The collapse of SVB exposes the largest crack in the economy • Hacker News Board

Re: The collapse of SVB exposes the largest crack in the economy

#11

Post by xwdv » Fri, Mar 10, 2023, 10:13 PM UTC

TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

The exemption should still be allowed, as it led to great banking innovations for startups.

The exemptees just need to be fucking careful with this advanced mode of operation.

Re: The collapse of SVB exposes the largest crack in the economy

#12

Post by cplusplusfellow » Fri, Mar 10, 2023, 10:13 PM UTC

Apocryphon wrote: post #10

So between the tech angle and the housing-related investment vehicles, are we remixing 2000 with 2008 now?

Self inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).

Re: The collapse of SVB exposes the largest crack in the economy

#13

Post by Jensson » Fri, Mar 10, 2023, 10:14 PM UTC

TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

> Downside: this also means bank is going to be less profitable.

What are the downsides to society if banks are less profitable? They invested in T-Bills, I don't see how that investment served society in any way.

Re: The collapse of SVB exposes the largest crack in the economy

#14

Post by wpietri » Fri, Mar 10, 2023, 10:14 PM UTC

fshbbdssbbgdd wrote: post #8

m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

The especially funny thing to me is that some VCs were telling their portfolio companies to get their money out of SVP first thing this morning. So Sacks is a VC asking for a bailout on a bank run triggered by VCs. Cry me a river.

It's nice that he took time from his busy schedule decimating Twitter to share his views. But in my opinion VCs can't simultaneously claim to be such financial geniuses that they deserve lower taxes (via the carried interest loophole) but such babes in the woods that they need Uncle Sam to bail them out for a bad financial decision. Pick a lane, buddy.

Re: The collapse of SVB exposes the largest crack in the economy

#15

Post by talideon » Fri, Mar 10, 2023, 10:14 PM UTC

TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

Your username is both very ironic and apt in this particular case. Also, your analysis is spot on.

Re: The collapse of SVB exposes the largest crack in the economy

#16

Post by happytoexplain » Fri, Mar 10, 2023, 10:15 PM UTC

m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

I don't use Twitter. The Tweets I see when I click this link are 80% political shitflinging from one side of US politics (even the replies to each one are 100% one-sided), and 20% non-political. Why?

Re: The collapse of SVB exposes the largest crack in the economy

#17

Post by dougmwne » Fri, Mar 10, 2023, 10:15 PM UTC

nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

Yes, another way to think about this is that if you bought an .80 t-bill today it would have the return on investment equivalent to a 1.00 bill bought last year. That’s because the new t-bill has a much higher interest rate.

So in effect, as the fed raises interest rates, they are destroying the principle of every existing bond on the market. That’s a big problem for anyone owning bonds, especially if they are using them as collateral for leverage.

Re: The collapse of SVB exposes the largest crack in the economy

#18

Post by practice9 » Fri, Mar 10, 2023, 10:16 PM UTC

fshbbdssbbgdd wrote: post #8

m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

> friends

Chamath?

Re: The collapse of SVB exposes the largest crack in the economy

#19

Post by PKop » Fri, Mar 10, 2023, 10:16 PM UTC

Jensson wrote: post #13

TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

> Downside: this also means bank is going to be less profitable. What are the downsides to society if banks are less profitable? They invested in T-Bills, I don't see how that investment served society in any way.

Literally funds the government lol

Re: The collapse of SVB exposes the largest crack in the economy

#20

Post by quantgenius » Fri, Mar 10, 2023, 10:16 PM UTC

nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

They would have gotten their principal back but missing out on interest for 10 years is a huge cost, particularly if you have to pay out interest in the interim to your depositors.