Busted bank
This is what makes me a fan of Arnold Kling: clear, succinct descriptions.
He is an intellectually curious economist, with deep theoretical knowledge about economics. His daily newsletter surveys the ideas landscape, searching for what he rates as good ones to pass along. His criteria are about intellectual curiosity and honesty rather than tribal loyalty or ideological rigidity. Which is not to say he doesn’t have any biases. He is a conservative-leaning libertarian, and says so.
His take on the Silicon Valley Bank bust exemplifies his succinct style. A snippet:
When interest rates go up, the value of a portfolio of fixed-rate bonds or mortgages goes down. Roughly speaking, if the bank paid $100 to buy a long-term bond with an interest rate of 2-1/2%, and now the interest rate on a comparable bond is 5%, the bank’s bond is worth about $50.
The regulators should make you [as a bank] mark down the value of your assets to their current market value and force you to shore up your capital. They should make you stop paying dividends and executive bonuses, for one thing. You should not be allowed to make any more risky loans, because of the moral hazard: if the risk pays off, you return to profitability; if it goes badly, then the taxpayers take a bigger hit via the deposit insurance fund. You have an incentive to take desperate gambles.
Read the whole thing—it doesn’t take but a minute. He makes a case against the government’s banking regulators allowing banks to fake the value of their assets. But he goes on to describe the way banks and government support one another in lousy behavior: banks in faking the values of assets on their books; governments in borrowing as if there will never be a day when the bills come due.
You can agree or disagree, but his description for how the system works as opposed to its ideal is easy to understand.
OK, no reason for posting this other than it had my wife and me almost 'in tears', and I thought perhaps a few folks here might at least get a grin out of it, though I know not everyone shares my sense of humor.
A 'bonus' posted at the end of JVL's Triad over at The B today...
(Note: I used to enjoy stopping at a particular Waffle House down in Ohio for a cup of joe and maybe a bite to eat pretty regularly on my trips back and forth to KY years ago. Haven't been for quite a while. Might just have to make it a point to make the drive again soon, since part of the charm was the 'people watching' I engaged in during my usually 'late night' visits, though admittedly it never was quite as entertaining as this.)
https://www.youtube.com/watch?v=KYNFqmu2toI
Also, we have snow flurries, but, it isn't really as cold as it has been, and I hate the darker mornings and my circadian rhythm is already off...lol...and I spent 10 minutes trying to fix the clock in my car...lol