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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#261

Post by uoaei »

mrosett wrote: post #50
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…

> Daily reminder that bank runs wouldn't be a thing if we did duration matching, forbidding banks from borrowing short and lending long. If we really want to prevent bank runs, shouldn't we just forbid lending? Snark aside, transforming duration is a big part of the value that banks add. In general, there's a lot of demand for lending short and borrowing long. Banks add value (and risk) by taking the opposite side of…

This pre-supposes a pretty radical (yet normalized nowadays) economic philosophy: that growth per se is good.

A more nuanced approach would be to value and triage lending opportunities according to how much they contribute to the heating up of the economy, and how much opportunity for future sustainability they provide.

Re: Bank run on Silicon Valley Bank

#262

Post by honeybadger1 »

cm2187 wrote: post #188
dublinben wrote: post #176

Earlier quoted context omitted.

Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” It seems that CEOs of banks haven't learned anything since 1873 when this was observed.

A variant of Thatcher's "Being powerful is like being a lady, if you have to tell people you are, you aren't".

[flagged]

Re: Bank run on Silicon Valley Bank

#263

Post by bluGill »

kapilvt wrote: post #223
bluGill wrote: post #201

Earlier quoted context omitted.

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

Right, but gp was talking about people not businesses

Re: Bank run on Silicon Valley Bank

#264

Post by diordiderot »

throwaway742 wrote: post #87
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…

There is no reserve ratio. We got rid of it in March 2020. https://www.federalreserve.gov/monetarypolicy/reservereq.htm

So if I open a bank with a couple million dollars I can make an infinite number of loans??

Re: Bank run on Silicon Valley Bank

#265

Post by notch898a »

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…

How easy is it for a real life poor person to just get $2M to start a farm? Almost everyone I've met with family farm inherited the land which was probably traced back to it being claimed in the frontier days.

Re: Bank run on Silicon Valley Bank

#266

Post by s1artibartfast »

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.

Owners typically have skin in the game now as do those that provide a loan.

There's a reason that people don't save up the purchase price of a home in order to buy it. They are willing to pay a serious premium in terms of Interest so that they can have a home today instead of waiting 15 years for 30 years in order to purchase a property.

If you want a car to get to a job and make money, you want it now, and are willing to pay more later. Without the car, you wont be able to work and save.

Re: Bank run on Silicon Valley Bank

#268

Post by axlee »

FormerBandmate wrote: post #137
ncallaway wrote: post #78

Earlier quoted context omitted.

Yes, but it’s pretty much always been problematic when a bank leader has had to make a statement akin to “We’re fine as long as there’s not a run”. That’s the kind of thing that only gets said when there’s some concern that there will be a run.

They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can be akin to the nuclear option)

FTX's actions have nothing to do with what is happening with SVB, it's not even close. Why make a bad parallel?

Re: Bank run on Silicon Valley Bank

#269

Post by PLenz »

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…

A lost folks in general (and SV in particular) operate on the principle of "got mine f you". They're comfortable so now we don't need to do anything to make anyone else so. It's a symptom of the greater issue of a lack of empathy.

Re: Bank run on Silicon Valley Bank

#270

Post by 0x457 »

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.

No, but there would be a lot more renters.
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