• Rich Barlow

    Senior Writer

    Photo: Headshot of Rich Barlow, an older white man with dark grey hair and wearing a grey shirt and grey-blue blazer, smiles and poses in front of a dark grey backdrop.

    Rich Barlow is a senior writer at BU Today and Bostonia magazine. Perhaps the only native of Trenton, N.J., who will volunteer his birthplace without police interrogation, he graduated from Dartmouth College, spent 20 years as a small-town newspaper reporter, and is a former Boston Globe religion columnist, book reviewer, and occasional op-ed contributor. Profile

Comments & Discussion

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There are 12 comments on Why Are Banks Failing and Does That Herald Another Financial Crisis?

  1. A sober, evidence-based, and well-presented review of the SVB collapse and its implications. I’ve already assigned this to my multinational finance and trade class as essential reading and shared it widely on social media.

  2. More regulation of small and mid-sized banks is not the answer. The regulators have plenty of statutes and regulations to prevent recurrence. More regulations of the banking industry will just drive more financial activity to the unregulated shadow banking system. What’s lacking is a focus on simple banking fundamentals — concentrations, on the funding as well as the investment side of the balance sheet, are inherently dangerous, an unsafe and unsound banking practice that is already made illegal by federal and state banking laws.

  3. Great conversation and analysis. I particularly liked Professor William’s statement that 2008 was about bad loans and poor credit underwriting while SVB was about irresponsible risk management. So true.And I liked his idea about not just having capital levels based on credit risk but for interest risks as well.
    I agree with the 3 experts that the current situation will not lead to a wide-spread banking crisis. However, what I am worried about is that extreme volatility leading to broader contagion.
    The US Treasury 2-year had its biggest one day move since 1982 and biggest 3 day move since the 1987 crash. Some bank stocks moved 60-80% in a day. There are many examples.
    These types of huge moves destroy VAR models and other risk controls. They can blow up hedge funds and other companies. They trigger margin calls and forced liquidation. Forced liquidation often occurs at highly uneconomic prices which causes further stresses and a cascade of new market actions.
    Banks are highly regulated and their holdings are visible to regulators. For many others, troubles are hiding in the shadows and we don’t know who is having problems or who blew up, until after the fact. It will be a warning sign that something bigger is brewing, if extremely high market volatility persists.

  4. it’s so obvious the country continues to give trophies to losers. those who lost by not preparing correctly. It’s that simple. and so bailouts are spun for newly created versions of ignorance coined these days and in the past “what we know now”. truthfully be on a prudent side always if your lending (depositing) or borrowing.

  5. Though I would prefer less to more regulation of banks, given that there are now no limits on deposit insurance, how about 100% reserve requirements on transactions deposits? If a bank promises immediate payment on an account require the money to be kept as vault cash, deposits at the Fed, or TBills. People with term deposits would simply have to wait for their cash as that is what they agreed to.

  6. So we have allegedly highly intelligent banking executives that thought interest rates were going to stay at zero forever? Will they be held responsible for being ignorant?

  7. This is a curiosity question for Cornelius Hurley: you stated you had been writing on the Federal Home Loan Bank system and your suggestion related to that seems to make a great deal of sense in terms of stepping in to stop high risk behavior. What are the venues for someone like you who is researching and knowledgeable about these systems to both discover high risk behavior and then recommend actions to the Feds on high risk behaviors in advance of a crisis? If less regulated banks can function with less transparency, then experts like you wouldn’t necessarily be able to know about it but are the watered down regulations still strong enough to respond to a report from experts if the experts became aware of the high risk behaviors?

  8. Banks never fail – the executive management does! However, more regulation is not an answer as well as no regulations at all – neither works. What we need is complete revamp of the banking and finance infrastructure, however no politician would ever touch this subject if he/she would want to be ever elected.
    Seems like we will keep hearing the too good to be true “too big to fail” sob stories by the Fed and the political establishment, who keep expanding the money supply by printing more and throwing more newly printed money at the problem. Volatility and uncertainty will follow, hopefully not the hyperinflation. The Fed has exhausted its resources beyond raising interest rates and killing the healthy economic activity to combat inflation.

  9. Having worked in a major bank, I would say the complexity if risks taken in the name of profit is far too complex for underfunded regulators. FDIC needs to charge banks far more, and in proportion to the risks they take, just as your auto insurance charges more for high risk clients. There has to be sufficient funds to hire enough qualified regulators to monitor and take action proactively. The FDIC (for banks) and SEC (for brokers, money managers) have never been funded sufficiently. This is not going to be the last banking crisis if not staffed correctly.

    Until then I’ll keep just enough to pay near term bills in my bank, and even spread that out amongst at least 2 banks. Rest is going in mutual funds where at least I know what risks are being taken with my $.

  10. It appears/seems to me that quite often in the U.S. Financial World, so many of its problems can be attributed, absolutely, right, to “American Greed,” and ALL that it entails.

  11. It’s essential to have open discussions about the health of the banking industry and its implications for the overall economy. By the way, it would be interesting to explore how currency exchange rates could be affected by these banking issues.

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