The sound of crashing banks is getting annoying. The world has enough problems without bankers getting everything wrong as well. Silicon Valley Bank was quite bad enough. Then Credit Suisse, etc.
Now another $100 billion or so seems to have fallen to some unreachable place behind the sofa with First Republic’s various woes. There was also a “deposit exodus”, like SVB. That’s another reason for everyone’s investment assets to be insecure and markets to lose value.
The wider issue of regular cookie-cutter financial disasters needs proper attention. Imagine a day or so without some world-threatening financial idiocy. It’d be like politics suddenly becoming rational. Where would the world be?
The amounts of money that go up in smoke at everyone’s expense are incredible. Politics and finance have a few things in common:
- Neither believes that the real world exists and if it does, it’s nothing to do with them.
- Neither finance nor politics are ever penalized for causing global disasters.
- They are both perfectly happy to mismanage other people’s assets and money.
- They do colossal damage to basic necessities on a daily basis “on principle” or for ideological reasons.
- They both despise the public and their clients, a la Goldman Sachs’ “Muppets” culture.
- They both routinely oppose any public welfare measures.
These are the norms since about the late 80s. When it comes to banks behaving like dominoes and damaging wider market values, however, patience wears a bit thin.
There’s a very odd and suspicious pattern here:
- Depositors pull a lot of money suddenly.
- They seem to know more than the stock market, which somehow routinely doesn’t officially know these things or anything else until a run on deposits happens.
- At this point, there’s suddenly no place for the bank to go, like SVB, Credit Suisse, and presumably First Republic.
This is more than a bit hard to believe.
All these highly qualified people somehow don’t know their organizations are effectively insolvent?
How does that happen?
Who benefits?
Usually, you’d expect a fire sale of assets to “benefactors” when a company collapses.
With a bank or other lender, however, you also could expect someone to benefit from a Bonfire of the Liabilities. A stack of inconvenient things might go up in smoke as irrecoverable write-offs.
There’s no way of knowing whether or not this is the case with any of these banks. It might be. The insane levels of debt worldwide are irresponsible at best, and catastrophic at worst. The banks are sometimes like storage lockers for these more imbecilic debts, or just financing very bad investments.
First Republic has another, ominous, dimension. This is a bank that caters directly to the very wealthy. What’s so great about a bank in this bracket going under? Even the most craven, groveling, sycophantic capitalist must see some risk, surely.
The finance sector often doesn’t make sense, even to itself. The problem is that people don’t want to pay for nonsense.
