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naraburns  nihil supernum  1yr ago (text post)   34909 thread views

Culture War Roundup for the week of March 13, 2023

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So I’m starting to just assume there’s zero reason for regional banks to exists.

This whole affair has actually convinced me of the exact opposite - there's no reason for gigantic banks which can cause the entire economy and unrelated businesses to go under/suffer when placed under stress. There shouldn't be any banks which are systemically important and require bailouts in order to prevent the collapse of the entire economy. Beyond the incredible fragility induced by having corrupt financial institutions with broken incentives (note the people actually profiting off these issues and selling stock in SVB before the news broke), the sheer concentration of wealth and power that occurs in those banks gives them far more influence over the levers of national power than is healthy for society.

So then why have GSIBs losts. They have higher capital ratios. They’ve lost every regulatory fight for a decade. The shit SVB did would never be allowed at the mega banks.

Being that SVB was deemed systematic and got a full bailout it’s obvious banks like them were benefiting from easier regulations while still being systematic.

I guess the solution is the regionals are treated like the GSIBs. So they need to raise their tier one capital about 50-80% right now to fit the same standards as the GSIBs. And we just drop the asset cap down to 10 billion for regulatory reasons since these guys are claiming their depositors need protected.

GSIB

Could you please explain this acronym?

Global systematically-important bank.

“Too big to fail” (without bringing down everything else too)

I'm sorry but could you please reword your comment? I have no idea how to parse the sentence "So then why have GSIBs losts." and the grammar errors elsewhere leave me unwilling to talk in depth on a technical subject.

@sliders1234 appears to be arguing: if GSIBs are so powerful, we should expect them to have less regulation. Mid-sized banks like SVB are dodging regulations which (hopefully!) apply to full-size ones, but are still getting the benefits of bailouts. If we are giving them the benefits they should also be paying the costs.

I don’t know what the bit about “asset cap” means.

$250 billion in assets was trigger for tighter regs.

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