Let’s Hope We Don’t Have To Worry About Credit Suisse
The deluge of bank headlines continued unabated Wednesday, when Credit Suisse returned to the spotlight for the wrong reasons.
Shares of the embattled Swiss institution plunged in Zurich, dragging a broad gauge of European banking stocks lower still, insult to injury during a week when European financials were under pressure from developments in the US.
Credit Suisse is five months into a turnaround effort which, if you're feeling generous, you might describe as "complex." A less generous adje
The shorts have been unleashed. Credit suisse probably won’t be the last target whether the shorts are successful or not. It shows how smart the fdic and fed was this wrekend.
A bad, poorly managed bank. Parties that do business with bad, poorly managed banks should be prepared to take their medicine when banks like Credit Suisse run into trouble. Capitalism.
With apologies, sometimes your unequivocal statements are misguided. It’s a SIFI. It’s not an entity that everybody in the world can just shun and avoid “doing business with.” And you shouldn’t be hoping for Credit Suisse to run into trouble. Unless you live off the grid somewhere (say, in an abandoned bus in the Canadian wilderness), you’d be affected in a scenario where CS has problems. You can think you wouldn’t, and you can say you wouldn’t, but you’d be wrong. So just bear that in mind.
If you’re right — and I have no reason to think you’re not — then that suggests to me we need a major rethink of the global financial system. If a single poorly managed bank in Switzerland is able, in effect, to hold every person in the world who chooses to live on the grid hostage to its bad decisions, then something is very, very wrong with that system and our assumptions about capitalism, national sovereignty, and individual agency.
Your framing is one sided. It is not a poorly managed bank that is the issue. Yes it was poorly managed in the past, additional equity was brought in to fix that (quite a bit different from SVB) as well as new management. In normal circumstances it could still fail, relatively slowly.
Now what we see today (and earlier this week) is relentless speculation with trading profit as only objective to see whether more banks can be brought down quickly. That is the issue at hand. You need to wonder who the real hostage takers are.
If a major rethink of the global financial system would be on the table there is a lot to think about, not just a relatively small Swiss bank.
Completely agree with your last statement. Too much opacity/not enough transparency, too much leverage (and ways to hide it), not enough regulation and oversight of the system, for starters.
Of course he is right, and of course, we need to rethink how we do life around money. There is just way to much money laying around not at work, it’s actually surreal.
And then of course, we as a society, are losing every day a bit more any form of idea about what it means to lead teams and manage large organisations. In my experience in M&A, I’d say that at least 80% of businesses are poorly managed.
This has less to do with capitalism then the basic assumptions that people are good at what they do when it comes to organisation above 100 people.
Well said mfn. CS has an approx. $10 billion market cap if I’m not mistaken. We apparently survived much bigger banks failing during GFC and then the pieces being acquired by stronger institutions, once an orderly process was laid out by the authorities. I’m certainly not hoping for CS or any institution, large or small, to fail. Govt should protect the depositors to prevent bank runs, so we can all live happily within the grid and avoid recurring bailouts.
The ECB decision tomorrow is must watch TV, will Lagarde risk it? It is decision time for central bankers in the developed world. I’m starting to think even the Fed might pause next week, not a dull day lately…
Sigh – now we have to think about derivatives, and that is something both huge and opaque.
Really huge. I had a colleague once who wrote his PhD dissertation on the notional value of derivatives, held by US banks, items not then included on balance sheets. He was aghast to find the total amount ran to something like $100 bil. This study was done about 25+ years ago. Last year, VisualCapitalist.com reported that the global market for derivatives measured by notional value, was over 800 trillion! That’s close to 8 times the total annual global GDP.
Bring out your dead….
Maybe there was fire, causing the smoke at Credit Suisse in October. Really hard to tell with such a convoluted financial system. I don’t wish for a meltdown at Credit Suisse or the banking system (which could easily be a prelude to societal breakdown). I can’t be the only though wishing for a sound money system. No one reading this is old enough to know, but was it ever sound? Was it created for exploitation or has a sound system been exploited? It seems we get further away, sometimes by the minute, from any common sense when it comes to money.
A house of cards, fractional reserves being the foundation, smoke and mirrors, gamification, weaponization, hide and seek, obfuscate, and any/everything else horrible you can think of describes the financial landscape that regular folks are subject to daily.
No wonder conspiracy theorists can hold any sway. No wonder at all.
I am not a conspiracy theorist, but it seems that ever since 9/11, when the world’s financial center was attacked, and the world stopped trading for what seemed like an eternity leading to exposing the fragility of the global financial system, we have gone from one financial catastrophe to another. Almost as if the major players are all in to reap whatever possible before an even larger event shakes things down maybe for good.
Maybe that’s just me; I know I sound crazy for putting this in writing.
Getting rich quick(wanting to and also actually achieving it) pervades our culture, Working hard and/or honestly smart is often derided and it comes from thinking the system is rigged. Why wouldn’t you cheat to win? Winning without honor just means you weren’t the sucker. Winning with honor;
silly notion.
I think we do have to worry about Credit Suisse and every single other bank operating today. Let creative traders trade, wild speculators speculate, and bankers be boring bankers for a change. And when failures occur, it’ll be ok to let them.