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SVB shows that there are few libertarians in a financial foxhole

ft.com

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

#21

Post by olivermarks »

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…

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...

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

#23

Post by fnordpiglet »

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…

Well, I’d argue that they should have hedged their rates risk especially as inflation started to tick up. They just don’t have good risk managers. But that said, if there hadn’t been a run the causal issues would have been a foot note in a quarterly filing. Everyone is acting as if SVB were Lehman or Bear Sterns. They just got caught with their pants down and everyone ran over to take a picture and post it on Twitter.

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

#24

Post by sdfghswe »

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…

> But in the end, even if we could argue that SVB should have been more prescient, it is clear that the root cause of the problems is the actions of the government and the FED.

No. SVB hid market to market losses by saying "these securities are held to maturity so I don't have to realize losses". THAT is the source of the problem. Not all banks did this. Sure excess liquidity was necessary for this behavior to be possible, but it wasn't the cause.

That's like saying the person who leaves their car unlocked is the root cause of the theft. No, the thief is. "Your honour... I plead not guilty, the car was unlocked."

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

#26

Post by cypherpunks01 »

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

Yes, FT's article links posted on twitter have a cool behavior where it bypasses paywall if you enter through the right Referer (I assume)

Garnered from https://twitter.com/FT/status/1635265357048082435

I like them for this, but I don't see a lot of other news outlets doing this. Most other places simply post links to their paywalled articles.

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

#27

Post by twblalock »

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…

It's also very unlikely that SVB is the only bank that made those kind of investments back when rates were low.

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

#28

Post by ajross »

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.

That's revisionist and silly[1]. Spending all your liquidity on long term bonds isn't "conservative" if you're a bank. It's not your money! It's your customer's money that you're just holding for them, and you just dropped it all in a vehicle that doesn't mature for 10 years. What if the customers want their money back? Yeah, we just found out.

No, the conservative option if you can't invest it is just to sit on it. That's what banks do. They sit on other people's money. That they are allowed to spend some of that money on speculation is a reasonable optimization, but it's just that. Obviously just sitting on it wasn't going to get the returns they'd promised to investors though. So they placed bets instead.

[1] And I'm not going to touch the idea that the "authorities" somehow forced them into this. No. Just no.

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

#29

Post by swatcoder »

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…

You can chase root causes all the way back to some Roman prelate if you want.

But at some point, there was a cause very close to the material problem you’re looking at. In this case, that’s the compounded risk that SVB took on in courting a concentrated clientele and trying to balance their books with unusually long-term purchases.

If you step past that and look at the government role, that’s a fine starting point for discussion about systemic issues in our society, but doesn’t absolve SVB of being the most proximate “root cause” of their own problems.

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