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The End of Silicon Valley (Bank)

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Re: The End of Silicon Valley (Bank)

#101

Post by javajosh »

iandanforth wrote: post #90

There's a huge leap taken by this piece with distressing casualness. "This action effectively means the $250,000 FDIC limit is meaningless: all deposits in any bank are presumably insured by the full faith and credit of the United States." Exceptional circumstances sometimes call for exceptional measures. A bank with 85% of its accounts over the $250k limit where most of the depositors are contractually locked-in com…

>If two people have knives to each others throats you don't win by just not being the first to cut, you win by putting the knives down.

Strictly speaking there are 4 outcomes, according to John Nash. The cooperate outcome is globally the best, but the 2 defect outcomes are much better for the individual winner. The 4th outcome, 'they fought and badly wounded each other, but both lived', is what's going on here, and the FDIC medics are coming in. This helps now but has the perverse effect of increasing the chances of defect behavior in the future, IMHO.

The angle I want to know more about is Peter Thiel. He's already demonstrated the willingness and ability to execute complex plans to destroy enemies (e.g. Gawker). He likes Trump, so not a fan of self-restraint or basic morality. Is it possible that Thiel has a bone to pick with SVB? Or maybe it's bigger, and Thiel, who famously hates competition, saw a way to hurt ALL startups, including some that might one day threaten him and his businesses. It's the old story about the orphan who makes it, recognizes the positive influence the orphanage had on his success, and then burns the orphanage down to ensure no others get its benefits and challenge his power.

Re: The End of Silicon Valley (Bank)

#103

Post by Semaphor »

sebzim4500 wrote: post #15
nsmog767 wrote: post #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 e…

>But that's not how it works! I would imagine the people advocating for a 'bailout' (using the most generous possible definition here) want this to become how it works. Like how in Germany the government guarantees every German bank balance. I have enough problems, I don't want to have to worry that my bank balance will disappear unless I spread it around in order to abuse a technicality.

> Like how in Germany the government guarantees every German bank balance.

It does? I didn’t know about that, and looking it up brings me to 100k per person guaranteed. Do you have a source for unlimited?

Re: The End of Silicon Valley (Bank)

#104

Post by hellcow »

trompetenaccoun wrote: post #98
cultureswitch wrote: post #92

Earlier quoted context omitted.

The answer seems pretty simple. Don't invest much more than you're ready to lose. I'm sure that even in the US there's a way for a business to open an arbitrarily large risk-free zero interest i.e. no investment bank account.

What do you mean "invest"? Most of this bank's customers are running a business and need a bank account, it's not an investment.

It’s quite simple, really. Startups should buy hundreds of millions in gold, then stash that under 160,000 different mattresses to diversify risk of a systemic bank collapse.

If Bogglehead retirees can figure that out, why not startups?

Re: The End of Silicon Valley (Bank)

#105

Post by ghaff »

reaperducer wrote: post #22
sebzim4500 wrote: post #15

Earlier quoted context omitted.

>But that's not how it works! I would imagine the people advocating for a 'bailout' (using the most generous possible definition here) want this to become how it works. Like how in Germany the government guarantees every German bank balance. I have enough problems, I don't want to have to worry that my bank balance will disappear unless I spread it around in order to abuse a technicality.

I don't want to have to worry that my bank balance will disappear unless I spread it around If you have enough money to worry about having to spread it around, you have enough money to buy additional insurance for it, and/or enough money to hire someone to take care of those things for you. "Oh, no! I have $250,000 in savings and now I might have to open another bank account to hold even more money! Woe is me!" Can y…

I can also pretty much guarantee that very few individuals with >$250K of savings are keeping it in a bank. It's in a brokerage account in some combination of bonds, money market, and equities.

Re: The End of Silicon Valley (Bank)

#106

Post by cultureswitch »

ianpurton wrote: post #54
irusensei wrote: post #16

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

You're very close to how it works. In big business it's called Treasury, which derives from Trezor or Safe. For example Apple will have a Treasury department to manage it's cash. They don't put it in safes anymore, because, well you seem like an honest person, but your predecessors had a tendency to steal the money from the safe. You generally don't put it all in one Bank either as they have a tendency to either stea…

Interestingly, even the current, very inefficient and clunky set of popular cryptocurrencies can fit that role quite well. You can quickly buy and sell millions in BTC and ETH and no bank can go and gamble with it even if you leave it there for years. The only obvious problem is volatility, but that goes both ways.

Re: The End of Silicon Valley (Bank)

#107

Post by hackernewds »

nsmog767 wrote: post #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 e…

> depositors are a bank's creditors, who are compensated for lending money to the bank;

this is simply not true. if anything the bank charges me money to hold my funds.

Re: The End of Silicon Valley (Bank)

#108

Post by softwaredoug »

javajosh wrote: post #72
softwaredoug wrote: post #57

Earlier quoted context omitted.

Random internet tip: if you have any significant savings, and you don't need liquidity, it's been waaaay more profitable to buy 6 month treasury bonds

That was true last week . https://www.marketwatch.com/investing/bond/tmubmusd06m?count...

Oof! Still hard to find a savings account that pays > 1%.

Re: The End of Silicon Valley (Bank)

#109

Post by hackernewds »

ericpauley wrote: post #88

Any article, tweet, or comment section on this issue is rife with willfull ignorance of basic banking practices, chief among this being the strawman multiple bank accounts. The FDIC limit is not just some technicality that businesses abuse with many accounts, it is a recognition of that fact that banks like SVB, which hold large deposits from a small number of highly correlated depositors, are fundamentally more risk…

> despite rhetoric to the contrary, will be paid for by the taxpayer/bank account holder

I see this spewed haphazardly but have seen no convincing rationale to back it up.

Re: The End of Silicon Valley (Bank)

#110

Post by iandanforth »

javajosh wrote: post #101
iandanforth wrote: post #90

There's a huge leap taken by this piece with distressing casualness. "This action effectively means the $250,000 FDIC limit is meaningless: all deposits in any bank are presumably insured by the full faith and credit of the United States." Exceptional circumstances sometimes call for exceptional measures. A bank with 85% of its accounts over the $250k limit where most of the depositors are contractually locked-in com…

>If two people have knives to each others throats you don't win by just not being the first to cut, you win by putting the knives down. Strictly speaking there are 4 outcomes, according to John Nash. The cooperate outcome is globally the best, but the 2 defect outcomes are much better for the individual winner. The 4th outcome, 'they fought and badly wounded each other, but both lived', is what's going on here, and t…

"the old story about the orphan who makes it, recognizes the positive influence the orphanage had on his success, and then burns the orphanage down to ensure no others arise to challenge his power."

This would be a really interesting villain. Someone who wasn't subject to the fundamental attribution error and had an unlimited appetite for destruction.

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