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Bank run on Silicon Valley Bank

techcrunch.com

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Re: Bank run on Silicon Valley Bank

#251

Post by airstrike »

volkk wrote: post #112
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.

so...it would take actual generations for people to get out of being utterly broke since in your world, you'd have to save up as a poor person to actually open up a business or do anything worthwhile. sounds so fun, sign me up. i want my family to be poor for 250 years until we finally have 2 million that we need to start that farm my great great great grandfather wanted to. some people on this website literally live…

sadly you can remove the "on this website" qualifier from your last sentence and it holds just as well...

Re: Bank run on Silicon Valley Bank

#252

Post by Retric »

makomk wrote: post #222
orangepurple wrote: post #154

Earlier quoted context omitted.

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'…

Interest on loans should by increase a banks reserves every year barring massive defaults. The ROI for the actual reserves aren’t particularly relevant by comparison.

Similarly from a reserve standpoint they don’t need to worry about inflation as they need to pay back deposits in nominal terms not what the money is worth when withdrawn.

Re: Bank run on Silicon Valley Bank

#253

Post by recursivedoubts »

dev_tty01 wrote: post #234
recursivedoubts wrote: post #95

Earlier quoted context omitted.

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…

CDs are duration deposits, but you can still get the money out minus some fees associated with the early withdrawal. That doesn't help the run on the bank situation.

So long as the bank has reserves (out of profits) they can offer to buy people out early, according to their own profit and loss calculations. But they can't be compelled to, and they must have that money available to them at the given moment.

In this make believe banking system that I am making up. :)

Re: Bank run on Silicon Valley Bank

#254

Post by airstrike »

ticviking wrote: post #93
chollida1 wrote: post #82

Earlier quoted context omitted.

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.

so the economy grows annually at ~0.0% meaning no real value gets created because productivity basically never improves and labor participation tanks

congratulations, you've taken us back to Feudalism

Re: Bank run on Silicon Valley Bank

#255

Post by Retric »

ttt333 wrote: post #246
makomk wrote: post #222

Earlier quoted context omitted.

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'…

respectfully, I'm not so sure. The decline in bonds applies to all fixed-rate securities. The only alternatives would have been just straight up cash (bad with inflation) or riskier, less-liquid assets (non-tradable loans with floating rates, for example). They are limited on the latter by risk weighting, and I'm not sure having looser risk controls on the asset side would really help confidence in the banking sector…

Inflation isn’t a concern here. Depositors hand a bank 1 billion and X% inflation hits, well the bank still only owes them 1 billion.

Re: Bank run on Silicon Valley Bank

#256

Post by vineyardmike »

boringg wrote: post #116
rippercushions wrote: post #15

From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.

Poor move by the CEO. It's like he wanted to be honest with everyone but that wasn't a strong signal. Also out most of the banks - you would expect that the clients of SVB are a little more sophisticated than your retail bank demographic being start-up companies and all (big assumption).

Conversely, they’re very sensitive to having their capital liquid compared to bigger companies that may have multiple banking relationships or access to credit markets in case of short term issues.

Re: Bank run on Silicon Valley Bank

#257

Post by jojobas »

FormerBandmate wrote: post #60
rippercushions wrote: post #15

From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.

This is how every bank has always worked since banks were invented

The first banks just stored your money and charge you for it, until somebody had a brilliant idea.

Re: Bank run on Silicon Valley Bank

#258

Post by sillybov3456 »

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 problem isn't insuring the losses, that they can do. The problem is will you even be able to buy anything after the chaos if a systemically important financial institution goes under? The banks that hold the most ordinary customer deposits aren't like Lehman Brothers and the fallout from one of them going under would be catastrophic on a level far beyond something like 2008.

FDIC was invented for the great depression when banks were not as large or concentrated, nor were they as globally connected and intertwined with day to day business. The reality is that FDIC is far from being sufficient insurance to calm down a collapsing market, that's why we had to do bailouts in 2008, because of what was coming down the road in that regard if the contagion were to spread further.

Re: Bank run on Silicon Valley Bank

#259

Post by monocasa »

pseudo0 wrote: post #175
monocasa wrote: post #144

Earlier quoted context omitted.

Also, most of the Muslim world works off of banking without usury.

Most of the Muslim world just offers financial products that have "fees" coincidentally exactly equal to the interest a non-Muslim bank would charge.

Correct, but those financial products don't have a tendency to combine in weird ways the way interest bearing systems do.

Re: Bank run on Silicon Valley Bank

#260

Post by s1artibartfast »

jongjong wrote: post #243
chollida1 wrote: post #82

Earlier quoted context omitted.

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…

Why does a business need a loan? They can just sell shares/equity to raise funds. It's better in every way; there's skin in the game. Why would anyone even want to loan money to a startups? If the startup founders go out of business and flee the country, the lender loses everything. The downside is unlimited. Yet if the startup does well and it becomes a billion dollar company, the lender will get maybe 20% return on…

I think that's a possible answer worth discussing , but nothing precludes that now. There's a reason why people don't crowdsource shares in their house when they want to buy it or if they're business when they create it. Sometimes they would rather pay the interest than share their asset. Sometimes there is a lack of Interest in people wanting a steak
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