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SVB Hall of Shame

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Re: SVB Hall of Shame

#201

Post by Nomentatus »

taco_philips wrote: post #106
acomjean wrote: post #55

Earlier quoted context omitted.

FYI: prisoners dilemma is an interesting game theory experiment where you do better if everyone cooperates. You do better than your "opponent" if you don't. The wikipedia explains it well. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

Prisoner's dilemma requires that the parties cannot communicate with each other.

The famous example illustrating PD created by Albert W. Tucker does have no communication - so that parties don't coordinate and cooperate with each other - but in this case with thousands of parties, there was no way to coordinate them all, or communicate with them all in time, or trust them all, so it still counts. It's possible to set up prisoner's dilemmas with communication, say in cases where it's a one off and the parties have every reason not to trust each other's word.

Re: SVB Hall of Shame

#202

Post by fastball »

zaroth wrote: post #183
fastball wrote: post #158

Earlier quoted context omitted.

I don't think that's true? SVB was insolvent because they had to sell bonds at a massive loss in order to cover illiquidity that was a problem due to the bank run .

They’ve been insolvent for some time. The bank run didn’t cause the insolvency, the bank run exposed it, and laid it bare.

What is your source for this? From everything I have read, the first point at which they were clearly insolvent was what I mentioned previously, when they sold a huge swath of bonds at a massive loss at or around March 8th 2023, which was less than two weeks ago.

Re: SVB Hall of Shame

#203

Post by klabb3 »

kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

> If they want equity, they should sell long-term secured loans with LVRs under 100% or lock in my cash with term deposits or any number of other less liquid asset classes.

Exactly. Banks get special sweet deal privileges for their “superior” ability to manage risk and they still haven’t come up with a way to protect against a few days of rumors? I don’t buy it. Either it’s extreme incompetence, world record complacency or there’s some meta play where someone makes money off it.

And yeah, I’d be super happy to lock in deposits in exchange for a higher interest rate, it’s a dead simple financial product that nobody offers. Failing at running a bank seems to me like losing in tic tac toe as a first mover. This is why people turned to crypto. Not saying it’s good yet, but doing better than the current financial system is a low bar.

Re: SVB Hall of Shame

#204

Post by krick »

This is laughable. I won't start on how it's my money and all that jazz, so just one thing: keeping your money and your clients' money in a bank that is on the verge of a bank run is not a sign of valor, it's either a sign of being stupid and irresponsible, or a sign that you know something that others don't.

Re: SVB Hall of Shame

#205

Post by danielmarkbruce »

ineedasername wrote: post #72
danielmarkbruce wrote: post #23

Earlier quoted context omitted.

They were liquid. They could sell the $80 bill or so of bonds they had quickly and at fair value. Their problem was selling forced them to face the reality that they'd lost $12 or $13 bill on a wrong way interest rate bet.

Under that interpretation nearly everything is liquid. If you’re going to take a loss by selling an asset prematurely, it is illiquid. Otherwise you’d have to say things like the houses people own are liquid because the person could sell it in a day if they were willing to do so for 80 cents on the dollar. That is not the financial world’s definition of “liquid”

Nonsense.

Things one can sell at fair value in a few mins are liquid, and things one has to sell slowly or take 80 cents on the dollar to get rid of it fast (like a house in your example) are illiquid. It's a function of buyers and process, not my accounting treatment or tax treatment or whatever other treatment might make me not like the idea of selling right now.

What's next? The FX markets aren't liquid because I don't feel like realizing a gain from a tax perspective?

>> That is not the financial world’s definition of “liquid”

Yeah, it is, to us in the financial world.

Re: SVB Hall of Shame

#206

Post by ashwagary »

YeBanKo wrote: post #154
photochemsyn wrote: post #137

Earlier quoted context omitted.

What you're describing is a service provided by a bank called a safe deposit box, which banks provide as a fee service. This is quite an archaic view of banking services. The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank sa…

Safe deposit boxes are very hard to come by these days. Banks are moving away from them. Last year JPM started phasing them out [1]. The trade is likely to continue. [1] https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-...

>Safe deposit boxes are very hard to come by these days.

Safe deposit boxes are also not insured.

If you put $250k of cash in a box and the bank catches on fire or gets robbed, you will most like get $0 back, while people with accounts will atleast get the FDIC insured portion of funds back.

Re: SVB Hall of Shame

#207

Post by Danieru »

terragon wrote: post #188
Danieru wrote: post #140

Earlier quoted context omitted.

You are confused about how fractional reserve works. The 10x multiplier is on the bank's equity. For every dollar of home loan there is a dollar or more of deposits. The multiplier effect of fraction reserve occurs over iterated loans and depositing. The fraction term comes in because the bank can lend out a fraction, less than 1, of deposits.

This is incorrect. Fractional reserve lending means that they can keep a fraction of deposits as reserve and loan out the rest. This necessarily means they are not fully covered in times of large withdrawals.

Sorry, you are not getting what OP was confused about.

The OP thought 10dollar of loans existed for every 1dollar of deposits. That is what I address. Instead for every say 9 dollars of loans there exists 10dollars of deposits.

You are agreeing with me. The outstanding loans are/should never be greater in value than the outstanding deposits. Aka: they should be a sub 1.0 fraction. Of course the fraction reserve aspect is the inverse ratio, itself also below 1.0.

Re: SVB Hall of Shame

#208

Post by jrmg »

kamikaz1k wrote: post #16
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive…

If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday?

I mean, it was fine for them by Monday.

Re: SVB Hall of Shame

#209

Post by dang »

drc500free wrote: post #35

The amount of victim-blaming astroturfing I've seen on hn this week has been quite surprising. Depositors are never, ever to blame for bank runs. Edit: From the about page: > Who I am is not important. Holding accountable the hypocrites responsible for Silicon Valley Bank’s collapse is. I can be reached at svbhallofshame@protonmail.com. All correspondence will be kept anonymous. It's just missing a PAC called somethi…

Please make your substantive points without resorting to the "astroturfing" canard. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.

I don't disagree with you on the topic, but I promise you that the volcano of anger and indignation that spewed forth about this is basically all from entirely legitimate users.

Re: SVB Hall of Shame

#210

Post by danielmarkbruce »

remote_phone wrote: post #185
taxman22 wrote: post #148

Earlier quoted context omitted.

SVB was insolvent last quarter.

You don’t know what the definition of insolvent is, if you believe that.

There isn't an agreed upon definition of insolvent. SVB certainly was insolvent under some definitions of the word.
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