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SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

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Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#81

Post by spopejoy »

mablopoule wrote: post #55
TheOtherHobbes wrote: post #51

Earlier quoted context omitted.

Imagine a world where people had enough cash to do those things without needing a loan. No doubt it would be "inflationary" or some other nonsense, but the reality is that banking is a form of deliberate rationing and enforced political hierarchy. The financial industry exists solely for its own benefit, at spectacular cost to everyone else - not just by making significant capital almost cripplingly expensive for mos…

How is giving financial leverage to people with not enough cash in the bank, but a solid forseeable revenue stream "a form of deliberate rationing and enforced political hierarchy"? It's like wishing that healthcare system wouldn't exist because you imagine a world where people were just healthy instead.

Because the current overinflated housing market is a direct consequence (in the US) of loosening credit requirements for mortgages, the product of a herculean lobbying effort by investment banks in the late 70s to get the government to allow them to securitize mortgages (that is, immediately sell the off after origination), with the mortgage interest deduction (a subsidy to banks) the cherry on top.

Mortgages used to be boring and conservative, house prices were rational, but financial middlemen didn't make any money on it so it had to stop. It took the Reagan administration installing the Merrill Lynch CEO as head of Treasury to get it done.

The 2008 financial crisis and today's overinflated shitshow of a housing market are the direct result, along with tons of wealth creation for the rentier class.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#82

Post by isitmadeofglass »

more_corn wrote: post #38
jefftk wrote: post #2

I wish people would distinguish between "SVB does not deserve a bailout" as in "let it fail" vs as in "wipe out the shareholders and bond holders, but, sure, bail out the depositors"

Exactly. SVB has ceased to exist. The bank is not being bailed out. The depositors are. You know, the normal people who’s only error keeping money in a bank.

[dead]

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#83

Post by egberts1 »

I am kinda shocked that the focus is still on hedging against a 100% singular (riskiest) form of T-bill investing.

Shouldn't we be looking at the implementing Basel III capital requirements for ALL financial companies, and not just toward banks (thus exempting non-banks such as SVB)?

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#84

Post by erik_seaberg »

machina_ex_deus wrote: post #56
em500 wrote: post #48

Earlier quoted context omitted.

We're not keeping negative scores, that's the whole point of the invention of limited liability corporations. It's has large upsides (democratization of capitalism, ability to participate in larger and riskier ventures). Like most powerful tools, it can be abused, but it's such a powerful force multiplier that giving it up is just too costly.

Normally if I have contract with somebody of borrowing money, and I don't pay, the other side lost money. Because it was my responsibility who I do business with. So we both get to play until we reach zero. That's fair game. Now we're saying, actually, banks effectively don't impose counterparty risk on their clients. So the government is actually who's taking the counterparty risk. If that's the government and not t…

The Fed really wants the discount window to back loans, and they’re fighting at least one bank that wants to operate with a 100% reserve ratio.

https://news.ycombinator.com/item?id=32235721

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#85

Post by youngtaff »

erincandescent wrote: post #57
youngtaff wrote: post #53

Earlier quoted context omitted.

Except SVB’s customers aren’t “normal people”… they’re VCs, their funds and portfolio companies

...portfolio companies which need to make payroll payments to normal people

Still doesn’t make the majority of SVB’s customers normal people

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#86

Post by hgdfhgfdhgdf »

spopejoy wrote: post #81
mablopoule wrote: post #55

Earlier quoted context omitted.

How is giving financial leverage to people with not enough cash in the bank, but a solid forseeable revenue stream "a form of deliberate rationing and enforced political hierarchy"? It's like wishing that healthcare system wouldn't exist because you imagine a world where people were just healthy instead.

Because the current overinflated housing market is a direct consequence (in the US) of loosening credit requirements for mortgages, the product of a herculean lobbying effort by investment banks in the late 70s to get the government to allow them to securitize mortgages (that is, immediately sell the off after origination), with the mortgage interest deduction (a subsidy to banks) the cherry on top. Mortgages used to…

The $175,000 brand new 3 bedroom homes in Houston are overinflated? There must be something else that's causing the inflation.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#87

Post by kreutz »

youngtaff wrote: post #85
erincandescent wrote: post #57

Earlier quoted context omitted.

...portfolio companies which need to make payroll payments to normal people

Still doesn’t make the majority of SVB’s customers normal people

With thousands of your "normal people" on payroll by proxy.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#88

Post by youngtaff »

kreutz wrote: post #87
youngtaff wrote: post #85

Earlier quoted context omitted.

Still doesn’t make the majority of SVB’s customers normal people

With thousands of your "normal people" on payroll by proxy.

Those normal people still aren't SVB customers… they don't decide where their employer banks or why they bank there

Yes, they're exposed to SVB failing but as everything in life we're all exposed to failures we have no influence over

VCs, founders etc had influence over where companies money was kept, and ultimately whether to start a run on the bank and kill it

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