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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

#211

Post by satvikpendem »

cplusplusfellow wrote: post #41
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…

I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?

Hacker News has not been pro-startup and VC for a long time, probably at least for 10 years. It's now mostly tech workers who are not the capital class or are startup founders.

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

#212

Post by boppo1 »

JackFr wrote: post #194
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…

Agree. SVB was not small, but an order of magnitude smaller than the large money center banks (Citi, BofA, JPMChase). That being said, nearly every other bank of that size submitted Dodd Frank Stress Test results to the Fed in 2022. https://www.federalreserve.gov/publications/files/2022-dfast... Somehow SVB avoided this. I don’t see this as systemic at all. The FDIC will make depositors whole and the owners and manag…

97% of depositors exceeded the FDIC limit.

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

#213

Post by twblalock »

rehitman wrote: post #80

Everyone says SVB had bad investment and they deserv it etc. However, I am worried about this being the first of many similar financial instutation failing. After all, bonds are supposed to be safe on paper. Increasintg interest rate fast can break many people who are not able to adjust.

Every sophisticated bond investor knows about duration risk. We expect banks to be sophisticated in that way. This was a really boneheaded investment to make at a time when interest rates were at historic lows.

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

#214

Post by [deleted] »

jandrese wrote: post #64
yalogin wrote: post #31

As someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?

Only indirectly. They released a statement after the FTX collapse saying effectively "don't worry, no problem here", which caused a bank run that they couldn't manage and forced the collapse.

[deleted]

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

#216

Post by ageek123 »

JackFr wrote: post #194
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…

Agree. SVB was not small, but an order of magnitude smaller than the large money center banks (Citi, BofA, JPMChase). That being said, nearly every other bank of that size submitted Dodd Frank Stress Test results to the Fed in 2022. https://www.federalreserve.gov/publications/files/2022-dfast... Somehow SVB avoided this. I don’t see this as systemic at all. The FDIC will make depositors whole and the owners and manag…

I’m not sure you’re using the standard definition of “make whole”…

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

#217

Post by throwawayfky »

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…

He and his buddies were talking about playing gambling and donating earnings.

I saw it as a promotion for gambling. Listening to them talk about it made me sick

Americans love for gamlbing and alcoholism is beyond my comprehension. Like all bad things it's very bad in the long run

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

#218

Post by Our_Benefactors »

aqme28 wrote: post #190
cm2187 wrote: post #180

Earlier quoted context omitted.

Yes and no. LCR is basically requiring you to keep in cash and liquid assets the equivalent of a 30 day bank run. And it should work. A european bank had very large bank run last year and survived without even breaching its regulatory minimums. But that still leaves the bank in a weak position after the bank run, and you can't predict the exact magnitude of a run.

What is a "30 day" bank run? How is a bank run measured in time?

Undoubtedly it is a dry bureaucratic definition like “A 30 day period where on each day capital outflows were greater than inflows by a factor of 10”, of course in the definition failing to capture what an _actual_ bank run is.

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

#219

Post by throwawayfky »

practice9 wrote: post #18
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…

> friends Chamath?

[flagged]

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

#220

Post by quesera »

celestialcheese wrote: post #135
JohnFen wrote: post #61

Earlier quoted context omitted.

They won't lose deposits except insofar as they decided it was OK to exceed the 250k limit for FDIC insurance. And in deciding to do that, they were deciding to take a risk and got burned by it -- but it was a risk they willingly took on.

Asking honestly - if you just got $100m wired to your account from a Series C, what's the right way to protect your cash?

I learned yesterday about CDARS.

These spread your deposits over (up to) thousands of banks, keeping each account below FDIC insurance limits. You can choose demand deposit accounts, or CDs or money market accounts if you want interest.

All accounts roll up into a single bank statement from your primary bank.

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