Reasons the banking crisis isn’t a repeat of 2008

The fact that they publish this in the first place, is worrying, to say the least.<p>It&#x27;s also quite true - the banking crisis won&#x27;t be a repeat of 2008.<p>But, unlike 2008 which was fairly limited to (arguably huge) banking and residential mortgage sectors, this crisis will hit hard everywhere - valuations are still insane, the % of zombie companies is off the charts, inflation is everywhere, FED and governments have much less room to manoeuvre (contrary to what the article claims).<p>In the past 3 weeks, 3 fairly big US banks were seized by regulators, and a 166 year old Suisse bank was rescued.<p>My personal indicator for when the shit is really hitting the fan, is when Warren Buffett starts buying stuff.

Serious question: Is it a good idea (ever) to trust a bank&#x27;s take on a financial crisis?

History never repeats itself, but it does often rhyme.<p>We cannot have a decade of 0% interest rates and expect no consequences. Peter Schiff predicted this from the moment the fed bailouted the banks in 2008.<p>There&#x27;s nothing the fed can do to escape this one, it&#x27;s either massive inflation or massive recession. The fed has avoided the latter by bailing out the banks again so expect double digit inflation for the next decade.<p>PS: My personal CPI (rent + food) is 23% so I&#x27;m already experiencing this. I would advise everyone to calculate their personal CPI because that&#x27;s what affects your standard of living...The government numbers are rigged and everyone&#x27;s reality differs...

It aint fucking lost on me that financial papers spent the better part of 2022 arguing that we were headed for a recession. The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we&#x27;re in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued.<p>The fucking owners of capital seem bound and determined to destroy their own system.

Okay did anyone else get tricked by that websites dark pattern?<p>We&#x27;ve all been trained to not even look at the &quot;do you accept cookies&quot; thing anymore and just blindly press it. On this website, it&#x27;s actually an ad link to their paid services that looks just like one of those accept cookies buttons.

Who cares about keeping deposits safe when money isn’t worth anything?<p>Americans don’t even have money in the bank. Median savings is $4500.<p>Many people who perform socially useful jobs can barely afford the basic basket of goods like rent, food, and transportation.

I find it more interesting few seem able to recall what happened the year prior in 2007.<p>Recall the elevated marketing hype from those trimming portfolios knowing full well what was happening. What I see is a short term 30% sales bump in real-estate (ratio of debts in negative amortization) as the amateur tries to find inflationary shelters after getting disappointed by laggard bond markets.<p>Kind of reminds one of giving sugar-cubes to raccoons... knowing they wash their food in water as habit.<p>Rule #9: if people start answering odd questions you didn&#x27;t ask, than one probably should be extra cautious.<p>My bag of popcorn is ready. =)

Who wouldn’t trust this unimpeachable source of information about bank health?<p>I know, I know. Snark isn’t allowed. Feel free to downvote if you love how Chase Bank treats you as a customer.

<p><pre><code> The primary function of central banks isn’t managing inflation and employment, it is acting as a lender of last resort. In this way, central banks provide the bedrock for the banking system. The Fed’s ability to perform this role expanded during the Global Financial Crisis. They created many different types of lending facilities to provide liquidity to banks, and many former broker-dealers (like Morgan Stanley and Goldman Sachs) became bank holding companies so that they could access them. </code></pre> Am I crazy or was there an entire section that said &quot;this isn&#x27;t a crisis because the fed is happy to give banks that make poor investment decisions taxpayer money?&quot;<p>Doesn&#x27;t this say that when a bank makes a poor investment, they can borrow from the taxpayer so they don&#x27;t have to realize their loss?

I wonder about the end-game effect of the BTFP. Great, today banks got enough liquidity thanks to the Fed, but after 90 days they have to return borrowed funds together with a relatively high interest and get back semi-worthless paper (because selling it will result in realized losses). In 90 days credit conditions probably will be even tighter than today and a lot of people will flee to the too big to fail banks. How we expect small&#x2F;mid banks to stay stable after that?<p>And I don&#x27;t even want to touch the question of fiscal deficits, which not only do not show signs of moderation, but accelerate even further. It either ends in a real default, or persistent high inflation, with negative real rates, which in a sense is also a default.

It feels like all the content here is subtext... so I guess I get to do Philology. These are the given reasons:<p>| this probably isn’t 2008, for three key reasons:<p>(1)Policymakers have tools to solve banking crises, (1.5) and the bigger banks are much stronger (2) The economy is in a much different place (3) The magnitude of the problem is, so far, much smaller |<p>His take on reason #1 is that MMT has won. Monetarism is over now. Dollars in the bank are dollars in the Fed and these are infinite. They&#x27;re still pretending in the rhetorical, political and legal sense... but the <i>policies</i> are not that anymore. The Fed can, if it wants, increase rates but as it does it will fully back banks.<p>Banks are no longer limited by the value of securities on their books. This is now known not to cause <i>hyper</i>inflation, and regular inflation is either tolerable or someone else&#x27;s job.<p>reason #2 - For Non-banks like a company with a loan or a human with a mortgage, &quot;Monetarism is dead&quot; means nothing. They&#x27;re affected by rate increases and <i>can</i> run out of money and get wiped out. Luckily, debt is not super high like it was in 2008.<p>He charts household debt, but I think the bigger &quot;story&quot; is company debt. Google, Amazon, even Tesla are all about equity. They&#x27;re don&#x27;t care about interest rates.<p>Reason # 3 needs no commentary: &quot;The Global Financial Crisis was driven by price declines in low-quality assets with poor disclosure leading to a solvency crisis. This episode has been driven by price declines in high-quality assets with pristine disclosure leading to a liquidity issue.&quot;

To summarize:<p><pre><code> &quot;Policymakers have tools to solve banking crises [...]&quot; </code></pre> With TARP&#x2F;EESA still in place Fed&#x2F;Treasury have more power<p><pre><code> &quot;The economy is in a much different place&quot; </code></pre> XLK has subsumed XLF since 2008<p><pre><code> &quot;The magnitude of the problem is, so far, much smaller&quot; </code></pre> Look forward to my upcoming essay &quot;Casting doubt on the commercial real-estate economy&quot;<p>In conclusion, &quot;we still don&#x27;t see it coming&quot; avoiding the term, &quot;subprime&quot; or acknowledging that predatory lending ever occurred, and this weird typo:<p><pre><code> &quot;[...] the primary facility *though* which banks can borrow [...]&quot;</code></pre>

Of course isn&#x27;t a repeat, it&#x27;s just another flavour with similar consequences: bailouts, money printing, rampant inflation, credit crunch, and so on. No matter the language acrobatics and fancy terms used to describe it.

I wasn&#x27;t worried about this until Chase Bank felt the need to publish &quot;Reasons the crisis isn&#x27;t a repeat of 2008&quot;

Just because a cookie doesn&#x27;t crumble the same way doesn&#x27;t mean the cookie isn&#x27;t crumbling.

I’m a quarter way convinced mid-sized banks’ stock shouldn’t be publicly traded.

I&#x27;d argue a big difference between 2008 and now is that in 2008 we mostly saw an institutional run on the bank after Lehman, i.e. money market funds and other banks not trusting banks and refusing to lend longer term than overnight.<p>What we are seeing now is a retail run on the bank, the electronic equivalent of people hearing rumours on the street and queuing in front of branches (except now with twitter and their banking app). In some cases for good reason, others not so good.<p>I think the difference is that retail depositors don&#x27;t look at financial ratios (and shouldn&#x27;t be expected to be able to understand them). So how do you convince them?<p>One thing that is certain is that contrary to what the article says, none of the regulations introduced in response of the financial crisis helped. Higher capital ratios? Credit Suisse had 14% CET1 ratio and there was still a run. Higher liquidity requirement? Credit Suisse had over 200% LCR and there was still a run. Bailin? The swiss regulator judged that doing a full bailin of a large financial institution would be too disruptive to financial markets so only bailed in a small tranche of the CS capital stack (AT1). So what tools exactly are available to regulators that weren&#x27;t in 2008?

1. Because in putting all their money into MBS, SVB essentially invested it with merrill lynch pierce fenner and smith circa september 2007, and per temporal waste management rules, when you send toxic waste back in time to destroy it, you can&#x27;t call it a &#x27;repeat&#x27; when it is still a problem in the present<p>2. Because chase wasn&#x27;t writing listicles in 2008<p>fwiw chase&#x27;s actual argument is &#x27;bank stocks are in the shitter&#x27;. This is not what I would write if Chase hired me to write a listicle about Chase being a safe and good place to store things.

JPMorganChase bought Bear Stearns for $2 a share in 2008, but this is entirely unlike UBS acquiring Credit Suisse this past week?<p><a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2008&#x2F;03&#x2F;17&#x2F;business&#x2F;17bear.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2008&#x2F;03&#x2F;17&#x2F;business&#x2F;17bear.html</a><p>Credit Suisse shareholders were paid in shares of UBS, in a major value writedown, quite comparable to the JPMChase deal for Bear. Certain select shareholders (Saudi Arabia and Qatar) seem to have been protected while others (AT1 bondholders) were not.<p>Patrick Boyle&#x27;s YT channel is doing a great job on this, first became aware of it during the SBF spectacle, just as good now:<p><a href="https:&#x2F;&#x2F;youtu.be&#x2F;hV0gpO1B6tU" rel="nofollow">https:&#x2F;&#x2F;youtu.be&#x2F;hV0gpO1B6tU</a><p>&gt; &quot;UBS was clear from the very start that they would only participate in the deal if it was cheaply priced and if UBS could be indemnified from any of the legal issues that Credit Suisse was potentially facing... &#x27;This is no bailout&#x27;, the Swiss finance minister said, &#x27;This is a commercial solution&#x27;&quot;<p>So the difference is what, it&#x27;s more globalized this time around? Note that indemnity provision was likely informed by fallout from the JPMChase deal for Bear, see this 2013 Reuters Blurb:<p>&gt; &quot;New York state’s lawsuit against JPMorgan Chase &amp; Co. alleging fraud in mortgage-backed securities sold by Bear Stearns may be one of the broadest cases to come out of the financial crisis...&quot;<p>It seems quite familiar. Investment capitalism goes belly up once again due to short-sighted greed and a lack of regulation, and the government steps in to cover the losses for the fearless risk-taking entrepreneur class (who have bought most of the politicians) in what certainly looks like an &#x27;entitlement program&#x27;... while libertarians everywhere remain curiously silent. Con artist much?<p>Social safety nets for the billionaire investors are needed to prevent societal collapse, it seems. But who cares about all the homeless encampments, they should have learned how to program... it&#x27;s their own fault, and people need to take responsibility for their actions...

A good strategy to not get to a &quot;crisis&quot; would be to keep increasing interest rates in order to squeeze the middle class and at the same time print trillions to provide liquidity to the big players like banks. In this way not only will you push wages down through constant layoffs, remove all the advantages that employees had for negotiation during the coronoa boom. But you also squeeze the middle class with huge inflation thus eroding all their savings and hope.

In 2008, the Treasury and Federal Reserve had a ton of ammo to use to provide liquidity. Since then, they have tried to inflate their way out of it using creative accounting and quantitative easing.<p>The reason this could be worse than 2008 is that those methods will not work as well.<p>Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc.<p>When they tried to sell it to provide liquidity for deposits they found there were not many buyers for it.<p>Since 2008, foreign purchases of long term debt have dropped from many of the main credit countries with no real replacement other than the federal reserve.<p>If the Fed moves from a buyer of last resort to the only buyer then that is game over. QE won&#x27;t help because it will cause inflation. Inflation will move people, foreign countries and institutional investors away from long term debt.<p>Basically a hyperinflationary environment with systemic bank failures all caused by a sovereign debt crisis. Before long just funding the Govt will be impossible because the debt will no longer be seen as safe as it once was.<p>The difference is that the collapse won&#x27;t be as immediate as 2008. It can be much more of a controlled demolition, until the methods they have used stop working.<p>It all just has to collapse at some point and reach an equilibrium again. It&#x27;s only a matter of time...

This time its different.<p>Wait we have been through this before. The 2000 dot.com boom, 2008 subprime banking crisis where we bailed out the banks and the banking bonuses. 2023 silicon valley bank, credit suisse. Central bank zero interest policy caused this. Somehow it started in 1980-1990 Japan with their real eastate crisis and japanese bonds central banks going towards zero interest rates. Hopefully it will be better this time.<p>I guess now we will have a mix of startup bubble, real estate bubble, obligation bubble, stock proce inflation of p&#x2F;e rates valuations.

China is stronger than it&#x27;s back in 2008. If America continues playing these stupid games, it will end up loosing power to China.<p>You can not export your problems to the world all the time and expect no consequences

&gt; For now, the magnitude of this problem is smaller<p>I am not sure about that. In 2008, it was only a crisis in the US real estate lending market that became contagious. Now, it is a crisis of global inflation. All long-term loans were granted by the banks in recent years with the expectation of much lower interest rates. Their prices were ment to cover the risks. Sinces all such loans were too cheap, they actually do not cover the risks appropriately. This means that banks worldwide will face large deficits in the foreseeable future.

They want to convince investors not to withdraw their money based on pseudo-logics. They want to gather money by leveraging on emotions and feelings. They can do both only with dumb people.

Banking will only change when we keep the management fully responsible. The bank goes bankrupt, the management goes bankrupt, see how they will gamble with your money then.

Credit suisse looked more like 2008. Svb, frc not so much.

adding liquidity via “policy maker’s tools” doesn&#x27;t fix the problem or provide assurance that Credit Suisse isn’t the beginning of something else<p>CS AT1 bondholders now have gigantic $17bn hole in their balance sheet&#x2F;portfolio<p>The whole AT1 bond market is experiencing losses of similar size to the treasury bond market<p>If anybody collateralized those? Bigger losses<p>Losses aren&#x27;t controversial, but they are when theyre losses with other people’s money who arent investors

The three reasons: (1) Policymakers have tools to solve banking crises, and the bigger banks are much stronger (2) The economy is in a much different place (3) The magnitude of the problem is, so far, much smaller

here is my take: interest rates are already where they used to be in 2008, that would imply that people have a hard time paying back their mortgages. Trouble with housing would imply that real trouble is somewhere around the corner.<p>here is a tools that is showing interest rates over several decades: <a href="https:&#x2F;&#x2F;tradingeconomics.com&#x2F;united-states&#x2F;interest-rate" rel="nofollow">https:&#x2F;&#x2F;tradingeconomics.com&#x2F;united-states&#x2F;interest-rate</a>

That’s what they said last time and the time before that.

It quite clearly is not <i>a repeat of 2008</i>.<p>It is a repeat of the Savings and Loan Crisis of the 1980s and 1990s.<p>I am not sure they can write and publish that piece however

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If anything the banking crisis is more of a repeat of 1973 than 2008.

It helped greatly that the fed acted so fast. Had nothing been done it would have been way worse. Even Charles Schwab even was down 20% on Monday ,and this was after the bailout. Things were getting really scary.

&quot;Nothing to see here! Move along!&quot;

it isn&#x27;t a repeat it&#x27;s just another crisis with different causes

Lol thanks chase