Comments on: New banks: No better than old banks http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Nate http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3127 Wed, 24 Jun 2009 16:50:35 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3127 Really? You are going to pick one of the 97 banks that started business in 2008 as THE PROOF that a clean bank plan wouldn’t have worked? And one that didn’t even open its doors until the end of November 2008? Even though it is admitted in your cited article that profitability usually isn’t achieved until after a year and a half of operation?

I’ll admit the grocery list of errors since opening would suggest poor management, but Herald isn’t exactly representative of new banks.

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By: Cortland Richmond http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3110 Wed, 24 Jun 2009 11:00:14 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3110 To quote Terry Pratchett: “Ave! Bossa nova; similis bossa seneca” or (in Mr. Slant’s tortured Latin), “Hail! The new boss; same as the old boss.”

Of COURSE we get what we got; that’s what we paid for.

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By: M.G. in Progress http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3106 Wed, 24 Jun 2009 07:54:52 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3106 I was one of the first proposers of new “good banks” and would like to make few points. First we have not even tried to get something closer to setting up a “good bank” so I do not see how we can say now that it would not work. As a matter of facts the banking problems are still there but we are buying time. Instead of solving the problems and fixing the system we are waiting the recovery to fix the bank balance sheets. If one thinks that good credit and sound banking can generate or help the recovery one should not wait the recovery to help banks to fix their balance sheets. The causation should not be inverted and cash to trash or toxic is not really a good allocation of resources. In the new good bank proposal it was not actually a matter of having start ups with implicit risk of failure but a system of parallel new, smaller, good banks replacing the old bad ones and too big to fail. It’s a pity that we continue to discuss the too big to fail or to save banks. Have got a cost benefit analysis of setting up good banks instead of trying to fix the zombies?

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By: JC http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3048 Tue, 23 Jun 2009 02:57:00 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3048 I’m inclined to agree with the sentiments in the last two paragraphs, but I’m wondering if you’ve thought about the implications of this point for your ongoing “burn down the SEC and start over” crusade? Does the distinction between a governmental agency and a for-profit corporation entirely alter the administrative and operational challenges of replacing large institutions with new organizations, or is there more to say on the subject?

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By: maria errico http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3046 Tue, 23 Jun 2009 01:17:05 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3046 xxxx

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By: jason http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3041 Mon, 22 Jun 2009 21:03:54 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3041 I disagree 100% . If the too big to fails actually failed the market would purge itself of them and new growth would spawn. I am sure there would be some new companies that would not survive right off the bat but that would be quite minimal if there is indeed a market for those businesses and the field is fair. That’s like saying if you cut down big trees the little ones under them who gain the new sunshine would just die. Horse hockey! I don’t believe it for a second. And we are damaging the ground underneath in our frantic efforts to save these big trees from rotting.

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By: Mike A. http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3038 Mon, 22 Jun 2009 18:37:24 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3038 Felix, my understanding of an “ultra-clean new bank” [1] would have been to put the *entire* loan portfolio (performing & non-performing) of a troubled bank into a Chapter 7 bankruptcy estate for orderly liquidation (e.g., sort of like runoff mode for insurance companies) by its creditors and shareholders (after all, that was the bet that they took!). Note that here the FDIC does not have to go through the messy and labor-intensive determination of distinguishing between a performing & troubled loan. In addition, the government would buy the operating assets of the troubled bank.

So an ultra-clean new bank, say Citibank, would be recapitalized with a fresh injection of equity capital: it is essentially the old Citibank except that it has a tabula rasa loan portfolio. As was touted in Q1, banks with zero loan losses were *enormously profitable* due to the steep yield curve.

[1] Khan, Salman and David Leinweber, “New American Bank Initiative: Removing Structural Flaws in the Economic Rescue,” November 11th, http://cift.haas.berkeley.edu/docs/nabi/ nabi-Nov11.pdf (see especially Figure 4, p. 8); http://www.youtube.com/watch?v=_ZAlj2gu0 eM (seek 10:20 to 12:15 for elevator pitch).

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By: Max http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3036 Mon, 22 Jun 2009 18:33:01 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3036 You’re comparing two dumb ideas. Who cares which one is dumber?

The principle that needs to be enshrined in public policy is: if you invest in a bank, you might lose money. Duh.

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By: Griff http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/comment-page-1/#comment-3027 Mon, 22 Jun 2009 16:02:26 +0000 http://blogs.reuters.com/felix-salmon/2009/06/22/new-banks-no-better-than-old-banks/#comment-3027 right analogy, but an imperfect conclusion. Launching a de novo bank brings it’s own risks, of course, but I’d think in two years this institution could still survive. Were I to start my own, i would NEVER be fully staffed at the outset…just insanity. Get the basics staffed, open 1-2 branches and move up from there. Hire enough loan officers to start…easier to add as needed I’d hae to think.

Paying bankers NY wages, to boot; no wonder they’ve let folks go. But as Ive thought before, any doofus with capital and the charter docs can open one.

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