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

SVB shows that there are few libertarians in a financial foxhole

ft.com

Post reply on HN
Print view View original

151–160 of 493 posts

Re: SVB shows that there are few libertarians in a financial foxhole

#151

Post by toast0 »

fnordpiglet wrote: post #36
sdfghswe wrote: post #24

Earlier quoted context omitted.

> But in the end, even if we could argue that SVB should have been more prescient, it is clear that the root cause of the problems is the actions of the government and the FED. No. SVB hid market to market losses by saying "these securities are held to maturity so I don't have to realize losses". THAT is the source of the problem. Not all banks did this. Sure excess liquidity was necessary for this behavior to be pos…

I don’t understand. If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it. The mark to market only comes relevant if you’re experiencing a run, which they were holding sufficient regulatory liquidity for. They should have hedged their rates risk a bit better, especially as infla…

> If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it.

If you hold a bond to maturity, you get it's Net Present Value at maturity which is actually Net Future Value. Mark to market of treasury bonds is essentially the NPV of the bond, considering current interest rates. When interest rates are near zero, sure, a dollar today and a dollar tomorrow are the same, with significant interest rates, they aren't. And there's the problem.

You can't give a depositor a $100 treasury bond, due in 2028, when they want $100 now. That's only worth $85 today (or whatever the value is, I dunno).

Re: SVB shows that there are few libertarians in a financial foxhole

#152

Post by fnordpiglet »

sdfghswe wrote: post #88
fnordpiglet wrote: post #72

Earlier quoted context omitted.

That’s literally the purpose of a bank my friend. Welcome, yes, the emperor has no clothes and never has.

No you didn't answer my question. You made the case that how you value it depends on the plan. So what was the plan? The answer, of course, was that these people didn't have a plan because they're incompetent, and that has nothing to do with the "purpose of a bank". It's just incompetence, nothing more.

The plan in a normal bank operations is to hold a mixture of long, medium, short, and liquid assets proportionate to a normal heavy withdrawal of funds. No bank stays liquid enough to survive the drawdowns they saw, because they’re not required to by law. They operate within the regulatory construct they exist in. The way they pay interest on deposits is by investing them to begin with, and if they’re invested in anything other than cash or treasuries, they face liquidity risk. That risk is not zero. It’s actually not even insubstantial. And risks are what the word implies, a risk. In an unlikely situation, they are insolvent while they liquidate assets - and often their long terms assets must be liquidated at a loss. This is literally how every bank operates. This is also why the government was able to step in and restore bank operations in a few days. They know how banks work too, they wrote the rules. So they know exactly what to do in this situation - because since it’s a risk of banking business, it can and will happen.

You seem to understand the concepts enough, where is the disconnect? It’s genuinely confusing. This isn’t a novel take on how a bank works.

Re: SVB shows that there are few libertarians in a financial foxhole

#153

Post by bigtex88 »

mtlmtlmtlmtl wrote: post #122
braingenious wrote: post #15

This reminds me of one of my favorite books from the past couple years, A Libertarian Walks Into a Bear. It’s a fascinating deep dive into an attempt to create a sort of libertarian utopia in a small town called Grafton, New Hampshire. The speed at which they arrive at “we need government services” after they eviscerate government services is… unsurprising. 10/10 I highly recommend it for anyone that’s interested in…

I'm probably wrong more often than I'm right when it comes to politics on average. But libertarianism has been obviously illogical to me since I was about 15, half my lifetime ago. Since then I've spoken to some very intelligent libertarians at length and... nope, it still doesn't make any sense. It makes less sense than ever, in fact. At least when I was 15 I just thought they must be stupid, but no, not necessarily…

That's because it is illogical.

“There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs."

Libertarians are stuck in a pubescent state-of-mind and are wholly incapable of viewing the real world as it is. Hence their absolutely insane "political leanings".

Re: SVB shows that there are few libertarians in a financial foxhole

#154

Post by initplus »

ajross wrote: post #28
elzbardico wrote: post #11

The author ignores that behind the downfall of SVB was a climate of excess liquidity on the markets, a bonanza created by the authorities that made SVB see itself with a glut of funds. Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. Someone could argue that they could have foreseen that this abundance of liquidity in the markets, alon…

> Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. That's revisionist and silly[1]. Spending all your liquidity on long term bonds isn't "conservative" if you're a bank . It's not your money! It's your customer's money that you're just holding for them, and you just dropped it all in a vehicle that doesn't mature for 10 years. What if…

The government actually wants banks to speculate with customer funds. You might think that the safest bank would be one that doesn’t do anything with customer deposits, just sits on them.

Well this “safe bank” actually falls foul of US banking regulation - there are regulatory requirements for minimum levels of “speculation“ as a bank.

Now clearly SVB got in over their heads here with risk. But just sit on all the money isn’t a legal alternative.

Re: SVB shows that there are few libertarians in a financial foxhole

#155

Post by yunwal »

_ktx2 wrote: post #87
yunwal wrote: post #78

Earlier quoted context omitted.

Oh ok so they’re only libertarian when it benefits them financially. I actually don’t think anyone disagrees with that.

You should probably look at the link my guy. 13/20 of those definitely aren't Libertarians.

I don’t care about what political party they belong to. Do they regularly argue to slash regulations on the basis of government=bad? Do they routinely try to convince people that technology companies should be in charge of social organization rather than the government?

This is the type of shit that gets talked about at VC conferences all the time: https://youtu.be/K8JIzP8HmjQ

Re: SVB shows that there are few libertarians in a financial foxhole

#156

Post by AdrianB1 »

jacktribe wrote: post #8

Is there a term for someone that is libertarian inclined, but does believe in a minimal level of government regulation and intervention? A "Lite-Libertarian" of sorts.

Classic liberal. That was at peak around 100 years ago, when there was more freedom and way less tax in the countries that lived it (Europe). One can argue that in a very limited way it was similar in US in the period of 1800 to 1900, but that is a bit different.

The more modern way (still in Europe) is seen as reasonably minimal level of government regulation, but strongly applied. For example the libertarians I know are for minimal government (and associated taxes), but very strong consumer protections - this is because individuals have very little power against huge corporations, so it is just leveling the field.

Re: SVB shows that there are few libertarians in a financial foxhole

#158

Post by storf45 »

I'm proudly libertarian - in fact, we have an explanation for these boom/bust business cycles via https://en.wikipedia.org/wiki/Austrian_business_cycle_theory. Libertarians have criticized cheap/free money for a very long time so it's not surprising that an institution that had to invest excess deposits into 'safe' treasuries is in trouble once interest rates started to rise. There are likely many other banks, company's, and institutions in trouble right now because of operating assumptions build on free/cheap money are invalid.

Re: SVB shows that there are few libertarians in a financial foxhole

#159

Post by senko »

doodlesdev wrote: post #97
sdfghswe wrote: post #68

Earlier quoted context omitted.

That's like saying that any time any one makes a loss, it's everyone _else's_ loss, because guess where their money comes from. What do you suggest should happen here?

I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally. There's a gigantic moral risk in the FDIC covering uninsured losses, because that's a value judgement, and if next week my bank fails why shouldn't the FDIC cover all of my uninsured losses too? The value judgement that was done here is that if they didn't do it…

> I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally.

And then a bunch of small business fail, then everyone else looks at 20 other small and middle-tier banks and realizes they don't want to end up the same way and pull their money out, then they fail, per your suggestion FDIC still does nothing, then another couple dozen banks and couple thousand business fail ...and next week you're back in 2008.

Re: SVB shows that there are few libertarians in a financial foxhole

#160

Post by EdwardDiego »

jacktribe wrote: post #8

Is there a term for someone that is libertarian inclined, but does believe in a minimal level of government regulation and intervention? A "Lite-Libertarian" of sorts.

I consider myself to be economically liberal in the "laissez faire, laissez passe" sense to a large extent. No government should pick winners or losers, no government should protect uncompetitive businesses.

But I believe that the government must protect the free market against capitalism's inherent tendency towards monopoly, and that likewise, it must protect consumers against exploitative business practices (which arguably, a properly competitive free market could help achieve).

Post reply on HN