Last week, as First Republic Bank headed toward the dustbin of history, I wrote this in Substack Notes: Would First Republic eventually have suffered depositor outflows and financial weakness sufficient to prompt an FDIC takeover, even without their terrible
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.
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.