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SVB Hall of Shame

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Re: SVB Hall of Shame

#151

Post by throwawaylinux »

throw123123123 wrote: post #101
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

That is not what banks do, its the modern banking system. That's what bitcoin was all about..

That's what banks choose to do. People depositing their money with a bank don't have a responsibility to ensure it remains solvent though.

If you think there is a significant risk your bank is going to go under, you get your money out. If you think that risk is due to panic about a bank run kicked off by an unfounded rumor, you get your money out. You take care of your affairs, and the bank can take care of its operations and public relations.

Re: SVB Hall of Shame

#152

Post by peeters »

rexreed wrote: post #18
nl wrote: post #11

Hmm It was 100% possible to genuinely hold the belief that "Silicon Valley Bank is safe" and to advise portfolio companies to remove money to reduce risk. In-fact, that looks like it was the prudent way to behave: depositors probably haven't lost their money but it sure is a lot less liquid. And this is exactly why bank runs are dangerous - once there is risk of one the safe thing to do is to remove your money as wel…

The best way to prevent a bank run is not to run. A stampede isn't caused by the movement of a lone animal, but by the herd. It's a classic feedback loop.

Curious analogy, given what would happen to someone caught in a stampede who tries to stop it by standing their ground.

Re: SVB Hall of Shame

#153

Post by mikeryan »

klooney wrote: post #139
borski wrote: post #109

Earlier quoted context omitted.

> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.

But there's this endless array of explainers saying they don't- https://www.google.com/search?q=banks%20don%27t%20lend%20dep...

You need to re-read those articles. They don't say banks "don't lend depositor funds" At least the first couple on that page explain that banks don't "need" depositor money to lend and in fact they generally lend out money they borrow from a central bank since their loan outlay tends to outpace their deposits.

But outside of the central bank reserve requirements the banks are free to loan our or otherwise invest their depositors cash, which is in fact prudent since cash "loses" value from inflation. Putting that excess funds into loans or other investments can all lead to what happened to SVB if a run on the bank over runs the reserves.

Re: SVB Hall of Shame

#154

Post by YeBanKo »

photochemsyn wrote: post #137
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

What you're describing is a service provided by a bank called a safe deposit box, which banks provide as a fee service. This is quite an archaic view of banking services. The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank sa…

Safe deposit boxes are very hard to come by these days. Banks are moving away from them. Last year JPM started phasing them out [1]. The trade is likely to continue.

[1] https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-...

Re: SVB Hall of Shame

#155

Post by 462436347 »

462436347 wrote: post #78

These people absolutely deserve to be named and shamed. If the big, "evil" banks can cooperate for the collective good of their industry and the wider economy as they did today by injecting $30 billion of deposits into First Republic to forestall its collapse, there's no reason why these supposedly enlightened, rational VCs couldn't at a minimum collectively agree to just not completely withdraw their deposits from S…

And before any more midwits play the "Prisoner's Dilemma" card to defend this:

https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

> Two members of a criminal gang, A and B, are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communication with their partner.

The guilty parties here could communicate with each other, and could cooperate, just like the banks did today by aiding First Republic. Instead, it appears that while they did communicate and cooperate, it was only towards the end of running on SVB. And as others have pointed out, even if the framing of it as a Prisoner's Dilemma is correct, it's not a single iteration variant: if the VC community could have come to some sort of an agreement, any party that refused to cooperate, or worse, that pledged to and then betrayed the others, would suffer a substantial loss of trust from other VCs and startups going forward.

Re: SVB Hall of Shame

#157

Post by jrumbut »

TylerE wrote: post #127
jrumbut wrote: post #111

Earlier quoted context omitted.

Fixed terms of 5 years would be a very hard change to swallow in the US.

Might fix the Airbnb problem though.

Oddly enough, a very similar percentage of homes are owner occupied between the two countries despite the apparently dramatic differences in mortgage availability.

Edit: this is based off a two minute Google I could be wrong.

Re: SVB Hall of Shame

#158

Post by fastball »

throw123123123 wrote: post #110
croes wrote: post #74

Earlier quoted context omitted.

Can't you kill any bank with a bank run?

If you are solvent, in principle, you can get a loan from another bank to cover illiquidity. Yes, runs can kill any bank, but insolvency killed SVB first.

I don't think that's true? SVB was insolvent because they had to sell bonds at a massive loss in order to cover illiquidity that was a problem due to the bank run.

Re: SVB Hall of Shame

#159

Post by manquer »

cde-v wrote: post #107
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%

If you are a privately owned bank with a small group of similar minded shareholders who are not looking for a lot of ROI and also the bank should not issue any bonds and raise debt then it may work.

Given that you can only accept maybe 20x[1] of the equity investment. Is it possible to raise $15B in equity financing with this model ? Otherwise this bank cannot service the volume deposits of SVB and it would be a just small novelty bank.

Banks have significant costs and expectations of growth, shareholders to satisfy, which is why they take risks. Risks that are regulated - which perhaps not strong enough (Basel III) are still pretty strict

---

[1] Ignoring risk weights etc, you would need at least 5% of the deposits in equity to be "Well Capitalized". The number goes higher depending on risk factors.

Re: SVB Hall of Shame

#160

Post by [deleted] »

idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

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