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SVB shows that there are few libertarians in a financial foxhole

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

#161

Post by shagie »

colpabar wrote: post #5
cypherpunks01 wrote: post #2

https://t.co/kw7ykC3763 Without paywall courtesy of FT twitter post

So I'm assuming that's a link posted on twitter that includes some flag that prevents the site from paywalling the article? Neat. I'll still post a humble archive link as well. https://archive.is/6MBEL

Chasing links...

  https://t.co/kw7ykC3763    returns a 301 to https://on.ft.com/3Jy8UBY
  https://on.ft.com/3Jy8UBY  returns a 301 to https://ft.trib.al/b2FR72U
  https://ft.trib.al/b2FR72U returns a 301 to https://www.ft.com/content/ebba73d9-d319-4634-aa09-bbf09ee4a03b
There's certainly some magic with going from the t.co link - going to the other two direct hit the paywall.

    :method: GET
    :scheme: https
    :authority: www.ft.com
    :path: /content/ebba73d9-d319-4634-aa09-bbf09ee4a03b
    {cookie with lots of stuff in it redacted}
    Accept: text/html,application/xhtml+xml,application/xml;q=0.9,*/*;q=0.8
    Accept-Encoding: gzip, deflate, br
    Host: www.ft.com
    User-Agent: Mozilla/5.0 (Macintosh; Intel Mac OS X 10_15_7) AppleWebKit/605.1.15 (KHTML, like Gecko) Version/16.3 Safari/605.1.15
    Accept-Language: en-US,en;q=0.9
    Referer: https://t.co/
    Connection: keep-alive
Yep, there's a referer in there.

Curling the page gets the trial text (ghads that's verbose html).

    curl --referer https://t.co/ https://www.ft.com/content/ebba73d9-d319-4634-aa09-bbf09ee4a03b | less
And that returns the expected trial-less text.

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

#162

Post by eep_social »

strbean wrote: post #128
worksonmine wrote: post #53

Earlier quoted context omitted.

SVB locking money they might need access to is the FEDS fault do I understand you correctly? Did they hold a gun to their head? I'm not saying they're doing anything different than their competitors, but that's a stupid excuse. The only thing that's broken is the financial system. A customer should be aware when depositing money that that money might be locked away, and agree to those terms, and get a cut. This is SV…

[flagged]

Your personal inability to understand the risk SVB took isn’t universal.

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

#163

Post by pg314 »

shagie wrote: post #94
olivermarks wrote: post #21

Earlier quoted context omitted.

It was their unwise bet on ten year T bonds that got SVB into difficulties, a far larger societal economic issue than is being acknowledged. 'This decade’s learning: bonds aren’t a universally safe asset class.' ...the US federal reserve are playing a dangerous game battling the inflation they enabled with rate hikes http://www.brooock.com/a/svb-collapse-exposes-cracks-in-econ...

The bonds are worth exactly what they thought they'd be worth if held. There is no bet on that part. The purchase of 10 year bonds also implied a bet that faster maturing bonds won't be more valuable. As shown in https://fred.stlouisfed.org/series/T10Y3M that is no longer a true statement and that bet failed. It was a true statement for about 15 years with one flirtation in August of 2019. It appears that this is is…

> The bonds are worth exactly what they thought they'd be worth if held.

That's wrong. A 10 year treasury bond with a .60% you bought in august 2020 is now worth significantly less. Whether you hold it or not is irrelevant. If you disagree, I'm willing to give you one, if you give me a 7 year treasury bond at the current interest rate of 3.86%.

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

#164

Post by psychlops »

fnordpiglet wrote: post #114
psychlops wrote: post #56

Earlier quoted context omitted.

> just don’t have good risk managers They had no chief risk officer for 8 months. They argued publicly against stress testing banks. Their complete absence of hedging guaranteed that time bomb that would have gone off now or later.

I agree 100% up to the point of the necessity of a bank run. I think they faced some serious quarterly losses for some time to come, but many banks see that without a run on the bank. That’s why I suspect someone large and influential in the startup world operated a bank run whisper campaign for their personal benefit. I’ve no proof, but I’ll wager $5 on it.

It's entirely possible, but they wouldn't have been a random target. They put themselves into a very precarious position with the unhedged bets they made and the very selective client base they held. Consider that (nearly) all other banks weathered the storm just fine so far through correct risk management.

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

#165

Post by initplus »

JohnFen wrote: post #95
ummonk wrote: post #82

Libertarians invested in FTX and other crypto banks. They haven't demanded government bail them out. Businesses putting their deposits in reputable regulated banks is a different matter. Nothing libertarian about that. They're following standard practice as expected by the government and the government rightly decided to make them whole and maintain confidence in the system to ensure businesses would continue to enga…

> They're following standard practice They weren't mitigating the risk of how they were using their deposit accounts. That's not following standard practice.

Splitting deposits to stay under the 250k limit is artificial behaviour that doesn’t change the overall risk profile for FDIC. The total amount of money covered by insurance is the same regardless of how it’s subdivided.

Splitting up deposits isn’t the intended outcome by regulators here. It doesn’t actually achieve anything meaningful.

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

#166

Post by Analemma_ »

tus666 wrote: post #157

Is there any evidence they were libertarians to begin with? Peter Thiel might be, but he isn't asking for a bailout - he got himself out.

Yes, lots. There's a fun meme going around where you take any random VC ""thoughtleader"" demanding a complete backstop for SVB depositors and search "bailout until:2023-03-09" on their Twitter account to see what they thought about bailouts and moral hazard before last Thursday.

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

#167

Post by psychlops »

fnordpiglet wrote: post #138
psychlops wrote: post #66

Earlier quoted context omitted.

Don't forget they also paid bonuses the morning they failed.

This is the time of the year when banks pay bonuses for the prior years work. My understanding is it was scheduled annually at the same time and happened to occur the day they went insolvent. Frankly I’m down with Nancy in client confirm generation getting her bonus. The senior managers all got fired and their comp clawed back, so seems legit.

I've no problems with Nancy, she's pretty cool. Firing isn't really enough, loss of license and industry bans should be on the table as well as criminal investigations for fraud and negligence of custodial funds.

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

#168

Post by at-fates-hands »

fnordpiglet wrote: post #93
swatcoder wrote: post #54

Earlier quoted context omitted.

You say it takes a run, but all it really takes is an aggregate change in deposit behavior. Like, for instance, your disproportionate share of startup clients easing off the cheap loans you had been offering them, because they’re no longer so cheap, and instead drawing down on (or moving) the balances that you had insisted they keep with you as collateral. Trouble was brewing on both sides of the business, not just o…

That’s what led up to the need to create more liquidity. The run happened after that when depositors spooked and drew down faster than the bank could liquidate assets. They were never, even MTM, under water. They just couldn’t raise enough cash in a single day to pay out all the withdrawals. But the cause of the run is the suspicious part to my mind. It feels orchestrated, and I have heard rumblings that Theils found…

>> But the cause of the run is the suspicious part to my mind.

I've heard multiple reports that one of their large investors got wind of their attempts to get a $2B loan so they wouldn't lose that money in their bond investments and thought it was a huge red flag and was the first to take out all of their money. The theory goes it was a large SV company, and news travelled on social media and the SV financial circles about they did and their belief that the bank was about to implode.

This created a long line forming on Friday morning of companies wanting to get their money out as well.

I agree, I'm not sure if the rumor was enough to spook people, or an orchestrated move by several companies, once one company found out what they were doing - but its very suspicious. Add in the founders were busy taking money at the same time they were liquidating their positions, which I'm sure the SEC will have something to say about as well.

Add in all the people who may have found out early and took out short positions as well who are now poised to possibly make a good chunk of money in all this chaos.

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

#169

Post by benlivengood »

fisherjeff wrote: post #149
sdfghswe wrote: post #50

Earlier quoted context omitted.

> 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. Correct. So, if you have customers and you put THEIR money into a bond and say you're holding it to maturity, but then your customers want their money, what exactly was the plan?

I mean, it’s a balancing act, right? If you plan to be able to accommodate 20% redemption in a single day , you’re left with a portfolio maturity of 5 days. You will be almost unavoidably marked to market but your yield, even when rates are high, is going to be roughly zero and you’re going out of business anyway.

You offer customers CDs if they want higher interest rates. Isn't that how it's been done for decades?

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

#170

Post by reducesuffering »

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.

No, they bought MBS, yielding 1.6% at the time, which aren't conservative. What they should have done is bought 1 month - 1 year Treasuries, yielding 0.10%. Then they couldn't give out above-market interest returns, in excess of 0.5% compared to other banks, which SVB depositors pocketed during the upside, and then failed to realize the risk during the downside, being bailed out by the government.

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