I am not a finance person but read a lot, especially non-fiction history. When I look at the history of the United States, ESPECIALLY the emergence of Investment banking (Civil War) has brought with it a remarkably unstable banking system with runs on banks built in. The worst of the worst always emerge whole. It seems to me that the MOST IMPORTANT element of banking failures should be punitive to ensure taxpayers are not getting fleeced. I think bank failure should be treated as a red badge and officers and key employees should be banned from both banking and regulating for perhaps 10 years and even lifetime on the second occurrence. I especially observe the seeming absence of this foolishness in Canada and frankly lots of countries. This remarkable distortion which rewards WRECKLESS risk-taking is the fuel to better returns (insulated from the downside risk by so-called regulators). These investments with higher returns fuel inequality among their other failings.
Finally, liquidity standards should be sacrosanct and reportable CONTINUOUSLY, not just quarterly. This should be the tax associated with government insurance. I would actually prefer performance bonding and not just a balance sheet. Performance bonding can survive bankruptcy and reorganization and can even be attached to officer holdings.
You're not alone in mentioning Canadian banks as a model - I had an interesting conversation with Mark Dykeman of How About This? about Canadian banks last week. There are a few large ones, and some credit unions, but the U.S. I believe has far more small and regional banks.
I'm not sure I agree that punitiveness is the answer (it rarely is and tends to create bad incentives), but certainly something is structurally awry in the banking sector. Commercial real estate stress won't help, since much CRE exposure is held by smaller banks. Yet, work has structurally changed too and is unlikely to revert back to the 2019 model (nor should it, that was totally inefficient), no matter how many CRE stakeholders wish it would.
I enjoy the writing of Malcolm Gladwell and he often provides somewhat contrarian views. His roots in Canada tend to compare US and Canadian experience in a lot of areas. I lack broad knowledge in finance so a lot of what I say is impulsive (and punitive) perhaps. Gladwell often juxtaposes US and Canadian approaches.
My impulse is we have created a world of life based upon dollar value. This seems coarse but our civil courts seem to bear it out when they happily create spreadsheets about what a life is worth.
On the assumption the life / money equivalence, it seems a simple next conclusion that whatever element in an economy the government fails to regulate with the same zeal will create a distortion where corporate risk takers will engage the behavior for better returns. Toy companies do not sneak lead paint in to make an increased margin anymore. The same cannot be said of bank and finance "innovations" as Goldman-Sachs hires the best and the brightest to create new ways to exploit. They are insulated from risk (see Wall Street 2008). It is no surprise you get more of what you provide incentive for. The economic structure and our current regulatory environment privatizes gain and socializes loss. Nowhere is that more prevalent than finance. Lack of punitive standard only means no matter the excess, the conclusion is at worst "sorry, my bad". My guess is that explanation does not work for the petty larcenist. We are punitive toward the small-fry while banking and finance remain at the altar.
I am not a finance person but read a lot, especially non-fiction history. When I look at the history of the United States, ESPECIALLY the emergence of Investment banking (Civil War) has brought with it a remarkably unstable banking system with runs on banks built in. The worst of the worst always emerge whole. It seems to me that the MOST IMPORTANT element of banking failures should be punitive to ensure taxpayers are not getting fleeced. I think bank failure should be treated as a red badge and officers and key employees should be banned from both banking and regulating for perhaps 10 years and even lifetime on the second occurrence. I especially observe the seeming absence of this foolishness in Canada and frankly lots of countries. This remarkable distortion which rewards WRECKLESS risk-taking is the fuel to better returns (insulated from the downside risk by so-called regulators). These investments with higher returns fuel inequality among their other failings.
Finally, liquidity standards should be sacrosanct and reportable CONTINUOUSLY, not just quarterly. This should be the tax associated with government insurance. I would actually prefer performance bonding and not just a balance sheet. Performance bonding can survive bankruptcy and reorganization and can even be attached to officer holdings.
You're not alone in mentioning Canadian banks as a model - I had an interesting conversation with Mark Dykeman of How About This? about Canadian banks last week. There are a few large ones, and some credit unions, but the U.S. I believe has far more small and regional banks.
I'm not sure I agree that punitiveness is the answer (it rarely is and tends to create bad incentives), but certainly something is structurally awry in the banking sector. Commercial real estate stress won't help, since much CRE exposure is held by smaller banks. Yet, work has structurally changed too and is unlikely to revert back to the 2019 model (nor should it, that was totally inefficient), no matter how many CRE stakeholders wish it would.
I agree that liquidity standards should be stricter, and therefore I'm intrigued by and possibly support narrow banking (https://en.wikipedia.org/wiki/Narrow_banking).
I enjoy the writing of Malcolm Gladwell and he often provides somewhat contrarian views. His roots in Canada tend to compare US and Canadian experience in a lot of areas. I lack broad knowledge in finance so a lot of what I say is impulsive (and punitive) perhaps. Gladwell often juxtaposes US and Canadian approaches.
My impulse is we have created a world of life based upon dollar value. This seems coarse but our civil courts seem to bear it out when they happily create spreadsheets about what a life is worth.
On the assumption the life / money equivalence, it seems a simple next conclusion that whatever element in an economy the government fails to regulate with the same zeal will create a distortion where corporate risk takers will engage the behavior for better returns. Toy companies do not sneak lead paint in to make an increased margin anymore. The same cannot be said of bank and finance "innovations" as Goldman-Sachs hires the best and the brightest to create new ways to exploit. They are insulated from risk (see Wall Street 2008). It is no surprise you get more of what you provide incentive for. The economic structure and our current regulatory environment privatizes gain and socializes loss. Nowhere is that more prevalent than finance. Lack of punitive standard only means no matter the excess, the conclusion is at worst "sorry, my bad". My guess is that explanation does not work for the petty larcenist. We are punitive toward the small-fry while banking and finance remain at the altar.