The End of Silicon Valley (Bank)
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The End of Silicon Valley (Bank)
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Re: The End of Silicon Valley (Bank)
#2>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue even riskier strategies, knowing that depositors will be safe.
I don't believe this is a binary issue, but a lot of the "pro-bailout" rhetoric is essentially "well of course we need to know we'll get our money back if we deposit it in a bank." This is clearly the best ideal. But that's not how it works! And FDIC limits were real but ignored in this case!
Re: The End of Silicon Valley (Bank)
#3This is still a better situation than 2008, where banks were bailed out to the extent that management even stayed (despite deserving prison), and shareholders lost nothing.
So that's the worst possible outcome, today's is probably second worst. But I don't see what would be better. Ben talks about loss of trust now, but we'd actually lose more trust if depositors weren't bailed out, and probably contagion would spread and many banks would fail.
Thinking about an endgame, I think extending this all out into the future, its hard to see banking remaining in any way a free market. Either it becomes state sanctioned and protected profit making, which it already is for the big 4 banks, or banking just becomes fully nationalised, and basically a state run commodity.
You can't get out of it being more and more centralised. I just don't see another way. And when it becomes fully centralised, the question is, does Jamie Dimon actually do anything, or is he basically a state actor with a billion dollar salary?
Re: The End of Silicon Valley (Bank)
#4Is it just me or has Stratechery gone downhill in it's analysis (or at least put too much mindshare on mid-market B2B SaaS startups, AdTech, and B2C).
A number of the Stratechery articles I've read recently seem to remain in that whole echo chamber and don't seem to extend that well into other segments in the larger innovation industry.
Re: The End of Silicon Valley (Bank)
#5This is still a better situation than 2008, where banks were bailed out to the extent that management even stayed (despite deserving prison), and shareholders lost nothing. So that's the worst possible outcome, today's is probably second worst. But I don't see what would be better. Ben talks about loss of trust now, but we'd actually lose more trust if depositors weren't bailed out, and probably contagion would sprea…
"Deserve prison"? Did they commit a crime?
Re: The End of Silicon Valley (Bank)
#6Is it just me or has Stratechery gone downhill in it's analysis (or at least put too much mindshare on mid-market B2B SaaS startups, AdTech, and B2C). A number of the Stratechery articles I've read recently seem to remain in that whole echo chamber and don't seem to extend that well into other segments in the larger innovation industry.
What industry is that?
Re: The End of Silicon Valley (Bank)
#7This is one of the better articles written about the whole debacle…
Also demonstrates VCs shortcomings (lack of diligence?) in the affair… which is probably why VCs are shouting about it and pointing fingers at others rather than examining their own failure in this
Re: The End of Silicon Valley (Bank)
#8> There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything?
Because if the bank doesn't give any interest, people will keep the money in either a competing bank that gives interest or in cash or in other instruments that pay interest.
What a full backstop removes from the interest is a risk premium. You already see that at Chase or BoA accounts. The risk premium is zero so the interest they pay is much lower than other banks. But this is where other banks get an opportunity to compete for deposits.
Re: The End of Silicon Valley (Bank)
#9This is still a better situation than 2008, where banks were bailed out to the extent that management even stayed (despite deserving prison), and shareholders lost nothing. So that's the worst possible outcome, today's is probably second worst. But I don't see what would be better. Ben talks about loss of trust now, but we'd actually lose more trust if depositors weren't bailed out, and probably contagion would sprea…
"Deserve prison"? Did they commit a crime?
What do you think?
Re: The End of Silicon Valley (Bank)
#10Is it just me or has Stratechery gone downhill in it's analysis (or at least put too much mindshare on mid-market B2B SaaS startups, AdTech, and B2C). A number of the Stratechery articles I've read recently seem to remain in that whole echo chamber and don't seem to extend that well into other segments in the larger innovation industry.
What industry is that?
Stratechery seems to stick to the B2C, AdTech, Fintech, and mid-market B2B SaaS sectors, and at least for Biotech (loose term, Pharma VC is distinct from Healthtech VC is distinct from B2C health apps is distinct from ...) and Cybersecurity+Infra Startups, some of the analysis seems not as targeted.
I've worked in both those industries and the VCs, GTM, Operations, Personas, and Economics for those segments are different from how an early stage Stripe or Uber or Amplitude would operate.