231–240 of 889 posts
First silvergate, now SVB. Is this going to be a wave across the banks?
Anyone holding long term bonds they bought before the fed raised rates is in liquidity trouble. The question is if those institutions will have a run or not.
one if banks need to rebalance but
especially if the OCC tells banks they dont need to touch that crap anymore to fulfill their regulatory requirements
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…
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I assume you are trolling, but in case you are not. How would you provide loans to help get businesses started? How would you provide loans to people to buy their first homes? How would you provide loans so people can afford to go to school? How would you provide loans to buy a vehicle so people can get to/from their job before they get a paycheck? How would farmers afford to buy land, equipment and plant crops befor…
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.
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Who would deposit their money in a bank that wouldn't let them get it back for years?
You are touching on the difference between demand deposits and duration deposits. If you were charged a small nominal fee for your demand deposits, you would likely say "OK, I'll keep a certain amount in my demand deposit account, and then put the stuff I don't need into longer duration deposits, so I can get some interest." This would be the right thing, and that money could be safely loaned out at durations shorter…
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> The bank is telling two or more people they own (or, at least, have access to) the same dollar at the same point in time But they don't do that. Or, I've literally never seen them do that. What the bank tells me is what my current deposit is. That's the truth. They aren't representing that the amount they're listing is a specific dollar somewhere, they're telling me how much money I've given to them.
They are telling you you can have all that money immediately. And they are telling that to all the depositors. That's the lie. It's a bit abstracted due to aggregation, admittedly, but that's the lie. I use a single dollar just to make the idea concrete.
I don't think they're even telling you that. And that is absolutely not what we were taught about banks in school. I think that banks do assume that everyone basically knows how banking works, though, so they don't engage in an educational program about it when you open an account.
What banks have told me is that my deposits are safe (in the sense that I won't lose my money) up to $250k. That's true enough. And I also remember reading the paperwork I signed when I've opened accounts where they specifically say that my deposits might not be available at the moment I want to withdraw them, for various reasons.
Sometimes the headlines write themselves...
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> 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
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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.
What you've just created is a world in which the only people who can afford to buy a home are people with rich families they can borrow money from. Congratulations, you've concentrated wealth in even fewer hands.
There are other ways. Like buying one brick at a time. It's a real thing in places where access to lending is less common.
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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.
If I want returns I should seek an investment.