Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The collapse of SVB exposes the largest crack in the economy

brooock.com

Post reply on HN
Print view View original

101–110 of 311 posts

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

#101

Post by Jensson »

PKop wrote: post #19
Jensson wrote: post #13

Earlier quoted context omitted.

> 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

But why would you need a private corporation to put peoples money in T-Bonds? Why not just make the government do that directly? I don't see how these corporate profits benefited society. They didn't fill some hard to do function, they just risked others money and planned to skim the gains for profit, why should society encourage that? And they didn't even risk the money in growth areas, they just gave it to the government, I could see their value if they actually took some valuable risks, I don't see the value of a private corporation that skims profits by investing into the government.

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

#102

Post by iSnow »

cplusplusfellow wrote: post #41
fshbbdssbbgdd wrote: post #8

Earlier quoted context omitted.

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…

I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?

It's just that VCs and their portfolio companies are part of the same plutocracy as the banksters of 2008. Those without gazillions in stock options are furious that all of a sudden, they cry for bail-outs. Just like 2008.

Let them crash and burn, they shouldn't have all their assets in one bank.

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

#103

Post by beezle »

stefan_ wrote: post #24
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%.

Just so we are all fully aware: SVB bet in ~2020 that interest rates they offer could be well below 1% (given their operating costs and what not) for 10 years. Obviously, by 2023 already, depositors were expecting much more. So, yeah, these MBS will probably pay out when held to maturity, but their customers didn't buy MBS, they deposited their money in a bank.

Let us hope that the bank did not "bet" and instead had a decision making process.

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

#104

Post by iSnow »

yieldcrv wrote: post #86
spamizbad wrote: post #25

Earlier quoted context omitted.

Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper. We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only b…

all I’m seeing is that the monkey jpeg startup just needs to never take VC capital from Andreesen Horowitz and then won’t be tied to using that one bank just stick with selling directly to collectors and you already have enough money

>just stick with selling directly to collectors and you already have enough money

Uh, oh! Unregistered security...

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

#105

Post by beezle »

dragontamer wrote: post #5
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.

Why? My money at VMFXX is almost entirely composed of safe Fed Repos with average maturity of 2-weeks. VUSXX is mostly Treasury Bills, again of maturity averaging like 2-weeks. My money at SWVXX is composed of AAA-rated bank notes, of similar 2-weeks-ish maturity average. The idea of a bank, like SIVB, being composed of largely 30-year mortgages and 10Y or 30Y Treasury Bonds is insane. The bank deserves to die after…

It is not insane at all. Banks match expected duration of their assets and liabilities. This bank made a number of errors and was caught in a classic liquidity squeeze. Not the first and won't be the last.

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

#106

Post by narrator »

Apocryphon wrote: post #10

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

Boom and Bust is a feature, not a bug in western fractional reserve banking. In China, where they have a different system, the central bank would electronically print debt free money and recapitalize the bank and execute any bankers violating lending guidelines or otherwise giving "illegal loans" in order to prevent the moral hazard this would otherwise create. Being a banker and screwing around is an extremely serious crime in China.

The only reason the boom/bust cycle is implemented thus in the west is so the banks can periodically redistribute assets of their least successful borrowers to other people. In China, the reorganizations are more market priced since the ownership and control of distressed assets is written down by the central bank and they are resold for pennies, while in the west it tends to go through bankruptcy court, which is a slow complex bureaucratic process and tends to destroy what was left of the company.

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

#107

Post by gesticulator »

morelisp wrote: post #70
bequanna wrote: post #54

Earlier quoted context omitted.

Please name one “banking innovation” the banking industry has implemented in the last decade which has benefitted consumers.

VCs and founders must believe SVB offers at least one, or why not go with a normal bank?

This has to do with a web of relationships and risk tolerance, not some product set…

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

#108

Post by snewman »

rehitman wrote: post #80

Everyone says SVB had bad investment and they deserv it etc. However, I am worried about this being the first of many similar financial instutation failing. After all, bonds are supposed to be safe on paper. Increasintg interest rate fast can break many people who are not able to adjust.

These bonds were supposed to be "safe" in the sense that they would be repaid on schedule. And that's been fine, AFAIK there is no suggestion that they won't be repaid.

The problem is that SVB, knowingly, took on "interest rate risk" by buying long-term bonds (average 6.2 years, I read) that lock in an interest rate. The money to purchase those bonds came from deposits, which can be withdrawn at any time. When everyone started withdrawing their money SVB had to sell the bonds, and they took a loss because interest rates have increased and the bonds they were selling were not longer worth as much.

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

#109

Post by markus_zhang »

jschveibinz wrote: post #93
rehitman wrote: post #80

Everyone says SVB had bad investment and they deserv it etc. However, I am worried about this being the first of many similar financial instutation failing. After all, bonds are supposed to be safe on paper. Increasintg interest rate fast can break many people who are not able to adjust.

Just something to consider… A casual look at the regional bank index ETF will show that starting about two weeks ago, the price started to steadily decline and then a sudden drop with SVB. I’m not sure if this decline is well correlated with the total market index over the same period, but if not, it suggests that some people “saw this coming” a couple of weeks ago and the other shoe may still need to drop. Was it ju…

This kind of things usually have someone or some people pushing from behind. I'm sure there are some sharks around the corner. Of course you have to have blood to attract sharks but human sharks can easily buy social media and newspaper to exploit small wounds.

This might be just the beginning of a large hunting campaign, let's wait and see.

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

#110

Post by teacpde »

snuxoll wrote: post #83
teacpde wrote: post #76

Earlier quoted context omitted.

Curious what are the ways SVB could have hedged in this scenario?

Not investing such a large percentage of their capital in long-duration fixed income vehicles all at once. There's nothing wrong with going long on duration, it's a hedge against decreasing rates. The problem is when you go all-in on long duration investments and rates suddenly shoot up like they did, you now can't sell those assets without eating a massive loss. An appropriate hedge would have been doing what every…

Makes me wonder why they made the risky move in the first place, they surely knew the risks, but still did it, because of greed for higher yields?
Post reply on HN