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The collapse of SVB exposes the largest crack in the economy

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Re: The collapse of SVB exposes the largest crack in the economy

#21

Post by cplusplusfellow »

dragontamer wrote: post #5
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

Why? My money at VMFXX is almost entirely composed of safe Fed Repos with average maturity of 2-weeks. VUSXX is mostly Treasury Bills, again of maturity averaging like 2-weeks. My money at SWVXX is composed of AAA-rated bank notes, of similar 2-weeks-ish maturity average. The idea of a bank, like SIVB, being composed of largely 30-year mortgages and 10Y or 30Y Treasury Bonds is insane. The bank deserves to die after…

I couldn’t give two shits about banks that go under. The businesses that concern me are the ones who lose deposits.

Re: The collapse of SVB exposes the largest crack in the economy

#22

Post by rco8786 »

xwdv wrote: post #11
TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.

> The exemptees just need to be fucking careful with this advanced mode of operation.

How many times will we get burned until we learned that banks will not be careful if they are given an opportunity to not be.

Re: The collapse of SVB exposes the largest crack in the economy

#23

Post by malermeister »

wpietri wrote: post #14
fshbbdssbbgdd wrote: post #8

Earlier quoted context omitted.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

The especially funny thing to me is that some VCs were telling their portfolio companies to get their money out of SVP first thing this morning. So Sacks is a VC asking for a bailout on a bank run triggered by VCs. Cry me a river. It's nice that he took time from his busy schedule decimating Twitter to share his views. But in my opinion VCs can't simultaneously claim to be such financial geniuses that they deserve lo…

[flagged]

Re: The collapse of SVB exposes the largest crack in the economy

#24

Post by stefan_ »

nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

Just so we are all fully aware: SVB bet in ~2020 that interest rates they offer could be well below 1% (given their operating costs and what not) for 10 years. Obviously, by 2023 already, depositors were expecting much more.

So, yeah, these MBS will probably pay out when held to maturity, but their customers didn't buy MBS, they deposited their money in a bank.

Re: The collapse of SVB exposes the largest crack in the economy

#25

Post by spamizbad »

m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper.

We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only breed lazy entrepreneurs, taking hard-earned tax dollars away from America's job-doers.

Re: The collapse of SVB exposes the largest crack in the economy

#26

Post by danielheath »

happytoexplain wrote: post #16
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

I don't use Twitter. The Tweets I see when I click this link are 80% political shitflinging from one side of US politics (even the replies to each one are 100% one-sided), and 20% non-political. Why?

Because that’s estimated to maximise the chance of you signing up?

Re: The collapse of SVB exposes the largest crack in the economy

#27

Post by talideon »

xwdv wrote: post #11
TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.

So, you're essentially proposing a weaker, informal version of Basel III. In which case, why have such an exemption in the first place? What innovations does it lead to? Restrictions on banking typically exist for a _really_ good reason. After all, we saw what happened when retail and investment banking were allowed to mingle because it 'lead to [...] innovations'. If you're going to advocate for something beyond saying 'but look, innovation!', you need to be more explicit about what those innovations are, because European banking is plenty innovative within the constraints of Basel III.

Re: The collapse of SVB exposes the largest crack in the economy

#28

Post by dougmwne »

EwanG wrote: post #7
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

Is that universally a bad thing? Are all US Banks so thinly capitalized that none of them could survive a run? If so, then doesn't that make one question why you'd ever keep money in a Bank in the first place? I get that the FDIC insurance is supposed to make you whole as long as you have less than $250K in a bank. But then you have to ask if the FDIC can actually cover that for several banks at a time - particularly…

What you are talking about here is the financial apocalypse. If a hundred million people all lose the money in their bank accounts, then we go back to the barter system overnight. The thing you will be bartering will likely be seeds and ammunition.

Re: The collapse of SVB exposes the largest crack in the economy

#29

Post by ohashi »

fshbbdssbbgdd wrote: post #8
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

So gambler wants house to cover his losses because his friends and him won't be able to continue gamble if they lose.

Re: The collapse of SVB exposes the largest crack in the economy

#30

Post by testfoobar »

cplusplusfellow wrote: post #12
Apocryphon wrote: post #10

So between the tech angle and the housing-related investment vehicles, are we remixing 2000 with 2008 now?

Self inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).

SVB failed to hedge their interest rate risk.
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