71–80 of 130 posts
Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.
Earlier quoted context omitted.
> Like I don’t want to defend the execs too much as they are the responsible people. But the gov and Fed did this. Erratic economic policy did this. It’s sad so many people think it’s a greedy bank. Being named Silicon Valley Bank doesn’t help. Classic libertarian chant assigning the success to the private individual and blame to the government. Everyone is dealing with the same macroeconomic environment. SVB execs d…
SVB clearly got greedy. They looked at their models and decided that they should use long-term vehicles with higher interest rather than short-term vehicles. The core problem they had was that interest rate risk prices have changed a lot over the last year and a half, largely due to the fed, and they severely underpriced that risk. Long-term fixed-income investments lose a LOT of value when rates go up and gain a lot…
The irony is, eventually they will be vindicated, when the Fed is forced to start QE all over again.
> They banked with SVB because it's one of only a handful of banks that was willing to align its financial products with the holistic levels of risk that are required to work in startups. I don't really understand what this means. What specifically did SVB offer that, say, Chase or BoA didn't?
So, ease of banking access, for one thing, led to the unique mix of SVB clientele.
Edit: Currently, after SVB's demise there is Mercury and Novo, I believe, that are banking partners of Stripe-Atlas.
The obvious fact is that we don’t need private banks to run our payment system or provide deposit accounts. It can be done perfectly well by allowing individuals to have accounts at the central bank through a postal savings system. There is probably some value in having banks to do loan underwriting and allowing private credit creation but this whole thing if allowing private banks to run everything and then providin…
Banks depend on depositor's money to generate loans. How would loans be generated, then, if consumers kept their money with the central bank? Issuing debt is a key engine for economic growth. This would incur an extremely contractionary effect.
"I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution..." Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.
“just got first founder email saying they are looking at moving their capital out of *all banks* due to contagion risk”
Earlier quoted context omitted.
> The moral hazard of trusting a licensed bank? With deposits in excess of FDIC limits? Yes, absolutely. There are a number of options to manage cash more securely than just putting it all in a single bank. Either one of 2 things must be true: 1. The FDIC 250k limit is real, and so deposits in excess of that limit must be subject to the risk of failure. 2. The FDIC 250k limit is fiction. If that's the case, then we s…
There's option 3: The limit is in practice "At least 250k" and the value of "At least" varies depending on the nature of the deposit, the institution it's in, and its failure mode. There are no doubt certain banks that would be more palatable politically to backstop further. I could imagine a national bank with mostly retail depositors and few over-250k accounts is "prettier" politically than if you had a tightly foc…
Well, option three is basically what we have now, and my argument is that it's supremely fucked up. As you point out, it highlights how vague, unclear laws or backstops are ripe for corruption and political cronyism.
It also adds a new form of moral hazard: if you're going to blow up, make sure you blow up big. Some small little bank that is pretty contained? Sorry depositors, you're all screwed. But scream "contagion" enough times and use the "nice economy you got there - be a shame if someone were to ruin it" tactic, and get Washington to come to your rescue.
"I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution..." Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.
"I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution..." Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.
I thought this was a great post. I've commented elsewhere that I'd be pissed at the moral hazard of unsecured depositors getting a federal bailout (though not if the feds just assist in finding a buyer or do as much as possible to ensure depositors can access their funds quickly), but at the same time I'm saddened by so much of the gleeful tribalism I see online (but not too saddened - many of the "dancing on your gr…
> I've commented elsewhere that I'd be pissed at the moral hazard of unsecured depositors getting a federal bailout This is a very strange take that I disagree strongly with. There is no such moral hazard, and I would not call depositors being made whole any sort of bailout. I would argue that one of the most important functions of the government, right alongside national security, is maintaining the illusion that ba…
The point is, right now, and in previous failures, uninsured depositors were not made whole. And, if the feds weren't worried about contagion, then they absolutely would not bail out depositors. So the moral hazard is "if you're going to blow up, make sure you blow up big, and get enough powerful people to contact your congressmen, otherwise, you're screwed".