111–120 of 222 posts
As a side note, I find it fascinating how fractional reserve banking is not only legal but considered indispensable to the economy. It just sounds like a big scam. Why do private bankers get to create money and decide who gets it? It feels like there has to be a better way.
They don't create money, they loan out deposits. It's not as scammy as people think. You are free to put your cash in a mattress instead.
As a side note, I find it fascinating how fractional reserve banking is not only legal but considered indispensable to the economy. It just sounds like a big scam. Why do private bankers get to create money and decide who gets it? It feels like there has to be a better way.
They don't create money, they loan out deposits. It's not as scammy as people think. You are free to put your cash in a mattress instead.
Most of that loaned out money is getting deposited into another bank account. And that deposited loan will (minus a percentage kept in reserve) get loaned out again. And so on, etc. I might be missing something important, though.
I think this might be the beginning. I think various funds (public or private) which have capitals stored in SVB is gonna be in a lot of trouble. Every investment firms are probably scanning their portfolios and business cash lines to see how much they are impacted by SVB and similar banks. I wouldn't be surprised to see a run on banks in the next few days/weeks if additional rumors (true or not) come out. Edit: didn…
Monday will tell. FDIC will have done enough rough accounting to roughly get an idea of how much money large depositors will actually get. It's also entirely possible a deal gets worked out over the weekend that results in all cash depositors being whole at a new bank. Monday will tell.
Earlier quoted context omitted.
I would bet it’s 80 cents on the dollar
It's exceedingly unlikely to be anything less than 99. The FDIC wants to reassure everyone so there aren't more runs. Do you really think they're going to let the eventual purchaser not make everyone whole?
As a side note, I find it fascinating how fractional reserve banking is not only legal but considered indispensable to the economy. It just sounds like a big scam. Why do private bankers get to create money and decide who gets it? It feels like there has to be a better way.
Because it's good for growth, as far as I know.
Earlier quoted context omitted.
I just got an email from Mercury saying they’re well capitalized and all is well. “ I want to assure you that Mercury is in a strong financial position (profitable and well-capitalized), and we have a number of ways that we keep deposits on Mercury safe:” Uhoh.
Is there any bank out there that can survive a panic bank run?
Earlier quoted context omitted.
And SVB means Silicon Valley Bank, which was shut down by a regulatory body some days ago: https://www.cnbc.com/2023/03/10/silicon-valley-investors-and... (seriously HN, we non-US people have never heard of your terms)
I think it is not a US-specific thing, I live in the US and had never heard of SVB until the recent volley of articles here.
As a side note, I find it fascinating how fractional reserve banking is not only legal but considered indispensable to the economy. It just sounds like a big scam. Why do private bankers get to create money and decide who gets it? It feels like there has to be a better way.
Earlier quoted context omitted.
You need some amount of cash for payroll, POs, etc. The rest is then generally held in "cash equivalents" such as short-dated government bonds. The latter has yield to offset inflation. But basically "cash" is being used quite loosely here. From the 8-K: > The Company has total cash and cash equivalents of approximately $1.9 billion as of March 10, 2023. Approximately $487 million is held at SVB, which represents app…
> The rest is then generally held in "cash equivalents" such as short-dated government bonds. Wouldn't these bonds belong to Roku but simply be bought/sold/held, for a fee, by SVB? I mean: my bank in Europe can go belly up, my stocks are my stocks and they'll be transferred to my new bank. They cannot be used as part of a bank "bail in" procedure (well at least I think and I hope that's the case).
That said, the bank can still lend out your assets within certain regulatory guidelines, but in theory the regulation is in place so that they always have enough liquidity should you choose to withdraw it. Issues only really come into play when large numbers of consumers try to withdraw in rapid succession and a bank doesn't have adequate liquidity available. Ie, a "bank run".
Your point on stocks is interesting though because it's quite possible your bank actually does loan out your stocks to short sellers and makes some yields some profit in doing so. My understanding is that there are scenarios where you can actually loose your stocks in the event your broker goes bankrupt, although in such a case your government should insure you up to a certain amount (like with cash deposits).
But in a worst case scenario you can lose your stocks and banks can definitely lend the assets you hold with them.
Earlier quoted context omitted.
This is how financial crises start. IndyMac ($40 billion) went under in July 2008 which caused tension, and then Lehman fell apart two months later which led to 15 institutions failing in a matter of weeks. There are other financial institutions that are suffering. We could definitely see cascades among some of the weaker banks
Bear Stearns was even earlier that same year. It’s like that old quote about going bankrupt, first it happened slowly, then suddenly.
"Two ways," Mike said. "Gradually and then suddenly."
--Ernest Hemingway, The Sun Also Rises