Author Topic: Banks Failing: Is It 2008 Again?  (Read 11459 times)

Offline haltkup

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Re: is it 2008 again?
« Reply #80 on: March 12, 2023, 10:00:12 AM »
Mark-to-mark creates too much volatility comes with its own risks and not a true measure for stable long term assets/investments held to maturity(even when categorized as afs). Whet is needed is different measures of required liquidity that come with cost to liquidate measures not just tiering the liquidity of capital

Offline Abey

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Re: is it 2008 again?
« Reply #81 on: March 12, 2023, 10:02:32 AM »
Mark-to-mark creates too much volatility comes with its own risks and not a true measure for stable long term assets/investments held to maturity(even when categorized as afs). Whet is needed is different measures of required liquidity that come with cost to liquidate measures not just tiering the liquidity of capital
an asset is only worth what someone else will pay for it. Volatility shmolatotlty look what good that opacity bought us here

Offline Alexsei

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Re: is it 2008 again?
« Reply #82 on: March 12, 2023, 10:07:43 AM »
Given the way calendars work we won't have 2008 again anytime soon, but we definitely will have 2023, time will tell.
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Offline ExGingi

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Re: is it 2008 again?
« Reply #83 on: March 12, 2023, 10:12:18 AM »
Read this thread.

I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline haltkup

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Re: is it 2008 again?
« Reply #84 on: March 12, 2023, 10:19:03 AM »
an asset is only worth what someone else will pay for it. Volatility shmolatotlty look what good that opacity bought us here
yes itís true when you are a forced seller, but not in normal situations. ( hence my comment on liquidity requirements) example, many in insurance industry would be insolvent if not for accounting rules that let values be stable through market cycles. ( on related topic the largest insurers were insolvent if we looked at reserve developments in 2000s, but you donít know about it and business goes on as usual)

Offline avromie7

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Re: is it 2008 again?
« Reply #85 on: March 12, 2023, 10:21:45 AM »
Anything less than 90% guarantee of all deposits risks a domino effect on other banks and the end of life as we know it (crypto would overtake fiat for example). Would be idiotic for the government not to do it, the downside is minimal as long as shareholders aren't protected.
SVB Was able to handle 25% of their deposits being withdrawn in 1 day. That means any bank with 75% of their deposits FDIC insured has no risk of a bank run.

Now the question is what percentage below 75% leaves customers comfortable that there won't be a run. At SVB it was less than 5%, most banks are somewhere between the less than 5% at SVB and 75% that gives complete confidence. Increasing the FDIC insurance will bring all banks closer to the 75% mark, which instills more confidence in the banking system.
I wonder what people who type "u" instead of "you" do with all their free time.

Offline Abey

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Re: is it 2008 again?
« Reply #86 on: March 12, 2023, 10:35:58 AM »
yes itís true when you are a forced seller, but not in normal situations. ( hence my comment on liquidity requirements) example, many in insurance industry would be insolvent if not for accounting rules that let values be stable through market cycles. ( on related topic the largest insurers were insolvent if we looked at reserve developments in 2000s, but you donít know about it and business goes on as usual)
Insurance companies donít have a duty to depositors the same way a bank does

Offline haltkup

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Re: is it 2008 again?
« Reply #87 on: March 12, 2023, 10:39:30 AM »
Huh?! They have a duty to indemnify

Offline mevinyavin

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Quote from: Yehuda57
סתם מביןיבין ר' יצחק הוא

Offline Abey

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Re: is it 2008 again?
« Reply #89 on: March 12, 2023, 10:43:54 AM »
Huh?! They have a duty to indemnify
the same way. They are not expected to show up with all the cash when asked.

Offline haltkup

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Re: is it 2008 again?
« Reply #90 on: March 12, 2023, 10:50:14 AM »
the same way. They are not expected to show up with all the cash when asked.
True and not trueÖ think about the impact of a major disaster that causes millions of life insurance policies to be called at once or if an eq hits nyc ( it is a possibility) impact on property insurance payments

Offline AsherO

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Re: is it 2008 again?
« Reply #91 on: March 12, 2023, 10:53:19 AM »
https://www.timesofisrael.com/tel-aviv-shares-drop-as-svb-failure-triggers-cash-flow-concern-for-israeli-startups/

Stupid of Israelis to complain that startups were banking their capital in the US, when Israeli banks suck in so many ways.

Offline ExGingi

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Re: is it 2008 again?
« Reply #92 on: March 12, 2023, 10:54:07 AM »
yes itís true when you are a forced seller, but not in normal situations. ( hence my comment on liquidity requirements) example, many in insurance industry would be insolvent if not for accounting rules that let values be stable through market cycles. ( on related topic the largest insurers were insolvent if we looked at reserve developments in 2000s, but you donít know about it and business goes on as usual)

Insurance companies generally match their assets to liabilities, and have substantial reserves. They are highly regulated. I am sure @yos9694 can shed more light.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline Sam 77

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Re: is it 2008 again?
« Reply #93 on: March 12, 2023, 11:23:40 AM »
Did evreyone suddenly become experts in economics?

Offline Definitions

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Re: is it 2008 again?
« Reply #94 on: March 12, 2023, 11:38:05 AM »
Did evreyone suddenly become experts in economics?
Let people be. Ironically an expert is only an expert because nonexperts say so. And I'm sure nobody is purposely misleading anybody.

For me I barely understand a word in this thread. I watched this video to understand what happened.
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Offline Yef

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Re: is it 2008 again?
« Reply #95 on: March 12, 2023, 12:30:38 PM »
If you have over 250k in an account in a big bank, would you pull it out now?

Offline yos9694

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Re: is it 2008 again?
« Reply #96 on: March 12, 2023, 12:31:13 PM »
Insurance companies generally match their assets to liabilities, and have substantial reserves. They are highly regulated. I am sure @yos9694 can shed more light.

Many life insurance companies would definitely be at risk of going insolvent if there was a "run on the bank". Main scenario being a spike in interest rates.  And that's including the ones that don't play games to bypass regulation. But it's unlikely to happen, and insurance companies don't have to give you your money right when you ask for it anyway

Offline Abey

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Re: is it 2008 again?
« Reply #97 on: March 12, 2023, 12:44:40 PM »
Finally
https://www.wsj.com/articles/silicon-valley-bank-fallout-poses-new-risks-for-markets-fed-"They do know the seriousness of this, and they are working to try to come forward with some announcement before the markets open. I'm hopeful something can be announced today."

Anything less than 100% security for deposits wonít stop this imo. Letís hope they are wise, buying these securities at par wonít cost them a nickel I believe but weak action will.

Offline ExGingi

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Re: is it 2008 again?
« Reply #98 on: March 12, 2023, 12:48:21 PM »
Many life insurance companies would definitely be at risk of going insolvent if there was a "run on the bank". Main scenario being a spike in interest rates.  And that's including the ones that don't play games to bypass regulation. But it's unlikely to happen, and insurance companies don't have to give you your money right when you ask for it anyway

The current spike in short term rates (with yield inversion) has created some interesting observations in regards to leveraging cash values.

I personally have:
1. Policies with no Direct Recognition and variable rates with different floors depending on product series (issue year).

2. Policies with direct recognition and fixed loan rates that are currently higher than short-term rates (with direct recognition, if I were to take a policy loan the dividend interest rate would increase for loaned values, as compared to current company dividend interest rates).

3. Policies with direct recognition and fixed loan rates that are currently lower than short-term rates (taking policy loans would result in a lower dividend crediting rate).

4. An insurance backed line of credit at Prime-1.25%.

I have seen clients shut down lines of credit (most aren't as low as mine). And I have strategically removed policies of type 1 from the line of credit backing. These insurance backed lines of credit are excellent assets on bank balance sheets, but I can see them being reduced at the current interest rate environment.
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline haltkup

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Re: is it 2008 again?
« Reply #99 on: March 12, 2023, 01:04:22 PM »
Many tend to conflate capital and liquidity which are 2 different but related important factors for financial viability of an organization.
At a high level for liquidity
1) banks are most at risk as depositors can demand cash at any time even in what is not considered a stress environment creating a run-on-bank (what many believe is the case of svb)
2) life insurance has some form if policies are cashed in usually it is in time of stress. ALM is important for capital but wonít help as much for liquidity, example: if rates rise asset losses are greater and theoretically discount of liabilities will match. However if liabilities get called full payment is required (hence reserve requirements)
3) p&c have the least liquidity issues because premium & liabilities can not be called. Risk is for a cat event (not yet a liability on the books) coupled with weak capital adequacy at the onset.