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SVB Hall of Shame

svbhallofshame.wordpress.com

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Re: SVB Hall of Shame

#141

Post by [deleted] »

borski wrote: post #109
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.

[deleted]

Re: SVB Hall of Shame

#142

Post by davidw »

zarzavat wrote: post #98
xoa wrote: post #69

Earlier quoted context omitted.

> You're right, but it is entirely prisoner's dilemma. But part of what makes that whole bit of game theory interesting is that it has a lot more complexity then just the simple version. Yes in a plain prisoner's dilemma betray can make sense, but in an iterated prisoner's dilemma that's no longer true. That's been part of the debate around the whole debacle, for much of SV's history it was very much iterated, it was…

I don’t understand how the iterated prisoner’s dilemma makes a difference. If you are a founder who withdrew all your company’s money, then your reputation is neutral or perhaps positive. You saved your company. You did “whatever it takes”. These are good qualities in a founder. If you are a founder who left your company’s money in SVB, nobody is going to give you a medal for that. Instead it exposes you to questions…

I wouldn't look so much at the founders as the folks higher up the food chain.

I'm not sure they deserve quite so much vitriol as that website directs at them, but it really does seem to be a lose/lose situation for all the people who claimed to be fans of that bank. No one seems to be better off.

And while it's not hard to explain this outcome as 'the rational thing', it's also easy to imagine a different outcome where some more courageous leaders got together and held things together.

Re: SVB Hall of Shame

#143

Post by [deleted] »

photochemsyn wrote: post #137
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

What you're describing is a service provided by a bank called a safe deposit box, which banks provide as a fee service. This is quite an archaic view of banking services. The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank sa…

[deleted]

Re: SVB Hall of Shame

#144

Post by labster »

taxman22 wrote: post #30

I can’t believe this narrative is at the top of HN. It’s disappointing.

I admire that it can get to the top of HN, though, in that there is no heavy-handed moderation coming from the top. It shows a good working knowledge of the Streisand effect.

Re: SVB Hall of Shame

#145

Post by kondro »

aristophenes wrote: post #114
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

What took down SVB was mortgage securities. In the USA mortgages are typically 30 years long, with a fixed rate the entire time. Actual average duration is only a few years in a declining rate environment and 5-6 years in flat rate environment. In a raising rate environment, which we haven’t really seen for any length of time in most people adult lifetimes, it’s probably 10-15 years. This transition is what harmed SV…

Fixed terms above 5 years are basically non-existent, most people tend to fix a portion (not always 100%) of their loans for 2-3 years if they fix at all.

30 year mortgages here aren't uncommon, but the rates are variable and are basically whatever their bank wants to charge (with competition from other banks preventing them from increasing ridiculously).

Loan affordability is a big thing here too with banks being mandated to ensure that borrowers can afford the mortgages they're receiving and even shading interest rates at 3 points above their current levels when assessing this.

Sub-prime mortgages are effectively non-existent here as are long-term interest rate risks for banks as their borrowing costs are always pretty closely aligned with their lending revenues.

Re: SVB Hall of Shame

#146

Post by borski »

klooney wrote: post #139
borski wrote: post #109

Earlier quoted context omitted.

> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.

But there's this endless array of explainers saying they don't- https://www.google.com/search?q=banks%20don%27t%20lend%20dep...

Ugh. Okay, banks don’t take the money that you deposit, turn around and loan it at a higher interest rate directly. But they do use the money you deposit to balance their books and meet the necessary cash reserves that make those loans possible, which is, in effect, lending out your money.

When people request their money back en masse, banks face a liquidity issue because of the required fraction reserves they must keep. Directly or indirectly, without your deposits banks cannot lend out money.

Re: SVB Hall of Shame

#147

Post by kondro »

cde-v wrote: post #107
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%

Your bank pays you interest on a transaction account?

Re: SVB Hall of Shame

#149

Post by tablespoon »

kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

> Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank.

Then the product you really want is a safe deposit box to put your literal cash in. They bank will make its money from the rental fee you pay. It doesn't sound like you're actually looking for a bank account that pays interest.

Re: SVB Hall of Shame

#150

Post by fwlr »

kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

One thing we want from banks is to store our money and provide it to us on demand. Another thing we want from banks is provide lending to the average consumer (mortgages in the large and credit cards in the small). A bank can do both of these well, in most economic situations, if it is run well. Those two services synergize most of the time so it’s useful to combine both under one entity, but in some scenarios the sign can flip and they antagonize each other instead.
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