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The point stands - if everything is fine, as many banks seem to be saying, their intervention would not be necessary.
by bthrn 4y ago
The point stands - if everything is fine, as many banks seem to be saying, their intervention would not be necessary.
- Swenrekcah 4y agoPeople in a panic can destroy perfectly good things because they're afraid. This move is an attempt to reduce uncertainty and panic.
- pksebben 4y ago"perfectly good" in this case reads a little like "fragile". We over optimize when things are good and then wonder what happened when there's a pothole. of course people are fickle and of course rates are going to change. Not being prepared for this is irresponsible.
- Swenrekcah 4y ago> perfectly good" in this case reads a little like "fragile". All banks are vulnerable to a bank run, no matter how well they’re managed. I agree with you though, SVB (and some others) failed in their risk management. Partly due to relaxed regulations I suspect. However that doesn’t mean all the banks made the same mistakes. It’s easy to see why people are worried but a panic will only make things worse.
- ceejayoz 4y agoIf someone decided I had to pay my entire mortgage tomorrow, I'd need an intervention of some kind. This doesn't mean I can't pay my mortgage. The banks have enough confidence the bank is solvent to risk losing at least part of $30B to prevent a bank run, which can be self-fulfilling prophesies. We've seen stuff like this pretty recently in other venues; people were getting into fistfights over toilet paper in 2020. It didn't mean we'd always be short on toilet paper; it was a panic and short-term issue.
- nikanj 4y agoThe banking crisis really hilights why It's a Wonderful Life gets shown every Christmas. The bank doesn't have your money in the vault, it's been lent out to other customers. Their loans can be in good standing and the bank can be perfectly solvent - but they can still have a liquidity issue if everyone wants to take out their deposits at the same time.
- pgwhalen 4y agoThe point doesn’t stand, unless you ignore the difference between solvency and liquidity, which is a grave mistake when reasoning about banks.