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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

#271

Post by tracker1 »

ramesh31 wrote: post #100
swatcoder wrote: post #29

Earlier quoted context omitted.

You can chase root causes all the way back to some Roman prelate if you want. But at some point, there was a cause very close to the material problem you’re looking at. In this case, that’s the compounded risk that SVB took on in courting a concentrated clientele and trying to balance their books with unusually long-term purchases. If you step past that and look at the government role, that’s a fine starting point fo…

>If you step past that and look at the government role, that’s a fine starting point for discussion about systemic issues in our society, but doesn’t absolve SVB of being the most proximate “root cause” of their own problems. I think it's time we stop imagining that financial institutions will ever do anything that they are not legally required to do. This was a failure of regulation. Calling it personal responsibili…

I think the failure, in terms of regulation, is holding accountability in the first place when they violate existing laws and SEC regulations. Not to mention, ever actually holding executives and boards to account in terms of liability against their personal wealth.

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

#272

Post by tripletao »

fnordpiglet wrote: post #108
ralph84 wrote: post #47

Earlier quoted context omitted.

Why hedge when we privatize the profits and socialize the losses? SVB execs sold tens of $millions in stock before the failure. Are the execs going to be forced to return the compensation they received for showing higher profits by not hedging?

Yes. It’s called clawback provisions. They were summarily fired and their compensation was clawed back. And how are the losses being socialized? The assets of the bank are collateralizing the lines of credit they’re getting to stay solvent. It won’t cost anyone a thin penny, other than bank management and shareholders.

The FDIC is guaranteeing all SVB deposits, including deposits above $250k. Any deficit will be paid from the FDIC's insurance fund, which if necessary will be topped up by a special assessment on all participating banks. So the losses (if any) won't be socialized over taxpayers, but they will be socialized over some combination of bank owners and customers.

https://www.federalreserve.gov/newsevents/pressreleases/mone...

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

#273

Post by watwut »

ren_engineer wrote: post #111
sdfghswe wrote: post #24

Earlier quoted context omitted.

> 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…

at the time they bought them the Fed was saying they had no plans to increase rates. You can blame SVB somewhat for not hedging but they took the Fed at their word and got burned for it, not exactly something that builds confidence in the financial system. The Fed bowed to political pressure related to high inflation rather than following the plan they laid out

They had no plans, things changed, plans changed. It is completely valid to blame SVB for not hedging. It is valid to blame them for lobbying to loose up regulation over how much risk they can take too.

If anything is damaging trust, it is banks and investors lobbying to loosen up regulations, claiming the banks are too small to pose systemic risks and then ask for special exceptions the moment it does not work out.

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

#274

Post by watwut »

concordDance wrote: post #208
kqvamxurcagg wrote: post #119

Earlier quoted context omitted.

You fail to understand the actual reason for their insolvency. Their risk team chose to buy 10 year treasury bonds instead of 1 year treasury bonds. This is because 10 year bonds offered a higher interest rate (more profit for SVB) but at a much much higher risk. The losses were then unrecognised, hoping the market would turn. Only when it was too late did SVB admit defeat. With their equity gone, they attempted a ba…

> Anyone working in risk management will tell you SVB’s risk team and executive team should be in jail. Jail seems extreme for an error in judgement that neither killed nor maimed anyone.

People go to jail for all kinds of frauds and all kinds issues they cause to other people.

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

#276

Post by UncleSlacky »

varispeed wrote: post #140

Libertarianism, socialism, capitalism etc. all fail to take into account human nature and that's where all the conflicts come from. Regulation is necessary to ensure that people who manage to get into position of power, who have certain kinds of personality disorders and other issues won't be able to game the system to their own personal advantage or satisfaction. In most cases whether it is socialism or capitalism,…

"To look at people in capitalist society and conclude that human nature is egoism, is like looking at people in a factory where pollution is destroying their lungs and saying that it is human nature to cough." - Andrew Collier

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

#277

Post by watwut »

tracker1 wrote: post #262
nerdponx wrote: post #215

Earlier quoted context omitted.

And to the original point about libertarians, this would only ever not happen in the face of regulation.

As a libertarian, I'm perfectly fine with letting a business fail, and holding the management and board to personally account/liability for their actions.

The actual "letting it fail" would be to pay up looses only for those insured. Those who did not insured would not be paid looses in "let it fail world".

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

#278

Post by wolfendin »

refulgentis wrote: post #105
nomay wrote: post #65

Earlier quoted context omitted.

You just explained the businness model of banking.

Correct. And they failed at it. Swap bonds for magic beans and see if it’s defensible. We know the bonds were worth less, but it doesn’t obviate failing to manage the half of the business that isn’t people handing you money

Magic beans could be anything. So I’m not sure that works

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

#279

Post by masklinn »

zac23or wrote: post #192

I read a lot of hackernews, for the technical part. But I never liked or believed in the VC/Startup bullshit. If HN had a filter just for technical stories, that would be great. I never believed in the talk of “let the market decide”, “we invested in that startup to change the world”, “disruption”, “good product will win” and other nonsense. Everything revolves around money, money and money. And there's nothing wrong…

> I read a lot of hackernews, for the technical part. But I never liked or believed in the VC/Startup bullshit.

VC/Startup bullshit is literally hn's business daddy though, that's what the domain it lives on does.

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

#280

Post by dragonwriter »

tripletao wrote: post #272
fnordpiglet wrote: post #108

Earlier quoted context omitted.

Yes. It’s called clawback provisions. They were summarily fired and their compensation was clawed back. And how are the losses being socialized? The assets of the bank are collateralizing the lines of credit they’re getting to stay solvent. It won’t cost anyone a thin penny, other than bank management and shareholders.

The FDIC is guaranteeing all SVB deposits, including deposits above $250k. Any deficit will be paid from the FDIC's insurance fund, which if necessary will be topped up by a special assessment on all participating banks. So the losses (if any) won't be socialized over taxpayers, but they will be socialized over some combination of bank owners and customers. https://www.federalreserve.gov/newsevents/pressreleases/mone…

> So the losses (if any) won’t be socialized over taxpayers,

I mean, a “special assessment” is just a different word for a one-time tax, and it being directly on all banks and indirectly on everyone who banks, or does business with entities who bank, makes distinguishing the payers of this tax and “taxpayers” ludicrous hair-splitting.

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