference in 40 minutes from now.
| raverbashing wrote:
| They probably said to the board "if you wait 6 weeks there will
| be no bank anymore" and I think that they understood that.
|
| It's that simple. Either they get a % of something or 100% of
| 0.
|
| Especially since now the purchase price went to $2Bi.
| bagacrap wrote:
| Nobody asked the board. They pushed through a legislative
| change overnight.
| Octokiddie wrote:
| It's far from clear what this buy/bailout does to "end" the
| crisis. Was the crisis caused by Credit Suisse being too small?
|
| > The plan, negotiated in hastily arranged crisis talks over the
| weekend, seeks to address a massive rout in Credit Suisse stock
| and bonds over the past week following the collapse of smaller US
| lenders. A liquidity backstop by the Swiss central bank failed to
| end a market drama that threatened to send clients or
| counterparties fleeing, with potential ramifications for the
| broader industry.
|
| This makes more sense. It's an attempt to manipulate world
| financial markets. But if the deal doesn't address the root
| cause, the same situation will repeat soon enough.
|
| There's also this from a different article:
|
| > The deal caps a highly volatile week for Credit Suisse, most
| notably on Wednesday when its shares plunged to a record low
| after its largest investor, the Saudi National Bank, said it
| wouldn't invest any more money into the bank to avoid tripping
| regulations that would kick in if its stake rose about 10%.
|
| https://www.krqe.com/news/business/swiss-to-hold-news-confer...
|
| So maybe there's something to be gained by making UBS/CS bigger.
| It allows investment by other private parties that would have
| otherwise triggered onerous provisions.
| rspoerri wrote:
| Purchase price is 3 Billion Swiss Franks. Kaufpreis ist 3
| Milliarden Schweizer Franken.
| fancyfredbot wrote:
| What just happened? On Friday CS was borrowing money from the
| Swiss national bank to buy back it's own debt and their stock
| seemed stable. They had just published a quarterly report showing
| a 14.1% CET1 ratio. Why sell at less than half Friday's closing
| price? Was a bank run in progress?
| m3drano wrote:
| Just on Friday they had 10,000 million CHF in outflows. So I
| guess yes.
| jesterman wrote:
| They will be paying just 9% of the market cap from a week ago.
|
| EDIT: This is likely wrong, it's probably more like 20+%, I was
| using the $.27 a stock from an earlier price of about 1 billion.
| It appears that the actual price is more than 2 billion.
| stefan_ wrote:
| And yet, since they are the only buyer and had to be
| strongarmed into it, they are probably paying 9% of market cap
| too much!
| orra wrote:
| Why has this been downvoted? Is it speculation?
| jesterman wrote:
| 9% is probably wrong, it was using an earlier figure of less
| than or about 1 billion, when the actual figure is more than
| 2 billion.
| kzrdude wrote:
| Yes, I read the price was suggested as 0.25 CHF and then
| doubled to 0.50 CHF per share for the deal.
| dang wrote:
| Recent and related:
|
| _Switzerland Weighs Full or Partial Credit Suisse
| Nationalization_ - https://news.ycombinator.com/item?id=35219363
| - March 2023 (97 comments)
|
| _UBS offers to buy Credit Suisse for up to $1B_ -
| https://news.ycombinator.com/item?id=35218296 - March 2023 (118
| comments)
|
| _UBS in talks to acquire Credit Suisse_ -
| https://news.ycombinator.com/item?id=35203775 - March 2023 (44
| comments)
|
| _Credit Suisse borrows more than $50B from Swiss National Bank_
| - https://news.ycombinator.com/item?id=35177523 - March 2023 (9
| comments)
|
| _Credit Suisse shares fall to record low as top investor rules
| out more funding_ - https://news.ycombinator.com/item?id=35169184
| - March 2023 (4 comments)
|
| _Credit Suisse sheds nearly 25%, key backer says no more money_
| - https://news.ycombinator.com/item?id=35166892 - March 2023 (575
| comments)
|
| _Credit Suisse finds 'material weakness' in reporting, scraps
| exec bonuses_ - https://news.ycombinator.com/item?id=35151690 -
| March 2023 (98 comments)
| belter wrote:
| And 4 days ago the Swiss Financial Market Supervisory Authority
| regulator said...
|
| "...The Swiss National Bank SNB and the Swiss Financial Market
| Supervisory Authority FINMA assert that the problems of certain
| banks in the USA do not pose a direct risk of contagion for the
| Swiss financial markets. The strict capital and liquidity
| requirements applicable to Swiss financial institutions ensure
| their stability. Credit Suisse meets the capital and liquidity
| requirements imposed on systemically important banks. If
| necessary, the SNB will provide CS with liquidity..."
|
| https://www.finma.ch/en/news/2023/03/20230315-mm-statement/
| 082349872349872 wrote:
| the SNB _did_ provide CS with liquidity.
| londons_explore wrote:
| One of the main roles of a regulator, during a crisis, is to
| loudly say there is no crisis...
| labster wrote:
| The louder they say there's no crisis, the more convinced I
| am that there is definitely a crisis.
| [deleted]
| simonh wrote:
| Margaret Thatcher -- "Being powerful is like being a lady.
| If you have to tell people you are, you aren't."
|
| It's the same with bankers and being solvent.
| smsm42 wrote:
| This way, nobody would ever believe what regulators say,
| which is certainly a smart behavior for any responsible
| citizen.
| glenngillen wrote:
| Levine covered this last week. It's factually accurate in that
| the US issues are unrelated, though also somewhat damning in
| that the issues at CS were largely of its own doing due to poor
| governance and investment decisions spanning multiple years.
| daydream wrote:
| "UBS Group AG Chairman Colm Kelleher said he will rein in Credit
| Suisse Group AG's investment bank, a unit that has racked up
| losses in recent years.
|
| "Let me be very specific on this: UBS intends to downsize Credit
| Suisse's investment banking business and align it with our
| conservative risk culture," Kelleher said Sunday at a press
| conference announcing the deal."
|
| -- https://www.bloomberg.com/news/articles/2023-03-19/ubs-s-
| cha...
|
| Oof. Sounds like a lot of CS investment bankers are going to be
| out of a job soon.
| jeffrallen wrote:
| If keeping your job in investment banking had anything to do
| with not losing enormous sums of money, they would have already
| lost their jobs long ago.
| elliotec wrote:
| Yeah but the key word here is "downsize" - there will be
| layoffs.
| weard_beard wrote:
| But will they close the positions? Let's be clear. The
| investing arm of CS isn't suffering from too many middle
| managers or bloated salaries. They lent money to profligate
| gamblers. It's speculated their losses could be in the
| hundreds of billions.
|
| Closing out those positions could sway the fortunes of
| American blue chip stocks and publicly traded companies
| around the world.
|
| Closing CS's trading arm could reshape the entire US stock
| market over night.
| ganoushoreilly wrote:
| Is it time for the Archegos Tranche of swaps to finally
| come due? That's been the rumor and if the rumors are
| close, you're right, it's going to be a doozy.
| baxtr wrote:
| "Oof"? Do you feel sorry for these guys?
| mhh__ wrote:
| Hate the leadership feel bad for the excel grunts.
| throwaway5959 wrote:
| Working for CS is like being a contractor on the Death Star.
| They knew the risks.
| cm2187 wrote:
| But will it end the bank runs or will the panic just move on to
| the next bank? For those who lived 2008, it feels so deja vu.
| silentsea90 wrote:
| Bear Stearns collapsed on March 16, 2008. Lehman Brothers on
| Sept 15, 2008. It took 6 months from the first major one to
| widespread carnage and bailouts. I can't tell what will be but
| I wouldn't assume we're out of the woods by any measure. The
| first dominos to fall are the ones holding most risk (SBV, CS),
| but the "safe" ones aren't really safe either.
|
| I wonder what the Fed will do next i.e. conform to market
| expectations of a cooling off of QT and hikes and let inflation
| possibly rise or continue at 6%, or be resolute in raising
| rates to control inflation at the risk of a systemic failure.
| mschuster91 wrote:
| What most people don't account for is that we're not in a
| classical inflation scenario - we're, at least fundamentally,
| in an _energy cost inflation_ scenario where the countries
| with more than enough of oil and gas to spare jack up the
| prices just because they can.
|
| And unfortunately, on top of that comes profiteering. The
| price hikes of _everything_ that went far and beyond
| reasonable increases due to rising energy costs are insane -
| and outside of Spain which has introduced serious price
| controls and other counter-inflationary measures and Hungary
| where Orban misdirects EU funds into bribing his voters, no
| major Western government is doing _anything_ about that.
|
| At least the French are bringing out the pitchforks.
| baremetal wrote:
| >introduced serious price controls and other counter-
| inflationary measures
|
| Price controls are not effective in curbing inflation [1]
| And they have a deleterious effect on production. For
| example: no farmer is gonna sell his produce at a price
| that is less than his cost to produce. So if you control
| the price, there will be nothing on the shelf.
|
| [1]https://www.stlouisfed.org/publications/regional-
| economist/2...
| mschuster91 wrote:
| Price controls can also be of the form "COGS+5%". These
| allow profitable operation but limit excess profits.
|
| Or you can do post-fact price controls by comparing
| profits now with average profits over the last years and
| taxing everything above at 100%.
|
| All it needs is the political will to help _the people_.
| peyton wrote:
| Cost-plus pricing on commodities will fuck with
| forecasting. There aren't good tools. You'll get
| shortages. It's fine for natural monopolies.
| nonethewiser wrote:
| Is this what the Communist Party of China does?
| [deleted]
| silentsea90 wrote:
| Markets don't arbitrarily inflate prices across asset
| classes (stocks, crypto, commodities, real estate).
| Classifying widespread worldwide inflation as energy cost
| inflation OR profiteering is (subjectively) an excuse for
| policy failure. Single family home owners in San Diego
| don't collude with condo owners in Vietnam. They do respond
| to bidders outbidding each other, flush with cash from
| asset values rising as a consequence of money printing
| worldwide. The core reason is money printing. The rest is
| noise. See charts for Fed balance sheet, M1 and M2 money
| supply for 10 years worth of printing in a year. The
| Cantillon effect makes people close to the money spigot
| richer at the expense of the masses.
|
| The Fed knows it too, else QT and interest rate hikes
| wouldn't be used as weapons against inflation. Political
| messaging is oriented around not taking responsibility and
| blaming the pandemic, supply chain issues, Ukraine war etc.
| These reasons do play a role to be clear, but not to the
| extent that $ printing does.
| ameister14 wrote:
| The proximate cause might be money printing, but the
| policy failures go way deeper than that to the cause of a
| hyper-concentrated economy.
| silentsea90 wrote:
| Please expand
| nonethewiser wrote:
| Agree with everything except the US "fanning" the war in
| Ukraine. In what sense? Is Ukraine fanning the war?
| djbusby wrote:
| Who said fanning?
| silentsea90 wrote:
| I did earlier but removed it. See other response where I
| address this
| silentsea90 wrote:
| I removed this sentence as it is subjective and distracts
| from the original point. That said, the US supplies
| Ukraine with weapons and Intel, instead of making strong
| efforts to bring all parties to the negotiating table.
| China is now supplying weaponry to Russia. This is
| escalatory and takes us further from peaceful resolution.
| Of course, I don't have any insider information so this
| opinion is weakly held
| lovich wrote:
| If you're going to analyze the Ukraine war in terms of US
| policy then you'll have to take into account more than
| the financial world. The US's position in Ukraine affects
| a number of other policy positions like our political
| alliance's, how much we want to let Russia grow its power
| in opposition to our own, and even to Taiwan and how we
| want China to feel about any possible US responses to
| invasion there.
| phatfish wrote:
| The escalation was Putin invading Ukraine.
|
| How are the US and NATO's actions escalating any further
| than that? Last i checked there was no Russian territory
| occupied by Ukrainian forces, let alone any hint of NATO
| involvement in achieving such an escalation.
| mschuster91 wrote:
| > instead of making strong efforts to bring all parties
| to the negotiating table
|
| Putin literally said there are no negotiations possible.
|
| The only way to force Putin to the negotiation table is
| to crush the Russian forces.
| silentsea90 wrote:
| Maybe, maybe not. Crushing Russian forces helps sell
| weapons and also helps take down an adversary while
| having Ukraine fight the war. The incentives behind
| blowing up the pipeline also appear to align with the US
| cause. I would take the media's reporting on this with a
| large grain of salt.
| phatfish wrote:
| > "while having Ukraine fight the war"
|
| Interesting turn of phrase, and one used heavily in
| Russian propaganda to remove any agency from the
| Ukrainian people. If the Ukrainian government had
| listened to their western allies Zelensky would have been
| on an evacuation flight shortly after the first missile
| hit.
|
| I'm quite sure they are not "having to fight" against
| Russia for anyone except themselves, and to ensure the
| continued existence of their country.
| silentsea90 wrote:
| I don't mean that the US instigated the war or that
| Ukraine is somehow a puppet, but it is convenient for the
| US to not have to fight it and let Ukraine use US's
| weaponry, drones etc to fight this war. I am not Russian
| or a sympathizer, but also not blind to US incentives to
| sell weaponry in Europe, and hurt an adversary in Russia.
| It is true that everybody underestimated Ukraine.
| Swenrekcah wrote:
| It's no use negotiating when the parties can't come to a
| conclusion.
|
| Russia wants to take Ukrainian territory, Ukraine wants
| to keep it and neither wants any compromise there
| between.
|
| Also they probably are trying to get them to negotiate a
| ceasefire anyway, even if those talks aren't being
| advertised, but I don't have any inside info on that
| either.
| nostrebored wrote:
| The fed has absolutely abandoned QT.
|
| The fed has already added hundreds of billions to their books
| this week and is looking at a 25bps hike. From where we're
| at, this is effectively QE.
| almost_usual wrote:
| They haven't abandoned QT yet, Treasuries mature twice a
| month, mid month and end. Last week 7.1 billion in 3 year
| notes rolled off which was the only asset scheduled. There
| is a larger roll off end of month.
|
| The "QE" money on the books is a loan as of right now which
| isn't QE.
|
| Now will QT continue? Probably not, we're hitting a
| liquidity floor. I see rate hikes may continuing though.
| silentsea90 wrote:
| I am dumb. How does Treasuries maturing help with QT (not
| questioning this, just not clear on this)?
| almost_usual wrote:
| The Fed injects money into the economy by buying US
| Treasuries or GSE MBS traditionally from the open market
| (QE).
|
| During continued QE the Fed will re-purchase these assets
| when their existing ones mature. During QT on maturity
| rather than buy assets again they write them off and
| liquidity (money) is removed from the market.
| adventured wrote:
| The Fed had to know that as they kept pushing, more serious
| stress would show up in the financial system as they went
| higher. This is exactly what they have been looking for. To
| the Fed this means what they have been doing is working
| (their goal has rather openly been to slow the US economy,
| and to a lesser extent the global economy, to bring down
| inflation via demand destruction). Nothing quite brings
| economic growth to a halt like a large banking crisis and
| the corresponding panic.
| nemo44x wrote:
| Yeah but this could be an instance where the cure is
| worse than the disease.
| adventured wrote:
| I think it's very likely to be worse (certainly
| drastically more risky). The Fed has a history of hard
| landings.
|
| There was a level at which more modest rates would have
| gradually bent inflation downward over time, and it would
| have taken a while (a year or two longer, say). IMO the
| Fed was too aggressive in trying to stop it asap. They
| went too far too fast and we'll see a rolling fallout
| from it for several years yet. Lower rates with elevated
| inflation for a bit longer, would have been the more
| prudent choice, than cranking the volume fast and risking
| a financial crisis.
| silentsea90 wrote:
| Maybe, maybe not. The Fed has wiped out 6 months of QT's
| impact within a week. They might temporarily slow rate
| hikes but I am not convinced they will stop. I see this
| more as them plugging a hole in the economy. It will take a
| collapse for them to pivot and admit defeat to inflation.
| JumpCrisscross wrote:
| > _Fed has wiped out 6 months of QT 's impact within a
| week_
|
| How are you calculating that?
| silentsea90 wrote:
| It should be 4 months in 4 days, but the broader point
| still stands: https://fallacyalarm.substack.com/p/the-
| fed-just-reversed-4-...
| nemo44x wrote:
| They need to cut at least 100bps. This is the only way to
| bring all those mortgage and treasury bonds back a bit and
| not be so under water.
|
| This may or may not restart inflation but it's the only
| option that will be effective.
|
| The Fed has been cargo-culting Volkner in the 80's without
| considering this is a different beast. They needed to raise
| rates but they needed to do it far more deliberately and
| cautiously. And of course should have started sooner.
|
| We need to accept multiple years of 6-10% (possibly more)
| inflation or collapse everything and create carnage no one
| wants to live in.
| benjaminwootton wrote:
| This round of rate rises seem so political. They know
| they were slow out of the gate so now seem to want to
| compensate, appear strong and even actively cause some
| damage to prove their commitment.
|
| And all of this with the context that most of the
| inflation is supply side so interest rate rises are
| anaemic anyway.
|
| I don't see a pivot unfortunately even though it seems
| they are playing with fire here.
| JumpCrisscross wrote:
| > _need to cut at least 100bps_
|
| They need to hold pattern for a few months, then continue
| raising. The bank crisis is showing no signs of prompting
| deflation.
| nemo44x wrote:
| Deflation? Are you even understanding what's going on
| right now? With 200+ banks insolvent basically? Hyper
| inflation is the risk right now. That it total anarchy as
| we see 40% unemployment. Pick your poison.
| JumpCrisscross wrote:
| > _inflation is the risk right now_
|
| When deposits are destroyed, that causes deflation.
| Deposits aren't being destroyed. But wealth, in the form
| of banks' non-deposit liabilities, is.
|
| The Fed would _welcome_ such deflation (though not its
| cause). But that doesn't seem to be likely. That said,
| nothing which is happening right now is inflationary
| other than, potentially, the Fed pausing its rate
| increases.
| jeffbee wrote:
| Bear Stearns was a very different case. Instead of a run on
| deposits, their credit disappeared. Bear operated on a system
| of continuous credit. They would pick up the phone and call
| some other place and borrow. Everyone else collectively
| decided to just stop lending to them, quite suddenly. They
| had been writing down a lot of losses but when their guy went
| on CNBC in March 2008 to announce that his bank had plenty of
| liquidity, the next day literally nobody on the street would
| lend them anything. Then the Fed had to bail them out on
| Saturday. It was really a completely different type of thing.
| silentsea90 wrote:
| Everything is different at a granular level but similar at
| a higher abstraction. In all cases (SVB, BS), banks ran out
| of liquidity and had paper losses on current investments
| that would see them go under. Ultimately, if you run out of
| money, you're bankrupt as a country/company(even
| banks)/individual
| [deleted]
| Zetice wrote:
| Bank runs are psychological in modern times; my next worry is
| that the news machine has begun to nibble on midsize banks, so
| that may be the next victim that gets devoured for content.
| cm2187 wrote:
| There are a few other large banks that have also their lot of
| challenges. At this stage, as you say, it is an irrational
| panic. CS was well capitalised by any modern standard and it
| would have required massive losses before creditors and
| depositors were seriously exposed. But no bank can resist a
| large enough bank run.
| Arnt wrote:
| FWIW almost none of the $100B that flowed out was insured.
| fsckboy wrote:
| that's interesting, and exactly what regulators should
| expect. in a certain sense, the crisis starts when the
| bank starts taking in large uninsured deposits
| Arnt wrote:
| To be pedantic, this was managed money, not deposited.
|
| You can go to CS and say "Here, I have a million, please
| buy and sell some shares for me so my children will have
| two million each", or "here, we sell much in the runup to
| Christmas but our costs are evenly spread over the year,
| please manage our spare cash so we'll earn something when
| we can".
| mschuster91 wrote:
| CS was gobbled up in a truckload of scandals _for years_
| now; I 'd guess only Deutsche Bank surpasses them.
|
| It is not surprising at all that all the mistrust finally
| caught up with CS.
| dwater wrote:
| Are you referring to Credit Suisse as a victim of the media
| and not their own constant institutional failures? Ditto
| Silicon Valley Bank.
| blibble wrote:
| CS is not middle size, it's one of the big ones ("globally
| systemically important")
| psychphysic wrote:
| It was a dumpster fire of a business however.
|
| And confidence has been lacking for much longer than this
| recent crisis.
| EFreethought wrote:
| It depends on who winds up running CS.
|
| Officially, Boeing bought McDonnell-Douglas, but in the
| end the engineers at Boeing got pushed out and the bean
| counters at M-D were in charge and ran it to the ground.
|
| The question is will prudent people run the new UBS? Or
| the same sort of people who got CS in the trouble that it
| is in?
| psychphysic wrote:
| UBS has been very clear that they intend to gut the
| investment banking arm and continue the universal banking
| arm.
|
| This should prove a cash cow for UBS so long as they
| ruthlessly trim CS.
|
| The final deal is a bit different from OP 3.3bn, 100bn
| liquidity and 8bn indemnity from losses (more than market
| value of CS Friday!)
| Zetice wrote:
| "Midsize U.S. banks reportedly ask the FDIC to insure all
| deposits for two years" [0]
|
| The beast must be fed.
|
| [0] https://www.cnbc.com/2023/03/18/midsize-us-banks-
| reportedly-...
| fsckboy wrote:
| your warning makes me think "wait till a bank _and_ a media
| company start relying on the same AI for advice " - chatGPT,
| for the lulz
|
| of course, employees of various companies in a place like NYC
| socialize together after work (in NY, everybody goes out
| after work on the regular, who wants to go home to a teeny
| airshaft apartment?) so they're basically engaging in a large
| game of telephone about what happened each day, might have
| the same effect.
| nonethewiser wrote:
| And if that's the dynamic, you can be sure foreign interests
| are hard at work to exploit it.
| Arnt wrote:
| Credit Suisse was a bit special. In the words of someone who's
| worked at several of the large banks there, "Credit Suisse was
| always a bit more more aggressive about risks".
|
| If you mean whether the panic will move on to the next bank
| with a similar reputation, then...
| somewhereoutth wrote:
| I learned a new (financial) word thanks to all this:
| _idiosyncratic_ - CS 's case is particularly idiosyncratic,
| apparently.
| kreeben wrote:
| >> was always a bit more more aggressive about risks
|
| Isn't there always a handful of banks that are like that and
| isn't there always a handful of other banks that are
| invested? And isn't there always another set of banks that
| are invested in them? But is there really no chance of a
| devastating, cascading event? Should we really not panic? The
| only thing that holds banking together, is it that we don't
| panic? Because if so, then...
| mardifoufs wrote:
| Maybe, but credit suisse was a mess even back in the "good
| days", since at least 2018. They went from blunder to
| blunder, even when other banks were doing just fine. The
| only other bank I can think of that has struggled as much
| is probably Deutsche Bank. In comparison, most other banks
| are very well capitalized even in the current situation.
| gWPVhyxPHqvk wrote:
| Commercial real estate is next
| baremetal wrote:
| I wouldn't want to be holding commercial real-estate REITs in
| this environment.
| AnimalMuppet wrote:
| No, to me it doesn't feel like 2008. It's kind of in that
| direction, but this is nowhere near as bad. In 2008, I was on a
| hair trigger. Then, I was prepared to take emergency action
| within 24 hours. This time around, I'm not there... yet.
| JumpinJack_Cash wrote:
| We are still flattening the curve.
|
| What is happening right now is the byproduct of governments not
| wanting to face an economic crisis and a health crisis at the
| same time.
|
| Now the health crisis is over (or better yet the panic around
| COVID has subsided) now we have to face the economic crisis that
| comes with closing down the world for 2 years.
|
| We have only just pulled that forward. There is no free lunch.
| somewhereoutth wrote:
| The world wasn't closed down for 2 years.
|
| However, governments used monetary policy much too aggressively
| (printing money) whereas they should have been using fiscal
| policy (taxing rich people). Now comes the reckoning.
| aaa_aaa wrote:
| Except both crises were caused or amplified by the governments.
| Not "we".
| markus_zhang wrote:
| I'm glad they managed to get something done before Asia wakes up.
| We are pretty much dependent on a relatively stable financial
| market. TBH I'm a bit scared that a financial meltdown is
| imminent and many of us will lose jobs in a sudden.
| fiftyacorn wrote:
| This is the problem with banking - they mess up, get bought buy a
| competitor to sweep the problem under the carpet and kick the can
| down. this reduces competitors in the marketplace. Eventually
| there is a state bailout
| HDThoreaun wrote:
| CS's shareholders lost all their money. Most employees will be
| fired. I don't see how this is a good outcome for cs at all.
| worrycue wrote:
| There is already a state bailout. CS got loaned $54B. UBS got
| guaranteed another $100B loan for buying CS - and I read from
| another post (https://news.ycombinator.com/item?id=35222147)
| the state will cover up to $9B in losses from the buyout.
| fiftyacorn wrote:
| I was including that - the issue to me is that banking needs
| better regulation to stop them getting into this situation in
| the first place
| Waterluvian wrote:
| I wonder if there's anything to learn from the Canadian
| banking industry, which, through regulation, basically
| didn't participate in the 2008 collapse and seems to be in
| fine shape during all this. (Or maybe it's not and we're up
| next!)
| moltar wrote:
| Just wait until the RE bubble collapse and we'll see.
| There's a ton of mortgage fraud not to mention the risk
| of defaults. Everyone is so strained.
| g42gregory wrote:
| I love the Bloomberg headline. It does not say "... in Historic
| Deal to End the Credit Suisse Crisis." Instead, it says "... in
| Historic Deal to End Crisis." On the remote chance that you
| thought there might be some sort of global bank crisis, Bloomberg
| tells you that it is already ending. Since Bloomberg tries to
| manipulate people's perception so openly (most people do not read
| beyond the headline), this makes me even more worried. What else
| its out there that they don't want me to know?
| JumpCrisscross wrote:
| > _What else its out there that they don 't want me to know?_
|
| If only Bloomberg News had competitors.
| g42gregory wrote:
| But is it possible to refer to them here?
| JumpCrisscross wrote:
| Financial news is a deep well. The mainstreams are the
| _Journal_ and _Financial Times_ , but practically every
| sub-genre has droves of researchers cranking out everything
| from the questionable to prescient. (Almost universally,
| the free blogs are the former.)
| lvl102 wrote:
| This deal stinks of panic. I know they're rushing to calm the
| market but I think it will have the opposite Streisand effect.
| Last week it was 30B CHF now they're throwing 100B CHF to make it
| work? Something is terribly wrong with CS book.
| throway514 wrote:
| Sorry, I can't see anywhere in the article where they mention
| 100B. I'm I misunderstanding something?
| fabstei wrote:
| It's the line of credit the UBS allegedly secured from the
| Swiss national bank
| jsnell wrote:
| They've said in the press conference that SNB is providing
| 100B CHF in liquidity, and (IIUC) additionally the state is
| insuring UBS against 9B in losses from the deal.
| _trampeltier wrote:
| It's just for liquidity. If someone want's money, the banc
| can't give them a part of a house (where they give the credit).
| ivalm wrote:
| I'm not sure how Streisand effect is relevant here.
| Sufficiently large backstop removes panic because if the govnmt
| backstops enough there can't be a loss for depositors. It's
| always a balance between safety of depositors and liability of
| the government. But increasing backstop just ensures that
| depositors are ever safer.
| lvl102 wrote:
| PTSD from 2008 is very real. People will act first think
| later.
| [deleted]
| rspoerri wrote:
| 100 Billion Swiss Franks (CHF) is the safety the National Bank
| is providing to Credit Suisse and UBS. It is not the purchase
| price.
|
| The purchase price is 3B CHF.
| lvl102 wrote:
| Yes, and last week the backstop was 30B CHF. So why did they
| increase that by more than 3x within days? Makes no sense
| other than UBS finally looked at the books and freaked out.
| rspoerri wrote:
| UBS cant decide on that. The swiss goverment has to, and
| apparently it decided to make it more secure, because the
| market did not trust it's previous safety net.
| TuringNYC wrote:
| >> Yes, and last week the backstop was 30B CHF. So why did
| they increase that by more than 3x within days? Makes no
| sense other than UBS finally looked at the books and
| freaked out.
|
| There were likely internal (to CS) marks based on
| assumptions. The assumptions may have assumed baseline
| market conditions. External parties came in and didnt want
| to assume baseline market conditions and/or didnt agree
| with the assumptions, so they were changed to more
| conservative figures, and new marks came out. The new marks
| were significantly lower. They have veto power over the
| deal and the government was forced to backstop to make the
| deal happen.
| jcfrei wrote:
| No, the 100B CHF is just to bridge the liquidity. If they
| didn't provide this then Credit Suisse might need to sell a
| big chunk of its bond portfolio for further withdrawals -
| which would incur a big loss compared to holding the bonds
| until maturity. Same issue and fix as for Silicon Valley
| Bank. I don't know the terms for accessing this emergency
| liquidity but I assume it's not going to be cheap.
| londons_explore wrote:
| At market rates, it should cost the same as selling the
| bonds now.
|
| And selling the bonds now would put them in the red.
|
| So either they have been given better-than-market rates,
| or they're pulling some other accounting trick to make it
| look like there is more of value here than there really
| is...
| bartvk wrote:
| > At market rates, it should cost the same as selling the
| bonds now.
|
| You assume that the spread is zero and that there are
| actually buyers. But I might be wrong here, I don't know
| about the liquidity of these bonds.
| dafrie wrote:
| as just confirmed in the press conference, the overall
| liquidity safety net is actually 200B CHF from SNB. Then 9B
| of guarantees from the Swiss government to UBS for potential
| risks
| lvl102 wrote:
| This deal makes no sense. They also wrote down some
| creditors to zero while equity holders got at least a few
| cents.
|
| Edit: and now CBs come out with additional coordinated
| measure.
| heybrendan wrote:
| So what happens to the Archegos bags CS was holding? Why would
| UBS willingly take on such deep exposure?
|
| We're in a weird timeline when the investors on /r/SuperStonk
| begin accurately predicting the future.
| AnonMO wrote:
| People have be "predicting" or more like coming to an educated
| guess using the plethora of public data on these subreddits for
| many years. I used to be an active poster on wallstreetbets
| years before the meme stock stuff and there was always people
| like you who would come after the fact and be like I can't
| believe you predicted the future, but they never showed up when
| I was wrong. It's only a weird timeline because you probably
| joined these subreddits after the hype not before.
| heybrendan wrote:
| Impressive. You managed to not answer any of my questions.
|
| Reddit can and does create echo chambers. But that doesn't
| mean I wasn't willing to fully acknowledge and concede that
| this Reddit community was /right/ about this.
|
| Dial back your sensitivity. We're on the same side.
| lmm wrote:
| > Why would UBS willingly take on such deep exposure?
|
| "Willingly" in what sense? I suspect they were heavily leaned
| on by the Swiss government.
| ganoushoreilly wrote:
| My guess is the exposure is directly related to the 100b/200b
| (seeing the later now being reported) in backing on the deal
| should things go south. The real question is, will that be
| enough if the (swaps) are as bad as /r/superstonk and other
| believe them to be?
|
| I'm going to pop some popcorn and watch it play out either way.
| [deleted]
| expertentipp wrote:
| > Historic Deal to End Crisis
|
| > End
|
| > Crisis
|
| Shit's starting. Fasten your seat belts. One week from now things
| will be different.
| baq wrote:
| Don't become a permabear though, liquidity is so thin a spark
| can start a 15% rally
| nemo44x wrote:
| Indeed. I think a lot of people are unaware or misinformed than
| hundreds of banks are insolvent right now. Something like 700B
| in deposits were pulled last week and that will accelerate.
|
| 50% of existing mortgages were written between 2020 and 2022 at
| around 3% interest at 30 years. The banks holding all those are
| underwater as interest rates on much safer treasuries are
| higher. Imagine if we start to see a bit of defaulting on those
| mortgages!
|
| Mix in all the long dates treasuries they're sitting on.
|
| The FDIC doesn't have enough money to even cover the <250k
| deposits at the hundreds of banks that are insolvent when
| marked to market.
|
| So we'll either see emergency rate cuts which will increase
| inflation or we see the fed ignite it and the system collapses.
| Or they print money to backstop it all resulting in more
| inflation. Possibly hyper inflation.
| loeg wrote:
| I don't know about other borrowers but my 2.5% 2020 mortgage
| was sold to (government owned) Fannie Mae (or Freddie Mac, I
| forget which) more or less immediately.
| nemo44x wrote:
| That's maybe half of existing mortgages but the problem has
| been that banks sell to Freddie to get cash to loan. Well,
| loan demand was incredibly low. So they bought bonds and
| held onto mortgages.
|
| Also keep in mind many mortgages are non-conforming so
| Freddie can't buy them.
| wombatpm wrote:
| Same here. And I'm never going to default on a 2% loan.
| Hell I may never sell again unless I can pay cash, because
| I never want an 8% mortgage again
| bombcar wrote:
| Housing prices haven't cratered _yet_ - the banks wouldn't
| mind some of those loans defaulting, because they could sell
| and get the principal out there at higher rates.
|
| Worse for the banks, those on low rate loans will sit tight.
| spacebanana7 wrote:
| Even without defaults the value of those loans falls as
| rates rise because of the change in net present value
| [deleted]
| [deleted]
___________________________________________________________________
(page generated 2023-03-19 23:02 UTC)