SVB chief pressed lawmakers to weaken bank risk regulations • Hacker News Board

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#11

Post by college_physics » Sat, Mar 11, 2023, 3:57 PM UTC

> Touting “SVB’s deep understanding of the markets it serves, our *strong* risk management practices”

(Emphasis mine). According to other news [0] they did not have a formally appointed chief risk officer for eight months. While having a puppet CRO is obviously not a sufficient condition to ensure "strong risk management", having a well staffed and - as much as possible - independent risk management department is widely considered best practice [1]. In this instance such an internal body would get on high alert and run scenario upon scenario and stress test as soon as the inflation/interest rate environment changed.

[0] https://fortune.com/2023/03/10/silicon-valley-bank-chief-ris...

[1] https://www.bis.org/basel_framework/chapter/SRP/30.htm

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#12

Post by andsoitis » Sat, Mar 11, 2023, 4:02 PM UTC

mistrial9 wrote: post #2

with no dog in this fight, I see this as some enforcement grudge match from NY capital old-school on California capital new-school, triggered by zero tolerance for crypto. IMO - almost all the leveraged finance in the last 20 years is already over-the-top and mostly "fake money".. who gets the axe first is politics. Supporting statement to this heresy? When the "real economy" tanked due to covid-19 lockdown, the pape…

> Roku (who I have never heard of as a consumer)

You have commented in threads that reference Roku many times over (e.g. https://news.ycombinator.com/item?id=29338658) so you will forgive me for not believing you.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#13

Post by ProllyInfamous » Sat, Mar 11, 2023, 4:04 PM UTC

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

"Privatize profits, subsidize losses."

It's the global economy way!

Hint: nothing will change, depositors and banks will get bailed out. Water is wet.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#14

Post by nico » Sat, Mar 11, 2023, 4:05 PM UTC

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

> Bailing out these depositors would send the wrong message and encourage moral hazard

This seems to be the way the financial system has operated in the last 20 years. So I’d expect a bailout.

Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can.

> where success is based on merit and hard work

That’s the lie we all want to believe, but reality is that people at the top are a small club that will always prefer their family/friends/network than some hardworking rando from “the outside”.

You are far more likely to be successful (money/career-wise), if you are born into a well off, well connected family, than if you are born poor but super hardworking.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#15

Post by ouid » Sat, Mar 11, 2023, 4:05 PM UTC

Every meaningful financial scheme is the same. Borrow more money than you can be asked to pay back, and gamble it heavily. This is the only way to make money without doing any work. It's theft, very simply, but its hard theft to detect.

This theft is made more difficult to efficiently regulate when a blacklist style bottom up approach to regulation is used. If I have to evaluate every investment strategy that calls itself a bank for hidden leverage, I'm guaranteed to miss some. Its a hard game to play, and investigators are humans with both the capacity to make mistakes and be corrputed.

This is further dynamically complicated by the fact that the government is the insurer of last resort in a lot of these cases. The FDIC was instituted in response to what happens in the absence of government intervention (the great depression), and it doesnt really stop there. The federal government has the authority to bail out overleveraged "banks" that fail, and banks know this, leading them to seek out even riskier (more correlated) investments.

If we cannot consistently identify hidden risk, we need to be taxing the shit out of leverage. We are the ones who are going to be on the hook when the dam breaks, and they file a claim. so we should set the price of the premiums.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#16

Post by jasonwatkinspdx » Sat, Mar 11, 2023, 4:06 PM UTC

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

Are you aware of all the lobbying your current bank does? Seems an unreasonable expectation.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#17

Post by bratao » Sat, Mar 11, 2023, 4:12 PM UTC

jasonwatkinspdx wrote: post #16

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

Are you aware of all the lobbying your current bank does? Seems an unreasonable expectation.

I´m not, but I do expect sophisticated companies such as Roku to do better risk management than me.

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#18

Post by somsak2 » Sat, Mar 11, 2023, 4:14 PM UTC

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

> it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations

what an insane standard. as a customer of any company I'm now supposed to investigate their lobbying activity? what else do I need to do due diligence on?

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#19

Post by somsak2 » Sat, Mar 11, 2023, 4:19 PM UTC

epolanski wrote: post #10

zerop wrote: post #3

So gradually it's all opening up. The scams at those levels are most impacting one to people. I only see more fallouts in future.

It's amazing how post 2008 nothing was learned by US and pretty much no major bank but top 10 is expected to have more than 5/10% of cash-like collateral of deposits. In Europe, no single bank is allowed to have less than 100% collateral of deposits, not one, and yet they manage to make good money and profits nonetheless.

EU only has 4 of the top 50 banks by market cap. the us has 10. I'm not saying the us system is necessarily better, but for two economies that are comparable in gdp, that's a big gap.

https://companiesmarketcap.com/banks/largest-banks-by-market...

Re: SVB chief pressed lawmakers to weaken bank risk regulations

#20

Post by lp0_on_fire » Sat, Mar 11, 2023, 4:22 PM UTC

nico wrote: post #14

bratao wrote: post #8

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the beli…

> Bailing out these depositors would send the wrong message and encourage moral hazard This seems to be the way the financial system has operated in the last 20 years. So I’d expect a bailout. Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they ca…

> Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can.

All the more reason regular people need to be screaming to high heaven that those rich and powerful people will get eaten if they push for and eventually receive a bailout.