Episode 149 – Regional Banking: It’s Over Bro

Cas Piancey and Bennett Tomlin discuss the ongoing struggles of regional banking in the United States, and why it persists.

This podcast was recorded on March 6th, 2024.

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Other episodes mentioned in this episode:

Episode 147 – MONEY TIME: Deltec Bank moved customer funds from FTX to Alameda Research
Episode 116 – The FDIC, Infinite Insurance, and Moral Hazards (feat. Rohan Grey)

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English Transcript:

00:00:05:03 - 00:00:06:11
Cas Piancey
Welcome back everyone. I am

00:00:06:11 - 00:00:17:06
Cas Piancey
Cas Piancey. I'm joined, as usual by my partner in crime, Mr. Bennet Tomlin. It's wonderful to be talking to you for an extended period of time. Today we're recording two episodes. Right now we're going to be talking about,

00:00:17:06 - 00:00:25:05
Cas Piancey
banks. We talked about a bank in the last episode. Deltec, in this episode, we're going to be talking about regional banks in America.

00:00:25:07 - 00:00:28:07
Cas Piancey
we're going to revisit the banking crisis from last year.

00:00:28:07 - 00:00:44:11
Cas Piancey
I think we should go over it a bit. I, you know, it has been a year since we had Rohan Gray on to to talk about it. If you are interested in that discussion, which I think was valuable and insightful when it comes to moral hazards, insurance, all of this stuff, give it a listen.

00:00:44:11 - 00:00:51:07
Cas Piancey
if not, you know, we're going to just quickly go over some of the, the talking points that we had in that. But I also want to

00:00:51:07 - 00:00:52:09
Cas Piancey
discuss

00:00:52:09 - 00:00:56:04
Cas Piancey
I know we're no banking experts, but I do want to see what our,

00:00:56:04 - 00:01:04:03
Cas Piancey
opinion is as to the lessons learned and the takeaways that were made and whether the future

00:01:04:03 - 00:01:08:00
Cas Piancey
for community banks, regional banks and larger banks,

00:01:08:00 - 00:01:10:08
Cas Piancey
too big to fail banks, I suppose.

00:01:10:10 - 00:01:12:21
Cas Piancey
looks bright or looks bleak.

00:01:12:21 - 00:01:16:04
Cas Piancey
where do you want to start, Bennet? Because there's a lot of places we can start here.

00:01:16:04 - 00:01:22:12
Bennett Tomlin
I think one of the most interesting places to start with this is, as you mentioned, the bank in trouble right now is New York Community Bank Corp,

00:01:22:12 - 00:01:24:10
Bennett Tomlin
which merged with Flagstar.

00:01:24:10 - 00:01:38:17
Bennett Tomlin
and what makes them interesting is they were struggling quite severely. They got $1 billion investment led by one of my least favorite people on earth, Steven Mnuchin, today, which should hopefully allow them to continue operating.

00:01:38:19 - 00:02:02:14
Bennett Tomlin
Hopefully, it allows them to continue operating in a way where Steven still loses all of his money. That's my goal for this investment. but what's what's interesting about it is that, flagstar was the entity which acquired a lot of the signature bank assets after their difficulties. And so that's the crypto connection that initially jumps out at me.

00:02:02:19 - 00:02:04:06
Bennett Tomlin
Is that we saw

00:02:04:06 - 00:02:26:10
Bennett Tomlin
signature Bank became Signature Bridge Bank after its failure as is typical. Those assets were then acquired by Flagstar as Flagstar was merging into New York Community Bank Corp. And now we've had kind of this chain of failures chase this set of assets up the chain, right? silvergate fails, which puts more pressure and signature eventually causing signature to fail.

00:02:26:10 - 00:02:36:23
Bennett Tomlin
So signatures assets get bought by Flagstar, which eventually, after it merges with New York Community Bank Corp ends up in this situation where they need $1 billion. Let's call it a lifeline.

00:02:36:23 - 00:02:45:04
Bennett Tomlin
and it's kind of funny, at least to me, that it's that same in parts that have assets that have been passed along that chain the entire way.

00:02:45:04 - 00:03:08:06
Cas Piancey
I. I just imagine being one of these customers and how infuriating it would be. Like, imagine having. This is what I said to Bennet before. Imagine having $300,000, you know, having over the insured amount in a bank account at signature Bank. And then they fail and the FDIC swoops in and you're thinking like, oh, no, I lost like $50,000, like a significant sum of money.

00:03:08:10 - 00:03:25:11
Cas Piancey
If that's my all the money that I have. And then the FDIC eventually assures you like, no, don't worry, we're giving everybody their my like, it's going to be fine. And also this this other bank is moving in to swoop up assets. Everyone's getting everything. so you you kind of let out a sigh of relief. You think, okay, good.

00:03:25:16 - 00:03:36:00
Cas Piancey
My $300,000 is safe again. Maybe you didn't learn the lesson because of this. To not just get a sweep account or have more than one bank or, you know,

00:03:36:00 - 00:03:45:14
Bennett Tomlin
get insurance on the secondary market. Like, we should be explicit. If you're. If you're a rich person and you have uninsured deposits, you can go to, like, insurers and buy insurance.

00:03:45:14 - 00:03:55:11
Cas Piancey
sure. So so there's multiple ways to go about this. There's a lot of different things you can do to alleviate these these risks and these issues. If you have over $250,000 in the account.

00:03:55:11 - 00:04:04:14
Cas Piancey
but imagine being someone who didn't learn that lesson from that first failure, and now you're having to deal with that stress again of like, oh no, is my bank going to fail?

00:04:04:14 - 00:04:07:08
Cas Piancey
And just to be that person, to see

00:04:07:08 - 00:04:09:02
Cas Piancey
the two banks you're banking with

00:04:09:02 - 00:04:11:16
Cas Piancey
fail within a year of each other?

00:04:11:16 - 00:04:12:14
Cas Piancey
pretty much.

00:04:12:14 - 00:04:15:23
Cas Piancey
Right. So it's not a failure, but to me, it might as well be,

00:04:15:23 - 00:04:22:02
Cas Piancey
if you need a single individual to come give you a lifeline to me, that means your bank has, as ultimately failed.

00:04:22:10 - 00:04:42:05
Bennett Tomlin
We should be clear. It's not just Steven. His firm is bringing about half the total with 450 million. But it's filled out with a bunch of other firms, including, like Citadel and Reference and whatever. Yeah. No. Listen, any situation where you start to feel like Stephen Mnunchin might be like your hero might be the solution to your problem.

00:04:42:05 - 00:04:45:08
Bennett Tomlin
Instead of a problem. You're in deep shit.

00:04:45:08 - 00:04:47:23
Cas Piancey
relying on Citadel as your hero, you are definitely in trouble.

00:04:47:23 - 00:04:55:09
Cas Piancey
what I'm saying is more to the effect of, like, you're kind of teaching a really horrible lesson to any

00:04:55:09 - 00:05:04:21
Cas Piancey
distracted investor, to any buddy, not even an investor, just somebody. And this is going to get to a bigger point that maybe we'll make a little bit later.

00:05:04:21 - 00:05:05:19
Cas Piancey
But to me,

00:05:05:19 - 00:05:12:07
Cas Piancey
most of what these banks are supposed to be providing, I understand the mechanisms they engage in now.

00:05:12:07 - 00:05:15:02
Cas Piancey
And a lot of it is speculative nonsense,

00:05:15:02 - 00:05:21:09
Cas Piancey
largely what they're supposed to be doing is providing a public good. They're supposed to be giving people

00:05:21:09 - 00:05:23:07
Cas Piancey
access to

00:05:23:07 - 00:05:33:02
Cas Piancey
access to a place to store their wealth, access to vehicles that could earn them conservative amounts of interest, or higher.

00:05:33:06 - 00:05:45:04
Cas Piancey
It's more speculative amounts of interest, if that is what they're seeking. But overall, the goal is to bring a community in, bring a bunch of individuals together and work with them and provide them

00:05:45:04 - 00:05:50:04
Cas Piancey
something that is very important everywhere in this country, everywhere in the world.

00:05:50:04 - 00:05:59:03
Cas Piancey
and it is a public good. And so I like I reflect on that and I just think they're really not performing their duty.

00:05:59:05 - 00:06:10:16
Cas Piancey
And the lessons being taught to these people who are using these banks aren't good lessons. Like if you're if you should only have $250,000 in these accounts, then we need people to be

00:06:10:16 - 00:06:16:02
Cas Piancey
Responsibly behaving with their money in different ways than just throwing it all into one single account.

00:06:16:02 - 00:06:16:19
Cas Piancey
And

00:06:16:19 - 00:06:28:02
Cas Piancey
that is not the lesson being taught when signature fails and you say, never mind when Silicon Valley bank fails and you say, never mind when when these banks fail and you say, don't worry about that legal limit that we said was necessary,

00:06:28:02 - 00:06:33:10
Cas Piancey
but then you continue to pretend that that, that that is the enforceable legal limit.

00:06:33:12 - 00:06:36:20
Cas Piancey
I have no idea what lesson you're even teaching other than you're lying.

00:06:36:20 - 00:06:56:00
Bennett Tomlin
I think we got into this really well in our episode with Rohan, actually, where we talked about how banking is this extraordinarily unique industry. I think it is the only industry in the United States that's allowed to take deposits of people's money. Right? Lots of other places can extend loans and do the rest of like, the banking business.

00:06:56:03 - 00:07:18:23
Bennett Tomlin
But the taking of the deposits is a uniquely bank activity. And like that has this, like strange effect in the way we treat banking both in like how we set up the FDIC and how we deal with the insurance, how the Federal Reserve provides liquidity, but also like the strange crossroads you or cross heads you end up with in some moments in the banking industry.

00:07:19:04 - 00:07:24:13
Bennett Tomlin
And we you see this in the Greek financial crisis, right? And the movements afterwards where

00:07:24:13 - 00:07:31:22
Bennett Tomlin
It is reasonably straightforward to make an argument that the bailouts after the great financial crisis

00:07:31:22 - 00:07:40:05
Bennett Tomlin
did more good than harm by preventing knock on financial consequences due to the failures of some of these institutions.

00:07:40:09 - 00:07:50:07
Bennett Tomlin
However, that's still leaves us at where we were when we were talking with Rohan. If you're in a situation where the state where the taxpayer funds

00:07:50:07 - 00:08:15:04
Bennett Tomlin
are being effectively extended, is this de facto guarantee that these firms, these institutions need to continue existing and will continue existing in the state, is willing to step in to ensure they continue to exist, then it is only reasonable that there are additional expectations placed in those firms and those institutions, because they are they are filling that role.

00:08:15:09 - 00:08:37:00
Bennett Tomlin
And so when we had Rohan on, one solution we talked about was like this restructuring of banking, where you change how the deposits are held so that you're able to offer that full insurance. And when banks fail, like they just fail and get wiped off in the deposits are still insured and you don't actually need to worry about the people, the bank, the equity, whatever that can all end up worthless without harming the individuals.

00:08:37:09 - 00:08:56:20
Bennett Tomlin
But and you were getting at this before we were get before we got out. You were, I think, frustrated with the way the expectations of the stock market and the fiduciary duty executives are meant to hold till shareholders often seems at odds with responsibly managing a bank.

00:08:56:20 - 00:09:16:05
Cas Piancey
broaden this because to me, it's important that I mention other things in in this sense, because I do think that banking is a public good. I do think that things like electricity, water, like things that are going to, you know, even like I, I, I guess I understand more with something like pharma, right.

00:09:16:05 - 00:09:20:07
Cas Piancey
Like as much as I might not like for like pharmaceuticals,

00:09:20:07 - 00:09:22:21
Cas Piancey
I understand needing to

00:09:22:21 - 00:09:35:19
Cas Piancey
profit to put it. Not that they all do this, but profit so that you put a lot of that money back into doing research and development so that you can help, help people that way. Like

00:09:35:19 - 00:09:39:05
Cas Piancey
are banks doing that right with their profits?

00:09:39:05 - 00:09:49:23
Cas Piancey
Are they putting the money back into finance to change it so that it's better for everyone? Are electricity companies putting a ton of money into R&D?

00:09:49:23 - 00:10:04:14
Cas Piancey
instead of maintaining the lines and making sure that there's not giant wildfires in California, like, no, I don't think they are. I don't think that's where those profits actually are going. And if those aren't where the if the profits aren't going into

00:10:04:14 - 00:10:08:14
Cas Piancey
fixing the system, if it's broken, then

00:10:08:14 - 00:10:10:15
Cas Piancey
what are you why are you profiteering?

00:10:10:17 - 00:10:15:00
Cas Piancey
Why is this something that needs to be traded

00:10:15:00 - 00:10:19:23
Cas Piancey
in in a public market, like on the New York Stock Exchange? Why does it need to be traded

00:10:19:23 - 00:10:24:01
Cas Piancey
on the Nasdaq? Like, it's crazy to me that

00:10:24:01 - 00:10:27:06
Cas Piancey
we simultaneously expect

00:10:27:06 - 00:10:29:09
Cas Piancey
these banks to be

00:10:29:09 - 00:10:39:13
Cas Piancey
protecting customers and building communities and helping helping people. Fiduciary duty. You mentioned that, right? Fiduciary duty.

00:10:39:15 - 00:10:42:17
Cas Piancey
These people have a duty to you to protect your money.

00:10:42:17 - 00:10:45:07
Bennett Tomlin
But they also have a duty to their shareholders.

00:10:45:07 - 00:10:46:02
Cas Piancey
this

00:10:46:02 - 00:11:05:14
Cas Piancey
like how can you possibly make those two ends meet? And I don't think you actually can. And that's where I go. Like what what are we doing? And have we have we learned anything in the past year. We you know, you and I were talking before and I was saying this regional banking crisis just essentially just never ended.

00:11:05:17 - 00:11:12:12
Cas Piancey
And like, if this bailout, if there's buy in for, for investing in, in flagstar,

00:11:12:12 - 00:11:22:14
Cas Piancey
this is not the end of this. And you were like, well, maybe it is. And I'm like, in what sense? In what sense do we not see this happen again? Because all it takes, we've seen how little it takes

00:11:22:14 - 00:11:23:15
Cas Piancey
it takes this.

00:11:23:20 - 00:11:29:18
Cas Piancey
There's a bank run, which as you've said, there's ways to actually protect customer deposits in situations like that.

00:11:29:18 - 00:11:49:03
Cas Piancey
And then there's things where it's like it's already outside the scope of a bank run, when now we're talking about the stock price just plummeting, whether or not the assets are there, whether or not like they're not toxic assets like, I had an argument with with another friend of the show back when Silicon Valley Bank was

00:11:49:03 - 00:11:52:10
Cas Piancey
already toast and First Republic was

00:11:52:10 - 00:11:53:12
Cas Piancey
looking really bad.

00:11:53:16 - 00:12:12:18
Cas Piancey
I love I loved First Republic. They, like my mom, had banked with them. She always had talked about how great they were, and I saw what was happening to them. And I said, it doesn't matter. It doesn't matter if the customers love them, doesn't matter what the banking experience has been forever. First Republic is going to get crushed now because it is just a symptom of this disease.

00:12:12:22 - 00:12:34:10
Cas Piancey
And this person was like, no, that like their their book is better, their assets are better. They don't have the same issues that Silicon Valley Bank has. And I said, it doesn't fucking matter. And I hate to say this because they should have been right. They should be right. If the book is better and the assets are better, the efficient market would say that they're right and I'm wrong.

00:12:34:16 - 00:12:38:07
Cas Piancey
And yet First Republic was dead like a week later.

00:12:38:07 - 00:12:43:13
Bennett Tomlin
I think that the point you're making there is really interesting, because there is this potentially,

00:12:43:13 - 00:12:57:21
Bennett Tomlin
really strange feedback loop where the struggling stock price, the struggling equity value of, like, the equity value of the bank, even if the assets and liabilities are

00:12:57:21 - 00:13:13:14
Bennett Tomlin
seemingly okay, solvent, whatever, you can end up at a point where because people start pulling their deposits in reaction to fear from the stock price, declining equity, things like that causes the bank to go from safe to unsafe

00:13:13:14 - 00:13:16:01
Bennett Tomlin
because of this drop in the stock price.

00:13:16:01 - 00:13:32:05
Bennett Tomlin
That might be unrelated to the actual like assets over liability of the bank. And that is a problematic tension. And I think that we were really trying to get at this when we had Rohan on. And it's one of the things that frustrates me a bit with the banking system is because.

00:13:32:05 - 00:13:33:07
Bennett Tomlin
that's bad.

00:13:33:08 - 00:13:57:05
Bennett Tomlin
People should not be expected to assess their banks solvency before they deposit money. That's not a reasonable expectation, apparently, even for top flight venture capitalists. Right. So we've established that no one can do that, even investors, and apparently not even bank executives.

00:13:57:05 - 00:13:58:06
Bennett Tomlin
That's not reasonable.

00:13:58:13 - 00:14:02:22
Bennett Tomlin
The solution to me ends up feeling like if you want to have

00:14:02:22 - 00:14:17:10
Bennett Tomlin
investment banking banks doing lending things like that, you need to somewhat disconnect those activities from risk to depositors. We talked about that with Rohan is by basically restructuring it so that they have to hold certain assets to cover those

00:14:17:10 - 00:14:22:03
Bennett Tomlin
with certain insurance to cover it in changes in how the FDIC is capitalized to manage that.

00:14:22:05 - 00:14:42:19
Bennett Tomlin
I think that gets partway there. The other solution I am a big fan of is things like postal banking. Right? When you when the state actually directly offers a lot of these services to people, you kind of put a floor on how bad other banks can be because there's this like easy, broadly available alternative, right? If you're worse than the postal banking, you won't get enough deposits.

00:14:43:00 - 00:14:48:15
Bennett Tomlin
And without changes to the banking structure, you can't do all your risky shit unless you're convincing people to put deposits in.

00:14:48:15 - 00:15:13:18
Bennett Tomlin
you are somewhat limited, right? There's structural limits on how much you can do and stuff like that. And so like there are partial solutions there, but it does feel like especially post Greek financial crisis, we've created a system that makes it so you can't prosecute these big entities because the knock on risks of that risk financial damage to many, right?

00:15:13:21 - 00:15:38:10
Bennett Tomlin
Lenny Breuer said that when he was Obama's head of DOJ, when we consider these prosecutions, he said he did the right thing in not going after any of these people, because the consequences would have been better than any benefit that would have been brought by those prosecutions and regulators down the line generally seem to agree with that. The Federal Reserve, the OC and the FDIC very much prefer a consent order to not getting the consent order right.

00:15:38:10 - 00:15:46:13
Bennett Tomlin
They want you to agree, sign off and say you're going to make these changes and all these things. And so because of that, there is this kind of

00:15:46:13 - 00:15:52:08
Bennett Tomlin
as long as you're not too bad for too long to blatantly.

00:15:52:08 - 00:15:54:04
Bennett Tomlin
You'll kind of skirt on by.

00:15:54:04 - 00:15:57:04
Cas Piancey
Yeah. Too big to prosecute, which is kind of

00:15:57:04 - 00:15:58:13
Cas Piancey
crazy.

00:15:58:13 - 00:15:59:07
Cas Piancey
I guess.

00:15:59:11 - 00:16:01:02
Cas Piancey
It's exactly what you're talking about.

00:16:01:02 - 00:16:07:02
Cas Piancey
these people are saying we can't prosecute people for for white collar crimes at banks because,

00:16:07:02 - 00:16:20:07
Cas Piancey
basically, if we do that, there's going to be bank runs and then all the banks are going to have bank runs and then everybody screwed. Well, then that points to a broken system to me. And that isn't just a person saying I didn't go after them.

00:16:20:07 - 00:16:30:11
Cas Piancey
Let's move on. That's actually someone saying I didn't go after them. The system's broken. We need to fix it. And if and we have not done that, I guess is what I'm

00:16:30:11 - 00:16:41:11
Cas Piancey
whether we're talking about prosecuting people for crimes or we're talking about simpler things like ensuring that depositors don't get hurt when a bank fails. Right?

00:16:41:11 - 00:16:43:06
Cas Piancey
these very, very important things

00:16:43:06 - 00:16:45:06
Cas Piancey
have been completely not addressed.

00:16:45:12 - 00:16:50:21
Cas Piancey
And that that's after Silicon Valley Bank, which was one of the bigger regional banks

00:16:50:21 - 00:16:52:09
Cas Piancey
in America,

00:16:52:09 - 00:17:08:12
Cas Piancey
had this insane collapse occur. And the knock on effects were very real because it was First Republic, it was Pac, Pac West. It was like there was a bunch of these. It was signature. It was a bunch of banks, actually big, big regional banks that got screwed.

00:17:08:12 - 00:17:30:19
Cas Piancey
And now, a year later, we're still dealing with the ramifications of this. And no, no process has changed. Nothing about the system has changed. Even when the FDIC had to go in and say, never mind, forget the insurance limits. Even when you had regulators essentially shitting themselves, you had the fed freaking out. You had everyone scared in this moment.

00:17:30:22 - 00:17:33:22
Cas Piancey
But then we move on like nothing happened.

00:17:33:22 - 00:17:59:11
Bennett Tomlin
you actually probably remember better than I do. Because you were older than I was when it was happening. But Arthur Andersen, their prosecution. We've talked about Arthur Andersen on here before for their role in world and Invent. But their PR push after the prosecution when they were working on appealing eventually all the way up to the Supreme Court and getting a lot of it reversed their PR push, was this is a firm of 26,000 innocent people, right?

00:17:59:13 - 00:18:06:02
Bennett Tomlin
You can't go after us. You can't do that because most of these people didn't do anything and you wouldn't want to hurt them.

00:18:06:02 - 00:18:21:17
Bennett Tomlin
And that sentiment has become deeply embedded in a lot of like the regulatory state and things like that, where that is a serious consideration made by SEC, CFTC, OSC and DOJ, individuals before they bring a case.

00:18:21:19 - 00:18:49:10
Bennett Tomlin
And even recently in cryptocurrency, I was struck by, some in Christopher Blodget comments in a deposition related to the SEC case against Binance U.S, where he was kind of complaining that the SEC suit against Binance U.S was a near mortal blow that led to them needing to lay off 200 people and all these things and basically. And that they lost 15 out of their 20 market makers and all these banks cut them off.

00:18:49:10 - 00:19:02:04
Bennett Tomlin
And all this and the kind of insinuation seems to be that, like the SEC caused all this damage, destroyed our thing, and have yet to even prove their case. Right. And like

00:19:02:04 - 00:19:04:09
Bennett Tomlin
That tendency for

00:19:04:09 - 00:19:09:14
Bennett Tomlin
firms to so heavily emphasize the cost of any kind of

00:19:09:14 - 00:19:12:18
Bennett Tomlin
regulation, oversight, anything

00:19:12:18 - 00:19:13:20
Bennett Tomlin
seems

00:19:13:20 - 00:19:20:05
Bennett Tomlin
deeply embedded in a lot of our corporate and regulatory culture. And I don't really have a good feeling in how to solve it.

00:19:20:05 - 00:19:23:18
Cas Piancey
Well, I mean, it's funny to me that, you know, it didn't work for Arthur Andersen,

00:19:23:18 - 00:19:24:06
Cas Piancey
right?

00:19:24:06 - 00:19:27:04
Bennett Tomlin
I mean, it kind of did, though. They never went bankrupt.

00:19:27:04 - 00:19:29:20
Cas Piancey
Yeah. All their assets just got bought. yeah. Fair

00:19:30:00 - 00:19:42:12
Bennett Tomlin
And they lost their accounting license. Right. And Accenture still exists. And like, if you read, the stories of people working there, the consulting side had a ton of huge conflict of interest issues and stuff like that that were never addressed.

00:19:42:12 - 00:19:44:18
Cas Piancey
don't know either, but I will say that like.

00:19:44:18 - 00:19:51:19
Cas Piancey
I guess this, this even gets into like Trump stuff with him where the Supreme Court sidestepped the actual issue.

00:19:51:19 - 00:20:11:15
Bennett Tomlin
and the Supreme Court sidestepped the issue. And Arthur Andersen two. I don't know if you remember. That is when it came up to them. It the, the reason the charges got dismissed was because of the way the judge instructed the jury. And they found issue with specific jury instructions and how broad they were. And that was enough to basically overturn the conviction.

00:20:11:20 - 00:20:20:03
Bennett Tomlin
And then the government wasn't going to go for a retrial because Arthur Andersen's partners had put so much money into this, like, broad PR thing that had gone, like

00:20:20:03 - 00:20:28:14
Bennett Tomlin
all the way up into like, Lou Dobbs was really pushing it and stuff at that point that it had started to reshape the narrative around those type of things.

00:20:28:14 - 00:20:33:09
Cas Piancey
My point here being the the question for a lot of these things becomes

00:20:33:09 - 00:20:38:20
Cas Piancey
if for Trump, it would be something like, is he allowed to break any law because of presidential immunity?

00:20:38:20 - 00:20:39:17
Cas Piancey
for

00:20:39:17 - 00:20:47:01
Cas Piancey
a large company, for a bank or a bank for that matter, with millions of customers, let's say,

00:20:47:01 - 00:20:47:22
Cas Piancey
are they immune?

00:20:48:01 - 00:20:48:12
Cas Piancey
You know,

00:20:48:12 - 00:21:03:01
Cas Piancey
do they not need to be transparent because actual transparency will hurt people more. And and I'll tell you, I know that you and me have the same feelings about this, right? You and me know that to us, the answer is that's insane.

00:21:03:01 - 00:21:04:08
Cas Piancey
That's insane.

00:21:04:08 - 00:21:04:22
Cas Piancey
Like,

00:21:04:22 - 00:21:06:06
Cas Piancey
yeah, I'm sorry.

00:21:06:06 - 00:21:10:08
Cas Piancey
If every bank is doing something atrocious,

00:21:10:08 - 00:21:18:10
Cas Piancey
the answer isn't. Okay, well, let's just hide it for a while and fix it. It's expose this to sunlight and let's work on a solution.

00:21:18:10 - 00:21:24:22
Cas Piancey
if every cryptocurrency exchange is front running their customers or something. These are all hypotheticals.

00:21:24:22 - 00:21:26:01
Bennett Tomlin
Yeah. It's not all of them.

00:21:26:01 - 00:21:27:09
Cas Piancey
Yeah, exactly.

00:21:27:09 - 00:21:29:00
Cas Piancey
these things were happening,

00:21:29:00 - 00:21:30:14
Cas Piancey
I want them to be exposed.

00:21:30:14 - 00:21:50:23
Cas Piancey
And I want the people in charge of it to be properly punished. And yeah. Do I expect the public to be concerned? Do I expect them to maybe close accounts at certain places that are consistently awful in how they treat their customers, or how they've screwed their customers over? I it's always shocking to me that Wells Fargo is still publicly traded, even like, that's crazy.

00:21:50:23 - 00:21:52:17
Cas Piancey
but whatever. Right? Like

00:21:52:17 - 00:21:57:14
Cas Piancey
something needs to change. And I think the part that is disheartening to me,

00:21:57:14 - 00:21:59:20
Cas Piancey
you never expect things to change.

00:21:59:20 - 00:22:04:16
Cas Piancey
certainly not for the good. As you get older and older and more conservative and lame like me.

00:22:04:16 - 00:22:09:07
Cas Piancey
you hope still and when I see crises like this happen,

00:22:09:07 - 00:22:13:01
Cas Piancey
and then I feel like the lesson learned again.

00:22:13:01 - 00:22:18:14
Cas Piancey
Silicon Valley bank signature. These aren't small banks. They weren't small. They were big.

00:22:18:14 - 00:22:21:10
Cas Piancey
And to see them fail so quickly

00:22:21:10 - 00:22:22:10
Cas Piancey
and to just

00:22:22:10 - 00:22:38:05
Cas Piancey
like, I feel like everyone's forgotten about it, like it. No one talks about it. There's no congressional hearings about Silicon Valley Bank anymore. There's no like no, no congressman is making I mean, that should still be the main issue for a congressman in my in in California.

00:22:38:05 - 00:22:45:17
Cas Piancey
We should be talking about the finance sector and the banking crisis. That should be an an election issue this year.

00:22:45:17 - 00:22:49:05
Cas Piancey
I'll tell you, no one fucking cares. And that's crazy,

00:22:49:05 - 00:22:58:20
Cas Piancey
I don't know, I guess I just wanted to record us on this because I am disappointed, because I feel like there was a moment that could have been capitalized

00:22:58:20 - 00:23:02:09
Cas Piancey
and things could have changed, even if only a little bit.

00:23:02:13 - 00:23:03:19
Cas Piancey
And we missed it,

00:23:03:19 - 00:23:06:09
Bennett Tomlin
Yeah. The last thing I kind of want to add,

00:23:06:09 - 00:23:13:04
Bennett Tomlin
to my previous rant about, like, the nature of the public private partnership in banking and the state's role in it is that, like,

00:23:13:04 - 00:23:27:23
Bennett Tomlin
the state ends up kind of borrowing bank capacity to fulfill certain functions, right? Like financial monitoring of criminals is primarily, like initially done by banks filing SARs and things like that, reporting, likely structuring and things like that.

00:23:28:02 - 00:23:48:05
Bennett Tomlin
There aren't enough government investigators to be like investigating most of that kind of stuff. And so they rely on banks for that. And then we saw during Trump's administration, I'm thinking of like the Pep loans and the CARES act payments and things like that. A lot of the administrative and managerial expectations for those were shifted onto the banks instead of the state.

00:23:48:10 - 00:23:50:11
Bennett Tomlin
And so there was kind of like this.

00:23:50:11 - 00:23:58:09
Bennett Tomlin
And even in like 2008 or 2009, the great financial crisis, like it's the the government needed

00:23:58:09 - 00:24:08:20
Bennett Tomlin
enough of these banks to exist in order to inject the liquidity, because you need someone to take the liquidity and go buy the things in the market right into the banks were fulfilling that role.

00:24:09:03 - 00:24:46:06
Bennett Tomlin
I get nervous, whenever the state capacity depends on private entities and the private entities end up starting to become powerful enough that they have significant influence over the state. Right. And that relationship can become deeply problematic. And this gets into many of our rants about regulation in general and the revolving door. And I think banking regulation is like one of the ones that's been most stricken by that over its history, where the people regulating the banks have most commonly come from the banks and often go back to the banks.

00:24:46:06 - 00:24:58:20
Cas Piancey
Yeah. And this is at, like the end. To be. To be fair. Also, this is like an issue with a lot of regulatory bodies in general. We've talked about this with, like with, like the SEC. Even if we get into the history of the SEC, it's like

00:24:58:20 - 00:25:07:20
Cas Piancey
at the beginning, I can see how having Joe Kennedy and a host of other bigwigs come in and say, like, we're here to protect you, citizenry.

00:25:07:20 - 00:25:15:05
Cas Piancey
I could see how that could work in like 1934 or whatever, you know what I mean? Like, maybe I get it, but now

00:25:15:05 - 00:25:27:15
Cas Piancey
the way that they operate and what they provide for the public at large, like it's pretty difficult to suggest I, I would imagine the public that cares about the SEC

00:25:27:15 - 00:25:43:12
Cas Piancey
is probably disapproving of the job they're doing, and most of the most of them don't even care about the SEC as a government entity, because it little's so it like it matters so little to them in their everyday life.

00:25:43:17 - 00:25:48:03
Cas Piancey
And either way, that's kind of like not the best.

00:25:48:03 - 00:25:53:08
Cas Piancey
Like for especially if your job is to patrol markets like that isn't the best reputation.

00:25:53:12 - 00:26:15:07
Bennett Tomlin
See? And it's funny to me that you mentioned Joe Kennedy in the founding of the SEC there, because you can even kind of pitch that moment to imagine that moment as, like, they didn't want any more Pecora Investigations or similar. Right? They didn't want their names being dragged in front of Congress every week. And every reporter, like printing all these documents that showed these deals and whatever.

00:26:15:12 - 00:26:26:19
Bennett Tomlin
And so by having a regulator in charge of it, an entity they can like, exert influence over, over time, you can make sure that that kind of thing isn't in the Congressional Record every week. You know.

00:26:26:19 - 00:26:33:19
Cas Piancey
and I think this really brings us to our final point, which is obviously there is a solution to this, and it's Cass clean. Cass coin.

00:26:33:19 - 00:26:41:20
Cas Piancey
After the multiple bankruptcies and, business failures and, fraud charges and settlements,

00:26:41:20 - 00:26:49:01
Cas Piancey
we're here to stay. And I do have ideas that I think a lot of politicians are willing to hear me out on.

00:26:49:01 - 00:26:59:16
Cas Piancey
I know that a lot of you know what? I know a lot of, big names own Cass coin in general. So, you know, take it with a grain of salt. but credible sources have told me,

00:26:59:16 - 00:27:04:06
Bennett Tomlin
Credible sources have told me there's only 40 cast coin left on over-the-counter trading desks.