601–610 of 746 posts
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Giving away other people’s money is both effective and altruistic, it seems to me.
I suppose it's easier to justify this to yourself when you know most of the people whose money you're gambling with are also driven by the same greed. The cryptocurrency bubble was very transparently built on delusion and avarice, and everyone involved knew it. There are very few truly innocent victims here.
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Banks don't actually even 'lend out' customer deposits. That's a very common misconception. In modern bank operations, incoming fund transfers (which involve deposits) do provide liquidity that help allow the bank to be able to lend, but banks are actually levering up capital (paid-up share capital, retained earnings, etc.) to lend. The primary limit on how much they are able to lend (by Basel III regulations) is a m…
You’re creating a lot of confusion by ignoring cash accounting (the physical dollar I give a bank is then given to a homeowner as a mortgage) and talking about GAAP accounting, without making it clear that is what you are doing (the jargon only makes things worse). Like sure, it’s loan to capital ratio that matters but as you point out: > Bank runs are a liquidity problem because the bank's assets aren't all liquid e…
From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…
Banks don't actually even 'lend out' customer deposits. That's a very common misconception. In modern bank operations, incoming fund transfers (which involve deposits) do provide liquidity that help allow the bank to be able to lend, but banks are actually levering up capital (paid-up share capital, retained earnings, etc.) to lend. The primary limit on how much they are able to lend (by Basel III regulations) is a m…
Things became interesting when electronic transactions came into play. Banks virtually no longer have to payout any cash when they issue a loan to a client as they now only need to change two numbers: credit their asset account, and debit loan customer's cash account. So unless there were transactions paying out to another bank, there were no cash movements. So the minimum cash the bank should keep in their operation accounts is just the difference of the transactions paying out and those receiving in.
But does that mean customers' deposits are not significant to the banks? Nope. Banks actually lend out much more than their customers' deposits. How much can they lend out is basicly the deposit amount divided by the reserve rate, e.g. 20%.
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US banks have access to the Federal Reserve Bank and get funds from them at the fed funds rate. Then they add some margin and loan it out to you and me. They’re required to keep collateral and can only lend some smaller percentage of their capital. Etc etc. Such is what I have pieced together.
That doesn't answer where deposits go in a bank run.
When a bank pays a loan out to its lender, it must have capital (valuable assets actually owned by the bank) to back it up. But these "assets" are not always easy or possible to liquidate, or turn into cash. This is where the other person's deposit comes it. They use the deposits for "cash" instead of liquidating the assets they own in order to pay out the loan. This is what is meant by providing liquidity.
Technically, the bank's own assets can be considered to be backing the loan, but the long-and-short of it is that YES, bank's do use the cash from their deposits to make loans, and that is why there is no money available when the bank run happens.
Disclaimer: this is my interpretation of what others on this thread are saying. I don't actually know if this is right or wrong
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Uhm, yeah, people made the wrong bet because they fell for another hyped up tech company. But let's put a fine point on it -- that specifically fell in with a rent-seeking company capitalizing on a decentralizaed space with a centralized platform and then surprise-pikachu'd when they did the same thing as every one before them. > because when it's not on an exchange you can't convert it back into USD when significant…
> Go watch YT for a few hours and I'm sure youll be on to your next get rich scheme. I laughed, hard. Bravo to you. To be charitable, some people may only be able to afford a normal lifestyle though a successful "get-rich quick" scheme. Think insane markets like Toronto and Vancouver that are flooded with laundered money; how are you going to make enough money for a home without making a YOLO-style bet on something y…
Its hard to think of any scam that isn't portrayed as "working out (for the (would be) rich)". Again, a good reason to be wary of such things.
I'm totally in favor of helping struggling folks, taking care of basic needs, etc (though I'm not sure laundered money is the culprit I'd offer). But lord maybe some reasoning skills would also do some wonders. Also, Christ, it pains me how often I think "if only I could sleep with myself stealing money from fools". Because I do know you're right, that's the psychology of why get rich schemes work...
From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…
Banks don't actually even 'lend out' customer deposits. That's a very common misconception. In modern bank operations, incoming fund transfers (which involve deposits) do provide liquidity that help allow the bank to be able to lend, but banks are actually levering up capital (paid-up share capital, retained earnings, etc.) to lend. The primary limit on how much they are able to lend (by Basel III regulations) is a m…
If a bank does a transfer to another bank it will have to send its reserves which means it might have to borrow reserves from another bank or sell its long term assets to get enough reserves and that long term asset might worth a lot or worth very little depending on the difference between it's locked in interest rate and the current interest rate.
This is why banks sell their treasuries to the Fed, they have a long duration asset and a short term liability, so they give it to the Fed to get a short term asset.
I don't know what SBF is doing but maturity transformation is probably the riskiest thing you can do as a bank and it is very likely to break down eventually unless you have a central bank that spreads around the risk. From a purists perspective banks should only use certificates of deposits to ensure that their liability duration is longer than their asset duration. Of course that is difficult in practice because nobody is buying CDs nowadays.
The difference between a bank run on the licensed banking system and a crypto exchange is that the licensed banking system has a lot of experience with these types of problems meanwhile in the cryptospace you ask your neighbor and hope he doesn't shrug.
This is embezzlement. Mr. Bankman-Fried should be arrested. Now.
We need some lawyer to confirm if he can be arrested or even prosecuted in the US. Since its a business based out of Bahamas.
The Bahamas Securities Commission just froze FTX's assets in the Bahamas.[1] A provisional liquidator has been appointed. Next stop, bankruptcy.
All the jurisdictions where FTX has a presence are now after Bankman-Fried. US, Japan, Bahamas...
[1] https://fortune.com/2022/11/10/ftx-assets-frozen-bahamas-cry...
Earlier quoted context omitted.
US banks have access to the Federal Reserve Bank and get funds from them at the fed funds rate. Then they add some margin and loan it out to you and me. They’re required to keep collateral and can only lend some smaller percentage of their capital. Etc etc. Such is what I have pieced together.
That doesn't answer where deposits go in a bank run.
The problem essentially is that the money can be withdrawn all at the same time but the obligations cannot.
The CEO of FTX said "we tend not to have stop losses... I'm trying to think of a good example of a trade where I've lost a ton of money... I probably don't want to go into specifics with that" https://twitter.com/ApeDurden/status/1590912098871435265 How did this place end up managing billions of dollars?
What I'd like is a tool on Hacker News, that would allow me to click on a username in a thread and do a quick search for a term related to the thread. For example, I'd like to know how many people in this thread who are posting against SBF praised him in threads from months ago. I think the whole story with him is a testament to what's wrong with tech culture and the media more largely. It's almost Elizabeth Holmes-e…
[0] https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...