
The No-Lose Bet for Banks in IPOs - jackgavigan
http://www.wsj.com/articles/the-no-lose-bet-for-banks-in-ipos-1450402900
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pjy04
Let us not forget that they can also "short" the stock and elect to call
underwriter "greenshoe" in scenarios where the stock falls in price. They can
make money in so many different ways

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littletimmy
The greatest shock to my idea of fairness in the world was when I learned that
banks could deposit money in the federal reserve and get a guaranteed by law
interest rate of 6 percent. Heads, market's good and banks lend money and make
money. Tails, market's bad, banks put money in the fed and make money.

Not surprised that it is a similar heads-i-win-tails-you-lose situation with
IPOs. The House always wins.

~~~
dragontamer
That's not how it works. The current rate isn't 6% either.

If Banks loan money to the Federal Reserve, they are unable to pull the money
out for X number of days. If they need the money __now __(ie: Liquidity Crisis
of 2007), they can go bankrupt despite having a lot of cash stored elsewhere.

So no, it isn't a risk free practice. Managing liquidity (ie: loaning money to
the public in the form of Home Mortgages or Car Loans, or taking in deposits
and depositing it into investments like the Fed baseline rate to make money
6-months or 1-year from now) is the __very point __of a bank. If you think its
easy, you can go ahead and form your own bank.

~~~
dragonwriter
> If you think its easy, you can go ahead and form your own bank.

Given regulatory hurdles (which may be well justified by the social
consequences of unrestricted banking, but that's beside the point) that's not
really a valid challenge. Whether or not its easy to _run_ a bank, its not at
all easy to _start_ one, legally.

~~~
dragontamer
> that's not really a valid challenge

The number of small community banks and credit unions in the US is huge. There
are over 381 Registered Credit Unions in New York __alone __. There are easily
tens of thousands of small banks across this country.

[http://www.cuna.org/Research-And-Strategy/Credit-Union-
Data-...](http://www.cuna.org/Research-And-Strategy/Credit-Union-Data-And-
Statistics/State-Fact-Sheets/)

No really, if you think its a valid or easy business model, then start your
own. Literally tens of thousands of others have already done so.

~~~
dragonwriter
> The number of small community banks and credit unions in the US is huge.

Which is completely irrelevant to the issue of the regulatory difficulty of
starting a _new_ one _today_.

> There are easily tens of thousands of small banks across this country.

No, there aren't, and the number is dropping over time.

[http://mercatus.org/publication/small-banks-
numbers-2000-201...](http://mercatus.org/publication/small-banks-
numbers-2000-2014)

