Presented by the Economic Democracy Initiative (OSUN, Bard College) and the Economics Club, University of Missouri – Kansas City.
Keynote speaker: Dr. William Black
Moderator: Matthew Robinson, Research Scholar, Economic Democracy Initiative…(read more)
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Understanding Recent Bank Failures with Dr. Bill Black
In recent years, the number of bank failures has increased significantly, leaving many people wondering about the cause and implications of these failures. To shed light on this topic, we spoke with Dr. Bill Black, an expert in banking and finance, about the reasons behind these failures and what can be done to prevent them in the future.
Dr. Black, a renowned economist and professor, explained that there are several factors that can contribute to bank failures. One of the main reasons is the lack of proper regulation and oversight in the banking industry. When banks are not adequately monitored and regulated, they can engage in risky practices and make poor investment decisions, leading to financial instability and ultimately, failure.
Another factor that Dr. Black pointed out is the issue of moral hazard. In some cases, banks may take excessive risks because they know that they will be bailed out by the government if they fail. This creates a moral hazard problem, as it encourages risky behavior and can lead to widespread economic damage when these banks do fail.
Furthermore, Dr. Black emphasized the role of corporate governance in bank failures. When banks have weak corporate governance practices, such as a lack of transparency and accountability, it can lead to mismanagement and corruption, ultimately leading to failure.
When it comes to preventing future bank failures, Dr. Black stressed the importance of proper regulation and supervision. He emphasized the need for strong regulatory agencies to monitor banks and enforce compliance with regulations to ensure that they are operating in a safe and sound manner.
Dr. Black also highlighted the need for improved corporate governance practices within banks, including greater transparency and accountability. By holding bank executives and board members accountable for their actions, it can help prevent mismanagement and corruption that can lead to failure.
In addition, Dr. Black called for an end to the concept of “too big to fail” banks, which encourages risky behavior and creates moral hazard. He argued that breaking up these large, systemically important banks would reduce the risk of widespread economic damage in the event of a failure.
Overall, Dr. Black’s insights shed light on the complex factors that contribute to bank failures, as well as the steps that can be taken to prevent them in the future. By implementing strong regulatory oversight, improving corporate governance practices, and addressing the issue of moral hazard, we can work towards a more stable and resilient banking industry.
Okay thinks you too
If he didn't have a great Irish sense of humor, I couldn't drink this financial shot of whiskey straight down.
Loved his Bill Moyers interviews 2009-2010
Bill Black for president!
Is this Dr.Jill's brother-in-law? hope he gets his .10%
living legend
Bill is the Man!!!!
Pedestrian accounts + #216M
Roughy 10% of this presentation is watching an elderly man be flummoxed by his computer. Skip to 9:00
Bongino explained all the same concepts in under 7 minutes. Why not really name names like Gavin Newsom lobbying for the bailouts (which create more inflationary cash, which is what caused the interest rates to jump up, making the bonds worth less, sparking the run on the bank). Newsom lobbied for the bailouts for his 3 vinyards and other accounts because he didn't to his homework to see that SVB was being run by unqualified idiots.
00:00 – Intro by Pavlina Tcherneva
01:44 – Moderator : Matthew Robinson 29 MAR 2023 10 : 30 ET Event
03:50 – Dr William Black
09:10 – Slide: Finance's Dismal Record Continues
09:45 – Slide: Finance Is The Field Where Economic Theory Most Drives Policy
10:28 – Slide: One Great Exception : Deposit Insurance
11:44 – Slide: Result is Financial Policy Schizophrenia
12:24 – Slide: Restoring 'Discipline' Via Bank Capital
13:21 – Slide: Economists' 2nd Bet: Shareholders
13:40 – Slide: Optimizing Shareholder Discipline 1. Basel
14:08 – 2. USA "Prompt Corrective Action"
14:38 – Slide: The PCA Concept & Promise
15:44 – Slide: Regulatory System Premised On Ensuring Banks Have Adequate Capital
17:34 – Slide: Regulation Premised on Capital, w/o K
18:34 – Slide: Catastrophically Bad Mechanism Design
19:45 – Slide: Financial Economists' Record Failures
23:46 – Slide: Risk & Expected Run
25:20 – Slide: Liquidity Risk: Pneumonia Kills You First
27:16 – Slide: Warren Buffet Makes This Point
27:41 – Slide: Financial Risk'M Expected Value = 0
28:43 – These Core Insights Should Drive Financial Regulation – But Don't
30:20 – Slide: See Insights Should Drive Regulation
33:11 – Slide: Crypto Is Surrounded by BS
33:38 – Slide: The Core Interest Rate Risk Problem Was Easy To Spot & Stop
38:54 – Slide: Public Upside To This 'Straegy' = $0
40:48 – Slide: Everyone Knew The Bet's Failure Probability Closely Approached 1.0
42:19 – Slide: Everyone Knew That Rate Rises Would Punish Those Taking Interest Rate Risk
43:02 – Slide: Insane Bets from CEO's Perspective
43:21 – Slide: Downside Risk Massive: Size & Probability
44:03 – Slide: Five Failures
45:16 – Slide: The "Hold to Maturity" Insanity Lives
47:35 – Slide: Strategic Behavior Is Easy To Understand QUIZ
48:10 – Slide: The Answer To The Central Quiz
49:49 – Slide: FSOC: Failed Experiment. 1
51:32 – Slide: FOSC: Failed Experiment. 2 3
52:40 – Slide: 75 FSOC Charts In Report Focusing On Interest Rate Risk In 2014
53:33 – Slide: Even Now, No Regulatory Leader Leads Advisory vs Rule
54:11 – SCOTUS plans to gut our ability to issue enforceable rules
55:00 – Slide: There Is Zero Effective Enforcement
56:27 – Slide: The "Stress Tests" Are Farces
58:13 – Slide: SVB Was A Comedy Skit
58:27 – Slide: SVB Had A Top Official From Lehman
59:10 –
59:40 –
It would be nice if Bill Black spent more time explaining what regulation needs to be implemented, rather than laughing at the incompetence of SVB and its regulator .
There are $9.3Tn in uninsured deposits in US deposit institutions. The top 20 banks probably hold about $6Tn. That means on average the top 20 banks have about $300Bn in uninsured deposits, which is about twice as many as SVB had. The other top 20 banks also have interest rate risks as SVB. How can they not with rates rising so fast?
Does Bill Black imagine the regulators are ever in a million years going to wipe out all the deposits of the wealthiest depositors?
The crime here is that by allowing the existence of uninsured depositors in regulated banks is theft from the insured depositors. If the $9Tn in uninsured deposits was covered by deposit insurance that would raise tens of billions of dollars to cover all deposits in case of bank failure. But instead the wealthy big depositors are allowed to pocket those tens of billions of dollars and the depositors with less than $250K in the bank are billed for the cost of the insurance.
Bill Black has made a good case that expecting bank creditors (large deposit holders) to regulate banks "moral hazard" is ludicrous. There is no way out but to address that fact.
Great show thank you.
Thank you for sharing this, it's very insightful and engaging!