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The End of Silicon Valley (Bank)

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Re: The End of Silicon Valley (Bank)

#111

Post by ericpauley »

hackernewds wrote: post #109
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.

Where else does the money come from? Either there is no shortfall in which case there didn’t need to be a bailout, or the special assessment will be placed on banks, which will pass it on to consumers in the form of lower rates or increased fees. Just because there isn’t a “Silicon Valley Tech Bailout” line item on statements doesn’t mean it isn’t passed on.

Re: The End of Silicon Valley (Bank)

#112

Post by quickthrowman »

hackernewds wrote: post #109
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.

The banks aren’t going to lower their profit margins to pay for the bailout, the cost will be passed onto bank customers. This should be blindingly obvious.

Re: The End of Silicon Valley (Bank)

#113

Post by nine_zeros »

afiori wrote: post #96
nine_zeros wrote: post #8

> 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? Because if the bank doesn't give any interest, people will keep the money in either a competing bank that gives interest or in cash or in other ins…

Do people chose banks for interests rates in saving accounts? Like do people make the financial decision to use saving account rather than stock/bonds/hedge funds as investments? As far as I understand no reasonable bank anywhere offers interest higher than inflation.

Yes, people do make such decisions. Why? Because they expect stocks to fall and bonds to expose them to interest rate risk. They'd rather keep the money liquid and ready to sweep in to buy assets.

People also use savings accounts for impending expenses. Human stuff such as pregnancy, kids, car repairs.

Parking money in liquid savings with 3.5% interest is a very viable hedging strategy for humans. Perhaps not for institutions.

Re: The End of Silicon Valley (Bank)

#114

Post by twelve40 »

ericpauley wrote: post #111
hackernewds wrote: post #109

Earlier quoted context omitted.

> 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.

Where else does the money come from? Either there is no shortfall in which case there didn’t need to be a bailout, or the special assessment will be placed on banks, which will pass it on to consumers in the form of lower rates or increased fees. Just because there isn’t a “Silicon Valley Tech Bailout” line item on statements doesn’t mean it isn’t passed on.

most of the "startup bros deserve to die anyway" drivel I've read so far claims that the shortfall was minimal and the "bailout" was really unnecessary. In which case this special assessment will be small and likely to be covered by existing fdic reserves without those terrible fees passed on to the consumer.

Re: The End of Silicon Valley (Bank)

#115

Post by em500 »

trompetenaccoun wrote: post #94
em500 wrote: post #86

Earlier quoted context omitted.

Of course they have a choice: money market funds and T-Bills. If you're handling millions in cash, you're supposed to know about these.

Circle needs those dollars highly liquid because otherwise they'd run into issues with their own customers. Exchanges can't give the customers T-Bills when they trade for dollars. Also startups do not get paid in Treasury Bills when they strike deals. Clearly this system is flawed and prone to bank runs, which happen again and again. Because business people especially are aware of how banking works, they know the ban…

Banks will extend all the credit you need if you have billions of t-bills as collateral. No need to actually have millions (let alone billions) in actual deposits.

Re: The End of Silicon Valley (Bank)

#116

Post by javajosh »

iandanforth wrote: post #110
javajosh wrote: post #101

Earlier quoted context omitted.

>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.

It sounds interesting to me, and worth trying, but I'd be worried that such a villain would be uninteresting to watch on film. No cackle? No monologuing? They would be pure self-interest, executed calmly and without pity (including self-pity), would do crime but never brag about it, never get caught. Such a one would not be terribly interesting to watch because the villain basically has the mind of a spreadsheet.

Re: The End of Silicon Valley (Bank)

#117

Post by ericpauley »

twelve40 wrote: post #114
ericpauley wrote: post #111

Earlier quoted context omitted.

Where else does the money come from? Either there is no shortfall in which case there didn’t need to be a bailout, or the special assessment will be placed on banks, which will pass it on to consumers in the form of lower rates or increased fees. Just because there isn’t a “Silicon Valley Tech Bailout” line item on statements doesn’t mean it isn’t passed on.

most of the "startup bros deserve to die anyway" drivel I've read so far claims that the shortfall was minimal and the "bailout" was really unnecessary. In which case this special assessment will be small and likely to be covered by existing fdic reserves without those terrible fees passed on to the consumer.

My understanding is that the bailout cannot simply permanently pull from existing funds (which by the way were also paid by the depositor). There has to be a special assessment for any payout on uninsured deposits.

Re: The End of Silicon Valley (Bank)

#118

Post by quickthrowman »

twelve40 wrote: post #114
ericpauley wrote: post #111

Earlier quoted context omitted.

Where else does the money come from? Either there is no shortfall in which case there didn’t need to be a bailout, or the special assessment will be placed on banks, which will pass it on to consumers in the form of lower rates or increased fees. Just because there isn’t a “Silicon Valley Tech Bailout” line item on statements doesn’t mean it isn’t passed on.

most of the "startup bros deserve to die anyway" drivel I've read so far claims that the shortfall was minimal and the "bailout" was really unnecessary. In which case this special assessment will be small and likely to be covered by existing fdic reserves without those terrible fees passed on to the consumer.

Their portfolio of startup loans is definitely not going to be sold for face value, I’d be surprised if bids are above 50. Unprofitable companies in a rising rate environment aren’t who you want to be lending to..

Re: The End of Silicon Valley (Bank)

#119

Post by anonymousiam »

ericpauley wrote: post #111
hackernewds wrote: post #109

Earlier quoted context omitted.

> 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.

Where else does the money come from? Either there is no shortfall in which case there didn’t need to be a bailout, or the special assessment will be placed on banks, which will pass it on to consumers in the form of lower rates or increased fees. Just because there isn’t a “Silicon Valley Tech Bailout” line item on statements doesn’t mean it isn’t passed on.

As said in the Treasury Dept release yesterday (here: https://home.treasury.gov/news/press-releases/jy1337)

"Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

So this "special assessment" will be paid by all banks with FDIC coverage, and the cost will be passed on to the banking customers (us taxpayers).

Re: The End of Silicon Valley (Bank)

#120

Post by gen220 »

javajosh wrote: post #116
iandanforth wrote: post #110

Earlier quoted context omitted.

"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.

It sounds interesting to me, and worth trying, but I'd be worried that such a villain would be uninteresting to watch on film. No cackle? No monologuing? They would be pure self-interest, executed calmly and without pity (including self-pity), would do crime but never brag about it, never get caught. Such a one would not be terribly interesting to watch because the villain basically has the mind of a spreadsheet.

Sounds like the plot to "There will be blood" to me. :)

That was one of the best plots/executions of a plot that I've ever seen!

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