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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#221

Post by PeterisP »

twblalock wrote: post #106
ticviking wrote: post #100

Earlier quoted context omitted.

I own a few CDs. They’re not an unusual financial product.

Yeah but I assume you also have money in an account that lets you withdraw it in less than two years? A bank that only offers CDs or other long-duration deposits would be pretty weird.

Well sure, but one could theoretically imagine banks which are prohibited to lend money from their customers' current accounts and only make loans based on their CDs - and one aspect of that is that they'd have to offer much better terms for CDs since they would be in much higher demand.

Re: Bank run on Silicon Valley Bank

#222

Post by makomk »

orangepurple wrote: post #154
dylan604 wrote: post #127

Earlier quoted context omitted.

except when all of banks failed their stress tests, a) who remembers, b) who cared when it was announced?

Regulators have been putting immense pressure on big banks to hold adequate capital reserves since 2008 and they have been especially turning up the heat for the last 5 years. Moreover, it is clear that regulators will never allow a US bank to hold more than 3% of assets as crypto ever again.

Those government-mandated, ultra-safe capital reserves look like they're actually the big problem that's going to bring down banks right now. Banks have stuck a bunch of their reserves in really safe, predictable, high quality long-term bonds (particularly government issued ones). Because interest rates have gone up, those bonds are now worth substantially less than they were a year or so ago, meaning that the banks' ability to cope with people and businesses withdrawing their deposits has gone down substantially.

Re: Bank run on Silicon Valley Bank

#223

Post by kapilvt »

bluGill wrote: post #201
tempsy wrote: post #172

Earlier quoted context omitted.

You’re kidding right? There’s a limit of like $250k An individual could easily have that much let alone a startup with millions.

In a bank? If you have that much you really should invest in something better than a bank account. Banks should be petty cash that you spend in a couple months.

That’s not quite how payroll works

Re: Bank run on Silicon Valley Bank

#224

Post by subroutine »

njarboe wrote: post #132
WJW wrote: post #80

Earlier quoted context omitted.

Thing is, I want to start a business but need several hundred thousand USD in machinery. Lathes or bakery ovens are not free after all. I don't have that right now, and if I need to save up for several decades the opportunity will have passed. How do I convince people to lend me money without any interest? You can replace "want to start a business" with "want to buy a house" if you prefer.

If 30 year housing loans were not available, housing would be a lot cheaper.

Can't be cheaper than the materials and labor costs to build it. If house prices get too cheap house builders / contractors will stop building. This will pinch supply and keep house prices high enough that only cash rich (corps and banks) can afford them. Most people will have no choice but to rent indefinitely. Those who manage to save up some $400k may finally afford to buy a house just in time for retirement.

Re: Bank run on Silicon Valley Bank

#225

Post by auntienomen »

throwaway20222 wrote: post #23
pjc50 wrote: post #13

Earlier quoted context omitted.

It's more slow dominoes from the crypto crash, I suspect. I'm not worrying about contaigion yet, these guys aren't exactly Lehman.

Anecdotally about SVB and crypto; I really wanted to put my funding round assets into Silicon Valley Bank for my last start up. However, when I was speaking to their bankers, I mentioned that there was a possible element of the platform that would be Web3 based. The SVB team immediately paused my application and insisted that they do a deep dive into all of my investors, my bank accounts, and my pitch decks. My pitch…

Web3 is probably a red flag for aml/kyc.

Re: Bank run on Silicon Valley Bank

#226

Post by lvspiff »

JohnFen wrote: post #164
recursivedoubts wrote: post #21

Daily reminder that bank runs wouldn't be a thing if we did duration matching, forbidding banks from borrowing short and lending long. As always, the underlying problem in banking is that the banks are lying, telling two or more people they own the same dollar at the same point in time. If they locked deposits for a period of time they could safely (and morally) loan that money out without lying, and, in fact, there…

> telling two or more people they own the same dollar at the same point in time. I don't remember a bank ever telling me this. I was taught how banks work way back in grade school. Surely everyone knows that banks don't literally hold the money you deposit in a vault somewhere. I honestly don't see where banks are lying about this.

They may not be explicitly stating it but if the bank has $100m in assets most likely they are holing ~10% of that in cash and the rest in loans/real estate/bonds. If 2 members of the bank each cash out $10m at the same time they have a problem - in other words two people were owning the same $ at the same time

Re: Bank run on Silicon Valley Bank

#227

Post by Super_Jambo »

jdminhbg wrote: post #109
ticviking wrote: post #93

Earlier quoted context omitted.

Savings. Frugality. Only consuming what we can actually afford. Investment with real skin in the game. If you have to take on much higher risk to get returns we will find ourselves being more careful about those returns actually happening.

> Savings. Those savings are gonna grow at a pretty slow rate if you can't lend with interest.

Being able to create money out of thin air doesn't actually create the associated claim on value that the money represents.

So you're looking at this in terms of how you interact with money in the existing system. But all else being equal there would still be the same amount of value created & we can imagine ways that the value is distributed without the weirdness of banks & how we currently create money.

Re: Bank run on Silicon Valley Bank

#228

Post by geraldwhen »

Enginerrrd wrote: post #195
danielmarkbruce wrote: post #181

Earlier quoted context omitted.

Everyone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more…

That FDIC thing is so laughable to me because it's purely symbolic. Even the feds would have some serious trouble absorbing bank-run losses.

The FDIC does in fact insure up to 250k per account/bank. You can get more insurance by spreading your deposits between banks, a service some financial institutions will do for you.

https://archive.fdic.gov/view/fdic/4116

Re: Bank run on Silicon Valley Bank

#229

Post by bagels »

In retrospect, it seems pretty bad to bank somewhere that is tied to one industry for precisely the reason that when the industry starts facing trouble, the money disappears, and doubly so for our risky industry.

Re: Bank run on Silicon Valley Bank

#230

Post by WJW »

tshaddox wrote: post #220
WJW wrote: post #80

Earlier quoted context omitted.

Thing is, I want to start a business but need several hundred thousand USD in machinery. Lathes or bakery ovens are not free after all. I don't have that right now, and if I need to save up for several decades the opportunity will have passed. How do I convince people to lend me money without any interest? You can replace "want to start a business" with "want to buy a house" if you prefer.

Aren't a lot of companies given large amounts of capital at the early stages of the company which are not interest-earning loans?

Well they are hardly "given" any capital, they sell part of themselves for money. The VCs don't do it out of the goodness of their heart, they expect to get back more later. In any case if loans were not available and equity investments (by people who are already rich and thus have money to spare for investments) were the only way to fund capital intensive new companies, that would make my point even more.
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