Blackstone Can Be the Bank
Also BlackRock and utilities, short-sale bans, the writers’ strike as securities fraud and oil-well plugging liability.
Programming note: Money Stuff will be off tomorrow, back on Monday.
Why are there regional banks? We have talked a lot recently about the central fragility of the business model: Banks take short-term deposits to fund long-term loans, and when interest rates go up their depositors might leave (or demand higher interest) as their loans lose value, making them fail. Giant global banks mitigate this problem by being “too big to fail,” which means not only that if their depositors flee the government will bail them out, but also that their creditors might reasonably think something like “well, if JPMorgan fails, then the world has probably ended, so I’m not going to worry too much about their credit risk.”1 But regional banks don’t really have that advantage2: They are fragile, and their depositors notice their fragility, and they can go bust rather easily, as they have found out this year.