Inflated Bond Ratings Helped Spur the Financial Crisis. They’re Back
wsj.com
wsj.com
That's a real problem, and needs to be solved. It's not by itself a trigger for a financial crisis, though it's not hard to imagine it becoming one.
If the investment bank only facilitates the transaction, then the key incentive that could tilt the transaction toward having a sense of urgency, and as a result, indifference to the rating accuracy would be the personal gain of the individual/team attempting to process the transaction.
If that assumption holds, would tying in a performance based return to the banker who sells the security, balance it? That way they also have incentive to make sure the rating is as accurate as possible?
If so, then it seems that it would probably be resolved through legislation, because otherwise it appears to be an intractable coordination problem. Unless including a return for the seller based on the performance is something that occurs in the industry for other types of securities.
It's usually not proactive though. (PE firms get valuation checks before investment, but that's different than bonds.)
People just trust the agencies when they rate bonds highly, even if they shouldnt be
Rating agency who's customers pay a subscription price for receiving rating, should solve it?
Sellers need to convince buyers to buy their product. Sellers need to get their product rated in order to appeal to buyers. It's a one time cost to the seller to appeal to a large amount of buyers, and the higher the rating, the larger the pool of potential buyers.
Flip it around. How do you coordinate enough buyers together to pay for rating all the potential products out there to buy?
2008 provided strong empirical evidence that the market does not have the motive to solve its own problems. Markets are not obliged to conform to theories about how markets should work.
In aggregate, it sometimes makes sense to model participants as rational, but this is a very simplistic model that does not always apply. There are lots of economists studying how asymmetric information or irrational participants can cause market failure or other outcomes.
You cannot study economics in a vacuum...in other words you cannot conduct the "test" part of the scientific method, because the real world will always produce some other unknown imperfect variable that affects the theory.
This is why behavioral economics are so important. IMHO it's the first truly concerted attempt at isolating economics to its core science in a repeatable and testable form (albeit not perfect). For example - understanding things like anchoring, recency bias, nudging, etc.
It's tested all the time.
Add tariff, demand drops. That's also economics and works well in 2019.
This stuff is now so obvious we've forgotten it and can now argue about whether economists can predict recessions.
So it's hard to see economics as a valid science. There are no consistent theories and exceptions to everything.
“Science” is not some kind of shorthand for “ultimate understanding of the world”. It is just a process for validating and understanding the limitations of theories.
Absolutely no theory in economics passes even the most basic quantitative testing.
Really. That is an observable fact. It's not an opinion.
Empirical economics is barely even a thing, and even when it's a thing it's mostly nonsense, based on poor data and questionable methodologies.
https://www.livemint.com/Opinion/J7atYOViQO54PiBzSTdAYL/Empi...
That does not mean there aren't theories, hypotheses, experiments (usually natural experiments, or small scale pop psychology demonstrations like the dollar auction), and so there is data and you can fit models.
And in economics the hard part is getting good quality data, knowing what to try to quantize, where to start. Some folks spend decades hunting for signal. And then we get priming, and turns out it was nothing. At the same time there's SBTC (skill-biased technological change) the theory describing what happens as automation progresses. But it takes a lot of work to correctly "apply" that theory, because the effects are complex, and you have to keep in mind what else can also affect your observables. (So confounders has to be managed.)
And in the end we get high quality insights, such as the David Autor paper (Why there are still jobs?).
And there are the long and even deeper dives like the "Why nations fail?" book, which talks about the problem of public choice economics (politics) and how to model good politics, how to measure, how to quantify, etc. It's naturally less dense than a paper, but the problem and the pondering is a very important part of science. (The hypothesis generation, the abductive reasoning part.)
There's no need for correcting for local variations that are needed in econ. Or from a different perspective the fact that we have simple laws in physics, and chemistry, and engieering, is because we are only considering/using a _very_ limited part of the whole universe.
The classic CH4 + 2 O2 = CO2 + 2 H2O is a gross oversimplification, because there are a few dozen other things going on at the same time, and NASA/SpaceX/BlueOrigin has to consider those when they burn in an athmosphere. But since we rarely encounter these problems we don't often find ourselves lacking enough data to fit a better theory. (But of course that's what's happening in post standard model physics, or in cosmology, or in trying to design fusion plants, we are very early in magnetohydrodynamics, and even designing a better corrosion resistant material for use in molten salt reactors is a challenge.)
So, just as we have models for ant ecologies we have for economics of states/countries, but just as neuroscientists have trouble figuring out how exactly an ant works and when does what and where ants will go to forage next economists have trouble predicting when the next crash will happen. (See also bee hive collapse syndrome, we still don't know what causes it, yet there's a lot of hives and we could even do experiments with them easily.)
I can't remember the source for this aphorism, but it resonates a lot with your comment :-)
[disclaimer: I'm a physicist]
Well this the point. Personnal experience is flawed and unreliable. In my personnal experience, something that weight more should fall faster. This is not the case.
Which economic theory enuce clearly the subset of conditions required to be true and fit the refutability criterion? For chemistry: all of them.
Humor me… can you give a more specific example? When I took chemistry classes I don’t remember learning a theory that was completely correct, but it has been a while.
Soft science like economics, psychology, sociology will have none of the 2: conditions vary, results vary, and even if you could ensure you start with absolutely identical conditions it's very implausible that the result won't be heavily influenced later on by random factors.
That's not testing. That's just a real life interaction. You can't isolate the variables in supply & demand, so we can only theorize that supply & demand is universally true. If I mix copper and tin in a bowl, I will infinitely get bronze as a result. This can be tested again and again with no variation. I simply cannot reproduce people's behavior in a vacuum. We can only observe it in the real world and draw the conclusion. This goes for my comments about anchoring, etc. as well.
Additionally, a significant number of social scientists aren't scientists.
There is a lot of gray area, for example is medicine a science? Many treatments or diagnoses are based on probabilistic or empirical models -- that doesn't make them worthless.
Medicine is not generally considered a science.
And never was it implied that things that aren't science are worthless.
I think the issue here is more that economics is describing human behaviour, and we don't fit well in to a mathematical formula.
There is a whole field of economics ('behavioural economics') that explicitly doesn't make this assumption.
To quote Charlie Munger: “it economics is not behavioural, what the hell is it?”
It's not descriptive or empirical, and never has been.
The more honest economists will tell you it's considered part of moral philosophy.
https://www.goodreads.com/book/show/43267091-licence-to-be-b...
Use fixed universal prices regardless of location and you /will/ have problems. The Soviets tried unsuccessfully to do a value calculation for their existence.
Economics points out for instance that stopping smuggling without offering an alternative serves as a subsidy for the successful smugglers.
Doing the math to point out that say a deflationary currency would eventually become worthless as a currency is likewise objective.
It makes for good reading in the Harvard Business Review.
While they investigated new topics (i.e. economics), their methodologies were 100% within the standard practice of social and cognitive psychology at the time.
They were then awarded the Nobel Prize for this work. Now, not everyone in the field came from psychology, but a lot did, and the methods used in behavioural economics are essentially indistinguishable from those used in psychology.
For references, Thinking Fast and Slow is probably the best source, as one of the original authors describes their research program.
Also, modern economics use some heavy mathematical tools, yet nobody says its a branch of mathematics.
And lastly, psychology is in my opinion one of the most important branches of science right now.
I agree with you on psychology's importance, but that's probably because I am a psychologist :)
Macro investing literature is what you should read if you want to understand the economy. It's less focused on high level concepts and more on specific data points and how they relate to and impact one another.
Maybe so, but almost all of the irrational actors that still have any savings know not to get fancy in the securities market.
It is as much a science as any other study of a complex system. Meaning, yes, it is a science.
Economics can be deeply mathematical once you consider the game theory aspect, analysis etc.
I don't understand this criticism. All sciences are based on models that lie somewhere between incomplete and utterly wrong, but still these models are in fact useful and provide value. Take for instance physics, and how in some applications gravity is still modelled as a constant acceleration of 9.8m/s^2 pointing down. Although that model is very wrong it still works well enough to be useful.
In general you must choose a model on some scale between “accurate but too complex to be useful” and “easy to use but too inaccurate”. In the middle, hopefully, lies some theory which is simple enough to use in analysis and accurate enough to have applications.
For example, you wouldn’t see a civil engineer design a bridge with quantum field theory. They would generally use a less accurate, incomplete model of materials physics. Something simple enough that they can parameterize and run simulations.
Science is there in order for us to understand the limitations of these theories. This is why you can still e.g. use Lewis diagrams and get work done. They didn’t become “not science” just because they are an incomplete model of how bonding works, but through scientific experiment we have an understanding of how useful the model is.
Ultimately modern structured products creation and sales is basically just like old-school used car sales. Put sawdust in the motor, roll back the odometer, and tell the customer that it was driven by a little old lady that only took it to church and to the supermarket. Caveat emptor.
That is a terrible misunderstanding of the 2008 financial crisis.
Also known as: "you can lose a lot of money by being right at the wrong time."
It's doubly true when the market is as heavily manipulated as it is today. There's no point in trying to game or predict it at the scale of an individual investor, unless you enjoy the thrill of gambling.
> There's no point in trying to game or predict [the market] at the scale of an individual investor, unless you enjoy the thrill of gambling.
I don't agree with that, either. You can expect the value of stocks in general to go up over time in proportion to the growth of the global economy, which has been broadly predictable since the industrial revolution.
You can also hedge risk; not all investments are about making money.
Finally, you can certainly outperform the market if you have expertise in a certain sector of the economy.
Your complete dismissal of all investing as "gambling" is flippant and incorrect.
Warren Buffet is wealthy for a reason.
There is a kernel of truth in what you said if it is restated as: amateur investors should not expect to outperform the market.
Warren Buffet started and made much of his fortune when there were more inefficiencies in the market. It's not clear that the same method would work today.
With all of he data and speed that goes into trading, it's pretty unlikely that you have an informational edge unless you're able to pay for more data sources than everyone else and you have an army of humans looking for patterns for you. That is you need to spend a great deal of money getting that edge. Presumably that is somewhat what Renaissance is doing.
Even then you have to deal with the fact that insider trading is essentially instantaneous with modern communication and trading platforms.
If you want to play that game you have to compete against large firms that have buildings full of people looking into the fundamentals of the companies. Or you need some other informational advantage.
Otherwise you are almost certainly buying correctly-valued stocks. That's not value investing, but you can do something else that is useful, like buy an index.
For one thing, there are lots of companies I can buy into that Warren Buffet can't, because he can't take a meaningful (to him) position, because he would end up owning the entire company. And even that may not be enough to be meaningful to him.
I suspect this phenomenon also exists for firms and institutions much smaller than Buffet. It may not be that they would own the whole company, but simply that they would own too much of it and/or move the price on their own.
For another thing, lots of investors are irrational. They follow fads. There are certainly opportunities for contrarians.
Value stocks have underperformed in the last 12 yrs, but these things tend to follow cycles, so I'm guessing they will have a comeback. Here is an article about that: https://www.wsj.com/articles/the-agony-of-hope-postponed-by-...
> you can do something else that is useful, like buy an index
That is precisely not useful in terms of efficient price discovery, though it may be "useful" to the individual investor who has better things to do with his or her time. That is one kind of behavior that causes inefficient markets that careful investors can then exploit.
It's what the vast majority of people and businesses do with their money. Only a small percentage are investing in risky trades. And the ones that do that have plenty of money to spare and are well aware of the risk models.
The vast majority of people invest in founds that deals with short-term gambling. Heard of LTCM?
I really doubt that.
What does that have to do with the average investor?
Not really. Exhibit A: Follow realDonaldTrump on Twitter. Look what happened to the SPY index starting at 13:26 EST on 8/1/2019.
[A] https://twitter.com/realDonaldTrump/status/11569794468779622...
SPY -> https://i.imgur.com/MDp7zHS.png
Even if it took you 10 minutes to decide to short the SPX/SPY on that information, a leveraged trade made plenty of money over the following days.
There is an abundance of free information available these days. To people who hone their market discernment the edge is arguably more accessible than ever.
If they moved against, and had reasonable risk management, it should minimize losses.
Is it because of luck? Not trying to be silly, but how would you truly know it isn't just luck? E.g. read Fooled by Randomness for more background.
In general, though, if you look at mutual funds and hedge funds, I suspect that a lot of the winners and losers can best be explained by random luck. So in that sense, I agree with you.
I haven't read Fooled by Randomness yet but it's on my bookshelf ;)
The solution is the same for all of them. Effort. When you see reporting you're interested, find the original paper and skim it. At least read the abstract. Turns out the people actually doing the work are usually pretty sensible. There's a lot people don't know, but with this "one simple trick!" you can learn what we're less uncertain about.
The replication crisis suggests otherwise; they’re often delusional (believing in things that aren’t there) or outright frauds (publishing results they know are false for personal gain).
That's the plan as it turns out.
"Moving to dismiss the suit in a California federal court, S&P said that reasonable investors would know its assurances of independence were just marketing, and that its ratings should be treated as free speech, not as financial statements." https://qz.com/101722/sp-amazingly-says-no-one-should-believ...
Wow, that's literally what the salesman said when I bought my first used car. And I believed him, because of the low miles.
It's not like there are only a handful of AAA investment options.
And those investors don't only depend on these rating agencies. (They have their own fund managers, they have different divisions for different type/risk of assets - for example some dude going after risky VC type investments, a trader doing daytrading with stocks and other more liquid things [forex, derivatives <this is where the ratings come in>, money markets].)
But they don't just blindly buy anything that has been rated AAA.
In that sense the fact that rating agencies inflate ratings just means these big funds have more options to put on some more risk.
Of course, investing always had and will have some gambling style part. Because yes, maybe some thing is doomed to fail, but ... if that's thing is very large [eg. all of housing, or all of mortgages] you'll have to either hedge that risk anyway (and/or basically short it), or go in long, set up saddle options, etc. And usually that what happens, and then eventually reality gets more complex and enough small unnoticed bad assumptions get built into the system that it starts to crumble.
Naturally, it's not a great thing, because it has real world consequences. Funds go bust, projects get stopped, orders get stalled/cancelled, people are let go, families are stressed, health becomes at risk, lives are lost.
Is there a better system? Well, so far not really. The problem is not that there are some sophisticated bets on new research & development, new real estate, new capacity expansion for some company, or even betting on people paying back loans OR getting a house, or even the securitization of this is not a problem. The problem is that US and a lot of other "modern societies" don't have sufficient support nets for when those bets fail and people lose their work.
Once it dips and inverts, recession seems fairly consistent. Nothing is ever guaranteed but it is better reliability than most financial media, though the possible inverted yield curve is getting attention [2].
Machines and A.I. run it mostly now though, so game theory is now in their/algorithms hands. We are mere spectators in the speculative simulation. They are definitely watching for an inverted yield curve.
[1] https://fred.stlouisfed.org/graph/?g=lFt2
[2] https://www.bloomberg.com/news/articles/2019-08-05/yield-cur...
For the rest of the world it has not been a predictor. Unfortunately I can’t remember where I saw the article in the past day or two.
Also Chinas economy is slowing down but the problem is that probably nobody knows how much.
https://finance.yahoo.com/news/india-delivers-rare-35-basis-...
https://finance.yahoo.com/news/brazil-cuts-rates-6-amid-2118...
The inverted US yield curve is supposed to predict a US recession.
It doesn’t say anything about the rest of the world.
[1] https://www.frbsf.org/economic-research/publications/economi...
[2] https://www.frbsf.org/economic-research/publications/economi...
[3] https://www.frbsf.org/economic-research/publications/economi...
EDIT: Or is the problem a misalignment of incentives? It appears that investment rating providers are paid by the managers/sellers of the securities rather than the prospective buyer of the securities. This may create an incentive to attract more business by inflating ratings. If prospective investors paid for the ratings, perhaps there would be a different incentive alignment (and also possible opportunities for tragedy of the commons).
Here is how it works today. An originator finds people to lend to, aggregates them, works with a bank to structure them into a security that gets rated and then institutional investors buy the securities. Rating agencies get paid to apply their ratings criteria which they publish, allowing you to reverse engineer the model.
The opportunity, in my opinion, is a point of sale system where you hand iPads out to car dealerships, clinics whatever. Someone wants to make the big purchase, puts their social in and gets funded by the institutional investors on the spot. An institutional investor at the moment won’t get a say on funding, the platform will. They will simply set their high level criteria and the system will continue funding to get to some average that fits it.
For example, I could be an investor that says I want $10mm of subprime auto loans per month with average FICO if 615 and min/max loan sizes of XYZ. That gets entered into the system and then the dealerships continue handing iPads at the point of sale. The cash flow of the loans can move through the waterfall and ratings can be real-time in the flow as opposed to the security.
Anyway not sure if this makes sense as it is nuanced and I am being high level.
If you're aware of that fact then you know what you're getting and can deal it. But it's the tacit assumptions, magnified by aggregation and automation, that caused a disaster.
2. Analysing the ability for a large/complex company to pay back a bond is pretty complicated, as it depends on understanding the operations of the company, and the riskiness of the cashflows generated by those operations.
3. Your point about misalignment of incentives is correct, and mentioned in the article.
1. Student Debt - It is non-renounceable. Bankruptcy does not clear it.
2. Oil and gas companies - the entire "fracking revolution " has been funded by loses from bondholders.
3. All Private Equity debt - the basic business model is broken.
A more common example is the first generation Toyota Tacoma (00’-04’) that is currently going up in price, I’ve seen closing prices at $15k in the last year. Small trucks are now extinct and this particular model is proven to be absurdly reliable, but who would have predicted that 10 years ago when these were selling for $3k-$5k?
Diesel trucks used to be grossly overpriced too but now that most of the older stuff has aged out and the "new enough to still be kinda nice" market segment is full of emissions era diesels the crazy pricing has mostly gone away.
They're comparable to the Jeep JK and the WRX STI or a performance trim Mustang/Camaro but for different demographics. Anyone could tell you that they would hold value better than average when new.
Losing less value than average is not all that remarkable. Gaining or failing to lose value is exceptional and subject to the whims of consumer culture (see my tangent about diesel pickups). Jeep Wranglers used to be like that but as the 4dr JKs hit the used market it calmed down a lot. Old full size Broncos are probably about to stop losing value if the rumors of a new fullsize are to be believed.
Also I toned down the language in the original a little.
Anecdotally, I purchased a used Tacoma in 2011 for a few thousand dollars as a family workhorse vehicle. I sold it for nearly double five years later with only making regular oil changes. This really changed my impression of the used car market and have since started a side hobby buying and restoring "almost-classic" vehicles.
That's no longer a serious problem (and is in fact an opportunity for the majors that have taken over). That's several years in the past as a large risk. At the scale of the US economy and its wealth, the remaining debt implosion risk in the fracking (Permian etc) segment is trivial.
The fracking buildout is over and consolidation has already largely occurred. There are only a few relevant small players left to be acquired by the majors. Companies like Exxon, Chevron, ConocoPhillips, Devon, Pioneer, Apache, Concho and Occidental own everything. And a few of those are guaranteed future acquisitions for the big guys, including Devon and Apache. The majors have no real capital problems when it comes to affording to deal with swings in the price of oil, unlike the early years of the fracking boom when dozens of smaller firms still mattered and were highly leveraged. And at this point we know where most of the oil is at in the prime fracking zones, the little wildcatters served their purpose.
Without this - or incredibly tightly policed regulation of the existing private agencies, I don't see how an outcome like the one described here isn't mathematically guaranteed?
Then, of course, ...
>The Financial Crisis Inquiry Commission estimates that by April 2010, of all mortgage-backed securities Moody's had rated triple-A in 2006, 73% were downgraded to junk
>many of their ratings turned out to be catastrophically misleading, the large rating agencies enjoyed their most profitable years ever during the past decade.
I think we should have new state run ratings agency, one that competed for ratings at market rate. This would force the private labels to at least give out more plausible ratings.
[1] http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf [2] https://www.sec.gov/news/speech/2009/spch020609klc.htm
Are you going to ban people from giving opinions as to whether various investments are good or not? As well as being anti free speech it would make life harder for investors. However I guess you could have a government controlled agency in parallel. Or regulate the agencies that their ratings have to be reasonable to get a license and ban/fine them if they are giving AAA ratings to junk.
We already do basically do that for legal and medical advice.
Doesn't this suggest that the ratings are providing close to zero signal?
You’d need vastly more data points to firmly believe the conclusion “Their ratings are indistinguishable from being randomly generated.”
There are people on Wall Street who can appreciate this math. A statement which is true and necessary but may not be kind: Wall Street does not allocate their talents towards producing journalism.
If investment grade bonds are all crowded overvalued trades then you have to go further out on the risk curve.
If the market is slow to do that then the rating agency will just start inching ratings up and lowering criteria
EDIT: It's also one that's ripe for a good and proper YC-unicorn style disruption. Hit me up if interested.
How could a single company or group of companies alter a broken incentive system? It seems the two most salient options are (1) consolidation of competitors to reduce the race-to-the-bottom competition or (2) stricter regulation to prevent the kind of ratings shopping that debt issuers currently engage in.
While I can see how a tech disruptor could potentially put all the other ratings agencies out of business and achieve (1), this seems like a tall order. And my uneducated gut-reaction to that scenario is "decreased competition bad," although I'm open to being proved wrong on that, as this does seem to be a case where competition has caused the problem (from the article: "One author, Colorado State University Finance Professor Sean Flynn, says “competition among credit-rating firms has, if anything, reduced the quality of credit ratings.”")
https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...
The article even spells it out - they haven't changed their business model since. Bank needs a rating on a asset, but their incentive is to get a "better" rating, not a more honest one. There are multiple agencies, so banks shop around for the most favorable one. So, as soon as one agency loosens their ratings, they all follow suit. They sell good ratings. That's the industry.
Quote after quote:
The Financial Crisis Inquiry Commission (FCIC)[39] set up by the US Congress and President to investigate the causes of the crisis, and publisher of the Financial Crisis Inquiry Report (FCIR), concluded that the "failures" of the Big Three rating agencies were "essential cogs in the wheel of financial destruction" and "key enablers of the financial meltdown"
U.S. Securities and Exchange Commission Commissioner Kathleen Casey complained the ratings of the large rating agencies were "catastrophically misleading", yet the agencies "enjoyed their most profitable years ever during the past decade" while doing so.[41] The Economist magazine opined that "it is beyond argument that ratings agencies did a horrendous job evaluating mortgage-tied securities before the financial crisis hit."[42]
According to columnist Floyd Norris at least one rating agency—S&P—responded to the credit crisis by first tightening up its standards and sacrificing market share to restore its reputation,[83] after which it loosened standards again "to get more business",[84] tripling its market share in the first half of 2013.[85] This is because, according to Norris, for rating franchises to be worth anything, they must seem to be credible to investors. But once they overcome that minimal hurdle, they will get more business if they are less critical than their competitors.[84]
and on and on and on.
There are a number of ways this could work; one is they issue a contract redeemable for the difference between their predicted performance of a given company and the actual performance.
If they're as good at this as they think, they get another revenue stream. If not, the victims of their conflicts of interest have some insurance.
Memorable scene from The Big Short (2015) - "FrontPoint Partners confronts S&P"
For example, the only charts on the page show how smaller agencies give higher grades on average. What does this have to do with risky asset vehicles exploding in popularity? Not much.
There are many obvious explanations to this that the article doesn't even mention. Like how a slightly lower rating from a bigger agency may still carry more weight, skewing ratings higher the smaller the agency.
The article mentions several times that additional ratings agency competition has made things worse. And that doesn't make any sense, investors now have the ability to choose who they believe.
The bond inflation part of the article is believable, but the focus on comparing agencies to eachother is suspect to say the least
After all we don't let the pharmaceutical companies determine if a drug is safe.
The feds may well outsource ratings to private companies but those companies are no longer beholden to the issuer of the debt.
This is a good read if you'd like to have an understanding on what's coming up next.
As a group they miss acute macro moves, altogether.
But then the blurb talks about how he "accurately predicted the housing bubble" so then I think, nah, Pento also wants us to buy into his new prediction.
Though the folks on Goodreads that read it are sort of 50/50: https://www.goodreads.com/book/show/16719321-the-coming-bond...
This guy liked the parts where the book introduces you to specific macro concepts/schools: https://www.youtube.com/watch?v=uhSJ429r9mk But the comments are pretty negative.
What about the incompetent companies giving these ratings?
E.g., VCs in later rounds make sure that VCs from earlier rounds put in pro rata, because investing actions speak louder than words.
Until the misaligned incentives of the rating agencies get fixed, the ratings are really not worth the paper they’re printed on.
How do you buy bonds?
If I bought bonds myself I certainly wouldn't trust the rating. I'd only use it to serve as an indicator of how likely I can find a "greater fool"
There is no regulation that will fix the current system it is broken in its design.
I hope there will new banking through crypto currencies which work also for the environment.
If this was a app/provider outage and we would do a root cause analysis we would determine that monetary centralization is the root cause issue.