Saturday, March 11, 2023

Still More Twitter-Sized Explanations

I was living in Austin during the S&L collapse (ask yer Grandpa 👴🏻!). It took the Texas real estate market with it. I still remember a local editorial cartoon showing a bunch of well-dressed guys in silly party hats clutching bottles of champagne, in a car in a ditch (get it?). And blaming bystanders for their plight.

It’s a pretty good metaphor, because it’s so useful so often.
I went for “All of the above,” which is by far the most popular (if you can’t read the results). This explains all the whinging about the Fed and interest rates connected to this story.

1 comment:

  1. The lesson here is the same old lesson. 1. diversify. The bank was not diversified. They did not have a loan portfolio earning them money. They just took money in. 2. Only invest money you can afford to lose.

    Seems these bankers are small, limited thinkers. They took the simple thought of: US Treasuries, safest place in the world and did not actually think through the mechanics of being a bank overall. Thus: We have a lot of cash, where should be put it to be safe. They did not think about the bank actually having to earn an income.

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