FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#971

Post by rafaelero » Sat, Mar 11, 2023, 4:03 PM UTC

hot_gril wrote: post #868

rafaelero wrote: post #632

Earlier quoted context omitted.

> What I don't understand is why do banks work this way? People don't want to lose their money to inflation, so banks are implicitly required to make up for that. Also, it's just too tempting for them not to use the money that is collecting dust. Hopefully people will emerge from this with a better understanding of Bitcoin's advantage to normal fiat system, which is something that is severely lacking in discussions I…

Except the bank interest still doesn't beat inflation, let alone the rate of M2 increase. Chase offers 0.1% on savings accounts right now, which would be pointless to me. It's more difficult just to hold onto wealth than most people see. It'd be nice if everyone holding the currency weren't implicitly taxed through dilution, forcing them to passively invest, creating bubbles... and still being taxed on the so-called…

I agree. That's why we need a currency with guaranteed limited cap that can act as a device both for saving and for spending.

Re: FDIC Takes over Silicon Valley Bank

#972

Post by runeks » Sat, Mar 11, 2023, 4:07 PM UTC

Randalthorro wrote: post #711

tlb wrote: post #109

The regulations that allow a bank to hold long-term fixed-rate bonds backing variable-rate liabilities (since deposit rates float) seems broken. It's straightforward to reckon their exposure to interest rates: they had $90B in 10-year fixed rate bonds, so they lose $9 billion per % of interest increase. They must have known that a 4% increase in interest rates would put them underwater, but they did it (and were allo…

What’s crazy to me is the fed hasn’t been raising rates out of the blue. What the fuck was this bank doing the last two years during every raise? They should have been rebalancing.

> They should have been rebalancing.

How would that have helped?

Re: FDIC Takes over Silicon Valley Bank

#973

Post by hinkley » Sat, Mar 11, 2023, 4:15 PM UTC

mouse_ wrote: post #877

hinkley wrote: post #850

If we’re going to treat the US government like an underwriter, maybe we should allow the FDIC to charge fees that look a bit more like insurance. We won’t stop you from doing X, but the fees are higher because you’re more likely to default. As things are every time so thing like this happens either taxes go up, the national debt goes up, or we trigger inflation to solve it.

FDIC -is- insurance, and it's not supposed to make money, it's supposed to cost money. It's a safety net for when shit hits the fan. There should, in fact, be things you're not allowed to do as a traditional banking establishment. And I'm sure this event will be precedent for more.

It uses a pretty fixed set of rules though. So every fifteen years or so someone finds a new way to go bankrupt while following “the rules” and the FDIC and the public get to foot the bill because they technically did everything right.

That’s not how underwriters work. They look at your behavior and your business and they grieve you a quote based on how crazy you seem. And they do that with a bunch of legal verbiage about what they will cover.

Re: FDIC Takes over Silicon Valley Bank

#974

Post by danielmarkbruce » Sat, Mar 11, 2023, 4:19 PM UTC

FiberBundle wrote: post #948

danielmarkbruce wrote: post #750

Earlier quoted context omitted.

Of course the VCs who told their portfolio companies to pull the money were doing the right thing, by the people they are obliged to do the right thing by. They want to protect their companies and their investors. They'd be mad not to, and they are legally obliged in many cases. I think you'll find a lot of the people complaining are people who got hit and are bitter about it. e.g. some CFO's seem to be complaining a…

No, it actually was incredibly stupid and short-sighted by VCs. Here's Matt Levine on that point [1]: > Also, I am sorry to be rude, but there is another reason that it is maybe not great to be the Bank of Startups, which is that nobody on Earth is more of a herd animal than Silicon Valley venture capitalists. What you want, as a bank, is a certain amount of diversity among your depositors. If some depositors get spo…

This is weak argument. You take your money out of a bank who dusts all their equity on a dumb bet. You don't wait around hoping everyone will wait around.

Re: FDIC Takes over Silicon Valley Bank

#975

Post by bigbillheck » Sat, Mar 11, 2023, 4:30 PM UTC

delfinom wrote: post #275

zenmacro wrote: post #163

Wow, the government acted incredibly swiftly and decisively to crush the possibility of a general bank panic. The current US banking system is very different from the 2008 system.

Because SVB was an actual bank with deposits that is FDIC insured. This is their job and they always acted timely in any situation, even before 2008. Bear Stearns in 2008 was an investment bank, they were not hawking FDIC insured accounts.

There were a whole lot more banks that failed in 2008 beyond Bear Stearns.

Re: FDIC Takes over Silicon Valley Bank

#976

Post by [deleted] » Sat, Mar 11, 2023, 4:39 PM UTC

TechBro8615 wrote: post #51

katmannthree wrote: post #24

Yikes. Does anyone have an idea of which orgs have significant exposure (like Molly White's FTX contagion graph[0])? [0] https://www.mollywhite.net/etc/ftx-contagion

40% of startups just had their bank accounts cut down to $250k, so... a lot.

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Re: FDIC Takes over Silicon Valley Bank

#977

Post by fundad » Sat, Mar 11, 2023, 4:43 PM UTC

cglace wrote: post #429

chernevik wrote: post #418

I don't understand why anyone would park any sum larger than, say, $5mm in a bank deposit for more than a minute. It isn't hard to dump those funds into a money market fund backed by short-term commercial paper or even short-term Treasury bills. Or to just buy the Treasury bills outright. Such holdings are quite liquid and can be absolutely secure. Use the bank account for clearing, keep a couple million in it and se…

If you take an SVB loan you have to keep your money in SVB.

SVB is a closely held organization in these funding terms. All the more reason VCs should be on the hook for the losses because managing risk is their business, their venture if you will.

Re: FDIC Takes over Silicon Valley Bank

#978

Post by [deleted] » Sat, Mar 11, 2023, 4:44 PM UTC

kbrkbr wrote: post #964

Weren’t the events that lead to this a massive multiplayer prisoner‘s dilemma, with a large defect wave?

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Re: FDIC Takes over Silicon Valley Bank

#979

Post by [deleted] » Sat, Mar 11, 2023, 4:46 PM UTC

sacnoradhq wrote: post #941

Friends of mine who were acquired by VMware used SVB 2010-2015 because their investors preferred it. 20/20 hindsight: they were too niche and not diversified. It would've been a slam-dunk to send out flyers to local property owners in the South Bay Area and Santa Cruz Mountains. For my consulting LLC, I went with Comerica because I figured SVB had the issues of being like a credit union but without CU behind it. If I…

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Re: FDIC Takes over Silicon Valley Bank

#980

Post by [deleted] » Sat, Mar 11, 2023, 4:48 PM UTC

borgchick wrote: post #904

So when every country in the world started printing money like it's going out of style in the prime of COVID years, to help stimulate the economy, they effectively wrote the first few chapters of this story?

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