Quote:
Originally Posted by Slava
I do have to laugh at the banks crying about short sellers, as if that’s their issue. In some of these cases (SVB), it’s just gross mismanagement.
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I'm the last person to moan about short sellers (I regularly short all kinds of things and have written public short reports in the past). However, I do think financial institutions are a bit different, because they depend on trust.
If depositors see a headline "PacWest stock down 45% in banking crisis" they're a lot more likely to pull all their money, which then causes a banking crisis. And the more banks fail the more banks will be under suspicion. I think shorting banks during a crisis is irresponsible and don't do it.
I actually think the bigger issue is the sweet deal the FDIC cut JP Morgan on First Republic. Once you've set that precedent there's no reason for strong banks to take over the weaker ones without fdic backing, which only happens once they've failed. Right after that you saw TD cancel a deal to buy a big US regional, and the ones that are quietly shopping themselves aren't finding bidders for the same reason. Every buyer wants to get the FDIC special where the loans are guaranteed and they get a discount on the book.