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.
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.
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 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.
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.
You might find Kenneth C. Griffin is more your cup of tea in that case.
Bonus: he hasn't been caught yet. His crimes are still on-going.
Same principal crime model as Madoff though: own a market making business + a hedge fund, sell stocks (naked), take the money, give nothing in return.
There's some other petty stuff like front running household investors through PFOF and instructing the broker you buy order flow from to shut down the buy button for retail investors when the price moves against you. But that's just the petty crime.
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…
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.
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
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.
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.
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!
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.
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
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.
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”
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
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.
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.
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
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
"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?
Yeah it's tricky, if not impossible, to pin down exactly how any one person's money flows through the books but at the end of the day all bank profits come from their customers. We may pay account fees, overdraft fees, document and origination fees when they open a loan, interest on a loan if they don't sell it, etc.
Banks are in an interesting place because effectively any tax payer is going to have to have a bank account. In my opinion, that means tax payers are directly funding banks and the FDIC.
There are other types of customers for banks so I wouldn't argue that tax payers are exclusively paying those feels but it feel disingenuous to see politicians claim tax payers aren't footing the bill at all.
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
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.
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.
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.
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.
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).
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.
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.
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.
> 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.
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.
Deposit banks were banned from crossing state lines and investing in equities markets after the Great Depression. These limitations were removed in the 1990s.
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.