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The world’s empty office buildings have become a debt time bomb

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Re: The world’s empty office buildings have become a debt time bomb

#201

Post by mlyle »

triceratops wrote: post #200
mlyle wrote: post #82

Earlier quoted context omitted.

We had a longstanding regime and precedent for how bank defaults would be handled. Anyone with treasury experience knows about insurance limits and accordant risks. Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank. Then they were made whole at 100 cents on the dollar, when it probably would have ended up at 85 cents on the dollar on the amount over $250k…

> Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank. Call me silly but opening a bank account with the 17th largest bank in the US is not risky or reckless behavior in my book. It's nothing like Wall Street in 2008. They're bank accounts ffs. People use them to run businesses to earn their money. They don't become rich off bank deposits. At best SVB might…

> If I have $25m in 100 accounts at one bank, it's unconditionally insured.

Insurance is by ownership group, not by account.

Re: The world’s empty office buildings have become a debt time bomb

#202

Post by ghaff »

DrBazza wrote: post #61
orange_joe wrote: post #14

In my opinion this isn’t a consequence of the pandemic, but rather an inevitable outcome from the uneven pattern of building that vastly favored commercial real estate and prevented new housing. Even without teleworking, it was likely that jobs shifted toward suburban office parks as they had in the 80s to 2000s. People want to live close to work, and without sufficient housing in cities, commercial real estate in bi…

You're talking US zoning laws? We don't have those in the UK. The bellwether we have for the health of the UK, or at least London, is train and tube usage. It has, apparently, returned to almost 100% of pre-COVID. That's not to say that London's commercial properties are fully reoccupied, they're not, but London is perhaps doing slightly better than US cities in this regard. Having said that - HSBC is moving from Can…

Boston is still around half of pre-COVID transit use--though that's overlaid with some very disruptive long-deferred maintenance. Anecdotally, traffic seems worse than ever so I assume that a fair number of people switched to their cars and haven't come back to transit.

Re: The world’s empty office buildings have become a debt time bomb

#203

Post by triceratops »

mlyle wrote: post #201
triceratops wrote: post #200

Earlier quoted context omitted.

> Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank. Call me silly but opening a bank account with the 17th largest bank in the US is not risky or reckless behavior in my book. It's nothing like Wall Street in 2008. They're bank accounts ffs. People use them to run businesses to earn their money. They don't become rich off bank deposits. At best SVB might…

> If I have $25m in 100 accounts at one bank, it's unconditionally insured. Insurance is by ownership group, not by account.

I stand corrected. Even so, what's the point of all this money splitting? Increase the FDIC premiums for larger account balances going forward. Apply those increased premiums retroactively to all the banks that failed recently, if feasible. Let account holders get on with more useful work.

Re: The world’s empty office buildings have become a debt time bomb

#204

Post by mlyle »

triceratops wrote: post #203
mlyle wrote: post #201

Earlier quoted context omitted.

> If I have $25m in 100 accounts at one bank, it's unconditionally insured. Insurance is by ownership group, not by account.

I stand corrected. Even so, what's the point of all this money splitting? Increase the FDIC premiums for larger account balances going forward. Apply those increased premiums retroactively to all the banks that failed recently, if feasible. Let account holders get on with more useful work.

> Even so, what's the point of all this money splitting?

It eliminates the most proximal cause to the SVB collapse: strongly correlated behavior by large account holders. If banks have many account holders that are diverse, it's hard enough to get a panic that causes illiquidity.

The duration risk would have still been an issue, but a far smaller issue without the need for panicked liquidation. (Even with a healthier balance sheet, most banks would struggle to endure a bank run like SVB).

> Let account holders get on with more useful work.

If you have a massive amount of money, there's a little bit more work to do than dumping it in a random bank.

Ages ago, when my firm had a $15M bank balance, it was close to trivial to work with a vendor to spread the balance among 20 banks. We were still not fully insured, but we had significant insurance and limited exposure to any individual bank failing. 20x the risk of failure, but 1/30th the cost should one happen. We could have also bought some treasuries directly.

> Apply those increased premiums retroactively to all the banks that failed recently, if feasible.

How do you charge a bank that failed and doesn't have the money to pay its depositors money?

I'm in favor of a small increase in the insurance coverage. Maybe $500k or $750k. But I don't think it's good to make bank accounts equivalent in safety to treasuries up to any amount but more liquid.

Re: The world’s empty office buildings have become a debt time bomb

#205

Post by triceratops »

mlyle wrote: post #204
triceratops wrote: post #203

Earlier quoted context omitted.

I stand corrected. Even so, what's the point of all this money splitting? Increase the FDIC premiums for larger account balances going forward. Apply those increased premiums retroactively to all the banks that failed recently, if feasible. Let account holders get on with more useful work.

> Even so, what's the point of all this money splitting? It eliminates the most proximal cause to the SVB collapse: strongly correlated behavior by large account holders. If banks have many account holders that are diverse, it's hard enough to get a panic that causes illiquidity. The duration risk would have still been an issue, but a far smaller issue without the need for panicked liquidation. (Even with a healthier…

> How do you charge a bank that failed and doesn't have the money to pay its depositors money?

At least in the most recent cases, they have the assets but not the liquid cash.

> it was close to trivial to work with a vendor to spread the balance among 20 banks

Why can't banks offer a product like this themselves? Or do it automatically when an account balance grows too large? They could partner with other banks to do it.

Re: The world’s empty office buildings have become a debt time bomb

#206

Post by mlyle »

triceratops wrote: post #205
mlyle wrote: post #204

Earlier quoted context omitted.

> Even so, what's the point of all this money splitting? It eliminates the most proximal cause to the SVB collapse: strongly correlated behavior by large account holders. If banks have many account holders that are diverse, it's hard enough to get a panic that causes illiquidity. The duration risk would have still been an issue, but a far smaller issue without the need for panicked liquidation. (Even with a healthier…

> How do you charge a bank that failed and doesn't have the money to pay its depositors money? At least in the most recent cases, they have the assets but not the liquid cash. > it was close to trivial to work with a vendor to spread the balance among 20 banks Why can't banks offer a product like this themselves? Or do it automatically when an account balance grows too large? They could partner with other banks to do…

> At least in the most recent cases, they have the assets but not the liquid cash.

Yes, but those assets need to be sold for less money to pay current account holders.

Or if you issue a loan based on receiving the value of the assets in a few years, you'll need to account for time value of money, which has the same effect.

> Why can't banks offer a product like this themselves? Or do it automatically when an account balance grows too large? They could partner with other banks to do it.

Many banks do. Comerica set us up with this product, but we had to ask-- because otherwise they'd rather have had all of our money.

(And even though Comerica got equivalent amounts incoming, for various reasons brokered deposits are less desirable to a bank than direct accountholder deposits).

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