[Discussion] Cryptocurrency

Cryptocurrency! Either it's going to disrupt everything and usher in a new era of artistic and consumer freedom, or it'll hasten the climate apocalypse while largely benefitting a tiny number of investors. Let's yell about it!

The most important thing though is that rich people never lose money or pay taxes…that’s for those poor folk that can’t find their bootstraps.

Robear wrote:

Imagine losing your job, your bank savings, and your IRA and investments, all at once, while your rent/mortgage, child care, groceries etc stay the same. Is that better or worse than what actually happened? Yes, some very rich people got richer, but under your scenario they would have made out even better, with whole swathes of industries wiped out and ripe for the plucking. It would have created an even greater concentration of wealth when the dust settled, taken from the middle class for the most part.

This DID happen! To millions of people, and no one went to jail for it, and the banks learned that risk means nothing when the fed will bail you out. I am not an expert, obviously, but I know regular people got screwed.

Also, I get real tired of the "Democratic Presidents can't do anything with Republican congresses." He could have told DoJ on the first day in office to blow the dust off the anti-trust and financial fraud laws and start enforcement. He could have changed regulations and forced congress to rewrite the laws if they didn't like his interpretation. He could have put people in charge of agencies that would actually regulate.
You don't give up because of Republican obstruction. You do the right thing and force the Republicans over and over to show their true colors.

Except he didn't do that, because Democrats have also abandoned the middle class, and instead took care of their rich, elite, ivy league friends and donors.

Watch or read some Thomas Frank about it when you get a chance.

Here's a question.

If every deposit everywhere is insured by the government, why do we have banks at all?

The government (in our country, the people) now own all the risk? Who is paying into this HUGE repository that needs to cover (at some significant %) the deposits? Why should there be any profit here?

That is absolutely the moral hazard that's raised here, Top_Shelf.

Pretty sure that repository is funded by mandatory payments from banks, but everything is being shuffled around so I don't know whether that is still entirely accurate.

Mixolyde wrote:

This DID happen! To millions of people, and no one went to jail for it, and the banks learned that risk means nothing when the fed will bail you out. I am not an expert, obviously, but I know regular people got screwed.

Not to the degree they could have been. Read a financial history of the 19th century in the US. As it was, we had a deep global recession. The actions taken headed off a far worse outcome, with the entire world in a depression much worse than the 1929 crash. There is a difference between bad and really bad. Failure to acknowledge that, painting it as all the same, ignores the very real constraints of the situations.

Also, I get real tired of the "Democratic Presidents can't do anything with Republican congresses." He could have told DoJ on the first day in office to blow the dust off the anti-trust and financial fraud laws and start enforcement. He could have changed regulations and forced congress to rewrite the laws if they didn't like his interpretation. He could have put people in charge of agencies that would actually regulate.

You get real tired of reality? Me too. But that doesn't change it. This was not a problem of monopolies as such or of financial fraud. It was the direct result of deregulation during the Reagan years, which made the problematic collusion legal, and the failure by Congress to fix that. This allowed the regulators themselves plenty of space to be purposefully negligent, which they took, to their profit (and ultimate regret). (Yes, there was fraud involved, but that did not in itself *cause* the issues, it made them worse. And yes, only one American financial company was penalized, quite a few failed however, with some being placed in custodial receivership. As far as I know, the monies used in the bailout were repaid into the high 90's percent.)

In 2010, after the major recovery actions had been taken - And President Bush deserves credit for his initial handling of the crisis, in spite of Congressional obstruction by his own party - President Obama signed into law the largest ever reform of Wall Street regulation, the Dodd-Frank Act, which in my opinion did not go far enough, but again, he can't *force* Congress to do anything. (In this case, 7 Republicans were needed to get past a filibuster; the Republicans therefore were able to dictate terms.) The fact that this got done shows the seriousness of the situation, and the fact that Republicans later watered it down (even past the watered-down state parts of it arrived in) shows that Congress can resist the President handily (and as I mentioned the fact that Republicans in Congress obstructed *Bush* in his attempts to fix the situation shows Congressional power clearly). We still have more consumer protections because of this law than we had before 2010, and more regulatory oversight that actually functions. The idea that he could have "forced Congress to rewrite the laws" is fantasy, unless we are under one-party *majority* rule in Congress, which does happen.

How does he get people in charge of agencies? They go through a Senate appointment process. If the Senate is not friendly, then the new people coming in can't be the new brooms. Luckily, in 2008, the Democrats still controlled the Senate; this would change in 2010, as Obama came in. With Republicans in control again, he had little chance to get in a solid reformer, given McConnell's new "just say no" approach to Democratic initiatives.

You don't give up because of Republican obstruction. You do the right thing and force the Republicans over and over to show their true colors.

Except he didn't do that, because Democrats have also abandoned the middle class, and instead took care of their rich, elite, ivy league friends and donors.

To the contrary, Obama and others used their bully pulpits over the last 15 years to show exactly what Republicans were doing. And guess what? Their constituents loved it. As Trump shows, the more shameful and divisive and stupid their ideas got, the more popular they were. The idea of sunlight as a disinfectant fails when shame is no longer a factor in politics.

Bush, as much as I disliked him, and Obama, as much as I liked him, both did what they could with what they had, and the biggest constraint and drag on their actions was Congress. That's the way the system works. It's why our politics is in a shambles at the moment. You can't just hand-wave that away.

The absolute worst thing you can do, though, is give up on Democrats and try to tear them down. You want change? They are literally the only party that can give it to you. And the party is changing, slowly but surely, in a more Progressive direction. It won't happen all at once, most likely, but over time the Old Guard will die out and the AOC wing will gain more power. We all want that. But tearing the party down with revisionist accounts that ignore political reality and the very real national betrayals of Republicans is not at all useful. Gradual change is the best we can hope for at the moment, and the Democrats are the only ones able to pull it off in the right direction, even though they are currently fighting an uphill battle.

EDIT: In thinking about it, this is almost certainly bait. Nevertheless.

IMAGE(https://pbs.twimg.com/media/FrHYpmtXoAQ1sIx?format=jpg&name=900x900)

This is not the point of the thread, and I don't want to derail anymore, but I think a thing that has impressed me the most about white supremacy as I have gotten older is how desperately its adherents need it. The idea of racial equality is anathema to their very identity as a person.

Without it, they have no mooring in reality, no idea who they'd actually be. Being the "better" is the fundamental underpinning of their entire identity and worldview.

"1 Black"

"Welcome to the board meeting. Have you met our Black? Come over here boy, I mean, Roy."

Those 2 veterans, screwing everything up.

But seriously I'm trying to remember how oppressed minorities ended up ruining Lehman brothers, Lincoln Savings and Loan, WaMu, etc etc...

NPR Your Money sheds a little useful light on the funding of the FDIC, and the sort of situation that occurred before it was put in place to do exactly what it has done recently.

When you have a situation where you just let banks fail, as suggested above, you end up with far, far more damage to the economy and the country than when you have a bank-funded mechanism to make depositors good. Unless you imagine that President Roosevelt built this to protect the wealthy, it's clear that this protects all of us. Why? Because like it or not, the users of bank loans and deposits consist of both ordinary people and wealthy ones.

How bad can things get without this kind of backstop in play? As I said, a good look at the financial history of the US in the 19th and early 20th centuries is informative. But as an example, from 1929 to 1933, 9,000 banks failed, 4,000 of them in the first few months of 1933 alone, and the country entered its worst depression by far, impoverishing millions and ruining tens of millions more. In 1934, after the FDIC was put in place, there were 9 bank failures in the entire year. That's the difference between "let them fail" and "make them whole". Of course, strong banking regulations were put in place as well, and while we could use better ones, ours today are even stronger than back then. Yes, we need to go beyond Dodd-Frank, but that was a good first step. (The fact that Republicans hate it should be enough tell you that.)

That's a huge change, an incredible safeguard for the economy. We've had, I think, 3 regional banks fail in spite of it. The failure of SVB through negligence and outright stupidity could have led to hundreds or more bank failures, without the FDIC stepping up to do what it does. That's why the stock market was so shaky in the last few days.

By making this right for depositors, mostly large in this case, but showing that it will take care of all depositors whether whether we like them or not, the FDIC has moved strongly to protect the banking system from further runs. Hopefully that's enough to head off the current crisis.

And for the skeptics, no, the money does not come from taxpayer funds, at all.

I'll have more comments later but for now, some thoughts from Yakov Feygin:

Yakov Feygin wrote:

. The SVB bailout has made me very mad. Not because it is a particularly egregious bailout. Compared to the 2008 crisis, only depositors above the FDIC limit are getting bailed out. There is a lot of substantive debate about whether that is ok or not and what the consequences will be for how financial systems work. Bond and equity holders will probably eat it.

I am a bit more concerned about two other things. First is the possibility that the new Fed facility might offer soft duration insurance to banks, thereby letting them partially absorb the pain of rate hikes. That puts things into relief: the mechanism through which rate hikes lower inflation is by lowering the labor share. The second thing that makes me angry is that this was not necessary in the first place. We had a regulatory regime under Dodd-Frank that would have prevented this. However, in 2018, a bipartisan group of senators weakened Dodd-Frank to exclude regional banks from some of its liquidity requirements. SVB was one of the leading organizations lobbying for this change.

What angers me is that many intelligent people, including my dear friend and colleague Saule Omarova, warned that this would happen. As thanks, she got red-baited in front of the Senate. The real story was not that she had especially controversial ideas about the future of banking but that regional banks were very nervous about having a strict and responsible regulator at the OCC. Their association and, in particular, several democratic senators who pushed for deregulation were the ones that allowed the GOP floor show to go ahead and distract from the real issue at hand – whether regional banks like SVB would be strictly monitored and regulated.

Yep. I get it. Congress allowed this to happen, through weakening Dodd-Frank (as I alluded to earlier). Still, the potential damage of just "letting it fail" is extreme, and would certainly lead to a cascade of more bank and business failures, with an unknown ending point.

It's something that has to be dealt with now that its happened. At least this way, the banks themselves pay for it.

And Dodd-Frank was necessary because Clinton allowed Glass-Steagall to be repealed in 1999, opening the door for banks to create mortgage-backed securities and other risky instruments to speculate with grandma's nest egg.

The final version of the Gramm-Leach-Bliley bill, with bipartisan elements desired by both sides, passed with a resoundingly veto-proof majority. Clinton did not "allow" it to pass. His only choice would have been to symbolically veto and be overridden, creating anger within his own party, or to let it go and take the wins that Democrats had gotten, like the repeal of laws allowing Redlining.

That's politics. But blaming its passage on Clinton is disingenuous. It was a Republican bill, sweetened with some Democratic asks to get bipartisan support, and Clinton was just along for the ride.

The hate for Democrats is just heart-breaking given the situation of the last 43 years. It's a decent example of why liberals have not been able to defeat Republicans, even with the popular vote in the Presidential race for most of the last 8 elections. We are too quick to eat our own and factionalize, rather than unite in the face of a united conservative bloc.

Neo-liberal support for corporations, including banks, is not new. Clinton and Obama are rightfully criticized for their contributions to the Great Recession and the failure to hold anyone accountable. It has nothing to do with hate for Democrats.

To be clear, as bad as Democrats are, Republicans are always worse. Let's form ranks and defeat them. But we still have the right to criticize bad policy, regardless of who holds office.

I'm wrestling with that on a local level. The representative I door-knocked for is authoring legislation that creates new mandates for school districts. The mandates are fine (minimum wage for support employees), but the bill is unclear how they will be funded.

Mandates underfunded from state income taxes force school districts to make up budget shortfalls with property tax levies voted on by referendums. Property taxes are regressive and voters don't like increases if they have a choice. If levies fail, districts have no choice but to make cuts. My district is still recovering after having to lay off 50 teachers two years ago. I don't want us to be back in that position ever again.

So I criticize my friend's policy. It has nothing to do with my respect for him as a person or Democrat. And he'll always have my vote.

Saw clip of Bernie arguing against it and warning against this from the 2018 bill last night.

If we listened to Bernie and Liz more things would be a lot better

Top_Shelf wrote:

I'll have more comments later but for now, some thoughts from Yakov Feygin:

Yakov Feygin wrote:

The SVB bailout has made me very mad.

What angers me is that many intelligent people, including my dear friend and colleague Saule Omarova, warned that this would happen.

GOP: "Let's deregulate the banks."
Historians and Economists: "If you do that the banks will fail."
GOP: "Let's do it anyway."
(Banks fail)
(shocked Pikachu faces)
GOP: "This is all the Democrats fault!"

That's a lot more fair-minded than some here. But criticize Congressional Democrats or the party, rather than dumping it on Clinton.

Stele wrote:

Saw clip of Bernie arguing against it and warning against this from the 2018 bill last night.

If we listened to Bernie and Liz more things would be a lot better

Don't look at me, I tried real hard to get one of them to be President.

Y'all watching them banks? Is this a bailout?

Spoilered for wall of text from WSJ.

Spoiler:
WSJ wrote:

Federal regulators over the weekend guaranteed that all depositors of failed Silicon Valley Bank and Signature Bank would get their money back.

That prompted questions about whether the government support amounts to a bailout and whether taxpayer funds are at risk. Here is a look at some of those questions.

What did the regulators do?

The Treasury, Federal Reserve and Federal Deposit Insurance Corp. in a joint statement Sunday declared SVB and Signature “systemic risks” to the financial system, a formal designation that gave regulators more flexibility when dealing with the banks.

The statement said that all depositors in those banks would have access to their money on Monday, regardless of the size of their accounts. Ordinarily, the FDIC insures accounts with up to $250,000 per customer, while those with larger deposits assume the risk if the bank goes out of business.

Separately, the Fed said it had created a new lending vehicle—the Bank Term Funding Program—to help other troubled banks meet any customer withdrawals. Banks can take one-year loans from the Fed, with assets such as Treasurys or mortgage-backed securities as collateral, priced at face value.

The Treasury will provide $25 billion to cover any losses incurred by the Fed’s lending.

Together, the moves are designed to reassure bank customers that their deposits, no matter how large, will be safe and to prevent more institutions from suffering runs.

Is this a bailout?

That depends on whom you ask. Administration officials said this wasn’t a bailout because stock and bondholders in the banks wouldn’t be protected. Both SVB and Signature have seen their stock prices collapse. Regional lenders suffered their worst selloff in three years before rebounding Tuesday.

Senior management at both banks will also lose their jobs, the agencies’ statement said.

But Peter Conti-Brown, a professor at the Wharton School at the University of Pennsylvania, said the moves amount to a bailout of uninsured depositors at the two failed banks, benefiting people and businesses who kept more than $250,000 in a bank account.

“The uninsured depositors of Silicon Valley Bank are not entitled to this extraordinary government benefit, and they received it anyway,” Mr. Conti-Brown said. Meanwhile, bank customers who took steps to ensure they didn’t have more than $250,000 sitting in any one account did so unnecessarily, he added.

Are taxpayers on the hook?

Uninsured deposits at SVB and Signature Bank will be covered by the FDIC’s deposit insurance fund, and the Fed will provide the loans to other banks.

“No losses will be borne by the taxpayer,” said the statement from the Treasury and the bank regulators.

They said the FDIC will make up for any losses to its deposit insurance fund with a special assessment on banks.

Ultimately, those costs will likely be passed on to bank customers, said Aaron Klein, senior fellow at the Brookings Institution. That could be through higher overdraft fees, lower interest rates on deposits or other ways that banks make money from their customers.

“Main Street banks in America and their customers are bailing out the tech firms and cryptocurrency giants who had uninsured deposits at Silicon Valley Bank,” he said.

In addition, by offering $25 billion as a backstop to the Fed’s lending program, the Treasury Department is committing public funds if banks don’t repay their loans, Mr. Conti-Brown said.

“The Treasury has put itself in a first-loss position with money appropriated by the Congress,” he said. “That’s taxpayer money.”

The Fed said Sunday that the central bank “did not anticipate that it will be necessary to draw on these backstop funds.”

If the Fed did use that money, it isn’t clear what the final cost to taxpayers would be. A 2008 program that provided $700 billion in public funding to help stabilize the financial system, for instance, ended up costing the government much less: around $31 billion after banks repaid their loans and the government sold off the assets it had acquired, according to the Congressional Budget Office.

The FDIC’s deposit insurance fund will cover uninsured deposits at SVB and Signature Bank.

Will this make the banking sector riskier?

The administration says it won’t. On Monday, President Biden said the risks had been contained. “Americans can have confidence that the banking system is safe,” he said.

But if the experience at SVB and Signature convinces depositors at other banks that regulators will guarantee their money is safe, some bank customers could start to keep larger deposits, which would be more vulnerable in times of crisis.

More broadly, the government action sends the message that any bank failure, no matter whether it is a large or small bank, poses a systemic risk to the financial system, said Mr. Conti-Brown. That could give banks an incentive to take bigger risks, assuming that regulators will come to the rescue.

“Do we want to live in a world where failure is not an option for any bank anywhere?” he said.

The idea that there is this magical pot of money that the banks have been paying into that will be used is nonsense. Its an IOU that banks carry on their balance sheet as a liability but if the banks dont cough up then Taxpayers will bear the burden.

Wrong thread

What I didn't realize is that it's paid from a levy on bank deposits, so... Low-key tax on bank depositors.

Edit - That's actually no longer correct. The base that the bank pays, since 2010 or so, is now not just it's deposits, but *all* it's liabilities and holdings, times its base percentage. The bank pays this. I'm not sure the information I had earlier was correct, but certainly a lot is coming from the bank itself.

Edit - And Axios actually had it wrong. It's always been the banks paying premiums on their depositor insurance, based on deposits, but not *from* them. Further, they actually pay, I found no indication that they are allowed to hold this as an IOU on their books. That would be an obviously unacceptable risk.

Currently the fund stands at $125B. If that gets wiped out, it would probably be made good from a new assessment on the banks, rather than through taxpayer funds.

I mean, they technically pay it, but they raise fees and lower interest rates to offset it. They're not about to eat it themselves when they can pass it on.

Which of course means that they are subject to market forces, as people can walk rather than pay unreasonable fees and rates.

Yeah, switching banks is super easy and convenient if you're poor.

The last time I did it (going from a bank to a local credit union), it actually was very easy and fairly convenient. The only inconvenient part was that they don't have any days where they're open later than the standard 9-5 hours. It fit into my work schedule (at the time) just fine, but my wife had to take an hour off work for it.

From an ex-banker's perspective, the two hardest things for a victim customer to accomplish in switching banks is mortgage and payroll. We informally had a "stickiness" scale and those two things were the most sticky, they were the ones that stuck a customer to you the most. And to clarify, having an actual mortgage with a bank and having the auto debit to pay that mortgage from your bank's checking account are two different things: both sticky, but one is stickier than the other.

Moving your mortgage is nigh-impossible; people usually only do it when they refinance. Hardly anyone does it out of spite due to the mountain of paperwork, credit checks, estimates, etc involved.

The worst part about payroll is the risk that the ADP (or similar) app doesn't kick in at the right time and your money goes to the wrong account. This risk is exacerbated if you have to deal with a real live human HR person.

But -- as I found out first hand when I abandoned the financial sector and moved everything from my ex-employer's institutions in 2018 -- spite is a powerful thing. It can overcome many obstacles!

Robear wrote:

Which of course means that they are subject to market forces, as people can walk rather than pay unreasonable fees and rates.

I've been in-process on this for a bit.

We joined the local credit union tied to my wife's employee status and the customer service is outstanding. As far as the mechanics of switching, it hasn't been too bad, mostly because I switched jobs and had my new job just auto-deposit into the credit union. My wife switches jobs too here shortly and we'll get her checks into there once that happens. As Seth points out, the hassle of getting her HR department to do the auto-deposit change correctly was a nightmare. I told her to just hold off until she starts fresh at the new place.

All my other auto-deposits were relatively simple to switch over and since nearly everything, including all subscriptions, are on our credit card (cash back!) there really wasn't that much to switch.

Best parts of the credit union:
- more democratic
- no gouging of customers
- staff are paid fair wages
- money stays in the community

This aligns better with our values.

Seth wrote:

And to clarify, having an actual mortgage with a bank and having the auto debit to pay that mortgage from your bank's checking account are two different things: both sticky, but one is stickier than the other.

Moving your mortgage is nigh-impossible; people usually only do it when they refinance. Hardly anyone does it out of spite due to the mountain of paperwork, credit checks, estimates, etc involved.

You want to talk about stickiness?

I DID move my mortgage when I refinanced. I won't name names, but I moved from one institution I did not like very much, to one whose technology is much more 21st century.

A few months later, the one I refinanced to sold my mortgage back to the f&%kers I moved away from!

That's always the danger. I kept ending up with the same company for all my big-ticket item loans. It sucked.