Is this related to fractional reserve banking?
Bank run on Silicon Valley Bank
171–180 of 889 posts
Re: Bank run on Silicon Valley Bank
#172Earlier quoted context omitted.
Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?
If the Bank is federally insured, it's not a problem that the bank won't be able to make it work. That's why generally speaking bank runs only happen on uninsured banks in the US. SVB is not, as far as I can see, insured and should definitely be careful in their choice of words.
You’re kidding right? There’s a limit of like $250k
An individual could easily have that much let alone a startup with millions.
Re: Bank run on Silicon Valley Bank
#173Wouldn’t be surprised if some tech or crypto whales stated this, to show that banks aren’t more “save” than crypto
Don't think it will work. Banks accounts are federally insured.
At essentially $250k per account (although like all things banking the specifics are far more complicated than that).
Re: Bank run on Silicon Valley Bank
#174[flagged]
Thing is, I want to start a business but need several hundred thousand USD in machinery. Lathes or bakery ovens are not free after all. I don't have that right now, and if I need to save up for several decades the opportunity will have passed. How do I convince people to lend me money without any interest? You can replace "want to start a business" with "want to buy a house" if you prefer.
that machinery being so expensive is part of a long tradition of 'developed countries' (powerful peoples) wielding power over other weaker countries by means of technological availability restrictions.
The history of the textile industry is but an instance of this historical pattern of behavior.
all I'm saying is that it's all part of the same 'power system' of government and order.
in the end, interests is comparable to imposing a rent on upon time usage. i.e. interest forces us to pay with money for the time we live (or time we spent), regardless of whether we are working or doing whatever, regardless of where we are as long as we are under the influence of money created through loans with interest.
that we must pay taxes on top of the interest exacted from all of us is just a cherry on top.
Re: Bank run on Silicon Valley Bank
#175Earlier quoted context omitted.
Well, a lot of religions created before the modern era of banking say that lending with interest is a sin, and there are some people that still believe it.
Also, most of the Muslim world works off of banking without usury.
Most of the Muslim world just offers financial products that have "fees" coincidentally exactly equal to the interest a non-Muslim bank would charge.
Re: Bank run on Silicon Valley Bank
#176From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.
Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”
It seems that CEOs of banks haven't learned anything since 1873 when this was observed.
Re: Bank run on Silicon Valley Bank
#177Earlier quoted context omitted.
Sure, and everyone knows that their favourite person in the world could just run them over in a car and kill them in seconds, but if your best friend says to you, “you know, I could drive my car into you and you would die… your life could be snuffed out with a moments notice” you may start to question your friendship.
This situation isnt like that at all.
The relevant similarity is the *act of making* the statement is what’s problematic. In both cases the statement is true, but the act of making the true statement raises concerns.
Obviously there are important differences between the scenarios, but that critical aspect is what‘a relevant in this context.
Re: Bank run on Silicon Valley Bank
#178From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.
Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” It seems that CEOs of banks haven't learned anything since 1873 when this was observed.
Or that very simply banks are never 100% liquid.
Re: Bank run on Silicon Valley Bank
#179Earlier quoted context omitted.
If the Bank is federally insured, it's not a problem that the bank won't be able to make it work. That's why generally speaking bank runs only happen on uninsured banks in the US. SVB is not, as far as I can see, insured and should definitely be careful in their choice of words.
They've got an FDIC page, https://www.svb.com/fdic , and they show up in the FDIC bank finder https://banks.data.fdic.gov/bankfind-suite/bankfind/details/... Although the Assets, Liabilities, and Capital reporting available if you click "create financial reports for this institution" estimates 5.69% of deposits are insured. Is a corporate account limited to $250K of deposit insurance? If so, I imagine many of them ma…
> Is a corporate account limited to $250K of deposit insurance?
yes
Re: Bank run on Silicon Valley Bank
#180I'm really curious why banks like this are popular in the first place. I get why startups would want to lend from them, but what is the advantage of parking cash in a "startup-focused" bank? The rest of the business is exciting/risky enough, wouldn't you want your banking to be as boring as possible?
Well, just as an example SVB gave my startup a bank account and a no personal recourse credit card days after we'd formed the corporation. No way you'd get that from BofA.
They understand the startup ecosystem in a way that big banks don't. Now there's some competition from startup-focused banks like Brex and Mercury, but a five years ago SVB was one of the only games in town.