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SVB shows that there are few libertarians in a financial foxhole

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

#241

Post by fidgewidge »

fosk wrote: post #218
worksonmine wrote: post #104

Earlier quoted context omitted.

Instead of all these complicated hoops, wouldn't a true libertarian expect his money in the deposits to be no-go for gambling. And a separate account for stocks. If the bank want's to gamble they would need the customers approval for that, IE lock your money with us for 10 years and get this interest. Insurance is socialist, even if it packaged as capitalism. The bank has to cover it, but not today. And it's an agree…

Our deposits are liabilities for the bank (the bank needs the infra to secure the money, make it available everywhere at every ATM, bank tellers and so on). Banks invest the money (and give loans) to both pay for these costs and also make a small return on top. It is possible to have a bank that just stores the money without touching it, but this bank would charge us for the costs of doing so, and it won’t be free, a…

Such banks would be highly popular if paired with the other half of the proposal which is to not bail out depositors at collapsed banks.

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

#242

Post by matthewdgreen »

wstuartcl wrote: post #210
sdfghswe wrote: post #50

Earlier quoted context omitted.

> I don’t understand. If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it. Correct. So, if you have customers and you put THEIR money into a bond and say you're holding it to maturity, but then your customers want their money, what exactly was the plan?

They had 13b in cash going into this year and other highly liquid assets, those evaporated as the draw downs happened. Its not like they tucked away all assets into 10 year lockups (or higher risk loans). Even the bonds they did lock up -- in what would be considered 99% "normal" markets given the last few decades a sell off of those bonds would not have been highly problematic. It became problematic when they were s…

They had a customer base that would knife them at the first hint of a liquidity issue, then they had a liquidity issue. Of course a different approach would have reduced their returns, but then they’d still be in business.

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

#243

Post by nerdponx »

Waterluvian wrote: post #98
Animats wrote: post #77

Earlier quoted context omitted.

The normal FDIC procedure would be that depositors get receivership certificates which represent a share of SVB's assets. Those are hard to trade, though. Somebody would offer to buy them, but at a deep discount. A better offer from the FDIC would be to offer Treasury bonds instead to those who want them, at a discount based on the FDIC's valuation of SVB's assets. The FDIC is well placed to sell off illiquid assets…

Ahh okay. So the FDIC is doing that big government thing of acting collectively in everyone's interest, I suppose? Instead of everyone getting their piece of the frozen pie, starving as it thaws (possibly having to sell it at a steep loss of degrees to the radian), the FDIC just says, "I'll hold on to the whole pie and hand out slices from my backup pie stash. Then once it thaws, I'll add it to my backup pie stash."

I think they are also rebuilding the backup pie stash by charging everyone a slightly bigger slice of pie than before.

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

#244

Post by scrozier »

dboreham wrote: post #201
scrozier wrote: post #125

Earlier quoted context omitted.

Why/how does the IRS care if you store it under your bed? Serious question.

> Serious question. Because criminals/tax evaders do that.

That doesn't answer my question. The IRS taxes income, not assets. They don't care where your money is.

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

#245

Post by worksonmine »

scrozier wrote: post #125
worksonmine wrote: post #53

Earlier quoted context omitted.

SVB locking money they might need access to is the FEDS fault do I understand you correctly? Did they hold a gun to their head? I'm not saying they're doing anything different than their competitors, but that's a stupid excuse. The only thing that's broken is the financial system. A customer should be aware when depositing money that that money might be locked away, and agree to those terms, and get a cut. This is SV…

Why/how does the IRS care if you store it under your bed? Serious question.

Others have already answered but the proof of guilt is the inverse, I have to prove my money is legit, or it will be confiscated. Then when I deposit it in a bank the bank gambles and looses the money anyways, because excess liquidity.

The game is rigged. Give me a bank where I just deposit my funds, and nobody touches it and I'm happy to pay for the service. Maybe I want a portion of it to grow and I'll allow it to be lended, for interest.

The bank should work in my interest, not their investors.

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

#246

Post by tyre »

sdfghswe wrote: post #24
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 pos…

> No. SVB hid market to market losses by saying "these securities are held to maturity so I don't have to realize losses".

It did not hide them. This was in their financial statements (https://s201.q4cdn.com/589201576/files/doc_financials/2022/q... at page 15):

> Held-to-maturity securities, at amortized cost and net of allowance for credit losses of $6, $6 and $7 (fair value of $76,169, $77,370 and $97,227), respectively

> December 31, 2022 | September 30, 2022 | December 31, 2021

> 91,321 93,286 98,195

This shows that they had assets on 12/31/22 with an amortized value of $91bn and a fair value of $76bn

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

#247

Post by lscharen »

wins32767 wrote: post #179
ajross wrote: post #28

Earlier quoted context omitted.

> 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…

Do you really think putting it out as mortgages would lock the money up for a shorter duration? SVB had a reasonable amount of liquidity for normal stresses. They'd gotten close to breaching their regulatory cushion for spare capital which was why they were trying to recapitalize. However once the VCs panicked started a bank run, they folded. Just like literally any bank would. ~45b of net withdrawals in a single day…

If SVB were originating mortgages then, yes, that should have helped because then, like every other originator, they would have immediately sold the mortgage into the secondary market where it would be turned into a Mortgage-Backed Security and SVB would have cash on-hand and unloaded the long-duration risk.

Instead, they were the ones buying the MBSs and taking on the long-duration risk.

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

#248

Post by cowuser666 »

sdfghswe wrote: post #50
fnordpiglet wrote: post #36

Earlier quoted context omitted.

I don’t understand. If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it. The mark to market only comes relevant if you’re experiencing a run, which they were holding sufficient regulatory liquidity for. They should have hedged their rates risk a bit better, especially as infla…

> I don’t understand. If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it. Correct. So, if you have customers and you put THEIR money into a bond and say you're holding it to maturity, but then your customers want their money, what exactly was the plan?

this is inherent to fractional reserve banks and maturity transformation. any bank would be vulnerable if there's a bank run. this is a basic thing to understand before making claims on this issue imho.

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

#249

Post by jmull »

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 is clear that the root cause of the problems is the actions of the government and the FED

That's not clear to me.

I think the purpose of banks is to handle funds well. If a bank is "made" to "see itself with a glut of funds" it's needs to be able to figure out how to handle that.

I'm not endorsing the last several decades of federal monetary policy, but regardless, it doesn't make senses that it should necessarily focus on making things simple for regional banks.

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

#250

Post by mtlmtlmtlmtl »

dools wrote: post #233
mtlmtlmtlmtl wrote: post #122

Earlier quoted context omitted.

I'm probably wrong more often than I'm right when it comes to politics on average. But libertarianism has been obviously illogical to me since I was about 15, half my lifetime ago. Since then I've spoken to some very intelligent libertarians at length and... nope, it still doesn't make any sense. It makes less sense than ever, in fact. At least when I was 15 I just thought they must be stupid, but no, not necessarily…

Check out the Dave Troy podcast Dave Troy Presents

Looks very interesting. Thanks for the recommendation!
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