21–30 of 145 posts
I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.
>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…
>But that's not how it works! I would imagine the people advocating for a 'bailout' (using the most generous possible definition here) want this to become how it works. Like how in Germany the government guarantees every German bank balance. I have enough problems, I don't want to have to worry that my bank balance will disappear unless I spread it around in order to abuse a technicality.
If you have enough money to worry about having to spread it around, you have enough money to buy additional insurance for it, and/or enough money to hire someone to take care of those things for you.
"Oh, no! I have $250,000 in savings and now I might have to open another bank account to hold even more money! Woe is me!"
Can you even hear yourself?
>Banks are, at their core, facilitators: depositors lend their money to a bank, for which they are paid interest, and banks lend that money out, again for interest. That's not why I have a bank account. It's how you avoid paying fees to get checks cashed. If you want interest, you put it in a savings account, or a CD, also in a bank. The only safe alternative is savings bonds. If you want to gamble the money, then yo…
... isn't how banking actually works.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.
I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.
>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…
And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latter is of particular interest because they are confirmed to have had around 3.3 billion dollars with SVB (of the $40 billion they manage in total). So some quick math, they should have used 160000 different banks to be safe, no problem. Apart from the fact that there are less than 5000 FDIC insured banks in all of the US.
I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.
This is still a better situation than 2008, where banks were bailed out to the extent that management even stayed (despite deserving prison), and shareholders lost nothing. So that's the worst possible outcome, today's is probably second worst. But I don't see what would be better. Ben talks about loss of trust now, but we'd actually lose more trust if depositors weren't bailed out, and probably contagion would sprea…
"Deserve prison"? Did they commit a crime?
>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…