Ted Audio Collective Hello everyone, this is a special edition of After Hours.
I'm Felix and I'm me here.
And we're here to talk about the world of banking.
Yeah, it seems like such a boring world, but once in a while...
It gets a little too interesting.
It gets a little bit too interesting, right?
So, I've been dying to talk to you a little bit about two things, you know, really first the U .S.
version of this, which is Silicon Valley Bank and everything else that's going on there.
Signature, yes. And then Credit Suisse of course, Felix.
Yeah. You know, I happened to be in Switzerland this week.
Ah, that helps explain everything, Felix.
Yes, of course, I brokered everything in the background.
I cannot begin to tell you how important this is.
I think this is a little bit reminiscent of the time when Swiss Airlines went bankrupt, basically couldn't fly, which also, I think shocked the country in a way, it was almost unthinkable.
And then the Swiss generally are proud of their banking system.
It's incredibly important for the economy, and particular in a world where so many small and medium sized businesses are bank financed, the public markets aren't actually that big.
And so then to have one of the two big banks just go away, is incredible, really incredible.
And then the question, of course, is, is there more to come?
So we got to figure all this out, Felix.
Yeah, let's do it. Great.
So, we here are Silicon Valley Bank and all the pressures in banking.
How do you think about what's happening right now?
Yeah, it's completely fascinating.
So I think it's worth thinking about what makes them special and what makes them very common, like all other banks.
So let's just ground ourselves in what banks do.
So banks on the liability size raise money from deposits, which they pay relatively little interest on.
And then they invest those monies in lots of different things, maybe loans, maybe mortgages, and maybe government securities.
That's the basic business model of every bank.
And they basically take these deposits and then they invest them in something slightly riskier and maybe slightly more long -term, because those deposits are very short -term.
Okay, sounds pretty straightforward.
What makes Silicon Valley Bank special?
Really, three things.
One, it has a very unique business model, which is it is very specialized in one sector of the economy, obviously, Silicon Valley.
So they raise money from one sector of the economy and they deploy funds largely in that setting.
So that's not really what we normally think about banks doing, which is kind of diversified in the economy.
So that's one. Second, they had an unusually high level of uninsured deposits, which is just a way of saying, we have deposit insurance, it caps out at 250K.
These guys had a lot of large depositors.
And so that makes it a little bit interesting.
Then this third piece that's really interesting is they chose to invest in a lot of securities.
So they raised a lot of money when Silicon Valley was very hot, so those deposits came in and they just deployed them in securities, which were slightly longer dated.
Okay, great. So how could that all go wrong?
And the answer is, well, rates rise a lot.
When rates rise a lot, that entire portfolio of securities becomes worth less.
Now, what's supposed to happen in theory is everything's supposed to be okay.
Because that deposit base is supposed to also become really valuable because you're attracting money at relatively low cost and interest rates are really high, so that franchise is thought to be worth a lot more when interest rates go up.
Okay, well, what ends up happening?
Unsurprisingly, those uninsured depositors are not that willing to sit around as that loan portfolio deteriorates.
And then, of course, you add in social media dynamics and the whole thing comes undone.
Yeah. So it's really an artifact of those really three things, a very concentrated business model, very high uninsured deposits, and then lots of securities.
Now, the problem is those things do extend to other banks.
So not so much the specialized business model, although that's certainly true for signature, certainly true for First Republic, but more generally, not quite as true.
Most banks are more diversified, uninsured deposits.
Again, some banks have lots and lots of basically just insured deposits, but then there are banks with 70, 80 % of their deposit base being uninsured.
Really? Yeah. And then finally, of course, look, lots of banks held bonds and those have lost value as the Federal Reserve has increased rates.
So there's an element to this that is quite idiosyncratic, and then there's an element to it which is very common.
And what we're in the process of trying to figure out is how common is it and how idiosyncratic is it?
And that is the struggle of what we're trying to deal with.
Let me maybe emphasize a first point that you made.
I think that is just critically, critically important.
If you look at the unrecognized losses at Silicon Valley Bank, like what you just described, how these higher rates spill over into lower values for bonds, and then you have losses.
If you hold the bonds to maturity, you don't have to write them down right away, but this is why they're called unrecognized losses.
Silicon Valley Bank is not in the top 10 % of banks when you rank them by the size of these losses.
Similarly, if you look at how much capital did Silicon Valley Bank have?
It's not in the top 10 % of banks with the least amount of capital.
And so from these numbers, you would think, if you had to predict who's going to be in trouble in the current environment, actually Silicon Valley Bank wouldn't really be on the list of targets.
But what's really different about them is just the size of these uninsured deposits, where if I get a little bit nervous and I have much more than $250 ,000 at Silicon Valley Bank, I have every incentive to run.
That of course is directly linked to their business model, because think of a startup that gets generous funding from someone.
Well, what are they going to do with those funds?
They have to park them somewhere.
And in fact, they were encouraged to park them at Silicon Valley Bank by those venture capital funds.
Yes. So the bank played an unusual role, where it's the very business model that they had that then led to all of these uninsured deposits, which made it a prime target for a bank run.
Right. And now the question becomes, well, there aren't that many banks with specialized business models.
Of course, First Republic is a classic example of them.
In some ways, signature was too.
Signature was the bank to New York landlords, was the bank to Broadway, was the very specialized kind of a bank.
And then it diversified into crypto, right?
Indeed. And then they had some crypto.
Was supposed to make the bank safer because you didn't want that much exposure to the real estate market and that diversification moved in actually pan out the way they had hoped it would.
Right. And then the concern becomes basically that, well, other banks that are not as specialized and not as prone, perhaps to some of those problems, Felix, then the dynamic of contagion takes place, right?
And then we're in a different world, right?
Where we say to ourselves, okay, well, these other banks may not have the same problems as Silicon Valley or First Republic, but we become indiscriminate in our fear.
And when fear becomes indiscriminate, then we start to wonder that it's going to go throughout the economy.
So what the Federal Reserve and the Treasury Department effectively did, although they're trying to claw it back, is to in some ways uncap deposit insurance.
So they effectively kind of uncap deposit insurance at these banks.
Basically they said all those depositors are whole.
Now, on the one hand, you might say to yourself, okay, that's good, that'll calm things down.
On the other hand, you might say to yourself, well, wait a second, why are we uncapping deposit insurance?
And if we uncap deposit insurance in the whole system, like what does that mean to uncap deposit insurance?
That's a massive new set of guarantees in effect.
Yeah. And you know what's strange about the deposit insurance is, the way we do it, it's capped at a specific bank.
So in fact, if you spread lots and lots of cash in junks of 250 ,000 across dozens and dozens of banks, you effectively have uncapped insurance today.
It's just a total headache to do it.
And if people think it's not risky, no one will essentially do it.
And I guess the rationale why it was built this way in the 1930s was that the exposure of the federal deposit insurance was meant to be less because it's unlikely that dozens and dozens of banks fail at the same time.
But in a world that we have now, I think two things have changed.
One is maybe the 2008, 2009 big banking problems made this a little more skittish to begin with.
So we're more nervous about banking than we used to be.
And then the rise of digital banking, of course, makes it now so much easier to move deposits around.
In that world, I think the old rationale for capping how much deposits are insured at an individual institution, but keeping the system as a whole uncapped doesn't really make all that much sense because you will always have contagion.
And the moment you have contagion, the way you stop it is exactly what they tried to do, to say, oh, actually at this particular bank, now maybe it's uncapped for who knows how long, maybe a couple of years probably.
Right. I think the issue that we run into then, if we do uncap deposit insurance, and by the way, in systematically important banks, this is a classification that is being used.
The top 30 banks in the world are considered systematically important.
And in the US, in effect, we've kind of said deposits there are insured to an uncapped amount.
But just to be clear, what comes along with that is a lot of regulation.
Because when you uncap deposit insurance, as we've done for the systematically important banks, then you got to watch what they do really, really carefully.
Because once you have uncapped deposit insurance, bankers can do a lot of different things.
So you have to match it with lots of regulation.
So it can be a good equilibrium, but just we have to realize that it's going to come with a lot more regulation for regional banks and smaller banks, which have until now not had that.
The second piece of it is just to really think through today, what is going to next happen.
So one answer is, Felix, how do we arrest this?
Well, we uncap deposit insurance.
And then if we decide not to do that, and in fact, Secretary Yellen has kind of said we don't really want to do that, then you have to worry about depositors.
So what's a depositor to do?
Well, they can do one of three things really.
One, Felix, is split up all their deposits like you said.
That's right. Total headache.
Right. Total headache.
Although there's a fantastic story about an NBA star who basically does this, who has decided to do this in advance.
Number two, you say, well, why would I bank with my regional bank or my dinky little bank?
Everything goes to JP Morgan.
Why? Because then I'm getting uncapped deposit insurance.
Yes. And third, you say, wait a second.
I want out of the banking system.
I want to go to the money market system and mutual funds because then I get that liquidity and I'm investing in US treasury securities.
Why am I dealing with a black box of a bank?
So if deposits start to flow out of small regional banks into top tier banks, into money market funds, now we have a whole new set of problems because then that deposit run starts at all these other little regional banks.
And then it spreads and then they have to realize losses and then so on and so forth.
That's exactly right.
And we have first academic simulations that look at how big this problem is.
So one common assumption is that you think about half of uninsured depositors will run.
If that's true, we have about 200 banks in serious trouble.
And then the secured portion of the deposits amount to about $300 billion for which ultimately taxpayers on ours.
Oh, sure. So the problem gets really big, really fast.
The problem gets really big and really fast.
That's exactly right.
And so that's where we are now trying to figure out how to arrest that contagion either by uncapping deposit insurance or just hoping that the depositors won't be as mobile as we think they could be.
Right. And by the way, early evidence on this, it's not clear how mobile those depositors are because these regional banks and these community banks, they do provide very meaningful services.
So they aren't quite as transactional and mobile as you might think.
These depositors can be businesses, local businesses.
And they have a lot of needs from their local bank, which by the way, they ain't going to get from JP Morgan.
Like it's not going to work that way.
So now they could do the money market thing, but they don't really have that many choices.
And they believe in their local banks.
So there is the possibility for this to get arrested.
Having settled that, I think the key thing to think about more long term, so we have contagious dynamics that we just discussed.
The longer term issues are these kinds of banking crises, they end up resulting in higher costs of capital and higher costs of credit as the banking system kind of retrenches.
So the larger kind of economic question, aside from contagious dynamics is how does this play out over time?
And does it result in significant kind of contractionary effects, which is effectively what most banking crises do.
They have contractionary effects, which here's the really weird part, might be a somewhat of a silver lining.
That's right. A fight against inflation.
So maybe this contractionary element actually helps us in the kind of current fight against inflation.
So that's the final dynamic here that is actually, I think kind of weird and interesting.
Yeah. And in some sense, that might even be okay longer term.
So one of the ways in which they thought they would pay for the additional protection that they afforded was with the help of a levy on banks.
And if the levy on banks is in part passed on to bank customers, then of course we will have more expensive credit.
But if that's the true risk of banking, actually credit might be too cheap in some sense right now, because it doesn't reflect the fact that every now and then the Federal Reserve and ultimately the taxpayer just have to step in because it's not that stable a system.
And as a result, there's hidden costs that we don't account for if we don't plan for future bank runs of the sort that we've experienced in the last couple of weeks.
That's right. Although I think one thing is for sure, banking as an industry and as a system is going to be considerably less profitable than it was because of these kinds of stories.
So I think you're absolutely right.
It might be socially optimal to actually perhaps have all these regulations in place because of the nature of these losses.
But wow, if you're running a local bank or a medium -sized bank, you have to ask yourself over the long run, what is my franchise?
What is the way I make money?
And what does it look like going forward for the next 10 years?
Because there's to be lots of new regulations.
And then of course, the potential for a recession, which has all these feedback effects inside the business.
So it's going to be, I think, just a fascinating several years to watch.
And it's of course important to realize that, you know, we talked about this in some ways in a pretty antiseptic way, but there are lots of jobs on the line.
There's a lot of people who are deeply invested in these institutions.
And to watch them wither away and disappear this quickly is really shocking and heartbreaking to many people.
And they're an important part of ecosystems, including in Silicon Valley and, you know, all around the world.
So really interesting to watch.
OK, Felix, our man in Zurich is reporting live on the ground.
So, Felix, we have now had this crisis kind of cross the waters.
And I'm curious what you make of the Credit Suisse crisis and the connections to the kind of US crisis that we just heard about, if there are any.
So what do you make of it all, Felix?
So the two stories get mixed up all the time now, right?
Because in some sense, they seem similar.
You know, people withdrawing funds from a bank that we think was healthy not so long ago.
But actually, the two stories ultimately are radically different, not only because of the size of Credit Suisse, but also because of the underlying dynamics that are quite different.
You might remember following the 2007 -2008 crisis, UBS had to be bailed out by the Swiss government.
They were in deep trouble because they had invested significantly in mortgage -backed securities, which turned out not to be a great investment.
And at that point, interestingly enough, Credit Suisse was seen as the healthier bank, the healthier player.
Over the next, I want to say, roughly 10 years or so, the performance of the bank just declined continuously.
You see it in share prices.
You see it in profitability.
And some of it has to do with the exposure of the bank to the riskiest parts of financial services.
So investment banking, in particular, which tends to be highly cyclical, sometimes risky, and then their prime brokerage business, which had all kinds of troubles.
Now, I should maybe say, in all fairness, there's nothing wrong with picking a relatively risky part of the financial services business.
But you absolutely want to pair it with world -class operational control systems.
And I think in some sense, this is the thing that didn't really work with Credit Suisse.
People now scold them for having played in the risky part of the business.
But I think that's actually okay if it comes along with really fabulous controls.
But that's the combination that they didn't really do.
And so they didn't pull back from investment banking and brokerage quick enough.
UBS, by contrast, has been doing really, really well.
It's turned a fairly risky bank into a pretty dull business where dull, I think, is exactly a word that you like in the context of banking.
So they have really focused on wealth management for essentially the richest clients.
And that's been a growing business, a stable business, a highly profitable business.
So UBS is now doing really, really well while Credit Suisse had these spectacular failures.
You might remember Greensill Capital or Arkegos, where just the risk controls at Credit Suisse did not work.
They, in fact, almost reimbursed Arkegos for taking the kinds of risks that they took.
Right. When, in fact, everyone else knew that this is a story that might easily blow up.
And so what's happened since, essentially the government forced UBS to acquire Credit Suisse at what many people would say is a price that is in all likelihood far below the market value of the bank, just to give you a sense.
The book value before the forced acquisition was about $45 billion.
The market value of Credit Suisse had declined to about $8 billion.
And UBS paid $3 billion and some change for the bank.
So Felix, I'm fascinated by many pieces of this story.
And I do think there is a slight commonality with Silicon Valley Bank, which is, you know, I think in many ways, both of these banks were not managed well.
So we tend to look for commonalities in terms of credit risk exposure or some liquidity strategy or something like that.
I confess the commonality to me is poor management.
We have two banks here who are really poorly managed.
And, you know, specifically, Felix, as you pointed out in the Credit Suisse case, the risk is not depositors running, although they started to near the end.
They started to, yes.
But it's really this kind of role in larger financial markets where they pose counterparty risk.
So Credit Suisse is an important quote unquote counterparty, which is just a way of saying large financial institutions engage in trades with each other to offset risks.
And Credit Suisse no longer was a reliable counterparty.
So that I think also is a different form of a crisis, which is it's a counterparty risk crisis for the systematically important banks because Credit Suisse was one of those top 30 systematically important banks.
I guess the question I want to nail down with you, Felix, is there is a story of really bad management here.
And I'm curious if you buy it or not, because it was what you said about Greensill and Archegos, but then, of course, last year, it came out that there was serious financial reporting issues that were kind of underspecified.
And there's a sense in which the train really came off the rails with Credit Suisse, not just controls, but like basic management kinds of stories.
Do you think that's getting overplayed or do you think that's roughly right?
I think it's definitely true that these issues existed.
There is a long series of efforts to bring in new personnel.
You know, you remember the frequent turnover of CEOs.
Right. Sometimes a little bit of bad luck when they lost more senior people.
And there's maybe an aspect to the story that we don't often think about is if you shrink the investment banking business, if that doesn't seem to be the most promising part of the business.
Right. In part, what happens is that the most successful people will leave.
And I think, in part, what you see is like you ask, how can it be so difficult to institute better management controls?
And I think, in part, what's working against you is that the people that you have in these roles, they tend to be more junior now.
That's interesting.
Because the best people in the industry, they look around and say, well, it doesn't look like investment banking is really a key part of Credit Suisse's future.
And as a result, do I really want to be here?
And I think it's sort of this combination of definitely not great management with, I think, bankers who were less experienced than you would ideally like.
That first and foremost, I think, slowed down the transition.
It was pretty clear where CES wanted to go over time.
And I think that was reasonable decisions in place.
But it didn't happen at the pace at which you needed it to happen.
And then that combined with the withdrawals of funds that accelerated in the last quarter of 2022.
And now massive outflows, $10 billion or so each day that ultimately undid a longer -term strategy that they were slow to implement, but roughly seemed the right direction for the bank longer term.
I think this makes a lot more sense to me in a way, which is there is a kind of very slow motion train wreck aspect to Credit Suisse.
Yes. This has been going on for, like, as you said, 10 years.
For a long time, yes.
But I think you're absolutely right to highlight the talent piece of this puzzle.
Because once the talent deteriorates, and I'm sure there are many good people still left at Credit Suisse, but if talent deteriorates as people leave, then things just really can go off the rails.
Because it's worthwhile emphasizing these are really complex institutions to run well.
And so it's easy to kind of caricature them as bad managers.
But you need highly skilled people to run these places.
And so if they leave, that creates problems.
And then the other aspect is that IT wasn't always at the forefront.
And then of course, that makes it even more important that you have the best people in the business.
Because there's stories about delayed information, and that you didn't really have the kind of decision tools that you needed to have.
So then experience is everything.
Yeah, exactly. This combination of IT and an outflow of talent I think was really difficult for the bank.
The two other pieces of this story that I find fascinating are, first, we had the Saudi National Bank come in and provide a large amount of equity capital late in 2022.
And then of course, their statement last week that they would not be willing to do that again is really in part what triggered this.
So there's an aspect to this crisis, which I think is fascinating about sovereign wealth funds, Gulf states, who have historically underwritten some of these crises, including in 08, they recapitalized lots of banks.
And I don't think their appetite to do that again exists because they've been burned on some of these things.
So that's an interesting element of it.
And then the second interesting element is a little bit in the weeds, but is fascinating to me, which is when these things happen, all kinds of rules get broken.
So for example, no shareholder vote on whether they should do this.
Also, there were a set of bonds at credit suites, which one would have thought would get paid before equity would get paid.
Turns out actually those bonds, so -called Coco bonds or ET1 bonds, which have become quite popular in Europe as a way to capitalize banks got wiped out to zero, even though the equity got something in this case, two, $3 billion.
So those two pieces of this story strike me as having longer lasting consequences, which is if sovereign funds are not willing to backstop this.
In the way that they've been willing to backstop things in the past.
And if people start looking around and asking, well, wait, rules get broken and bonds are not safe, in these circumstances, that strikes me as a really interesting part of what can happen here.
Yeah. And maybe if I could add a third, that seems really important.
Following the 2008 crisis, Switzerland had devised a set of really elaborate rules.
What would happen in the next banking crisis?
So it's very involved, but the basic idea is you would try to insulate the domestic business of the banks because the banks are so important for the Swiss economy.
They basically underwrite so much of the business activity that if one of the big banks were to fail, so say 40 % of small and medium sized businesses have relationships with credit suites.
It's just like incredibly, incredibly important.
And so the broad plan was insulate the domestic business.
If government bailouts are needed, government bailouts will be available and then sell off everything else.
Or if it can't be sold, let the international portions of the business, in particular the counterparty business that you alluded to earlier, let that just go away.
That's going to fail and that's not going to be Switzerland's problem.
That was basically the plan.
And then of course, when it came to actually implementing it, they looked at the plan and they said it can't be done.
And the reason is that the global aspects, the contagion that everybody feared, were so massive it wasn't a coincidence that both US regulators and UK regulators were in direct contact with the Swiss regulators when they forced the deal.
I think that ultimately says these too big to fail ideas that we had in 2008, they're essentially not implementable.
And the most troubling part of this is, of course, what did we create in the wake?
We created an even bigger bank.
If it wasn't possible to let credit suites fail because of global contagion, what's going to happen if UBS, now inclusive credit suites, is going to get into trouble at some point in time?
And I think one of the things I'm curious about, how you think about it, is whether there's something about the size of banks that ultimately this crisis and previous crises have just proven that they become unmanageable.
They become a public liability in one way or another, asking them, is it even wise for economies or the global financial system to have institutions of this size?
I think that is a totally fascinating question.
And there's two at least angles on that.
First, in a way, Switzerland is unique in the sense that the size of the banking sector relative to GDP is very large.
It's enormous. And that has a historical legacy with it.
And so any, quote unquote, bailout has consequences in Switzerland that are very different than in any other country, because of just literally, if you compare the equity capital to GDP, the fractions are overwhelming in Switzerland, even much more than the US or the UK.
So that's the first piece, which is a Switzerland idiosyncratic piece.
But the larger question you're asking is, I think in a way, not too big to fail, but the way I've thought about this is too big to manage.
At some point, do these banks exist at a scale where the span of control and the risk controls that are needed are simply too large?
Now, on the one hand, Felix, you'd expect there to be incredibly economies of scale.
And there are, yes.
And there are, right?
And so we should expect talent to gravitate towards the best places.
There's large fixed costs, IT costs just to name one, but also expertise can agglomerate in institutions.
And one would expect there to be actually benefits relative to there being lots and lots of small banks.
Now, in the US, interestingly, we have both.
Like the US is kind of weird in the sense that we have 4 ,000 plus banks.
Now, four of them are massive and systematically important.
And then we have thousands of small ones.
And so in a way that US model has always struck me as weird and maybe we have too many banks, but increasingly I'm coming to appreciate it as a really valuable part of the US system.
Your question is whether those large banks should exist at all, I think is your question.
I mean, my instincts are actually those economies of scale will dominate and the need to have expertise and capital in large places is an important part of this kind of landscape.
Having said that, that has to come in line with really tight regulations.
The part that you can have is you can have large institutions and not have tight regulations.
And so that's what we have to assess kind of over the longer run.
Two things are really interesting here.
One is the kinds of regulations that fix the amount of capital that banks need to have.
Right. You look at the Credit Suisse case, this is not an issue of not enough capital, right?
In fact, when you look at capital adequacy ratios, oh, Credit Suisse is way up there, much better than Deutsche Bank, for instance.
So to the extent that we have to think about regulation, focusing so much on how much capital do they have at stake, unless we want to make credit much, much more expensive.
And then of course, risk would come down.
That's a really, really hard thing to do.
And maybe even a little more important is going back to the economies of scale.
One of the things that I'm unsure about is, is this a benefit that is mostly a private benefit in the sense that I now have lower costs, I can spread all of these IT investments over an enormous amount of transactions.
Exactly. What I think is the job of banking, does it actually affect the allocation of capital in the economy?
Does it somehow make it better?
So one of the reasons why I think even the banks that have these really big wealth management businesses, one of the reasons why they always will always have investment banking alongside is, is that many family offices want direct access to investment banking deals.
Right. But does that really improve the allocation of capital?
Or does it somehow just influences a little bit, who gets how much business?
And what does the distribution of profitability look like?
I'm increasingly a little less convinced that it has so much to do with the cost and sort of the right places to allocate capital, as opposed to a game where just I invest in trading infrastructure like no one else and I'm a millisecond faster than you and as a result, I get to make the deal and you
don't. Right. But really for the economy as a whole is that so important?
And of course, the other piece of this, Felix, you're questioning who gets the benefits.
Is it fundamentally management and capital as opposed to the economy?
But also, if we're always socializing losses, then it's not just the privacy of the gains, right?
It's the socialization of the losses that goes along with that.
And that combination, we thought after 08, we were away from.
And I think the specter of that returning is really troubling to people.
In a world where those kinds of institutions have lost so much credibility to go down another notch, is a really problematic thing.
Felix, I wonder if we can end with just talking a little bit about Switzerland because you're there and you referenced this in your opening comments.
I'm curious what this does to a country like Switzerland when one of these large banks fails.
Does it really go to issues of national identity and how are people kind of processing this situation?
Because, frankly, the Silicon Valley Bank is like a...
Maybe inside Silicon Valley is causing these kinds of issues, but in the US, broadly, it's not.
But in Switzerland, I can imagine it's doing something more.
Yeah. I think part of it is just the size.
It's 40 ,000 employees, not that large an economy.
And so, I think that will be felt really very directly.
But the issue of national identity, I mean, I cannot begin to tell you how often I heard that what is happening now is somehow affecting Swiss pride and what Switzerland is good at.
There are these stories when you grow up here that part of what you're proud of, part of what's amazing about Switzerland is that it's built these global businesses.
Right. Think pharmaceutical industry.
There's no particular reason why these really big players like Novartis and others should be located in Switzerland.
You see it in electronics.
I think part of the national narrative is that the Swiss are good at running these kinds of things.
Then, of course, if something like Credit Suisse happens, the first thing is you feel terrible for all the people that are involved now, people who lost part of their investments, but also people who are now worried about their jobs.
And frankly, this is, of course, not only at Credit Suisse but also at UBS.
To the extent that the local retail banks will be merged, there will be a lot of job losses at UBS when in fact you could think, well, actually that bank didn't really have an issue to begin with, but it will just be too many people.
So we talk so often about the failure of Swiss airlines, which was also sort of a symbol of national pride and the quality and everything that it had.
And I'm pretty convinced it will feel similar, like a real turning point in the history of the country.
Well, Felix, let's hoping that this is our last special episode on banks.
On banking crises, yes.
Can we agree on that?
So this is it for today.
Thank you for listening.
This was a special episode of After Hours at TED Audio Collective podcast.
