Hacker News Reader

Comment by bryanlarsen | Hacker News Reader

Perhaps true in 1945, but these days $1M is petty change to a bank. There are lots of people out there with $1M mortgages out there who are definitely at the mercy of their bank.

£1 in 1945 is ~$25M today and even that value doesn't seem high enough for the quote to apply. I wonder where the cutover is? $100M? $1B?

View on HN

It probably depends on the bank somewhat. My local community Bank in a small rural town won't have many, if any, million dollar home mortgages, maybe some of the farm or business loans are that large.

Also I hope you meant £1M is ~$25 M today and not £1 :D

I don't think local community banks typically hold onto a lot of mortgages. They would originate the loans and then sell them to someone else.

I think the quote applies in relative terms of the bank's size. When Elon bought Twitter, and then he started saying there were so many bots, I remember people saying how much the finance department at his creditor was sweating. That to me is Musk owning the bankers, and yet, $45B is likely not close to how much that bank as in deposits.

edit: which I actually just read, was multiple large banks, which is now a great strategy to not being owned by debtors. I assume a single large bank would be sweating a lot more.

https://en.wikipedia.org/wiki/Silicon_Valley_Bank hit $15bn of unrealized losses and exploded. It was destroyed by the collective action of its depositors in a classic bank run.

https://en.wikipedia.org/wiki/Se%C3%A1n_Quinn is another example; he managed to persuade the bank, via accomplices, to lend him €451 million to buy its own shares in a sort of circular pyramid scheme to inflate its value.

The trick is to keep the circle extremely wide. Then, it's called an Economy and Healthy Inflation. :) An ecosystem if you will.

Worth noting that banks are, on average, a LOT bigger than they used to be.

The popular conception of a bank, even when I was a kid, was a place that was based in your town and had maybe a few branches and took in people’s deposits and wrote mortgages and business loans.

Depending on where you live small local banks still exist. Although some merging processes are definitely happening, in my area.

Yes they do exists as you say. However in last 30 years or so 90% of small banks are merged into Too big to fail banks.

In the US, small local banks are everywhere. There's an entire ecosystem that matches capital to start a bank with experienced management teams that run the bank (not just anyone can be an executive at an OCC chartered bank). There are SaaS providers that do the heavy IT lifting. And, of course, specialist lawyers. They open a local bank, build it to a certain size, and (usually) one of the regional or super regional banks comes and picks them up. Lather, rinse, repeat. Not unlike what you see in SV with startups.

The situation in Germany with the "Sparkasse" and "Volksbank" is a bit different. They have a special legal form, preventing takeovers from other banks. But the local Volksbanken (or Sparkassen, I guess) can merge with each other. If that process in the end also leads to a "too big to fail" status at some point in time, I cannot predict, but I doubt it.

Sure, but over 50% of the assets held by banks in the US are held by five banks.

That’s about double the percentage in 2000. Things have changed a lot and the trend continues.

Apparently in the UK, the largest four banks control 75% of all current accounts (en-us: checking account ). Admittedly a smaller market, but even more centralised.

"Big banks have most of the money" and "Big Banks have gotten bigger" has absolutely nothing to do with "Are there small banks". I was talking to some folks I know in this world this week about a small bank they're starting, so it's not 2000 we're stuck in. I get "Big Banks are Bad" is the horse you want to beat, tho long dead, but there's plenty of room in this thread to shoehorn your pet gripe where it would be at least remotely on-topic.

My point is pretty easy to follow.

The quote, that is the title of this comment thread (we're discussing a specific thing here, the quote in question, mind you, not which banks are good and bad) was a whole lot more applicable in the past than it is today.

Yes, sure there are small banks. But if you walk around any major city or drive around any major residential area, nearly all the banks you see (and in reality, nearly all the banks people actually bank at) will not be a match for the main point this quote is making.

That's because the banks that nearly all of us interact with now, are so large, and so politically connected and interwoven with our core financial structures, that it's actually impossible for almost anyone living to have a bank at their mercy due to the amount of money they owe the bank.

So the quote, once widely understandable and applicable, is slowly starting to make less sense to the average reader.

Which is kind of interesting.

Just in my suburb of a major city, within, say 5 miles of me, physical banks that aren't the top 5: a bunch of small banks (Southstate, Cadence, MemberFirst, FirstCitizen, OZK, Unity National, Southern First, First Horizon, City National, Hyperion), at least 6 credit unions (usually considered 'small banks': Delta Community, Navy Federal, Emory, Associated, American Postal, Peach State), banks that are 'small but something else' (BestBank (bought by First Citizen I think), associated with Kroger, Woodforest National associated with Walmart) and 4 regionals (Truist, Synovus, Regions, Ameris (which is a rollup of 4 or so small local banks around here)).

How do they stay in business I wonder since noone sees them and noone banks there? What was your point again?

In a Man in Full in the scene where the bankers are grilling the guy who owes them money, they are worried because he owes them so much they have a problem - of course they do their best not to let on that such is the case and he evidently doesn't pick up on it either. I'm not sure the amount he owed in the book, published in 1998, but I believe it was 600 million dollars.

evidently a user named wasteduniverse is shadow-banned or something, I saw his question but it was marked dead and I couldn't reply. Looking at his comments page all his other comments were also grayed out and dead.

I don't know what he did but since his question seems unproblematic enough I'll answer here - I didn't finish all the book, my Tom Wolfe phase was done, it seemed ok but not as cool as I thought Bonfire of the Vanities was, I remember some snide reviews of it at the time all about how Wolfe was still trying to be his idea of a great writer which was hopelessly out of date (opinion of reviewers).

My understanding it the Netflix adaptation has gotten a lot of complaints.

Probably whatever is less than your actual assets.

You owe the bank $100 and have $0 to your name then they're just out. Although I guess they didn't lose sleep until it was a bunch of people's mortgages so probably ~250k.

There's a big difference between secured and unsecured loans, subprime lending crises aside.

Banks are bigger now, I assume.

Yeah, I mean, look at Elon Musk's buy of Twitter. Morgan Stanley and others secured about US$6bi? That's more on them than on Elon

PS: I am aware that Elon's shares on other companies were used as collateral, but yet...

Reply on news.ycombinator.com