[HN Gopher] Bank Failures Visualized
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Bank Failures Visualized
Author : A_D_E_P_T
Score : 751 points
Date : 2023-05-03 00:03 UTC (22 hours ago)
(HTM) web link (observablehq.com)
(TXT) w3m dump (observablehq.com)
| attentive wrote:
| Is this inflation-adjusted to compare to 2008 dollars?
| djbusby wrote:
| Would be cool to compare the dollar-of-fail as % of GDP at the
| time. Finance is all about ratio after all.
| photochemsyn wrote:
| Community-scale banks (aka credit unions) are a better idea for
| local-regional communities (aka cities and towns and agricultural
| regions) because their managers have to live with their clients.
|
| Take a community of 100,000 families, in an economic system where
| they're all collecting income and paying bills and so on. The
| idea behind a bank is that they hold the community's money
| securely while making their own money by providing loans at a
| greater interest rate than the interest rate they pay out to
| their depositors. Fundamentally, this means the bank is dependent
| on the fact that customers don't try to withdraw all their money
| at once (as the above dynamic means the bank is never able to
| meet this demand).
|
| FDIC guarantees by governments are intended to bolster this
| customer trust, as if everything goes sour the deposits (to a
| certain limit) are guaranteed. The important point is that the
| regional bank has a profit model based on giving _successful_
| loans to individuals and small businesses for things like houses,
| cars, business expansion, etc. The bank will of course want to
| know a fair amount about the people they are loaning to (drug
| addicts are not good bets, etc.) in order to ensure they get paid
| back.
|
| I hear people laughing in the background about the naivete of
| this picture in the modern American financial system. Since this
| post is already a bit long, go watch the movies "Margin Call" and
| "The Big Short" to get an idea of what's actually been going on.
| candiddevmike wrote:
| Why are drug addicts not good bets? Coffee drinkers seem pretty
| successful?
| judge2020 wrote:
| Sure, "Coffee is a drug" just as much as Caffeine and sugar
| are. OP likely meant that those who abuse scheduled drugs
| (outside of weed) are more likely to develop a habit of
| putting off work to feed that addiction, or to be fired for
| misconduct in connection with their use, resulting in more
| late payments and eventual repossessions/foreclosures on
| loans. It's all in terms of managing risk, but I'm sure
| chronic alcoholics are just as risky, if not more risky, as
| meth heads, since they blend in and have a good credit score
| but are more likely to lose their job for being intoxicated
| at work or go to jail for something like drunk driving.
| EGreg wrote:
| Credit Unions are better also because they are literally
| libertarian socialism. Imagine Uber with no shareholder class -
| as a cooperative, and so on. No one to extract rents from the
| two sides of the marketplace, the people themselves own the
| network.
|
| So are housing cooperatives. They have low rent because there
| is no landlord class. Look at the Mitchell-Lama program in NYC,
| 30 years later they the most desirable and awesome apartments
| for the price, all around the city. Meanwhile next door the
| capitalist landlord-owned buildings are 3x as much for worse
| amenities.
|
| https://en.wikipedia.org/wiki/Mitchell%E2%80%93Lama_Housing_...
|
| The democratically-run city tries to fix this with rent
| control, but it's only some housing, and just a few mins ago we
| learned this:
|
| https://www.nydailynews.com/new-york/ny-rgb-preliminary-vote...
|
| Plus the government is notoriously bad at getting even the
| simplest stuff done:
|
| https://therealdeal.com/magazine/national-july-2022/that-emp...
|
| So yeah, I'm a libertarian socialist. People in the US hear
| socialism and they think of a big, oppressive government, but
| actually government is just as much if not more on the side of
| the capitalist, the industrialist... bailing out large banks
| and injecting trillions into corporate equity to prop up
| markets. In the 19th century they actually violently put down
| strikers, evicted people, operated debtor's prisons etc. which
| is why most libertarians back then were socialist. It was cool.
| Today that lefty libertarian stuff is mostly in Europe.
|
| https://en.wikipedia.org/wiki/The_Soul_of_Man_Under_Socialis...
|
| There are very few famous lefty libertarians today, people like
| George Carlin and Russel Brand maybe.
| JPws_Prntr_Fngr wrote:
| That article at therealdeal has me pretty stunned.
|
| The headline story is that landlords are keeping rent
| controlled units vacant rather than renovating them which
| would be unprofitable, and daring the toothless regulators to
| do something about it. Ok, makes sense.
|
| Then as a side note, the article mentions that they're _also_
| deferring maintenance on whole buildings: roofs, boilers,
| cameras, etc. The fact that these landlords are incentivized
| not just to let a few units turn into roach hotels, but to
| let their _whole buildings_ crumble, without the remaining
| tenants leaving to a better building - that's a fundamentally
| broken market. Way beyond a few rent controlled units.
| PheeThav1zae7fi wrote:
| [dead]
| kortilla wrote:
| This doesn't work. The very failures we are seeing today are
| why this doesn't work.
|
| Why would someone leave their money in the regional bank
| offering 0.3% that all of their issued loans average barely
| above when people can take it to a bank offering 3% or get CDs
| offering that?
|
| Community scale banks aren't a solution for this.
| zamnos wrote:
| When Chase, BofA, and Citigroup are all offering
| approximately 0.0000% APY on their CDs, and it's credit
| unions that are offering 3+% (you should be shooting for at
| _least_ 4% right now), it 's not clear that big banks are
| actually better than a smaller, community-focused bank or
| credit union.
|
| https://online.citi.com/US/ag/current-interest-rates/cd
|
| https://www.bankofamerica.com/deposits/bank-cds/cd-accounts/
|
| https://www.chase.com/personal/savings/bank-cd
|
| I double checked, and it turns out they all have a couple of
| products offering closer to 4.5% APY, but the tables on those
| linked pages still have far too many numbers like 0.05% APY
| on them to be taken seriously.
| Night_Thastus wrote:
| I've always used a credit union, and I love it!
|
| I can easily get a real person in front of me, there's not a
| million layers of bureaucracy, and most importantly - _no
| bullshit fees_. I don 't constantly get my bank drained just
| for having an account in the first place.
| Scoundreller wrote:
| To join mine, I bought a $5 share (as a minor) and continue
| to get a $5 dividend many many years later (but I gotta close
| the account to get the accrued dividends...).
|
| I gotta go to the AGM one day. I hear it's catered.
| cperciva wrote:
| The model you describe is _exactly why S &L happened_. Small
| banks with highly correlated deposits holding their own loan
| books is a recipe for maximizing vulnerability to economic
| shocks. Interest rates go up and the loan book loses value; the
| local housing market drops and the loans get foreclosed and
| lose value; a major local employer goes out of business and
| depositors all start pulling their money out instead of
| reliably depositing paychecks.
|
| Banks don't work that way any more _because it 's a really bad
| way to run a bank_.
| opportune wrote:
| It's more complex than that. The ideal situation for a bank
| is when all its depositors are customers of each other. The
| deposits never leave the bank so the bank has very stable
| liabilities.
|
| So a local bank will be great when a community transacts
| mostly with itself. SL happens right around when
| multinationals and corporate centralization started becoming
| more of a thing..
|
| We live in the era of trillion dollar corporations, fintech,
| and the internet so a community bank ends up more like a
| small big bank. Its depositors are getting paid by
| corporations from way outside the community, and they're
| spending money on the internet or at giant multinational
| retailers and thus shifting deposits outside the community.
| In this paradigm, it's actually better to be huge and have a
| diversified customer base because the best way to keep your
| liabilities stable is to have the largest market share
| possible.
|
| You'll notice, banks usually have generous incentives for
| setting up direct deposit. Direct deposit is the best way for
| them to have a predictable measure of incoming deposits when
| there isn't a high likelihood of one particular account
| transaction with another.
| [deleted]
| photochemsyn wrote:
| This is a rather skewed perspective that ignores the fact
| that if you have FDIC insurance for depositors then that can
| be gamed unless you have strict regulation of the banks:
|
| > "The roots of the S&L crisis lay in excessive lending,
| speculation, and risk-taking driven by the moral hazard
| created by deregulation and taxpayer bailout guarantees."
|
| https://www.investopedia.com/terms/s/sl-crisis.asp
|
| This is why a lot of people worry that Silicon Valley Bank,
| First Republic, etc. might be the tip of an iceberg. If
| they've all leveraged themselves on risky speculation bets in
| the hopes that they'll get bailouts if it all goes sour (even
| though depositors greatly exceeded FDIC insurance limits)
| then you could have a domino situation.
|
| Note also that it's a perfectly good way to run a bank as
| long as you don't get greedy and go for big risky bets, but
| the only way to ensure bank managers don't get the Las Vegas
| bug is to enforce the banking regulations in a fairly strict
| manner.
| SamReidHughes wrote:
| What? How do depositor bailouts affect bank managers'
| incentives?
| zamnos wrote:
| The bank manager can take more risks, knowing that the
| depositor's won't lose their money (over $250k if the
| bank they manage fails. Which is important because people
| tend to get mad when they lose large amounts of money.
|
| Thus, buy bailing out depositors to an unlimited amount,
| bank managers are then incentivized to take more risks
| investing the depositor's money because the more risks
| they take, the more likely it is that one will pay out,
| raising the bank manager's bonus, and what their stocks
| are worth. Of course, by taking more risks, they also
| increase the chances that one will fail catastrophically,
| but since the depositors are all covered, up to an
| unlimited amount, eh.
| jonhohle wrote:
| If there is no risk, nothing is risky.
| cperciva wrote:
| The S&L crisis started before the deregulation. In fact,
| the deregulation of S&Ls was an attempt to address the fact
| that many of them were already insolvent due to holding
| long-term fixed-rate mortgages in a rising-interest-rate
| environment.
| coliveira wrote:
| They're just the tip of the iceberg. Pretty much all medium
| size banks have lots of underperforming assets, and they're
| just one minor mistake from going under, like these 3
| banks. Also notice that there are still many shoes to drop:
| comercial real estate (a disaster waiting to happen), car
| loan defaults, etc.
| SamReidHughes wrote:
| Keep in mind that car loans get paid down pretty fast.
| For example, Capital One's <620 FICO customer segment has
| already paid off about half the auto loan principal from
| 2021. Their delinquency rate has flattened, quarter over
| quarter, as well.
| coliveira wrote:
| New car loans are not only longer (> 6 years) and also
| more expensive than previous loans. Also, people stop
| paying when they lose their job, so the trigger may be
| the start of a recession.
| SamReidHughes wrote:
| Some of them. A bit less than half of loans at Capital
| One are more than 5 years, for instance. (I'm just overly
| familiar with that company.) But a 6 year loan from June
| 2021 is still almost 1/3 paid off.
|
| The other question is if there's a recession, how much
| will used car prices, for cars that were new in 2021,
| drop.
| noduerme wrote:
| One thing I don't understand, and perhaps you could
| explain, is why anyone in the US would ever keep more cash
| in any one bank account than what was covered by FDIC
| insurance. It's precisely the reason I don't e.g. take my
| savings to an offshore bank that offers much higher
| interest rates. Is this just a matter of people taking
| trust in a bank's solvency for granted?
| tiedieconderoga wrote:
| Banks can offer incentives for certain levels of
| deposits. Better interest rates, better cards, better
| loans. SVB offered perks to bank exclusively with them.
|
| https://www.cnbc.com/2023/03/12/silicon-valley-bank-
| signed-e...
|
| If you took that sort of agreement and bet on being
| bailed out in the event of a failure, you won your bet.
| photochemsyn wrote:
| This is the answer that makes the most sense.
| dlisboa wrote:
| FDIC limit is 250k per bank, so if you have 1 million
| you'd need 4 banks. If you have 10 million you'd need 40
| banks. Having money spread out like that doesn't seem
| easy to manage. Also having 10 million in one bank gives
| you better interest rates and service at that bank than
| if you only had 250k.
| zamnos wrote:
| Cash sweep products are a thing. For example, Wealthfront
| will sweep your cash into a bunch of smaller banks,
| putting 250k in each, so on the off chance they fail,
| your money's not been disappeared.
| lazide wrote:
| The last time anything like that happened was what, over
| a decade ago? People forget (for real).
|
| Also, no one seems to have lost a dollars yet in this
| crisis (on the depositor side), so hard to say anyone
| 'lost' this time either.
| zamnos wrote:
| Doral Bank failed in 2015, so 8 years? Not quite 10. The
| GFC was 2008 which was 15 years ago though but people
| still remember that one.
|
| Even though the FDIC chose to make depositors whole for
| SVB, Signature, and FRC, there's no written legal
| guarantee that they'll keep doing this, so in the face of
| that, I don't think people are forgetting the $250k FDIC
| limit.
|
| Anyway, my point is no one's walking up and down Main St
| with their $10 million and opening 40 different bank
| accounts by hand because the finance industry invented a
| product (prior to SVB, even) so no one has to do that.
| noduerme wrote:
| oh, I don't know. Lots of people walk up and down main
| street. No one I know keeps more than $250k in any given
| bank under the same name. Obviously having LLCs, wives
| and children etc let you spread things out in the same
| bank. I had to wait 10 months in 2008 for FDIC to make me
| whole when a local bank I had most of my savings in at
| the time went under. Most people have a living memory of
| that.
|
| Also, I have 8 accounts at 6 different banks and I'm not
| even worth $1m so I can't imagine it's too hard for
| someone worth $10m to figure this out.
| zamnos wrote:
| Figure what out? I'm saying people with that kind of
| money have private bankers*, and don't need to spend the
| time making 40 different accounts and managing that
| because their money is already protected through a
| sleight of financial trickery called cash sweeping.
|
| If you _like_ seeing the inside of bank branches, and
| having unnecessary zoom meetings where the background is
| a picture of the inside of a bank branch, that 's
| entirely up to you.
|
| * eg https://www.chase.com/personal/checking/private-
| client
| lazide wrote:
| Well, there are private banks/banks that specialize in
| private banking (like First Republic), and private
| bankers, which specialize in navigating the Byzantine
| bullshit endemic at a normal bank. I believe you pointed
| to the private banker division at Chase, and most large
| banks have them somewhere, for large net worth
| individuals like you're saying.
|
| It is definitely an entirely different experience (either
| way), no doubt.
| aaronharnly wrote:
| I'm not sure about personal banking (since I've never had
| enough in a bank to worry about it!), but in commercial
| banking I imagine it's routine. I work at a medium sized
| firm and I authorize multiple payments a week that are
| over the FDIC limit. I'm not sure how much juggling it
| would take to transact at volume and never have an
| account go over the limit, or for long.
| apaprocki wrote:
| If you've ever tried to practically use multiple banking
| institutions in the US, especially through the 80s-90s,
| you'd immediately relate to only using a single account
| regardless of what the statistical hazards are. It's 2023
| and my institution limits Zelle transfers to $2,500/mo.
| Want more, just as fast? Back to human wires and fax
| machines...
| noduerme wrote:
| Really? You could always just go get a cashiers check and
| walk it over to another bank. Now I've got accounts at
| several banks with free online transfers between them
| (2-3 business days)... it was more of a process in the
| 90s, sure, but now you can open a checking account at any
| major bank, link it to another bank and fuel it in 5-10
| minutes. Not with Zelle, just a normal domestic wire
| which is usually paid for by the receiving bank.
| apaprocki wrote:
| My credit union (it's actually very worth it, so I'm not
| switching) has no branch within multiple states from me.
| A domestic wire requires phone calls and fax, can't be
| done entirely online. It's certainly more doable with a
| behemoth like Chase, but then you're dealing with all the
| negatives of using Chase and employees that have no
| leeway to use common sense when solving problems.
| lazide wrote:
| You've just described _days_ of paperwork at most banks,
| in my experience, and with large amounts, things can get
| stuck on ways that will be days more.
|
| If you're dealing with large sums regularly, that quickly
| balloons into an unmanageable mess.
| fisherjeff wrote:
| SVB and FRC did not "leverage themselves on risky
| speculation bets." They made lots of _very safe_
| investments but did not adequately hedge against large and
| rapid rate increases. Also not good but it's a big
| difference, IMO.
| wavefunction wrote:
| I read one of their customers on here raving about the
| mortgage rate they got through SVB because it was so much
| better than anything offered by anyone else.
|
| I don't see any evidence of any overall prudent investing
| on their part considering the entire bank had to be
| bailed out and FDIC limits relaxed.
| fisherjeff wrote:
| I think an overlooked issue here is that, beginning in
| 2020, SVB suddenly had tons of deposits. Yields all
| around were zero-ish and they had money burning holes in
| their pockets. I can sorta see how they could be
| incentivized to close some loans.
|
| Also, I think that as with FRC, their loans tended to
| have fairly low credit risk, so again not super sketchy,
| just poorly hedged.
| photochemsyn wrote:
| Hindsight may be 20/20 (01/11/2023)
|
| > "SVB's focus on the innovation economy was a big winner
| in the past but may not remain so in the future,
| according to Dick Bove, the prominent banking analyst at
| Odeon Capital Group. The U.S. economy, in Bove's view, is
| shifting from a consumer-oriented economy driven by
| plenty of low-cost capital to a manufacturing economy
| marked by limited access to capital that's relatively
| costly."
|
| https://www.bizjournals.com/sanfrancisco/news/2023/01/11/
| svb...
|
| > "And despite his downcast report, Bove maintained his
| hold rating on SVB's stock. Investors seem to be a bit
| more optimistic. After SVB's shares lost two-thirds of
| their value last year, they're up nearly 11% so far this
| year, closing Wednesday at $254.99 a piece."
|
| Reading the tea leaves is an imprecise art, I guess.
| foota wrote:
| The only safe investment is a hedged investment, antthing
| else is up to your priors.
|
| While interest rates going up as much as they did may
| have seemed unlikely, it was still irresponsible not to
| hedge their risk.
| fisherjeff wrote:
| Oh absolutely. My point was just that if you truly wanted
| to make a big risky bet, you would definitely not be
| going out and buying a bunch of agency bonds.
| foota wrote:
| Sure, I'm just pedantic :) Re: the risk of interest rate
| backed securities "I too like to live dangerously" as
| they say.
| hibikir wrote:
| Not even most hedged investments at large scales. Hedging
| doesn't make risk disappear: It just shifts it somewhere
| else, either to someone even larger, or dispersed among
| many parties. When the risk is correlated with the risk
| from others, like the trillions in underperforming
| treasuries that the bing banks have in their balance
| sheets, who is the safe counterparty? Not the next bank,
| which also has a similar position. We saw this with the
| housing crisis and synthetic CDOs, and we see this on
| insurance against sufficiently large natural disasters.
|
| So sure, small banks failing to hedge is irresponsible,
| but at a large enough scale, someone holds the bag.
| foota wrote:
| I'm not an expert on interest rate securities, but with
| e.g., physical goods the bag holder has physical goods or
| contracts for supply that allows them to meet their
| obligations.
|
| Is something similar not possible with interest rates? I
| imagine for instance someone with lots of cash and little
| desire for risk could lend their money to the banks at
| overnight rates, collect the interest, and then offer
| swaps against that steam, no? Of course, no one's going
| to get their 10th mansion off of this. A little riskier,
| someone holding variable payment debts could do the same,
| as long as the loans are diverse the risk could stay low.
| In this way, the risk at least shifts from "we're screwed
| if interest rates change" to "we're screwed if interest
| rates change and many diverse loans start to fail to make
| payments" in which case you're probably screwed
| regardless.
| llanowarelves wrote:
| Evidently, the best way to run a bank is a 0% cash reserve
| minimum (as was granted to US banks starting during COVID),
| so you can make money off of literally every last penny, and
| then discourage and prevent customers from taking their money
| out, then [externalizing all costs]/[socialize losses] onto
| government (taxpayer) via bailout or customer via bail-in,
| while privatizing all profits in the meantime. And charge
| poor people $30 every time they dip under $0 even by a penny.
|
| Doesn't mean it's a good idea for the rest of us non-banks.
| dimitrios1 wrote:
| > And charge poor people $30 every time they dip under $0
| even by a penny.
|
| The list of large corporate banks that charge NSF fees and
| overdrafts is vanishingly small.
|
| OTOH, I know of plenty of credit unions that still do both.
| cde-v wrote:
| > The list of large corporate banks that charge NSF fees
| and overdrafts is vanishingly small.
|
| True for NSF fees, absolutely false for overdraft fees.
|
| https://files.consumerfinance.gov/f/documents/cfpb_overdr
| aft...
| dimitrios1 wrote:
| I would need to see 2022 as well. Many banks announced
| changes middle of 2021 and 2022.
| NoMoreNicksLeft wrote:
| > Banks don't work that way any more because it's a really
| bad way to run a bank.
|
| As compared to what we have now? With dubious financial
| instruments so opaque I'd have to spend 30 years lurking
| underneath desks on Wall Street eavesdropping on
| conversations just to have any clue at all how the fuck those
| work?
|
| I'm almost comforted when there's a Bernie Madoff, because at
| least I can wrap my head around how a Ponzi scheme works
| (ignoring the ethics, obviously). I'm (irrationally?) worried
| that some of what's been going on the last few years actually
| makes plain Ponzi schemes look legitimate by comparison.
|
| Not 25 years ago, we used to laugh about the stupid books
| with titles like "Dow Jones 100,000!" and whatnot, I think it
| was a Slashdot post way back when. And while we haven't quite
| reached that pinnacle of absurdity, it did hit 37,000 not so
| long ago.
|
| None of us may be able to pick the queen of hearts, but some
| of us have caught on to the fact that it's three card monte.
| When it all falls down, should we console ourselves with
| "well at least the banks weren't small and local and
| vulnerable to economic shocks"?
| rocqua wrote:
| The difference between a ponzi and real finance is mostly
| lying.
|
| In a Ponzi you lie about asset growth. In real investments
| you report real asset growth. If the system fails it won't
| be because people lied about what their assets were. It
| might be because they mis-estimated what those assets were
| worth. But that isn't a Ponzi.
|
| Crucially though, it is actually possible for assets to
| grow. As long as there is new good business to finance, the
| whole thing doesn't need to be zero sum. And annoyingly,
| growing business is so much faster with a conplex financial
| system, that countries with such financial systems stand no
| chance. So even if you don't like the risk and excess in a
| complex financial system, it's really hard to go without.
| kortilla wrote:
| > And while we haven't quite reached that pinnacle of
| absurdity, it did hit 37,000 not so long ago.
|
| Why do you think this is absurd? You know inflation means
| we'll get there even without ridiculous multiples, right?
| NoMoreNicksLeft wrote:
| What sort of inflation would take it from 2700 to 37,000
| since 1987? How close to the CPI is that, exactly? It
| seems a little off.
| tpxl wrote:
| > What sort of inflation would take it from 2700 to
| 37,000 since 1987?
|
| 7.5%. Doesn't seem that unbelievable.
| NoMoreNicksLeft wrote:
| Well, it doesn't seem bizarrely implausible. It has
| spiked even higher than that in my lifetime (not even
| counting recently).
|
| The trouble is that I've been told that it was far lower.
| By official government sources.
|
| It would be interesting to include the DJIA into CPI
| though. I bet some people would lose their shit over
| that.
| zamnos wrote:
| Why do you think it has to all fall down? What happens if
| it doesn't?
| CPLX wrote:
| Might be a bad way to run a bank, might not, but it's
| definitely not the cause of the S&L crisis. That was a story
| of deregulation leading to massive moral hazard, rampant
| speculation, and multiple high profile cases of outright
| fraud.
|
| Economic shocks and rising interest rates aren't usually the
| _reason_ that financial institutions engaging in risky or
| fraudulent behavior get caught, they usually just make it so
| the clock runs out on their scheme to roll over the losses or
| otherwise avoid getting caught.
|
| The liquidity crisis of 2008 didn't _cause_ Bernie Madoff 's
| fund to collapse, the fact that it was a complete fraud from
| inception did. It just made it impossible to ignore.
| tadfisher wrote:
| Credit unions aren't insured by the FDIC, they have NCUA
| insurance.
| WeylandYutani wrote:
| This would make the bank extremely vulnerable if the community
| is hit by a recession. You need to diversify the risks not bet
| it all on a single hand.
| WeylandYutani wrote:
| Some people want smaller banks because "too big to fail". While
| those same people are already freaking out when two banks fail.
|
| I'm taking the downvotes: just open an account at JPMORGAN.
| Banking is serious business your artisanal cornershop credit
| union can't hack it.
| frgtpsswrdlame wrote:
| Hm? Where's Lehman?
| DonsDiscountGas wrote:
| I think this is just consumer (ie FDIC) insured banks, Lehman
| was an investment bank.
| daliz wrote:
| The world is changing. And that's good news.
| conradev wrote:
| The graph seems to be in nominal dollars, but I feel like real
| dollars is the only way to get an accurate comparison of
| magnitudes
| dan1234 wrote:
| So is this just a problem with the US banking system, or are
| banks in other regions failing too?
| kzrdude wrote:
| Credit Suisse failed recently too
| momofuku wrote:
| For the life of me, I'm not able to understand why none of these
| lists include Lehman Brothers?
|
| A commenter below posted:
|
| >Lehman Brothers is also not included because, even though it was
| a US bank, it was an investment bank with no FDIC insured
| deposits. It was around the size of all of this year's failures,
| combined.
|
| So does this mean, that since Lehman had no customer deposits, it
| doesn't count?
| SeanAnderson wrote:
| Well, they're visualizing a dataset from the FDIC. So, it's
| more like it doesn't count due to a technicality. It's not
| clear to me if there's an "official" dataset that includes all
| non-FDIC institutions.
| djbusby wrote:
| For this dataset, yes. It's only got deposit banks (afaict)
| mywittyname wrote:
| Lehman had no FDIC-insured accounts. So it shouldn't be
| included in a list of failures managed by the FDIC, because it
| wasn't.
|
| The liquidation of Lehman was handled by the Treasury
| department (and a bankruptcy court), not the FDIC, and
| Congressional involvement was necessary to pass a bill to
| finance the resulting "bailout". The FDIC maintains its own
| fund to pay back depositors.
|
| It might sound like a pointless technicality, but it's really
| not. It would be like asking why an NHSTA report doesn't
| include plane crashes.
| EGreg wrote:
| So basically, a ton of more failures in teh past, now it's slowed
| down but we are losing our stuff over it?
| rout39574 wrote:
| I'd say, "Our few failures now, which we think of as plausibly
| just the leading edge, are already comparable in size to the
| _entire_ 2008 cascade."
|
| Losing stuff now seems... premature, but not insane.
| haldujai wrote:
| This is not even remotely close to 2008... This figure
| conveniently excludes the largest 6 failures of 2008, TARP,
| and major international banks and insurers simultaneously
| affected.
|
| As a reference the prospect of AIG failing without a bailout
| was so significant it became an international issue
| threatening both US and EU economic stability. SVB and FNB
| are borderline irrelevant in comparison.
|
| The amounts reflected in SVB and FNB are also exaggerated as
| the money isn't "lost" as if parent can obtain liquidity
| elsewhere (via government or merger) the asset will return
| principal + interest at maturity.
| fwlr wrote:
| Highly suggest sorting by date rather than size. Putting the
| smallest failures at the top causes a little bit of an optical
| illusion making the first tower appear smaller than it really is.
| It also highlights that whatever is happening here is drastically
| different than what happened in 2008 - here we have three "big
| bank" failures while 2008 had only one, but we have zero "little
| bank" failures while 2008 had hundreds.
| haldujai wrote:
| The difference is this is missing the biggest failures of 2008
| (Lehman, Bear, Merrill) as well as Fannie, Freddie, AIG and
| TARP.
| jbverschoor wrote:
| Indeed. Many factors make me distrust the author about his
| intentions and bias (great mongering)
| alex-moon wrote:
| Wonder what year that massive spike is. Oh no, can't zoom in on
| mobile! Guess I'll have to check later on my desktop, if I
| remember. Until then, it is a mystery.
| HatchedLake721 wrote:
| I can zoom in on an iPhone.
|
| It's 2008/2009
| alvis wrote:
| At times, it's not the size that matters, but rather the quantity
| that makes a chain reaction
| d--b wrote:
| Here is a forked version that includes Lehman Brothers:
|
| https://observablehq.com/d/dfe4257c84256e26
| a3w wrote:
| Nice. I thought WhoTF is Washington Mutual?
| dandare wrote:
| The "Bank failures" title is misleading, when only FDIC banks
| failures are included.
| _heimdall wrote:
| "investment banks" are also misleadingly named in my opinion.
| This dataset seems to stick to what the more common idea of a
| bank that accepts deposits and offers checking/savings
| accounts.
| dandare wrote:
| Well, yes :)
| 6451937099 wrote:
| [dead]
| 6451937099 wrote:
| [dead]
| misja111 wrote:
| Where are Lehman Brothers, Bear Sterns? And where are all the non
| US banks, such as e.g. Credit Suisse? They would make the other
| numbers in this graph dwindle ..
| Tempest1981 wrote:
| FDIC data only, but yes
| pjc50 wrote:
| They're not in the set of US depositor banks. (Lehman was an
| _investment_ bank)
| cyclecount wrote:
| Lehman Brothers and Bear Stearns were non-FDIC insured
| investment banks.
| nologic01 wrote:
| It makes perfect sense to focus on events defined in a uniform
| way across the dataset (in this instance US FDIC insured bank
| failures). Otherwise what you are depicting is an arbitrary
| collation of events that may have very different causes.
|
| What I derive from the visualization (btw Bostock is a genious)
| are a couple of simple yet still tentative observations:
|
| * A new _cluster_ of failures might be forming. The pattern of
| correlated failure is not new and it may point to similar
| business models and /or exposure to the same factors. Measurable
| correlation may also imply some level of contagion. This is
| defined as one event increasing the chances of another (after
| conditioning on common factors). But it is anybody's case what
| the fully developed phenomenon will look like. Three events is
| still small number statistics. Dont run an AI model on this.
|
| * There is at this point a remarkable absence of small bank
| failures. If this persist it hints that it is actually not the
| vanilla banking model (and poor risk management) that underlies
| what is happening, but more idiosyncratic factors that are
| specific to a few actors. In some sense that would be good news.
|
| One thing is for sure. The crisis will be properly visualized.
| theteapot wrote:
| > There is at this point a remarkable absence of small bank
| failures.
|
| Not sure it's that remarkable? 1. not adjusted for inflation as
| others have commented. 2. There are less banks in the US, maybe
| up to 1/2 as many as in 2008
| (https://www.statista.com/statistics/184536/number-of-fdic-
| in...). 3. You may only be seeing the leading edge of something
| similar to 2008-2010 range - too early to tell.
| nologic01 wrote:
| For a qualitative discussion of what might be happening
| inflation is a just a nuisance factor. There are other
| similar factors (e.g the size of the economy is not constant
| either) that we can ignore for this purpose.
|
| The bank size distribution is more relevant but 50% of a
| large number is still a large number. You'd expect this to
| somehow show up in the statistics.
|
| Timing is indeed a key aspect. The actors involved have quite
| a bit of discretion and options and it takes time for all
| these to play out. But if it does transpire that small banks
| are not as seriously affected as in the last crisis and its
| more of a "middle class" bank disease this would be a strange
| new thing.
| theteapot wrote:
| > a strange new thing.
|
| Indeed. ZIRP was a new thing [1]. My laymen understanding
| is these big banks got caught out making really stupid (in
| hindsight anyway) bets interest rate would stay near zero
| and ran into liquidity issues.
|
| Is there a reason small banks wouldn't also make stupid
| bets like this? Maybe they have less money slushing around
| that isn't in loans or something.
|
| [1]: https://time.com/4180698/nouriel-roubini-global-
| economy/
| nologic01 wrote:
| Its still too early to connect the dots. That all sorts
| of low-quality bets would be unwound with rising interest
| rates was indeed a given. But in such an opaque financial
| system, the surprises can come from any corner.
|
| A vanilla bank business model actually benefits from
| rising rates as this generally widens the spread between
| their lending and borrowing. So then you have to look at
| second order effects. According to reports one causal
| factor is traced to their "low-credit risk" investment
| portfolios and various combinations of real hedging vs
| creative accounting for their interest rate sensitive
| positions. It may be that the really small banks do less
| of that.
|
| In any case the long period or low rates is really not an
| excuse. Bankers are not extracting rents from society to
| play being idiots. Managing risks is what they are
| supposed to be paid for. You don't manage risks by
| assuming tomorrow will the same as yesterday.
| riskneutral wrote:
| This needs to be re-expressed as a % of GDP to be useful. And as
| already pointed out, the largest of them (Lehman) is missing
| FormerBandmate wrote:
| Lehman Brothers isn't technically a bank failure. It was an
| investment bank that went bankrupt, it had zero FDIC
| involvement
| Findeton wrote:
| And Credit Suisse although it's not on the US.
| abeppu wrote:
| Mike Bostock knows far more about data visualization than I do so
| I assume there are good reasons for choosing this presentation.
| But it strikes me as hard to think about, so I must ask: when is
| stacked+packed circles a good choice?
|
| The drawbacks to me seem to be:
|
| - At any given point on the x-axis, the associated height of the
| pile is partly taken up by circles but is partly space lost to
| circle packing. This proportion is hard to estimate visually.
|
| - Because circles extend in the x-direction, they contribute to
| height over a _variable_ time range. E.g. WaMu is still the
| tallest circle at the 2010 line. It's a bit like a kernel density
| plot where the _kernel_ is data dependent.
|
| Because of these effects taken together, though it's tempting to
| think of the profile of the pile as a smoothed average of the
| rate of bank-failures, but this is pretty misleading, which I
| suppose is why there's no labeled y-axis.
| reylas wrote:
| The way I understand the graph is that is not the "number" of
| circles, but the area (money) that they consume. So those three
| bank failures are taking up the same space as all those other
| failures from 2008.
|
| It is the total volume of money involved vs the count. The
| height of both stacks show just how much damage three did vs
| all the others in the left hand stack.
| abeppu wrote:
| Yeah I get the count vs area distinction, but I think the
| point would have been more cleanly communicated with e.g. a
| stacked barchart with failures by quarter. With circles, the
| filled area over any span of the x-axis is not solely due to
| failures which happened during the corresponding time period.
| So the area above a short span in early 2010 includes area
| contributed by WaMu, which happened in Sept 2008.
| rout39574 wrote:
| My read of it was that the circles are centered on the date of
| the failure, and the stacking was some flavor of minimum
| height. The result is you get an approximation of "area under
| the curve" of bank value that has failed, while retaining a
| sense of whether a particular peak was a few large actors, or a
| mound of tiny. I find that clear distinction valuable.
|
| The nice thing about Mike having posted the code is that, if
| you think there's a better way to portray it, the canvas is
| spread out before you. :)
| sam_goody wrote:
| And now that the fed said they will only "fully" back depositors
| in large banks that go under, there will be even more
| consolidation, so the next crash can consist of just one huge
| circle that acted gregariously and irresponsibly before its
| collapse, but no one could do anything because of its size.
|
| What makes this even worse, is that Yellen would have lost
| nothing had she said they would back every bank and not just
| large banks - small bank failures are just not that common, and
| the risk is low, (and can be walked back in two years when the
| tension lowers).
|
| Even worse, well over half of the SVB bailout went to <20
| accounts.
|
| IMO, they should have raised the amount that FDIC is insuring,
| which is unquestionably too low. [They still should do that.]
| They then should have insured everyone equally up to that point.
| And if Circle and Roku would lose 90% of their value from such a
| move, that beats the whole banking system consolidating into one
| or two massive players that can act with impunity.
|
| OK, I am not an economist, and admit that I probably don't know
| what I am talking about, but HN is full of smart people with
| domain knowledge. Please (gently) broaden my perspective.
| Ilverin wrote:
| The large banks are more heavily regulated. Trump raised the
| limit at which a bank is called large from 50bil to 250bil. The
| small banks value their freedom from regulation more than they
| would value full FDIC coverage. The fed would love to make that
| trade:more regulation of small banks in exchange for full FDIC
| coverage for small banks.
|
| Canada is dominated by five enormous banks, they are closely
| regulated, and Canada has had a better experience than USA with
| both fewer bank failures and higher real interest rates paid to
| customers.
| theironhammer wrote:
| Sure the Canadian banks are more stable but they are
| EXTREMELY conservative when it comes to lending out money.
| That's why the USA has a robust venture capital milieu while
| Canada does not.
|
| In fact a Canadian bank would rather loan money to an
| American business to buy out a Canadian business than to lend
| the same Canadian business to expand.
| mywittyname wrote:
| > What makes this even worse, is that Yellen would have lost
| nothing had she said they would back every bank and not just
| large banks - small bank failures are just not that common, and
| the risk is low, (and can be walked back in two years when the
| tension lowers).
|
| FDIC is supposed to protect smaller individual depositors, not
| gigantic companies with hundreds of millions of dollars in
| deposits. Gigantic companies have financial teams that should
| be tasked with protecting their operating capital.
|
| FDIC is also a last-resort. The idea is that bank assets are
| sold off and all depositors are made whole. It's very difficult
| and time-consuming to do this with a mega bank though.
|
| Maybe FDIC limits should be raised, but the problem with that
| is someone needs to pay for it. Perhaps companies with $100MM
| deposits should be paying for private insurance.
| penguinten wrote:
| > Even worse, well over half of the SVB bailout went to <20
| accounts.
|
| Do you have a source for this?
| sam_goody wrote:
| I don't have time to research now, but there were some well
| detailed breakdowns of the large payments when the bailout
| happened.
|
| The first relevant link in DDG is a statement by the Chairman
| of the FDIC. He claims that the top ten accounts held more
| than 13.3B between them, which is more than 10% of the total
| of all deposits in the bank, and more than half of the $20B
| that the government is expected to payout in total. [1][2]
|
| The FDIC would otherwise have had to pay a scant 3M of that,
| so there's 2/3 of the bailout just in those 10 accounts. If
| we include the next ten accounts, it will be much, much more.
| (One of the articles at the time claimed more than 85% went
| to 15 accounts, but I didn't want to be extreme without time
| to research sources.)
|
| [1]: https://www.banking.senate.gov/imo/media/doc/Gruenberg%2
| 0Tes... [2]: https://www.fdic.gov/news/press-
| releases/2023/pr23023.html
| thedufer wrote:
| I think that's a misinterpretation of the data. Based on
| reports, SVB had around 130B of deposits when it was taken
| into receivership. Something like 90% of that was
| uninsured, so around 115B of uninsured deposits. The 20B
| hole means that without FDIC backing the uninsured
| deposits, they still could have paid out over 80 cents on
| the dollar. So if the top ten accounts had about 13.3B of
| deposits, they only received less than 2.7B of the bailout
| - less than 15%, not "well over half".
| sam_goody wrote:
| Accepted, and thank you for the clarification.
|
| At the time of the collapse there were definitely
| articles making that claim, with analysis and numbers,
| and I still assume it to be correct.
|
| When I saw this, I was surprised, it seemed too clean and
| straightforward. Will have to look for the original
| sources.
| WillAdams wrote:
| I only saw a couple of entries which might have been credit
| unions --- were they intentionally excluded? Or are they that
| much less likely to fail?
| everybodyknows wrote:
| Excellent point. To Joe Consumer, bank vs credit union accounts
| are ready alternatives. Where might one find data on failures?
| A quick scan of this site offered no clues.
|
| https://ncua.gov/
|
| Insurance blurb from NCUA:
|
| https://ncua.gov/files/publications/guides-manuals/NCUAHowYo...
|
| They do have access to a high-margin business, "temporaily":
|
| https://ncua.gov/regulation-supervision/letters-credit-union...
|
| Lending at up to 18% is permitted.
| herbcso wrote:
| Credit Unions aren't FDIC insured, which is what this data set
| is using.
| boringg wrote:
| Way easier to diagnose & save 3 banks than the multitudes in 2008
| from a time spent analysis perspective (wether or not we should
| is a different matter). The question is the ripple effect here -
| it seems to have stemmed 3 large breaches where as in 2009 it was
| death by a thousand cuts (with some large breaches).
| bilekas wrote:
| I'm not familar with all the recent banks that are failing but is
| it a result of consolidation during the 2007 crisis?
|
| Seems really strange visually at least
| alkonaut wrote:
| This honestly looks much less frightening that I would have
| thought. But then my experience of '08 was "that wasn't so bad?"
| which I understand is highly regional. Visited some colleagues in
| 2015 in the UK who kept referring to "the recession" when talking
| about struggling customers or abandoned buildings. I had to ask
| whether they had experienced another recession or whether they
| still meant the 2008 one...
| hattmall wrote:
| Why so many in Georgia? Roughly 25% of all bank failures were in
| a state with less than 3% of population? Subprime lending?
| bighoki2885000 wrote:
| [dead]
| WatchDog wrote:
| Constantly impressed by Mike Bostock's work.
| yalogin wrote:
| Weird part about this whole thing is, we have been repeatedly
| told that banks are good and they learned a lesson in 08. Now
| both tech and banking are in trouble again.
| echelon wrote:
| > we have been repeatedly told that banks are good and they
| learned a lesson in 08
|
| This is a wholly different lesson.
|
| In 2008, banks were making bad investments.
|
| In 2023, the changing interest rate environment caused good
| investments to become worth less than their original value. If
| held to term, things would be fine, but liquidity issues put
| stress on the system.
|
| These are not the same, and we have better means of dealing
| with this problem. SVB and First Republic were handled
| appropriately. Investors written down to zero, depositors made
| whole.
|
| The future banking system will be even more robust after having
| learned this new lesson. I've no doubt that we'll have
| regulations that demand a better mix of investments that are
| regularly audited and stress tested.
|
| We as a society also have to stop thinking of banks as a means
| to earn interest on deposits. Chasing the best rate has led to
| this problem. Deposits are liabilities.
| anecdotal1 wrote:
| > In 2023, the changing interest rate environment caused good
| investments to become worth less than their original value.
|
| They were not good investments
| Mistletoe wrote:
| I strongly disagree, the current mess is largely caused
| because some banks didn't anticipate interest rates going up
| from historic lows. That's profoundly bad risk management. A
| child could have done better.
|
| https://fred.stlouisfed.org/series/FEDFUNDS
| G3rn0ti wrote:
| > interest rates going up from historic lows.
|
| > That's profoundly bad risk management.
|
| Well, yes. But it's also bad economic policy. The banking
| sector just happened to have adapted to a decade of low
| interest rates. Then during the Covid crisis of 2020 the
| FED pumped dollars like crazy into the markets [1] --
| adding fuel to the fire. If you set bad incentives you'll
| harvest bad behavior. That is the tragedy of FED-style
| economic planning in a nutshell.
|
| [1] https://www.federalreserve.gov/monetarypolicy/bst_recen
| ttren...
| candiddevmike wrote:
| What lesson are they going to learn? Go big or go home? I
| don't foresee any kind of legislature becoming law over this,
| especially with our divided government.
| melenaboija wrote:
| That banks need better capital planning and regulations
| around it need to be tighter.
| lottin wrote:
| A bank is a business and businesses fail sometimes. This is
| inevitable.
| kavalg wrote:
| However, this time it looks like the government failed, not
| the banks. If you look at the US government (bonds) as just
| another business the bank can invest in, you can't help but
| notice that the business had not been very well managed. It
| promised that bonds will keep their value, but they did not
| (currently at market price and in the future, due to their
| yield suffering from inflation). We still don't have a clear
| message on the situation with government debt as well, but we
| are probably headed towards more inflation and/or some
| (hopefully soft) default(s). And as always, fewer people will
| have more assets/control and the rest of us will pay the
| bill.
| lottin wrote:
| The issuer of a bond only promises that they will pay the
| principal of the bond back with interest. They don't
| promise that the bond will hold its value in the market.
| 0xDEF wrote:
| Both SVB and Signature Bank were atypical banks with atypical
| depositors.
|
| SVB catered to risky tech startup and Signature Bank was involved
| in risky crypto shenanigans.
|
| On SVB:
|
| >As a regional bank in the Bay Area, SVB offered services
| specifically designed to meet the needs of the tech industry, and
| soon became the largest bank by deposits in Silicon Valley and
| the preferred bank of almost half of all venture-backed tech
| startups.
|
| On Signature Bank:
|
| >By 2021, cryptocurrency businesses had represented 30 percent of
| its deposits.
|
| >Banking officials in the state of New York closed the bank on
| March 12, 2023, two days after the failure of Silicon Valley Bank
| (SVB). After SVB failed and in light of the closure of the
| cryptocurrency-friendly Silvergate Bank earlier in the week,
| nervous customers withdrew more than $10 billion in deposits.
|
| First Republic Bank was also an atypical bank that offered high
| interest rates for high-net-worth depositors by not insuring
| deposits and having a very high loan-to-deposit ratio:
|
| >Fitch Ratings and S&P Global Ratings downgraded First Republic's
| credit rating, citing "a high proportion of uninsured deposits"
| from wealthy customers who are more likely to move their money
| elsewhere and a loan-to-deposit ratio of 111%, meaning that it
| had lent out more money than it had in deposits from customers.
| robocat wrote:
| Sure, outliers will fail first. That doesn't say much about
| whether there are vanilla banks about to fail.
| JoeAltmaier wrote:
| Yes, yes, inflation changes things (a little) but the glaring
| result is, these bank failures are massive, significant and
| unprecedented.
|
| We can find historical failures of adjacent institutions but
| clearly something new is happening?
| haldujai wrote:
| If two regional banks failing with little realized loss is
| massive and unprecedented how would you describe 2007-2008 when
| the entire world economy was brought to its knees with napkin
| math ~1.2T of bailouts/failures in the US let alone Europe with
| several banks nationalized (e.g. UBS and RBS) and nation states
| defaulting on debt?
| JoeAltmaier wrote:
| From the linked graph, recent bank failures of this kind
| rival that entire event. And we're probably not done.
| majormajor wrote:
| I've seen a bit of discussion about concerns around office
| property mortgage and such (e.g. JP Morgan wanting to be
| insulated about losses on outstanding loans) for FRB which seem
| concerning as a post-Covid systemic risk.
|
| I wonder if the consumer deposit side, though, has a lot to do
| with an unanticipated risk of the particular business model SVB
| and FRB were using: higher-income people. Sounds great - less
| risk of defaulting on loans - but then you are highly-
| concentrated in larger deposits for a smaller total population
| (larger meaning less insured, so easier to spook; smaller
| population means the panic doesn't have to spread as far)... so
| it works well for decades and is seen as something to aspire
| to... until it suddenly doesn't.
| stall84 wrote:
| That is quite discouraging. Thank you. (no that is an awesome
| UI.. but dang..)
| beginnings wrote:
| National governments should control their own money, scrap
| interest entirely. Let the market decide what each currency is
| worth for international trading.
|
| The status quo international banking system is designed to
| enslave, and governments can't do anything about it because the
| banks are above them.
|
| How anyone can defend the current system is beyond me. It's not
| remotely close to being the best we can do, it's a scam at every
| level, way more complicated that it needs to be, by design.
| highwayman47 wrote:
| What is the alternative?
| beginnings wrote:
| [flagged]
| lottin wrote:
| > National governments should control their own money, scrap
| interest entirely. Let the market decide what each currency is
| worth for international trading.
|
| Isn't this how the current system already works? Except for the
| "scrap interest entirely" part, which I'm not sure know what it
| means.
| beginnings wrote:
| No, governments don't control the money printing machines.
|
| Scrapping interest means that when the money is loaned after
| being printed, there isn't a debt attached to it.
| lottin wrote:
| I don't think that this makes any sense. Debt is inherent
| to the act of lending. A loan that doesn't have a debt
| attached to it isn't a loan, it's a donation.
| realjhol wrote:
| > It's not remotely close to being the best we can do
|
| "We" can't do anything at all. We are modern day peasants, and
| we will accept what the regime tells us to accept
| csense wrote:
| I feel like it should include earlier time periods (80's?
| Depression?), and have some adjustment for different times. I'm
| not enough of an expert to guess whether to use inflation
| adjusted dollar amounts (using what inflation metrics?), or as a
| % of GDP, or a % of the banking system..
| chunk_waffle wrote:
| So we're supposed to just go about our day, anxiety free, after
| seeing this?
| mjfl wrote:
| what about lehman brothers?
| itsthecourier wrote:
| Where is Lehmann Brothers there?
| 99112000 wrote:
| Now plot it relative to the money supply :D
| wufufufu wrote:
| Can someone explain why this is being downvoted?
| rr808 wrote:
| Total number of FDIC banks over time is listed here:
| https://banks.data.fdic.gov/explore/historical?displayFields...
| JBiserkov wrote:
| https://www.fdic.gov/bank/historical/bank/index.html
| steve_adams_86 wrote:
| Are there no small failures this time around because of ongoing
| consolidation? This seems to be a dominant trend in economics
| across the board. Does anyone have a good answer why?
| krona wrote:
| The trend is a form of preferential attachment.
| https://en.wikipedia.org/wiki/Preferential_attachment
| rrrrrrrrrrrryan wrote:
| Some midsize banks got a massive inflow of deposits during the
| pandemic and they didn't know what to do with the money, so
| they parked it in "safe" investments like mortgage backed
| securities.
|
| Then when the pandemic subsided, people started burning down
| their savings accounts, and interest rates started
| skyrocketing. All the banks' money was tied up in all these
| 30-year mortgages that nobody wants anymore because they're
| paying like 2.5% and inflation is 8% now, but they're still
| forced to sell them for terrible prices just to keep their ATMs
| full. Eventually word gets out about what's happening, there's
| a bank run, and the bank starts death spiraling.
|
| Massive banks have nothing to worry about because if the
| government allows them to fail they'll take the entire economy
| down with them. And (presumably) smaller banks weren't under
| the same pressure from investors to generate returns on idle
| capital, so they didn't commit the same sins as the midsize
| banks.
| tickerticker wrote:
| SVB's fail was because of radical speed in deposit inflow,
| which was invested in fixed rate bonds just at the moment that
| the Fed was on a rising rate ratchet. Because of an affluent
| clientele, they had unusually high % of uninsured deposits.
| Very unlikely that a small bank would have had the need to
| layoff so many deposits in such a short time span. Very
| unlikely that a smaller bank would have had the high % of
| uninsured deposits. These are the funds that jump ship
| immediately.
|
| First Republic fail was because of large pool of fixed rate
| assets....(jumbo low-rate mortgages and Treasury Notes) in a
| rising rate context. They also had an affluent clientele and
| thus a high % of uninsured deposits. The fixed rate assets lost
| so much value while rates rose, that they had no tangible
| equity. Thus, the hot money deposits raced out of the bank.
|
| Smaller banks typically don't have such a concentration of
| affluent customers, which means that more of their clientele
| would be under the threshold for FDIC insurance. Smaller banks
| probably have a good book of commercial loans which are
| commonly priced at a variable rate.
|
| I am baffled that SVB and FRB did not hedge their fixed rate
| portfolios with interest rate swaps....Maybe their mind was on
| staying abreast of the white-hot tech sector instead of
| wringing their hands about the next Fed rate decision.
| kypro wrote:
| Would be slightly more insightful if it was inflation adjusted.
| The circles on the right should be ~30% smaller.
| bobbylarrybobby wrote:
| And if the circles' areas, not their radii, were the failed
| assets. As it is, a circle's apparent size (we judge 2D shapes
| by their area, not any one linear dimension -- although this is
| difficult to do in practice, and linear marks are generally
| superior) is the failure size _squared_ , which distorts the
| data a boatload.
|
| Here is a, er, more faithful representation of the data. The
| recent failures don't look quite so crazy anymore!
|
| https://observablehq.com/d/d85ce0c639bc4df7
| cduzz wrote:
| I would also have a 2nd plot that has all banks / banking /
| bank assets with the failures in a different color, so we
| could identify the relative size of the failed banks, and
| also see the actual size of the big players in banking.
| p-e-w wrote:
| > we judge 2D shapes by their area
|
| I've seen this claim a few times in discussions about such
| charts, but it's far from obvious to me that this is really
| true. My best guess based on my own perception is that we
| estimate quantities represented by circles as proportional to
| _something between_ the diameter and the area.
| alanbernstein wrote:
| Wouldn't that be even worse for interpretability?
| RC_ITR wrote:
| Well is the unit is the diameter, then why add extra
| dimensionality at all then?
|
| That's literally what bar charts are for.
|
| I can feel a Tufte monologue coming on, even.
| marginalia_nu wrote:
| Human beings are spectacularly shit at comparing areas. If
| you put two circles next to each other, one with double
| area of the other, most humans will say their relation is
| 3:2.
| IceHegel wrote:
| This uses a log y axis. The circles are actually better for
| visualizing.
| Agent-Cooper wrote:
| The circles' areas are showing the failed assets. Observable
| Plot defaults to using a square root scale when encoding a
| quantity with the radius of a circle.
|
| https://observablehq.com/plot/marks/dot#dot-options
| dietr1ch wrote:
| You'd think that radius meant radius, but that'd be too
| simple.
| andy_ppp wrote:
| So weird, should it not be the area of the circle being the
| value? The radius should be [?](Area/p) not the square root
| of the value or am I misunderstanding?
| igravious wrote:
| Circles don't have volumes?
| andy_ppp wrote:
| The volume of a circle would presumably be zero, but yes
| I've used the wrong word. I'll change it above. I
| sometimes wish there was a forum that allowed editing of
| spelling in other peoples posts and they could just
| accept the changes (same with Twitter). You could spend
| all your days correcting obvious mistakes...
| igravious wrote:
| > The volume of a circle would presumably be zero, but
| yes I've used the wrong word.
|
| i guess?
|
| > I sometimes wish there was a forum that allowed editing
| of spelling in other peoples posts and they could just
| accept the changes (same with Twitter). You could spend
| all your days correcting obvious mistakes...
|
| nice and interesting idea except some people are awful
| and would abuse that feature :(
|
| maybe you should make a forum with that feature!
| paulgb wrote:
| In this case, the x-axis is a different unit from the
| unit of data measured by the radius, so the fact that
| it's off by a constant multiple doesn't matter; it's just
| an arbitrary scale.
|
| If both the x- and y-axes were encoding data in the same
| unit as the area encoded, then it might make sense to
| correct for the area, but I don't think I've ever seen a
| plot like that.
| bobbylarrybobby wrote:
| TIL, thanks. Guess they are crazy after all.
| navane wrote:
| You ploted the size on a log scale and claim "the recent
| failures dont look quite so crazy anymore?" Is this a joke?
| bobbylarrybobby wrote:
| When I posted this the only change I'd made was to sqrt the
| assets (which I now see was wrong). The lollipop chart came
| later.
| hirako2000 wrote:
| Log 10, and the scale doesn't start st zero as if to
| compensate.
|
| What i find with graphs is that they scales and ranges are
| often chosen to look "alright" and always to communicate an
| intended message.
|
| Aside those datasets anyway what's truely going now is most
| likely under the surface still. RemindMe! In a year.
| [deleted]
| HPsquared wrote:
| That's a log scale...
| mbo wrote:
| I have also built an alternative as a stacked bar chart
| https://observablehq.com/@mjbo/bank-failures-as-a-stacked-
| ba...
| rerdavies wrote:
| The circle version is terrifying. The stacked bar chart is
| even more terrifying.
| dietr1ch wrote:
| Right, it makes me wonder whether we are really good at
| looking at areas or not.
| JBiserkov wrote:
| They still look pretty crazy to me!
| https://www.fdic.gov/bank/historical/bank/index.html
|
| Total assets of banks failed in 2008 + 2009 => 373 + 171 =
| 544 Billion
|
| Total assets of banks failed in 2023 (so far, still 2/3 to
| go) 548 Billion
| littlestymaar wrote:
| The total bank assets doubled in the meantime (from 11-12TN
| to 23TN)[1] so proportionally it's half than 2008 + 2009,
| but that's still gigantic.
|
| [1] https://fred.stlouisfed.org/series/TLAACBW027SBOG via h
| ttps://nitter.lacontrevoie.fr/2Steady4U/status/165337475754
| ...
| ghayes wrote:
| FWIW, I think the size of the insolvency is more telling of
| the failure than the AUM. E.g. First Republic was about ~$13B
| in the hole when it was taken over. Otherwise a large bank
| with a large hole looks way worse than a small bank with a
| huge hole.
| Buildstarted wrote:
| This person adjusted the values for inflation
|
| https://twitter.com/viralhysteria/status/1653369995877908481
| vukadinovic wrote:
| I was thinking the same!
| ajross wrote:
| It's also leaving out non-FDIC bank failures like Lehman, Bear
| Stearns et. al. which would make the '08 crisis much (MUCH)
| larger.
|
| Basically post-2008 the class of "investment banks" basically
| disappeared. But none of that is shown in this chart.
| ekianjo wrote:
| Are you trying to say that the current crisis is nothing ?
| These are famous last words.
| ivalm wrote:
| They didn't hold deposits. So it's kind of reasonable. They
| are called "bank" but they aren't the same kind of
| institution.
| bhaak wrote:
| But they held "value" that was "gone" from one day to the
| other which triggered the financial crisis.
|
| In reality they weren't worth anything but the realization
| that those values were worthless was the trigger. But those
| values were on the balance sheets and should therefore be
| visualized as well.
| ajross wrote:
| Only where "deposits" are defined as FDIC-insured consumer
| accounts. Clearly they held other people's money for them,
| which is pretty close to the economic definition of a bank.
| dtech wrote:
| but it's misleading. The financial crisis was basically
| triggered by those, and not by the ones shown here in
| 2008-2009.
| NoboruWataya wrote:
| I can understand why these banks were omitted but it
| completely changes the picture. Lehmans and Bear Stearns
| _were_ the bank failures of 2008.
| miclill wrote:
| "More insightful" is too gentle. At best the chart is
| misleading. But the _mistake_ to not adjust money for inflation
| is very common unfortunately...
| smashem wrote:
| And how about relative to M1 money supply?
| _heimdall wrote:
| The definition of M1 and M2 money was changed in May 2020,
| conveniently right as the government started printing money
| for their pandemic response.
| kasey_junk wrote:
| But inconveniently long after savings accounts started
| being demand deposits due to online bill pay, atms and easy
| access to electronic funds transfers.
|
| If you are going to complain about changing the definitions
| you should complain that they did it too late.
| littlestymaar wrote:
| Comparing to M1 doesn't make much sense, but "total bank
| assets" roughly doubled in the meantime:
| https://fred.stlouisfed.org/series/TLAACBW027SBOG
| bitslayer wrote:
| If we are comparing the impact, shouldn't it be adjusted for
| the size of the economy? The U.S. GDP was under $15T in 2008
| and is over $23T today.
| Luciatrutth wrote:
| [dead]
| MrQuincle wrote:
| Makes me think of firebreaks. What are the equivalents of
| firebreaks in the sector?
| crimsoneer wrote:
| The Fed acting as a backstop, essentially (like they did after
| Lehman in 2008)
| stuff4ben wrote:
| Is it me, or does this kind of illustrate that the banking
| industry doesn't know what it's doing and cannot be trusted in
| the future? I don't know what the answer is, but these "fat cats"
| running banks really aught not to.
| thehumanmeat wrote:
| That needs to go back to the 80s to capture the SnL crisis. It
| dwarfs 08 in bank failures. It better indicates the
| conglomeration of the many banks into the few we have today.
| peter303 wrote:
| Round 2 of the 2023 bank crises might be commercial real estate
| loans like the 1980s crises. Some downtowns are still 40%
| vacant. This more a consequence of covid than bad bank
| behavior.
| fragsworth wrote:
| You are correct. Additionally, the size of the bank(s) are not
| really what matters.
|
| I want to see the scale (sum) of what was _actually lost_ when
| they went bankrupt, and how much we (the public) have to put up
| to keep the system from collapsing. Does anyone have an actual
| visualization of how much we ponied up to keep our banking
| system from collapsing?
|
| Did the public just provide a reasonable interest rate loan for
| a few months to a year? Or was it a sweet 0% loan for...ever?
| The important details are lost in the media reports and it
| would be nice to get a sense for what _really_ happened.
| than3 wrote:
| Generally speaking, it turns into free assets. The people
| involved usually don't acquire the assets/associated debt
| without some kind of guarantee.
|
| OneWest Bank for example after 2008 had a guarantee where if
| the assets defaulted above a certain amount they would
| receive full value of the loans in a payout from the
| government. They were actively foreclosing on people to
| justify catastrophic losses to get the bailout. Not sure how
| that ended up since I was only marginally aware of the start
| of that and everything went silent once the news got wind of
| the perverse incentives.
|
| In terms of trends, the bailout game has been played
| consistently since the the dollar went off the gold standard
| (1971 iirc).
|
| The ponzi is starting to unwind now that inflationary
| pressures are out of control. I expect concentration to
| eventually lead to nationalization followed by a new currency
| which will fail because they lost all credibility from their
| mismanagement as a private entity.
|
| That's what's happened historically with every country that
| debases its store of value above the point macro effects
| become noticable which are around 3:1 ratio).
| TheSpiceIsLife wrote:
| There's argument to be made that approximately any cost to
| keep the system from collapsing is a trade-off worth making
| if the alternative is the system collapsing.
| jeremyjh wrote:
| There were winners and losers, but the government made money
| on TARP. That doesn't fit anyone's narrative very well, so
| you don't hear that much about it, but its a fact. So far not
| a public dollar has been lost in the current crisis. FDIC,
| like other insurance, is paid for by the insured. Every FDIC
| bank in the country is paying the cost of this.
|
| https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
| haldujai wrote:
| Nominally yes, but not when you consider borrowing cost and
| effects on deficit. The CBO has TARP costing 31 billion.
| [0]
|
| FDIC is paid by the banks but it seems probable it will be
| passed down to customers in banking fees at the end of the
| day.
|
| [0] https://www.cbo.gov/publication/59062
| DSMan195276 wrote:
| The problem with those numbers is that TARP lost money if
| you account for inflation over that period. That said the
| point wasn't to make the government money anyway, so
| whether that matters is up to you.
| [deleted]
| FormerBandmate wrote:
| 08 was artificially low because many banks got merged at a fire
| sale. Wachovia, Merrill Lynch, Bear Stearns, and National City
| stick out. Other financial institutions got essentially
| nationalized and stock became mostly worthless like Citi and
| AIG, although the government sold most of their stock in 2011
|
| Credit Suisse is about the same size as SVB, Signature Bank,
| and First Republic combined but it got "acquired" by UBS at a
| price 60% below its last trading price in a deal where $17
| billion of debt was wiped out so it doesn't count here
| rrrrrrrrrrrryan wrote:
| It depends on what we're trying to visualize. From an
| investor's perspective, a bank whose assets get sold for
| pennies on the dollar in a fire sale is essentially a
| failure. Lehmann Brothers was also a massive (investment)
| bank failure with huge second order effects on the economy.
|
| This graphic seems to be modeling things from a taxpayer
| perspective. These banks failed and the government needed to
| step in to do something to ensure people could get their
| deposits.
| ddeck wrote:
| The government stepped in in the missing cases too, just
| not the FDIC. Many of the missing cases had large
| securities trading and investment banking activities (e.g.
| Bear Stearns - ~400B), and so it was the Fed and SEC that
| were most involved in their forced sales.
|
| WaMu was bought by JPM and is on the chart, presumably due
| to the FDIC involvement, whereas Bear, which was a similar
| size and was also bought by JPM is not.
| jeremyjh wrote:
| FDIC premiums are not payed by taxpayers. What we're
| visualizing here are bank failures assumed by FDIC. The too
| big to fail banks didn't technically fail, but to give an
| accurate picture of a financial crisis they should be on
| the graph.
| _heimdall wrote:
| > FDIC premiums are not payed by taxpayers
|
| Tax payers are legally required to pay taxes in USD. I'm
| not actually sure if the IRS technically accepts cash but
| if so it would be extremely rare. Meaning all tax payers
| have a bank account and ultimately foot the bill even
| though it is technically funneled through the banks'
| books first.
| majormajor wrote:
| "Footing the bill by having a bank account" is one of
| those very-hard-to-picture-or-feel things in days when
| most bank accounts are "free" and these banks have so
| many lines of business. E.g. am I paying for FRBs bailout
| by increased loan application fees if I buy a house or
| car or such? That's what I'd imagine, or maybe it's just
| that maybe otherwise savings accounts would pay a bit
| more interest or something?
| haldujai wrote:
| Agree, this representation also makes WaMu's failure look
| like the worst in recent history but it felt like one of
| the smaller problems at the time with what was going on
| with the investment banks, Fannie/Freddie and AIG.
| btilly wrote:
| Credit Suisse is not included because it is a Swiss bank, not
| an FDIC insured US bank.
|
| Lehman Brothers is also not included because, even though it
| was a US bank, it was an investment bank with no FDIC insured
| deposits. It was around the size of all of this year's
| failures, combined.
|
| As you note, bank bailouts that were not FDIC bankruptcies
| are also not included.
| igravious wrote:
| And Bear Sterns?
| jeremyjh wrote:
| I think GP knows this, but I also think you know that the
| graph is trying to paint a particular picture, and that
| picture is misleading because a lot of information is
| missing. We are not in the midst of a financial crisis that
| approaches 2008, and the graph is trying to make us think
| something different.
| lazide wrote:
| Not in an '08 sized crisis - yet. Wait until commercial
| property debt finally 'looks down'. It's been running off
| the cliff for a long time already, and is in exactly the
| same boat as the securities that took out SVB, etc.
| btilly wrote:
| I know nothing of the sort.
|
| I think someone found an interesting dataset, tried to
| visualize it, and thought it looked interesting. I doubt
| that there was any motive to the dataset other than,
| "Here's what I get from the FDIC, what does it look
| like?" Then shared code and source so that anyone else
| could reproduce it.
|
| If you can find another data source that gives a fuller
| picture, you should. But compiling these data sources
| takes work. And the ones you get are all going to be a
| particular slice that represents some things but not
| others.
|
| I did not personally find it misleading.
| pranshum wrote:
| I wrote a post about this. The frequency of failures was much
| higher but the individual failures were smaller:
| https://yarn.pranshum.com/banks2
| themagician wrote:
| I have faith that we can top S&L. We have the technology. We
| have the talent. There are six banks with over a trillion in
| assets in the US. I have faith that one of them has been doing
| some wild book cooking. I'd place a bet on Citibank, followed
| by Wells Fargo. There's an old saying in Tennessee -- I know
| it's in Texas, probably in Tennessee -- that says, fool me
| once, shame on... shame on you. Fool me... you can't get fooled
| again.
|
| I'm just hoping this time it's something absolutely outrageous
| just for the lulz of it all. Like, let's get some FTX-style
| absurdity. All the absurdity happens in crypto right now but I
| still have faith in regular banking. Some people still like the
| challenge of regulated markets.
| RoddaWallPro wrote:
| Fool me... you can't get fooled again.
|
| George W gaffes have become so hilarious to me, now that
| they're 15+ years in the past. I laughed out loud reading
| this one.
| edrxty wrote:
| This may be my favorite all time HN comment.
|
| I totally buy it too.
| bboygravity wrote:
| JP Morgan is the biggest one. It can do ANYTHING it wants and
| get away with it.
|
| It can make 10 billion USD spoofing gold prices for a decade
| and get away with a 1 billion USD fine (and keep doing it)
| for example.
|
| The CEO can go on trips with Jeffrey Epstein, be friends with
| him and do business with him and get away with it.
|
| It made tons of money off of the Madoff ponzi by providing
| Madoff with a bank account and not reporting the (from their
| perspective) extemely obvious ponzi that was going on for 15
| years. Nobody went to jail and JP Morgan's fine was probably
| lower than what they made from the ponzi.
|
| There are 100's of other examples of quite outrageous FTX-
| style crime. This is just what I happened to read about and
| remember. And that's only the publicly known stuff.
|
| Let's turn it around: why would JP Morgan (and other big
| banks) NOT be engaged in extreme levels of crime that could
| be described as "financial terrorism"? If JP Morgan blows up
| it would be the end of the US and they know it and the US
| govt knows it. I repeat: they can get away with ANYTHING.
|
| I think you will get your lulz.
| RC_ITR wrote:
| > There are 100's of other examples of quite outrageous
| FTX-style crime.
|
| Woah woah woah. FTX (in the most generous telling) didn't
| even have its own bank account.
|
| Let's not conflate that with not proactively reaching out
| to snitch on a customer (as if they are some regulatory
| agency).
| seviu wrote:
| Add to the mix that despite all its flaws (which are
| many) crypto is way more transparent than a classical
| financial institution due to the fact that one can track
| all movements. Even for entities like FTX, we can guess
| what their wallets at and how many funds they hold. Part
| of the FTX debacle was due to depositors figuring out
| that it didn't have enough money to cover their debts.
|
| Unfortunately for USD backed currencies we still don't
| have any idea where or who holds the backing assets. They
| might as well be non existent...
| aftbit wrote:
| Alas, the biggest scams in crypto are more opaque than
| that. How many dollars does Tether hold, and in what
| forms? Where is all of this "commercial paper"? The
| biggest crypto falls are still to come.
| themagician wrote:
| I want something GOOD like FTX running on Quickbooks.
| That's what people need to aspire to these days. That's why
| I like Wells Fargo. Create fake accounts... so absurdly
| brilliant.
|
| JP Morgan might be the biggest, but I just don't have faith
| in them like I do Wells and Citibank or even HSBC. Some
| lame overly complex scheme isn't want I want. I want a
| decimal in the wrong place that everyone just ignores
| despite nothing ever adding up. I want vaults full of gold
| on the books that don't even exist... said to be held in
| countries that don't exist anymore. I want Superman 3
| salami slicing, but maybe one that's been running
| perpetually since 1980... and it turns out _that 's_
| actually the inspiration for the scam in the movie. I want
| Snopes to have to change something from "Legend" to "TRUE".
|
| The world needs to be reminded that the USA is #1 and
| always will be.
| usefulcat wrote:
| > FTX running on Quickbooks
|
| Quickbooks? I thought they were using post-it notes.
| Maybe I underestimated them..
| themagician wrote:
| Post-It note was for the login.
|
| Username: accounting@ftx.com
|
| Password: hunter2
| johnvanommen wrote:
| There was a hedge fund manager / college professor from
| Irvine CA who figured out Madoff's scam in the 90s, and
| nobody paid attention to him whatsoever.
| blowfish721 wrote:
| There's a good podcast (American Scandals) covering that.
| https://podcasts.apple.com/se/podcast/american-
| scandal/id143...
| themagician wrote:
| I never liked Madoff. Not inventive. Never found him
| aspirational. He also stole from seniors which I'm not a
| fan of. He deserved his fate.
| yieldcrv wrote:
| If you like absurdity, FTX has recovered 7.3 billion out of
| the 8.6 billion hole and plans on relaunching the exchange to
| make the last billions back in fees
|
| Most noteworthy is that this quick 8 month turnaround is
| partially thanks to the blockchain, and under no new laws
| being passed
| senectus1 wrote:
| wth?
|
| you got a good link for this? I stopped paying attention a
| while ago
| readthenotes1 wrote:
| [dead]
| yieldcrv wrote:
| reuters good enough?
|
| https://www.reuters.com/technology/bankrupt-crypto-
| exchange-...
| senectus1 wrote:
| its kinda lite on details, but i guess "Cash and liquid
| crypto assets" says enough.
|
| I think the claim they have "recovered 7.3 billion" is an
| overstatement... but time will tell.
| Technotroll wrote:
| Honestly, I've long since made peace with not ever
| getting back those assets. In that way I accept the risk
| I took when making the trades in the first place. But
| what really irks me with the FTX bankruptcy is how my
| assets were suddenly impounded, effectively stolen from
| me, and I wasn't allowed to trade it anymore even to
| avoid further losses. Yes, contracts, articles, and so
| on, but I'm a simple man: I pay. I own. So, if I am to
| ask compensation for anything, it must be 1. to get my
| crypto back, and 2. to be paid damages for the inability
| to trade during a period of free fall. As it's now,
| however I guess I can count myself lucky if I even get
| back parts of my own crypto, if anything. So, I've
| decided to not spend energy on it.
| yieldcrv wrote:
| we can debate liquidity and depth of the market for those
| assets, but they're also just using the same standard as
| what was lost as well as reporting where thats just asset
| price appreciation
| lottin wrote:
| How is any of this partially thanks to the blockchain?
| yieldcrv wrote:
| because the clawbacks are easier to track through
| multiple hops, even when the initial recipient had
| already done other things with the funds
| lottin wrote:
| What do you mean clawbacks? Blockchain transactions are
| irreversible, right?
| lesuorac wrote:
| Sure but a court can order you to do a future transaction
| that effectively reverses the original. (Akin to how
| almost every single reversed transaction _actually_
| works).
|
| And if you refuse, they can order your local (or not so
| local) PD to jail you until you comply.
|
| Blockchain still exists in the real world with its very
| real rules.
| RC_ITR wrote:
| What does _that_ have to do with decentralized consensus?
|
| You know, the _core differentiating feature_ of
| cryptocurrency.
| yieldcrv wrote:
| it doesn't and that wasn't the premise of why we can
| acknowledge that using that payment network saved
| everyone time in the clawbacks, despite the shaken
| confidence that the exact same event caused into that
| payment network
|
| the main distinction involved here is that not knowing
| who to subpeona for records slows down everything,
| whereas with the blockchains used most of the
| participants consolidate funds into KYC'd exchanges and
| we know which ones they went to, speeding up requests for
| records and subsequent action
| ricardobeat wrote:
| In other words, blockchains make it easier to track what
| we are doing with our money, without the justice system
| being involved, and that's somehow good.
| yieldcrv wrote:
| the blockchains that were used, as I wrote with high
| intention and precision because there are other
| blockchains that don't offer that transparency
|
| and then it comes to how they were used to leverage that
| capability, because people were not seeking to obfuscate
| or hide anything
|
| if that's your _actual_ goalpost, then don 't worry,
| "they were holding it wrong" and you can hold it
| correctly to fit your needs
| RC_ITR wrote:
| Wait, we recovered almost all of Madoff's money too?
|
| Traditional finance has _plenty_ of clawback mechanisms.
|
| You're completely straw-manning a world in which
| traditional finance isn't also mostly done on KYC'ed
| exchanges.
| yieldcrv wrote:
| I actually think Madoff is a _great_ example of
| comparison, and didn 't mention that because I felt
| someone _else_ would call that a strawman, ironically, or
| at least choose to say something about the difference in
| the size of those frauds.
|
| The main difference is the time, you're choosing to
| ignore that. 8 months versus .... how many years for
| Madoff? A decade?
| RC_ITR wrote:
| >But the biggest sum has been in "category A crypto"
| tokens with large and liquid markets. FTX now has more
| than $4bn of crypto assets under its control, a total
| that has been bolstered by a sharp recovery in
| cryptocurrency prices.
|
| >Bitcoin, which had dropped below $20,000 after FTX's
| collapse, this week broke $30,000 for the first time
| since June 2022 , with other cryptocurrencies including
| ethereum charting a similar course.
|
| This seems to go against your claims. - the existing
| assets just became more valuable in USD terms. Actual
| recoveries:
|
| >Recovery efforts have more than doubled that figure so
| far, court filings show, including $800m in recovered
| cash and a further $600m in "settlements and investments
| receivable".
| themagician wrote:
| It's not about the money, it's about the message. It's
| about running a global financial institution on Quickbooks.
| It's about not having a bank account. It's about not having
| stop losses. It's about wiping out losses by making your
| own money. It's about TOM BRADY. It's about the Larry David
| ad that ends, "Ehhhhh, I don't think so. And I'm never
| wrong about this stuff. Never."
|
| FTX really elevated fraud to an art. I'm not even joking.
| It's beautiful. It's so insane when I think about it that I
| don't even think it should be illegal. He should through
| his entire defense behind the 1st Amendment, say it was all
| part of an elaborate roleplaying game, and _somehow_ walk.
| yieldcrv wrote:
| for me its more about how much this mismanaged business
| shook confidence in "crypto", instead of just this
| mismanaged business - the way we would judge any other
| sector. while the crypto aspect is helping resolve this
| far faster than other insolvent schemes of similar size
| and magnitude.
|
| and Sam Bankman Fried is not involved in that.
|
| yes, Sam did that elaborate thing, the people recovering
| and the bankruptcy court are not Sam.
| themagician wrote:
| It really didn't though. Crypto is the never ending,
| infinite ponzi. It's unshakable, unsinkable. The hype is
| real.
|
| What Sam did was elevate things. Anyone can run a crypto
| scam. Literal kids do it. But to create art is something
| else. Something more human. Something timeless. SBF is
| perhaps the ultimate use case for crypto.
|
| I had about $100 in FTX. Worth it. Totally worth it.
|
| I'm stoked for the Coinbase collapse. My body is ready.
| Jesus, take the wheel!
| Nition wrote:
| The Tether collapse is where it's really going to get
| exciting IMO.
|
| By the way I love your writing style here, reminds me of
| James Mickens.
| yieldcrv wrote:
| okay I can play along
|
| I just want my Coachella 2022 NFT, wen bankruptcy judge
| do something
| smcl wrote:
| I'm not sure we _can_ treat crypto like any other sector
| - there are no others which are afflicted by a rapid
| succession of high profile scams, scandals and collapses.
| Confidence is shaken because there 's no other rational
| response to this situation.
| yieldcrv wrote:
| oil exploration, energy, banking, construction...
|
| its really a choice to consider mismanaged companies as
| the sector itself, at least the construction industry
| started putting X days since incident as an effort to
| differentiate each site since nobody was hearing about
| sites that were operating fine. confidence isn't shaken
| for everyone in the crypto space, and there might be a
| need for services to point out how many days since
| incident they've gone, since nobody currently indexes
| that or reports on that while the majority of activity
| occurs within services that operate smoothly and as
| expected
| smcl wrote:
| I dunno, you're asking crypto to be compared with sectors
| that actually provide services people need who between
| them have had a few high-profile flameouts over the
| course of history. Whereas crypto has had a fairly quick
| boom-and-bust and the biggest players frequently either
| go bust or are heavily exposed to those who already have
| (and are desperate to convince everyone they're not and
| are actually fine).
|
| I'm not sold on crypto and you'd have a hard time
| persuading me to change my mind, I'm afraid.
| yieldcrv wrote:
| You only have to look at what you're ignoring in order to
| hold that view
|
| > actually provide services... need
|
| You're valuing entertainment at zero (nobody _needs_
| that), vice at zero (nobody _needs_ that), financial
| services at zero, and a perpetual bug bounty at zero,
| those are the major components of the crypto space
|
| and you simultaneously hold every participant in any of
| those sectors as both representative of the whole thing,
| and equally as relevant as the next participant
|
| persuasion is not the word I would go for, the
| disingenuous nature of that perception is the main
| observation
| Mistletoe wrote:
| Are you sure about that $7.3 billion? Last I checked, SBF
| was counting illiquid nonsense like Serum and MAPS tokens
| in that number.
| yieldcrv wrote:
| SBF is not involved, its the new management and the
| bankruptcy court
|
| https://www.reuters.com/technology/bankrupt-crypto-
| exchange-...
| Mistletoe wrote:
| I'd like to see a list of those assets because this one
| consisted of a bunch of garbage tokens largely worth
| nothing.
|
| https://cryptoslate.com/breakdown-of-current-ftx-assets-
| show...
|
| The top token in that list, Serum, listed as worth $1.9
| billion, had a trading volume of only $2 million
| yesterday on Binance. -2% depth is $60,000 lol.
|
| https://coinmarketcap.com/currencies/serum/markets/
| yieldcrv wrote:
| we can debate liquidity and depth of the market for those
| assets, but they're also just using the same standard as
| what was lost as well, so does it really matter?
|
| unless we're going to start with "they didn't lose $8.6bn
| and an independent valuation put all lost assets at $2bn
| so now everyone's solvent what an amazing turnaround"
| Mistletoe wrote:
| One huge difference is that the $8.6 billion number
| probably included all the BTC and ETH that they were
| supposed to have and that was deposited with them. Those
| were actually liquid and worth a lot. When FTX failed
| they didn't have the BTC and ETH people had deposited
| with them. The theory is that FTX/Alameda used it all to
| pump tokens they owned, buy real estate and make deals,
| and of course losing trades. No one in crypto values this
| new list at 7.3 billion. It's actually a source of much
| ridicule and hilarity if it is similar to that list I
| posted.
| Aaronstotle wrote:
| I thought this was because BTC is up 50% from November?
| yieldcrv wrote:
| partially, it would be at $6.2bn based on November 2022
| crypto prices.
|
| https://www.reuters.com/technology/bankrupt-crypto-
| exchange-...
| RC_ITR wrote:
| > Most noteworthy is that this quick 8 month turnaround is
| partially thanks to the blockchain
|
| What are the specific examples of this that are intrinsic
| to crypto and not any digital transaction?
| derbOac wrote:
| Yeah these sorts of figures always frustrate me because the
| historical context for these things is so much broader, and it
| seems obvious to me to go back to the 80s, if not earlier.
|
| There's a better figure here I think:
|
| https://www.pewresearch.org/short-reads/2023/04/11/most-u-s-...
|
| Also some nice figures here:
|
| https://www.bankingstrategist.com/history-of-us-bank-failure...
| kibibyte wrote:
| TIL there was a different "First Republic Bank" that failed
| in 1988. This name carries a curse now.
| DANmode wrote:
| If you're not even digging deep enough to avoid naming your
| firm after a failed one, what else are you missing?
| DonsDiscountGas wrote:
| Going by Wikipedia, in 2021 dollars I count:
|
| 1980s S&L crisis: $654 Billion (summed 1984-1992 failures)
| across 23 banks
|
| 2008 crisis: $733 Billion (summed 2008-2011 failures) across 61
| banks
|
| 2023 so far (it's only May): $556 Billion (Signature + SVB +
| FRC) across 3 banks.
|
| It looks like 2008-2011 is the "winner", although other
| commenters have mentioned forced mergers etc. may not be
| counted.
|
| https://en.wikipedia.org/wiki/List_of_largest_bank_failures_...
| haldujai wrote:
| At the very least that's missing Fannie, Freddie, Bear,
| Merrill, Lehman, TARP and arguably AIG for another 1.2T+,
| granted a lot of this was eventually repaid as the FDIC will
| be as well.
| DonsDiscountGas wrote:
| None of those are consumer banks. Every dataset has to make
| scope decisions.
| boringg wrote:
| That on 2022 dollars?
| dnissley wrote:
| Aren't there some relevant details missing from this kind of
| analysis? Banks failing just means that the value of the
| banks assets fall below the value of their deposits, right?
| In which case the degree to which that happens seems to be
| highly relevant to this kind of comparison. E.g. the value of
| assets falling to 50% of deposits in bank failures in
| financial crisis A vs 90% in financial crisis B
| pjc50 wrote:
| In most of these cases the fall is to 99% of the value,
| because that's the point at which they have to cease
| trading.
| rr808 wrote:
| > conglomeration of the many banks into the few we have today
|
| There are still thousands of banks in the USA. I dont really
| see why there should be more than 100. Canada has 5 big ones
| and a few dozen tiny ones. Same in UK and Australia.
| peter303 wrote:
| Deposit banks were banned from crossing state lines and
| investing in equities markets after the Great Depression.
| These limitations were removed in the 1990s.
| dalyons wrote:
| It's not all roses - in Australia and Canada the few major
| banks operate in pseudo-cartel fashion. There's few enough
| that they can effectively collude without doing it illegally.
| a3w wrote:
| saturday night life crisis?
| cyclecount wrote:
| Savings and loan crisis
| https://en.wikipedia.org/wiki/Savings_and_loan_crisis
| vrglvrglvrgl wrote:
| [dead]
| ausudhz wrote:
| "too big to fail"
| tempestn wrote:
| Looking at this, it seems even more odd that no tiny banks have
| failed along with these larger ones.
| AYBABTME wrote:
| It's just a matter of visibility. The failed banks so far were
| all family of the tech industry. Since the tech industry is so
| far one of the most impacted by contracting conditions, its
| banks are being poked at first. Now that it's done, the other
| banks are going to get some love.
| torcete wrote:
| Ok, this must be a silly question but... What programming
| language/library is that?
|
| I am used to R + ggplot2 and I am aware that are quite a variety
| of other tools out there. In this case I unable to identify which
| one he is using.
| virtuallyvivek wrote:
| JavaScript and the library is Observable Plot
|
| Link: https://observablehq.com/plot/
| aketchum wrote:
| The person who wrote this blog also wrote the very popular and
| famous D3 visualization library for Javascript. It also looks
| like this is javascript from the code.
| torcete wrote:
| Ah, thanks. I can see it is also based on the grammar of
| graphic. Neat!
| adasound wrote:
| Jesus Tap-dancing Christ
| dilippkumar wrote:
| I'm stealing this excellent phrase.
| lisasays wrote:
| A veritable Mandelbrot Set of failure
| ShaurAsar wrote:
| [dead]
| 5kg wrote:
| <del> r should be sqrt(assets). </del>
|
| It is.
| PheonixPharts wrote:
| I generally love Mike Bostock's work, and this is a beautiful
| visualization, but I think this comment points out why circles
| are just a bad way to represent anything visual other than
| pizzas: it's a leaky abstraction (which is a real sin in
| visualization)
|
| You have to know _how_ the chart is generated in order to
| correctly interpret what you 're seeing. The value can be the
| radius, diameter (how pizzas are measured) or the area itself!
| All of these choices lead to different interpretations of what
| you're seeing.
|
| Then, on top of that, we're just not great and visually
| comparing _areas_. Pizzas are a great example of this. A 12 "
| pie and a 16" pie don't look _that_ different but you 're
| talking about nearly twice the amount of pizza! A good example
| in this visualization is Signature vs SVB
|
| Then on top of that we have the dimensions of the circle
| forcing the visual to overlap on the x-axis without this
| meaning anything concrete.
|
| All that you can meaningfully take away from this visually is
| "2008 had one big and a ton of small failures, and currently
| we're seeing 3 big, but not quite as big failures", and
| unfortunately there's not a lot more you can get out of this.
| Because of the x-axis problem it's hard to even tell if WaMu
| preceded some of the others or not.
| loeg wrote:
| Are the assets inflation-adjusted, also?
| DonsDiscountGas wrote:
| Or else replaced with a fixed-width rectangle and scale the
| height by assets. Would fit more easily on a timeline and
| humans are much better at comparing heights than we are areas.
| mbo wrote:
| your wish is my command: https://observablehq.com/@mjbo/bank-
| failures-as-a-stacked-ba...
| DonsDiscountGas wrote:
| Nice!
| jeffbee wrote:
| It is! That's the default radius type for the dot mark on
| Observable Plot. To play with it, add `type: "linear"` to the
| dict on line 6.
| 5kg wrote:
| Thanks. I guess rename 'r' to 'area' will make it easier to
| read.
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(page generated 2023-05-03 23:02 UTC)