SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC • Hacker News Board

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#21

Post by InTheArena » Sun, Mar 12, 2023, 5:52 PM UTC

This seems pretty knee-jerk, especially given, that the current glances that the business was probably too conservatively managed. The problem here was not holding safe assets - but the value of the government bonds depreciating dramatically because of the rising interest rates and a flush supply of higher interest rates due to massive government deficit spending. It’s also a reflection of the extremely aggressive mark to market rules that have been put in place.

You can make a very solid argument at the risk here is actually risk that was forced into these companies by the government.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#22

Post by wpietri » Sun, Mar 12, 2023, 5:56 PM UTC

whitemary wrote: post #20

wpietri wrote: post #16

Earlier quoted context omitted.

Sure, but that doesn't mean that we can't fight that. Indeed, I think it means we must work ardently against it. Capitalism's pretty neat, but it has known failure modes like monopoly and corruption.

It does mean you can't fight it with little advocacy groups or well-meaning think tanks. According to history, you need a strong labor movement led by principled socialists.

I think solving problems like corruption takes more than one thing, so I think false dichotomies are unhelpful.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#23

Post by makestuff » Sun, Mar 12, 2023, 5:57 PM UTC

InTheArena wrote: post #19

ZachPruckowski wrote: post #12

Earlier quoted context omitted.

Interest rates are where they were in the mid/late 90s ( https://fred.stlouisfed.org/series/FEDFUNDS ). The idea that these interest rates are unsustainable/dangerous is just silly. If anything, the 2009-2016 and 2020-2021 periods at an interest rate of 0% are the anomalies.

The problem is is that the amount of debt is percentage of GDP, and therefore the interest rates that we need to pay are significantly higher now. This kind of analysis is hopelessly naïve without taking into account overall macro situation.

I always see people say the national debt doesn’t matter because it isn’t like household debt. However, I just fail to see how that is true. At some point the can won’t be able to be kicked down the road anymore. I guess everyone is hoping that it won’t be during their lifetime.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#24

Post by fspeech » Sun, Mar 12, 2023, 5:57 PM UTC

Other than the focus on governmental regulation we should also look at the glaring principal-agent risk. Large shareholders (such as the Swedish pension fund) should have asked questions about the concentration risks and AOCI losses. Management could be loathe to realize the losses earlier due to profit targets. Their risk/reward calculation on addressing a mistake could be misaligned from the shareholders'.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#25

Post by whitemary » Sun, Mar 12, 2023, 5:58 PM UTC

olalonde wrote: post #18

whitemary wrote: post #13

Earlier quoted context omitted.

The capitalist class will always leverage its capital for its own interests. It's an inherent fact of capitalism. The American socialist movement was mostly wiped out during the Red Scare.

What is capitalist about modern banking? It's probably the most regulated industry in existence. Where a practice that would normally be regarded as fraudulent anywhere else (fractional reserve banking) is not only legal but encouraged by government. There's nothing capitalist about it[0]. [0] https://mises.org/power-market/central-banking-socialism

A sovereign state in a capitalist society is a capitalist state. A capitalist state always serves, in aggregate, the interests of the capitalist class. Karl Marx showed us how this works 150 years ago and nobody has challenged this part of his analysis to my knowledge.

I am familiar with the delusional American libertarian fantasies, but that's just ideological denial. They haven't done any actual analysis of how a government or state works, or who influences it.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#26

Post by ZachPruckowski » Sun, Mar 12, 2023, 6:00 PM UTC

InTheArena wrote: post #19

ZachPruckowski wrote: post #12

Earlier quoted context omitted.

Interest rates are where they were in the mid/late 90s ( https://fred.stlouisfed.org/series/FEDFUNDS ). The idea that these interest rates are unsustainable/dangerous is just silly. If anything, the 2009-2016 and 2020-2021 periods at an interest rate of 0% are the anomalies.

The problem is is that the amount of debt is percentage of GDP, and therefore the interest rates that we need to pay are significantly higher now. This kind of analysis is hopelessly naïve without taking into account overall macro situation.

I mean, yeah, that's ultimately a potential problem for the federal budget. But that's not what tripped up SVB - long-term Treasury prices declined because higher interest rates made short-term Treasuries more attractive than long-term ones.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#27

Post by jacquesm » Sun, Mar 12, 2023, 6:01 PM UTC

fspeech wrote: post #24

Other than the focus on governmental regulation we should also look at the glaring principal-agent risk. Large shareholders (such as the Swedish pension fund) should have asked questions about the concentration risks and AOCI losses. Management could be loathe to realize the losses earlier due to profit targets. Their risk/reward calculation on addressing a mistake could be misaligned from the shareholders'.

Pension funds - and municipalities - have no business to take the funds that they have been entrusted with outside of the country where they reside. The same kind of nonsense led to the Icesave debacle.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#28

Post by Telemakhos » Sun, Mar 12, 2023, 6:04 PM UTC

InTheArena wrote: post #21

This seems pretty knee-jerk, especially given, that the current glances that the business was probably too conservatively managed. The problem here was not holding safe assets - but the value of the government bonds depreciating dramatically because of the rising interest rates and a flush supply of higher interest rates due to massive government deficit spending. It’s also a reflection of the extremely aggressive ma…

I'd not consider that argument solid at all, considering that SVIB and Silvergate are the only ones bankrupt, while the other banks are solvent.

Instead, I'd look at the concentration of depositors within narrow geographic and professional areas and their connections to one another, which allows panic to spread faster and enables a bank run; other banks have a much broader and diverse set of depositors. I'd also look at the foolishness of some of those depositors who deposited far too much in one bank instead of distributing funds across many banks. Both are errors of over-concentration. Retail banking only made up 7% of deposits at SVIB; the rest was VC/tech money. That's not by any stretch of the imagination like other banks, and that's what caused this unique failure, not the same interest rate hikes that all banks are exposed to (and which they all account for regularly in internal exercises and stress tests like responsible banks do).

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#29

Post by enriquec » Sun, Mar 12, 2023, 6:05 PM UTC

whitemary wrote: post #17

andrewstuart wrote: post #11

Earlier quoted context omitted.

[flagged]

And those regulations were opposed by the unions that Biden crushed by forcing them back to work. It's a class conflict, not a partisan one.

Its understood that those regulations wouldn’t have saved the train in Palestine. That’s one problem with the discourse on the left. I don’t favor regulation for the sake of regulation - nor cutting it for its own sake. There obviously needs to be a rational best-effort cost-benefit analysis. Not cheap politics.

Re: SVB Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

#30

Post by whitemary » Sun, Mar 12, 2023, 6:05 PM UTC

wpietri wrote: post #22

whitemary wrote: post #20

Earlier quoted context omitted.

It does mean you can't fight it with little advocacy groups or well-meaning think tanks. According to history, you need a strong labor movement led by principled socialists.

I think solving problems like corruption takes more than one thing, so I think false dichotomies are unhelpful.

What you call "corruption" is fundamental capitalism. In other words, there has never been and can never be a capitalist society without it. Thinking otherwise is capitalist utopianism.

"The government" (or state) is part of capitalism. In fact, it is a critical component. There could be no capitalism without a state to enforce it. Libertarianism is not a coherent ideology; it is a disease of the intellect.