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A Bank of One's Own

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Re: A Bank of One's Own

#11

Post by NERD_ALERT »

margorczynski wrote: post #6
RcouF1uZ4gsC wrote: post #3

> But the only way they were able to participate in that world, and serve as a role model for others, was by quietly borrowing from a bank that understood what it meant to be a young venture capitalist with carry, but not enough savings. Using borrowed money for venture capital seems very risky and not something that a bank should be celebrated for enabling.

Wasn't mixing "normal" banking with investment banking banned in the US after 2007? Or this is something else that doesn't fall into that category?

Mixing commercial and investment banking was banned in 1933 by the Glass Steagall Act. The act was partially repealed in 1999 which allowed banks to engage in both commercial and investment banking again. As far as I know banks have been able to engage in both since then.

Re: A Bank of One's Own

#12

Post by WalterSear »

RcouF1uZ4gsC wrote: post #3

> But the only way they were able to participate in that world, and serve as a role model for others, was by quietly borrowing from a bank that understood what it meant to be a young venture capitalist with carry, but not enough savings. Using borrowed money for venture capital seems very risky and not something that a bank should be celebrated for enabling.

It wasn't.

It made bad bets on bonds and lost $2 billion dollars of the $200+ billion dollars it held in deposits.

I must be missing something, because I fail to see how this is such a big deal, or why anyone will be taking much of a haircut on their deposits.

Re: A Bank of One's Own

#15

Post by Osmose »

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds.

"Making loans to startups that otherwise wouldn't get a loan because they are too risky for traditional banks" does certainly grant more people access to the high-cost high-risk world of tech startups, but I dunno that it's a terribly compelling method to level the playing field because it does nothing to challenge the system itself, only gives new players a chance to spin the wheel.

The backlash against tech in general stems from the system itself and the things it prioritizes, like massive scale at all costs in service to investors being a vehicle for the rich to become richer. If you start from a position like "tech billionaires and their antics are a significant source of problems in the world" then a bank like SVB that lets more "normal" folks participate doesn't do anything to stop those said billionaires from _also_ profiting off these new incoming startups, except making the pool to choose from even bigger.

It's frustration with the system that drives these sentiments, not specifically SVB as the "secret backdoor for poors into the startup casino".

Re: A Bank of One's Own

#16

Post by Convolutional »

latchkey wrote: post #9

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. It isn't about being gleeful. This bank took massive risks, which were enabled by Trump changing the laws (and they supported), which then allowed them to take even more risky bets (aka: level the playing field). https://www.motherjones.com/politics/2023/…

First, I shook my head at the same sentence. The railway union whose potential strike was recently broken by the government and railroads levels the playing field (and works to evert things like the Ohio toxic train derailment). Silicon Valley Bank does not level the playing field.

The sob story about the partner at the VC firm did pull at my heart strings though.

The CEO of SVB spent half a million dollars to roll back banking regulation five years ago. Hoisted by his own petard...well not really - bonuses went out hours before the seizure and he was selling shares like crazy before the collapse.

Now David Sacks and all the tech bro libertarians want the taxpayer to bail out the SVB depositors beyond the FDIC limit.

Re: A Bank of One's Own

#17

Post by grey-area »

latchkey wrote: post #9

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. It isn't about being gleeful. This bank took massive risks, which were enabled by Trump changing the laws (and they supported), which then allowed them to take even more risky bets (aka: level the playing field). https://www.motherjones.com/politics/2023/…

This was a crisis of confidence.

Most other US banks are just as exposed to long term bonds and mortgages and have also been hung out to dry by the fed raising rates after a decade of zirp and we distorted yields and prices.

Yes this bank failed to hedge risk appropriately, but if customer confidence fails, all major US banks would be vulnerable to exactly the same situation.

IMO share/bond holders should lose if all but depositors should lose nothing/very little (which is perfectly possible and not too expensive). Otherwise the risk of contagion is very real.

Which fractional reserve bank is actually safe from a bank run without the implicit promise of an fdic backstop?

Re: A Bank of One's Own

#18

Post by grey-area »

WalterSear wrote: post #12
RcouF1uZ4gsC wrote: post #3

> But the only way they were able to participate in that world, and serve as a role model for others, was by quietly borrowing from a bank that understood what it meant to be a young venture capitalist with carry, but not enough savings. Using borrowed money for venture capital seems very risky and not something that a bank should be celebrated for enabling.

It wasn't. It made bad bets on bonds and lost $2 billion dollars of the $200+ billion dollars it held in deposits. I must be missing something, because I fail to see how this is such a big deal, or why anyone will be taking much of a haircut on their deposits.

The prices SVB and other banks use for their assets are not marked to market.

Selling it all, today, would mean that they get back far less than the total deposits.

Selling it over time or parking it with a temp bad bank would be fine though and that is what fdic will probably do.

Re: A Bank of One's Own

#20

Post by monkeydreams »

Convolutional wrote: post #16
latchkey wrote: post #9

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. It isn't about being gleeful. This bank took massive risks, which were enabled by Trump changing the laws (and they supported), which then allowed them to take even more risky bets (aka: level the playing field). https://www.motherjones.com/politics/2023/…

First, I shook my head at the same sentence. The railway union whose potential strike was recently broken by the government and railroads levels the playing field (and works to evert things like the Ohio toxic train derailment). Silicon Valley Bank does not level the playing field. The sob story about the partner at the VC firm did pull at my heart strings though. The CEO of SVB spent half a million dollars to roll b…

Libertarions really are the house cats that think they are lions.
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