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In July 2007, FT interviewed Chuck Prince, then CEO of Citigroup in Tokyo, to inquire about the acquisition boom. The answer was Banger, given the debacle that unfolds quickly.
Things get complicated when music stops in terms of fluidity. But as long as the music is playing, you have to stand up and dance. We’re still dancing.
Some people defend the quote as a slightly narrower thing about getting finance, but it was actually still humming (although increasingly unconformed). A few weeks later, the RBS-led consortium sweetened Abn Amro’s nearly $100 million offer with additional cash.
However, Prince also rejected a speech on the subprime mortgage crisis, claiming that “the depth of the liquidity pool is much greater than before, so destructive events need to be much more destructive than before.” So this can justify what went down in the record book as one of the best top market quotes of all time.
Sadly, there is no pizza on exactly the same level as Prince’s “Get Up and Dance” quote, but Alpha Bill suspects that this quote from the new SEC chairman Paul Atkins, which took place at an open meeting a few weeks ago, will age just as badly, if perhaps not too early.
One thing I know is that it is true regarding the FSOC (Finance Stability Monitoring Council). At least my counterpart at that institution is that non-banking financial institutions do not pose systematic risk to our markets.
Yes, the systemic dangers raised by popular bogeymen like private credit could probably be exaggerated (at least for now). Banks have historically been a major location for systematic financial risk given many of the key functions they play. Investment managers are really built differently, and applying the same bank-centric, “too big to fail” regulatory framework always seemed a little odd.
However, it is clearly ridiculous to argue that “non-bank financial institutions pose no systematic risk to our markets.”
Alphaville would argue that even 2008 was actually more like a non-bank financial crisis than a banking financial crisis.
Even if we classify Lehman Brothers and Merrill Lynch as traditional banks (although reliance on wholesale finance has really become a typical shadow bank), how can we remember that the US government forces us to guarantee the entire 4TN money market fund industry at the time?
It may be permissible to forget the shenanigans of LTCM – Atkins was an experienced lawyer with a senior stint in the SEC under his belt at the time, but the new SEC chairman must have known almost the author, who was deployed in the US Treasury market in 2020.
Certainly, yes, we had a Silicon Valley Bank blunder in 2023, but for all SVBs, there have probably been dozens of major accidents in the world of shadow banking.
Is banks still a bigger absolute risk? Yes, given their greater importance. But does non-banks pose zero risk? here we go.
If you think Atkins is out of context, you can see the entire public meeting below. The topic was to delay the deadline for the revised “Form PF” again. This is a requirement that investment instruments similar to hedge funds report details to the SEC. The comment comes from his final statement at the mark, about 37 minutes later.
It is possible that Atkins had no intention of expressing himself so definitively. Also, Alphaville finds it difficult to believe that all his counterparts at the FSOC are harmless given how much of the FSOC have over the administration, considering that they are worried about this.
But that’s exactly the kind of poor quote that people like us will unfold again and then laugh when the non-bank bits of the financial industry build on the soil itself.
Read more:
– SEC Commissioner Crenshaw tore agents’ “Regulatory Jenga” (FTAV)
