“Financial institution administration should be investigated”

All through our historical past, the US has at all times had a dysfunctional banking system. There was by no means a golden age of American banking. That doesn’t imply the system was at all times in disaster, however the potential for crises was at all times there.  (Even within the Seventies.)  This isn’t Canada.

There are various issues with the US banking system, however all of them are likely to revolve across the mixture of too many undiversified banks and the socialization of monetary losses.  That mixture creates ethical hazard, which inspires extreme danger taking.

This tweet caught my eye:

There is no such thing as a “if”.  We’re in hassle, and we’ve been in hassle for our whole historical past.  And if depositors have faith in deposits that exceed $250,000, then we shall be in even higher hassle.  The ethical hazard downside will develop into even higher.  Sadly, I think that SVB depositors have little to concern.

Dodd-Frank was supposed to repair the “downside” after the 2008 banking disaster.  Actually, it did virtually nothing to repair the underlying downside as a result of key segments of the enterprise and political world didn’t need the issue mounted.  It’s simpler to have a system the place the income are privatized and the losses are socialized, with taxpayers selecting up the tab.  Neither political celebration favors any kind of efficient reform of banking.  

So right here we’re once more.  In a follow-up tweet the congressman steered “Financial institution administration should be investigated”:

I’m reminded of that scene in Casablanca the place the officer was shocked to find that playing was occurring in Rick’s institution.   It’s politicians that handed Dodd-Frank.  It’s politicians that handed FDIC.  It’s politicians that object to financial institution mergers that will make banks extra diversified, much less brittle.  It’s politicians that demand bailouts even to depositors above the $250,000 threshold.  

An investigation?  Look within the mirror.

PS.  I see complaints that refined Silicon Valley traders couldn’t be anticipated to plan a secure method of storing their funds.  Matt Yglesias gives some helpful perspective:

(Bucks followers know that the quantity 50 has particular that means for Giannis.)