The Tale of Two Bank Collapses, Or, How I Got Here
“values in series taking on as real
we affect ready gold a steady token
flows in unbroken circuit and induces
our being, wearies of us as ideal
equals that heady crises eddy”
— Louis Zukofsky, A-9
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
— Genesis Block, Bitcoin
I graduated college into the summer of 2008, a summer that was about as far as my life could see: I’d figure out my future, I told myself, in the fall. For I had the crown-jewel of resume bullet-points awaiting me that summer—a much-coveted internship at MoMA that paid me a total of $3000 for three months of booking lunches, assembling poster stands in the lobby, and getting yelled at by my boss whenever the stapler was amiss. To make that $3000 last the summer, I ate $4 pizza specials for dinner and took a room in a makeshift pension house in Brooklyn; I had to watch out for rats on trips to the bathroom, yes, and I had to manually carry my room’s entire padlocked door into the hallway to get in and out, sure, but I was happy to swaddle myself from the world. I had kind roommates, access to the entire MoMA archive, and most importantly, I was financially independent for the first time in my life.
I was also, for that matter, delusional. I had befriended the head of MoMA’s film archives, and he’d let me spend my jobless days in the dark of Cinema Three watching the American Pastorals of classic Hollywood—films by Griffith, Vidor, and Ford espousing self-reliance in nature that I decided were relatable from my vantage point in a midtown movie theater. By September, however, I was facing the sober truth of adulting that my many-dozen cover letters espousing my stapler-fetching skills would not secure me a job. So I fled to another delusion, that this was my chance to become a strappingly self-reliant pastoral hero. I’d stick around New York until the end of September and then head to Europe to work on farms in exchange for room and board.
It was some late afternoon in the middle of September of 2008 on the Q train over the Brooklyn Bridge that my friend Dave, peeling sun back from his eyes to interrupt my monologue on the films of such-and-such filmmaker, asked me if I’d heard the news. The news? About the banks, Dave said, as he started to explain. I knew he was a finance junkie, and aswirl that summer in the made-up romances of dead actors from another century, I asked the only question I had the economic vocabulary to ask. Is this a big deal?
Dave blinked hard. Yeah dude. It was a big fucking deal.
We didn’t know it, but our life trajectories were shifting drastically that day—whatever destiny awaited us in early September was obliterated for good by the end of the month. I lost touch with Dave, then reconnected recently: weirdly, a decade and a half later, we both ended up in crypto. It’s hard not to think that sometime in mid-September, 2008, our futures had changed in days.
2008 was the year that bifurcated generations—bifurcated our culture, our beliefs, and even our ability to relate to one another. My classmates who were able to secure a job that summer embarked on the slow march to Societal Success, climbing the status ladder one promotion at a time. Dedicating themselves to performing the puppet show of the 9-5 like so many reanimated corpses of corporatists long gone, they served masters they despised so they could become them by the time they were 70. They were the last generation of the 20th century, and they knew it.
And then on the other side, there were the rest of us, the same age but career-less: the children of the 21st century. A generation seeking status not from public professions but private subcultures online. A generation that took up freelancing because, we told ourselves, it would free us from bosses and pay for us to pursue our real passion in some impecunious side hustle. A generation that told ourselves this because the reality was that the workforce had imploded along with all our admiration for it, and the steady jobs—well, the steady jobs were gone.
You see, a paradigm shift was afoot: from the life-work toggle-switch of 9-5 professionals in the 20th century to the life-as-work always on-ness of 24/7 freelancers in the 21st.
In the 20th century we’d consume our news at discrete intervals when the paper arrived on the doorstep in the morning and Walter Cronkite intoned the latest late at night; in the 21st, we’d not only consume it all day but generate it ourselves. In the 20th century, we’d consume our videos at discrete intervals in movie theaters on the weekends; in the 21st, we’d not only consume it all day on YouTube and TikTok but generate it ourselves. In the 20th century, our banks would process money at the discrete intervals of the 40-hour workweek; in the 21st, we’d not only process money all week and weekend long, but, yes, generate it ourselves.
Internet-native news, internet-native video, internet-native money. You can still see all three battling their legacy counterparts from another century. On occasion this produces some strange temporal dissonance as when, for example, a stablecoin can’t be redeemed on weekends because the banks are closed.
Working on an illegal pot farm in France in the spring of 2009, I got the email informing me that the prestigious PhD program I had applied to had shut down due to lack of funds from the recession. They would have loved to take me and pay me $16k a year, they told me, but unfortunately they just didn’t have the money, c’est la guerre.
I think sometimes about that other David, the David who didn’t graduate into a recession, and what he would be doing now. Writing a well-blurbed academic volume on the relationship of epiphanic Catholicism on the French New Wave, living in the suburbs of some cold Midwestern university, caring for half-a-dozen cats all bearing the names of famous Hollywood felines. If I met this David, 15 years later, would I recognize him? Would he recognize me? Would he approve of a single thing I’ve done in my life—and would he even care to hear about it? Or would he be so lost in the ashes of the 20th century that he would just wiggle his nose and readjust his horned-rimmed glasses and tug his tweed jacket in confusion?
Or, or, worse, so much worse, would he be right to do so?
At some level, I knew my masquerade of the self-reliant farmer was a farce. For one, I was a shitty farmer. But more importantly, I was facing that first hard lesson of adulthood: that our identities are being continually shaped by exogenous economic factors so boring, so banal, that we dare not even consider them as our lifeblood. And yet they are.
Of course, I’d had those defining events of childhood that had shaped me as a person: one parent’s attempted homicide of the other, the other’s attempted suicide and subsequent institutionalization a decade later, instructions never to pick up the phone or mail because it might be the IRS—and you knew what that meant. (Read with compassion for yourself here too: there is a very good chance you’ve gone through way worse.) It would take decades for me to realize that all of these were also, to some degree, socioeconomic events goaded by one parent’s financial leverage over another’s financial trauma. In my small, middle-class town of 5000 WASPs and 17 churches, I was learning the power of class.
The recession became one of those defining life events for me, but this time there was no skirting a fact that boom times had shielded from previous generations: our lives, our feelings, our relationships are determined by the economy. The economy is how we eat and sleep, how we fear, how we relate. It’s even, to some degree, how we love. It’s no accident that the template for the modern romcom was laid in the 14th century in Boccacchio’s stories of class-crossed lovers trying to attain that impossible dual mandate of financial mobility and emotional reciprocation. These were the first cultural records of what it felt like to live in a new economic system, Capitalism.
You learn the art of losing farther, losing faster. A couple years into the recession, my dad lost the last of his money in options-trading, a few years after being disbarred and losing his home to his fifth wife. Shortly after, he was evicted at age 89 by his landlord, a former client who had agreed to pay his bills under-the-table—until he realized there was no need to honor an illegal deal with an old man who was powerless to come after him.
I was broke at the time, and my mom hated my father, but she decided that that was good enough reason to bail him out: finally, she’d have leverage over the person who had always had leverage over her. Calling the VA, booking a room in the same retirement home as my grandma, and covering the flight—she realized we could marshal the resources to get my dad by for the next few years, and by then he’d probably be dead anyway. My mom had been wife #4, and for good measure, she called wife #5 to see if she’d chip in too after divorcing away my dad’s apartment. And so, one chilly afternoon, wife #5 handed my dad a lasagna and a check for $15,000 on the corner of 39th st and 3rd, and a week later, in the pitch-black dark of the Sandy blackout, I escorted my octogenarian dad down five flights of stairs to a new life in Sarasota, Florida.
After he died a few years later, I found a hand-written journal calculating his continual options-trades, with one column for net worth that gradually dwindled to $0 over the course of pages.
He had gambled away the $15k as soon as he arrived.
Evictions were the norm of the recession and not new for my father: as a child in the Great Depression, he would chase moving trucks home from school in fear they were coming for his house. Of course you could argue that unlike so many others in the recession, my dad really did deserve to lose everything because he was a derelict gambling addict and ailing criminal who had happily squandered the fortunes of everyone he met. I hear that. But I will just say, as someone who loved him, that I think he deserved to have a home.
It was increasingly clear, however, that the government did not share this verdict. Even today, it’s hard to fathom the venom-inked cartoonishness of class lines in the early 2010s: working-class homeowners evicted from their houses while the rich bankers who inveigled them into subprime mortgages were bailed out by taxpayers. I joined Occupy Wall Street in the fall of 2011, and we were mocked for the supposed failures of our reductive sloganeering: “*We* *are* *the 99%*!” “Whose streets? Our streets!” and, of course, “Banks Got Bailed Out! We Got Sold Out!” But 12 years later, these chants don’t just sound prophetic of a decade-long slush of mainstreet populism, metaverse commons, and bankless sovereignty, respectively—they were the chants, I’d argue, that helped conceive this new era. Our era of user-generated culture, politics, and finance.
What I mean is: in the box office tussle of superheroes that reigned over the early 2010s—Avengers, and Pirates, and Harry Potters galore—it’s easy to avoid the question of what this shit does to culture. An entire generation in their formative years of childhood, 8 or 9 years old, watched their parents and friends’ parents lose their house and job. They watched their families suddenly unable to provide in the ways they had. And they watched their parents’ religion, the religion of financial stability in the outside world, collapse before the deeper, conspiratorial truths about society they were discovering online.
My generation was the last generation that had a choice to care, and for the most part, we chose not to.
Gen Z didn’t have that choice.
Like most pop culture phenomena of the early 2010s—Gangnam Style, The Harlem Shake, and sure, Beyonce’s Baby Bump—Occupy Wall Street was poised awkwardly between the physical and the digital. As a physical movement, it was not particularly successful. I mean that partially in the sense that it ultimately did not reclaim the commons of Zuccotti Park, and partially in the sense that its many marches were kettled by the police. One protest of thousands ended with a couple dozen of us singing Wonderwall alongside a police van on 2nd ave at 2am, thanks to the assiduous efforts of the Bloomberg Police to corral us into separate blocks and punch, kick, and baton anyone they suspected of jaywalking along the way.
But I also mean that Occupy Wall Street was not particularly successful physically because decentralization is not very successful physically past a group of 10-15. “Mic check!” a rando organizer would yell as everyone gathered to relay their message. Mics were, in fact, illegal to use without a permit, so we’d form concentric rings around a speaker to repeat their phrases to the next ring out. There was something incantatory about this new experience of having to speak to listen, of participatory politics that relied on our own voices for anything to be said.
It was, in that sense, an experience that would become increasingly familiar on social media over the next decade. But it was also awfully inefficient: a paragraph of text could take 15 minutes to proliferate to a crowd.
Online, however, decentralization was massively efficient: a phrase of text could reach thousands in an instant. It was as if the printing press had been reinvented in everybody’s bedroom—suddenly everyone could write, and if people liked what they had to say, everyone would read them too. We forget that smartphones were also a legacy of the recession, the first time they reached mass adoption. And we forget that that era’s populist politics of decentralization owed as much to the political economy as it did to new technology.
It was on Twitter that Occupy Wall Street truly assembled and disassembled. Late one November night, someone posted that Zuccotti was being stormed by the cops, and texts rolled in from friends a few minutes later. I showed up an hour later, around 2am, and saw masses of convulsing, wheezing bodies straggling their way onto the sidewalk. They’d been tear gassed by Bloomberg’s police, they told us.
In reporting that it was over, only a few media outlets added the niggling detail that the NYPD had gassed its citizens. Within the concentric circles of Occupy Twitter, however, it was—so to speak—front page news. If you wanted, you could probably trace a fairly direct line from that moment to the Gamestop hype to VCs inciting bank runs. You are always 280 characters away from launching a revolution.
There was a moment during the recession where I’d routinely have to check in at the welfare office in Brooklyn because I was living off unemployment. Some memories: the mom screaming that she needed money for her kids and the clerk telling her, calmly, that that wasn’t his problem; two vituperative receptionists tangling the cords of their landline phones around each other like boa constrictors ready to strangle each other to death; the dull panic consuming everyone who has to wait in a 45 minute line to politely make the case they deserve to live another week.
I think sometimes about those receptionists and what they must have been feeling. I suspect—who knows—that it was a desperate feeling of powerlessness, one that made the claimants across the desk look disgustingly relatable. And I would guess they craved power as a way to distinguish themselves from that desk’s other side. Because in the early 2010s, everyone felt that powerless—it was just the feeling of the time. It was just how you acted on it that determined your character. And not everyone had the luxury to act well.
In Occupy Wall Street, you can see all the templates for crypto’s talking points today: turn private institutions into public goods, take sovereignty of our spaces, decentralize governance, democratize financial access, and finally, disintermediate the banks.
But nobody I knew in Occupy Wall Street was talking about crypto. Instead, I heard about crypto from my college friend, well, let me call her Persephone. Persephone was rich, something of an It Girl at New York Parties, and a junkie. When she told me about this exciting new technology, Bitcoins, which you could exchange 10-20 a pop for an envelope of heroin online, I failed to draw the connection to the doctrinaire economics I had started to espouse. Instead, I took it as a tool for those who had privilege to be criminals: the 1%.
And even today, I wonder how wrong I was. I had Occupy Wall Street lecturing its ideology in one ear, and the voice of Debaucherous Criminality whispering its own in the other. And what were these two voices, if not crypto’s guardian angels?
I’m trying and failing to get at something here. Let me try again.
In the summer of 2011, shootings started to escalate in my neighborhood of Parkside Avenue. One evening, my roommate and I heard a pop and screech of tires outside, and we spent the following hour watching from our roof as our neighbor bled to death from a drive-by shooting. It took the cops and ambulance almost an hour to arrive, and it left me with the recession’s most radioactive image: two white paramedics dragging this Black man by his feet down the stairs as his head smashed against each step and his family screamed. He wasn’t dead yet, but he was to them, and you might have wondered, as I did, if the paramedics saw their job to kill him.
Perhaps you’ll say this wasn’t an image of the recession. Perhaps you’ll say it was just an image of these particular men, an anonymous image that hardly does justice to their inner joys and turmoils outside this moment, or even just an image that we’ve hardly left to history. But I think of it as an image of the recession because it was the clearest crystallization I witnessed in those years of what happened when an economically dispossessed populace faced its fate in the hands of city bureaucrats. The role of centralized authorities in all these stories—my MoMA boss, the IRS, the landlord, the receptionists, the cops, the paramedics, and even the damn Avengers—should be clear. The point isn’t the power they had. It’s the power they lacked and wanted as desperately as us all.
There are these lines in Elizabeth Bishop’s “One Art” where she writes that she “lost two cities, lovely ones. And, vaster,/ some realms I owned, two rivers, a continent./ I miss them, but it wasn’t a disaster.” The words operate like money, a psyop to convince herself of a status that she knows is just a shield against despair. Of course, losing all that shit was an absolute fucking disaster. And the point isn’t just that she has to write a poem to convince herself otherwise: it’s that she can’t help but write about her losses because they still form an imaginary world where her mind continues to stray.
Financial crises serve as nice reminders that money is an imaginary garden in which we lead our all-too-real lives. In bull markets, we might be tempted to validate money in order to validate ourselves—to tell ourselves it’s deserved, a product of our hard work, a testament to our taste as upstanding citizens of the world. It is not just financial wealth that lets us forge our identities, but financial stability. It’s the fineries and fripperies of stable finance—the donation we make to our local PTO, the cutlery we set for neighbors when we invite them to say grace, the trip we book to Baja to showcase our new bikini—that shield our family and our god from the decennial death-rattle of a bank run.
Because the threat of a bank run is the threat of how we know ourselves as people. I spent my childhood shuttling between the Bank and Church in our small town for a reason. Without one, it’s hard to believe in the other.
I finally got interested in Bitcoin for the usual reason I was getting interested in things in early 2017: a girl I met on Tinder suggested I check it out. Like most crypto noobs, I was primarily drawn to the myth—specifically, the myth of some cryptographically cloaked figure named Satoshi who had embedded a front page headline in the Bitcoin Genesis Block reading, simply, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Of course, I liked that implicit positioning of Bitcoin as an alternative to a nationalist, military-backed banking system that would bail out the rich at the expense of the poor. As Satoshi argued in announcing Bitcoin to the world, “banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”
But I also liked that Satoshi had cheekily done what any hostage to an unfair system does to prove that they’re alive: include documentation of themselves with the front page news as a timestamp. And I liked that documentation was a feature of cryptocurrency in the first place. It suggested that Bitcoin’s real promise might not just be as a money relay system, but an abstractable messaging relay system for any kind of data.
Most of all, though, I liked that Satoshi was treating money as a historical record of our times. It’s easy enough to say that culture is just a history of how people feel across different economic eras. It’s harder to realize that the economy itself is just a history of how people feel culturally about each other and their institutions in given pockets of time.
And at this point I should ask the question haunting this piece: what is a bank anyway, and why do we need it?
The question depends a bit on who you ask. For the United States government, for example, banks compose a kind of money plumbing system to generate and distribute cash across the country. For the Federal Reserve in particular, which cannot print money itself, each bank is a kind of faucet for irrigating the economy. It’s through banks that the Fed indirectly sets interest rates by establishing targets for the rates they charge each other to borrow money to meet reserve requirements every night: lower rates mean the money plumbing system lowers its valves for more money to gush out in the form of loans. Likewise, the Fed can lower the reserve requirements themselves as another way of opening the valves. Or, in low-interest rate environments, the Fed can even take to buying securities (like bonds) from banks to give them credit—the equivalent of pouring more money into the money plumbing system to disperse.
Banks themselves, however, might define their job a bit differently, as borrowing short-term to lend long-term. In other words, they borrow from depositors who can and will withdraw their money at any given moment in the near future. But they lend it out to businesses and mortgages at long durations—and presumably higher interest rates. Their job is, essentially, to arbitrage the short-term need for a dollar against the long-term need for a dollar while accounting for the ways that fluctuating interest rates can tank that risk calculus.
This is one reason it can be challenging for major banks to offer high yield savings accounts to depositors even at the moments they’re reaping high interest mortgages from borrowers: the bulk of their portfolio might lie in lower interest rate mortgages and bonds from years prior that are sinking in value. Another reason, for what it’s worth, is simply greed. You might note some evidence that both these reasons played a part in SVB’s decline.
And then finally, there are the depositors who just want a safe place to park and retrieve their money. Banks, we’re told, are the safest place to do that. But as we’ve seen above, banks rely on holding onto money for the longest possible duration and lowest possible rates in order to maximize their loans. When those loans go bad and customers come calling, the money simply may not be there to retrieve—particularly if it’s over the FDIC insurance levels. So the one place that depositors can go to park and retrieve their money doesn’t actually park it and, every decade or two, may not let them retrieve it either.
It’s the competing demands of these three bank mandates—to serve the government, to serve clients, and to serve the profitability of the bank itself—that mean we depositors have little say in their banks’ policies. It’s also why, perhaps, no alternative exists for depositors just to park their money for a subscription fee and some guarantee it won’t be loaned. If we depositors had our way, banks wouldn’t be able to profit off loans and serve the money plumbing system.
And this is the point I want to make here. To some degree, our needs as depositors are at odds with those of the economy at large that needs to serve us.
I should have said, though, that there is one alternative to a bank. Crypto multisigs and MPC wallets are, in some sense, a new primitive for self-banking—enabling you not only to store your money sovereignly, but loan it out directly through protocols to receive the returns yourself. The real point of being bankless, in other words, is to become the bank.
Still, I wonder if we’d be in a better position to serve that role if we had chains that operated like a decentralized Fed governed by token-holders to manage inflation—setting interest rates with DeFi protocols, updating burn policies, and crediting us for bonds. We would be the banks for the chains, and we would be the governors for the chains, but just as importantly, the chains would have their own treasuries apart from us to invest in public goods.
The fact we don’t have this infrastructure is a reminder of what happens when you try to create a fully free-market financial system opposed to any notion of a government: sure, we can privilege depositors’ sovereignty at the expense of government mandates, but then do we even have a society for them to exist in?
For the irony is that it’s still the Fed that subtends belief in crypto. When USDC tanked to 88 cents on the dollar over the weekend, we saw how irrational traders would be even when their tokens remained solvent for $1 each. They were more or less backed by full collateral, but even collateral itself turned out to be a myth to traders until the Fed stepped in to ensure it would remain. Banks weren’t bailed out, but our imaginations were. The Fed gave us, if you like, an emotional bailout.
Of course, the Fed’s actions represented a historical expansion of financial power: an offer to backstop banks by charging them into a kind-of insurance pot, or if you like, to socialize profits in order to socialize losses. It was in some ways a mea culpa for 2008. Now banks would have to pay to save themselves, and no execs or shareholders would be bailed out.
But of course we know the reason they did it wasn’t to save banks directly but to prevent them from needing to be saved at all—by calming us psychologically. It’s moments like this when you remember that in many ways the Fed’s real job is, in fact, sentimental support.
And there are two points I want to make here. One is that you can’t conclude that collateral isn’t real without quickly concluding that money isn’t real either. Was there a world within reach where traders determined not only that overcollateralization was as fictitious as undercollateralization, but that money itself was just a fable foisted on them by the other side of their trade? How close did we come to the utter madness of people seeing things as they are—before the Fed held us tight and sang us our favorite lullaby that money is real?
And second, more pragmatically, people made millions from crypto this weekend for the same reason they always make millions on crypto: by arbing crypto’s own inefficiencies. Crypto’s long history of slippage-arbitrage and Kimchi Premiums found a new chapter to tell us, yet again, that crypto is great for making money as long as it doesn’t work.
Of course, the Fed ultimately didn’t bail out SVB, and crypto’s favorite stablecoin regained stability, so perhaps I am underestimating them both. Crypto and the Fed have both come a long way from 2008. But there’s a question how far they’ve come from each other.
See, I am trying to say something in this piece, written in real-time over a weekend of major economic news. I am trying to say that economics is not just a psychological phenomenon, but often—for too many of us—a psychological trauma. You can see a recession as a series of red numbers on a screen, but they are red numbers on a screen that will change people’s taste in movies, stick them with an addiction here and there, and scar lifelong relationships. I was forged in that smithy myself. This is a story, like any other, about how economics formed me.
But I am trying to say something else too. I am trying to say that the job of banks and the job of going bankless is really not so different at all—it’s to cushion us from that trauma. A trauma that’s often self-induced by both parties. And that’s it.
I’m glad we look to have escaped another era of bailouts, and I’m glad I didn’t lose all my money over the weekend. But I also wonder when we’ll create lasting value outside of arbitrage. And I wonder if there’s a world where the job of finance isn’t simply cushioning us from its own trauma, but giving us tools for mutual aid and support.
The last recession taught me to ask questions of the world that I’d never asked—and that even today, feel desperately unanswered. What would finance look like if we actually stopped relying on the approbation of central authorities to relieve us of their anxieties? What would finance look like as a collective belief system that we governed? What would finance look like as a collective distribution network to make sure we had the support we needed?
Let me try this one last time.
What would finance look like if its only goal were to get us a bed and a shower, and to tell us, despite all odds, that it’s ok—that we have each other?
With special thanks to Chase Chapman and Kyla Scanlon for inspiring so many moments of this piece.
Three quarks is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.