America’s banks are missing hundreds of billions of dollars • Hacker News Board

Re: America’s banks are missing hundreds of billions of dollars

#71

Post by xadhominemx » Wed, Mar 22, 2023, 6:32 AM UTC

simple-thoughts wrote: post #47

gen220 wrote: post #38

Earlier quoted context omitted.

Does the government require banks to buy long-term treasuries? [1] Or did banks choose to buy long-term treasury bills, chasing the highest paper returns (i.e. discounting the risk of potential rising interest rates in the future)? It's not a rhetorical question, but a sincere one. [1]: https://en.wikipedia.org/wiki/United_States_Treasury_securit... states that Treasuries are sold in all varieties of duration, from 4…

Imagine you run a small regional bank. You have marketing and operational expenses you need to cover, and you also need to be attractive enough to depositors to keep them from leaving to your giant to big to fail competitors who have explicit state backing. You’re required to buy from a very limited selection of assets that have government approval, especially government debt. Interest rates for short term debt are a…

Ok but the fact is a lot of regional banks didn’t buy very long-dated treasuries

Re: America’s banks are missing hundreds of billions of dollars

#72

Post by lmm » Wed, Mar 22, 2023, 6:39 AM UTC

7e wrote: post #52

jkhdigital wrote: post #49

Earlier quoted context omitted.

The article mentions the real core of the issue, but doesn’t make it clear that it is in fact the core: SLR (a banking regulation). SLR effectively requires banks to raise capital along with deposits . So if you flood the banking system with cash through fiscal policy, they can’t just accept all those deposits and leave them parked in their Fed reserve account. If they could, then the Fed wouldn’t need reverse repo—i…

If capital is too risky to raise, why can’t a bank refuse deposits?

That would at the very least be unpopular with their customers, if not outright illegal. What would it look like to be a customer at a bank that did that? Especially for something like SVB - your startup closes its funding round, they wire the money to your bank account, and the bank refuses it?

Re: America’s banks are missing hundreds of billions of dollars

#73

Post by NotACop182 » Wed, Mar 22, 2023, 6:41 AM UTC

albertopv wrote: post #60

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

2. is wrong, we had years of central banks money printing without inflation, recovery from Covid19 and the war are the reasons of this high inflation. Actually Fed real error has been raising rates to counter an inflation not caused by monetary policies. SVB put all their investments in one bucket and it has been a very poor decision, really a rookie one

Lots point to Covid-19 ppp and spending to be the cause of inflation. When the majority is supply chain and corporate opportunist. Great interview with Jon Stewart ad fed chair here: https://youtu.be/tU3rGFyN5uQ

Re: America’s banks are missing hundreds of billions of dollars

#74

Post by jaggederest » Wed, Mar 22, 2023, 6:41 AM UTC

rwmj wrote: post #11

micah94 wrote: post #8

Earlier quoted context omitted.

Yeah, I had like $4k left in a brokerage account. Then one month I noticed ~$100+ dropped in there and I was like WTF? That's 10x what I see in my savings account for the same amount of money just sitting there! So my money market is now my savings account. The risk is that you could lose your principal...but I guess not anymore!?! Thanks SVB, FRC, et al.

In the UK cash deposits in brokerage accounts are guaranteed in the same way as bank accounts (up to £85,000), through the Financial Services Compensation Scheme. Is that not the same in the US? Edit: To clarify, only the cash deposits, not any shares or bonds you buy of course. Also not all brokerage accounts, only ones based in the UK which have to be registered with the FSCS.

We have the SIPC which is a bit like the FDIC, though I'm not fully educated on the differences.

My understanding is that it's protection, but not ironclad.

https://en.wikipedia.org/wiki/Securities_Investor_Protection...

Re: America’s banks are missing hundreds of billions of dollars

#75

Post by lmm » Wed, Mar 22, 2023, 6:41 AM UTC

micah94 wrote: post #8

Uvix wrote: post #4

I’d managed to miss the memo that money market funds have such high rates now. I’ll have to consider doing the same, honestly…

Yeah, I had like $4k left in a brokerage account. Then one month I noticed ~$100+ dropped in there and I was like WTF? That's 10x what I see in my savings account for the same amount of money just sitting there! So my money market is now my savings account. The risk is that you could lose your principal...but I guess not anymore!?! Thanks SVB, FRC, et al.

Money market funds are not generally FDIC-insured. Given that the failure of SVB has made the implicit 100% FDIC guarantee a more explicit one, I'd say there's less reason to switch to a money-market fund than there was two weeks ago, not more.

Re: America’s banks are missing hundreds of billions of dollars

#76

Post by aaa_aaa » Wed, Mar 22, 2023, 6:42 AM UTC

albertopv wrote: post #60

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

2. is wrong, we had years of central banks money printing without inflation, recovery from Covid19 and the war are the reasons of this high inflation. Actually Fed real error has been raising rates to counter an inflation not caused by monetary policies. SVB put all their investments in one bucket and it has been a very poor decision, really a rookie one

This is false. Just look at amount of money pumped, it is easy to see the skyrocketing line in graphs. It is not the only but the main reason of inflation.

Re: America’s banks are missing hundreds of billions of dollars

#77

Post by taeric » Wed, Mar 22, 2023, 6:42 AM UTC

User23 wrote: post #55

simple-thoughts wrote: post #47

Earlier quoted context omitted.

Imagine you run a small regional bank. You have marketing and operational expenses you need to cover, and you also need to be attractive enough to depositors to keep them from leaving to your giant to big to fail competitors who have explicit state backing. You’re required to buy from a very limited selection of assets that have government approval, especially government debt. Interest rates for short term debt are a…

> Of course the flaw in this story is that the interest rate risk should have been hedged, and it wasn’t. How does the banking sector in aggregate hedge its interest rate risk exactly? They have to find a net counterparty outside the sector who wants exposure to interest rate risk. Who exactly would that be at sufficient scale to protect trillions in deposits?

I'm also interested in this answer. I've seen running credit cards?

Re: America’s banks are missing hundreds of billions of dollars

#78

Post by 1vuio0pswjnm7 » Wed, Mar 22, 2023, 6:42 AM UTC

csomar wrote: post #53

nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

"The upside of MMT and 0% interest rates is that it allows a whole set of businesses to become viable. Businesses with a 1% yield are not viable with a high interest rate as it makes more sense to just buy bonds. People who can generate yield will thrive, since the expected market yield is zero. It's still a question whether this will benefit mainstream; or a bunch of tech companies that have a monopoly of tech and innovation. In this kinda world, tech and innovation are the only possible venues to generate yield, since money is widely available for anything else."

Re: America’s banks are missing hundreds of billions of dollars

#79

Post by withinboredom » Wed, Mar 22, 2023, 6:48 AM UTC

7e wrote: post #52

jkhdigital wrote: post #49

Earlier quoted context omitted.

The article mentions the real core of the issue, but doesn’t make it clear that it is in fact the core: SLR (a banking regulation). SLR effectively requires banks to raise capital along with deposits . So if you flood the banking system with cash through fiscal policy, they can’t just accept all those deposits and leave them parked in their Fed reserve account. If they could, then the Fed wouldn’t need reverse repo—i…

If capital is too risky to raise, why can’t a bank refuse deposits?

“What do you mean my paycheck isn’t in my account?”

I don’t see that working too well …

Re: America’s banks are missing hundreds of billions of dollars

#80

Post by christophilus » Wed, Mar 22, 2023, 6:52 AM UTC

csomar wrote: post #59

harry8 wrote: post #56

Earlier quoted context omitted.

> Wrong. This is corruption. Janet is picking winners and losers. Some people are losing their deposits and some are not. You are systemic if you had dinner with Janet yesterday. Big call. Huge. Got some data or similar to back it? Edit: If there's clear picking of winners, or even plausibly so it's gonna look pretty bad. [1] [1] https://www.theguardian.com/business/2021/jan/01/janet-yelle...

You don't need a direct financial kickback to define corruption. From: https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-... > Treasury Secretary Janet Yellen told senators that government refunds of uninsured deposits will not be extended to every bank that fails, only those that pose systemic risk to the financial system.

If you’re too big to fail, you’re too big to exist. We should either let them fail (my preference, despite the pain) or bail them all out. But I also think that if we’re going to insist that there is a private entity that is too big to fail, it should be broken up until the pieces are not too big to fail.