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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#281

Post by lxgr »

frellus wrote: post #69
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…

> telling two or more people they own the same dollar This is the main issue, and it's called a "reserve requirement", which is a percentage of the deposits that the bank must keep on hand to mitigate risk of issues like this. https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta... In March 2020 the US Federal Reserve lowered it from 8% to 0%, which is where it is today. Just to give you an idea of how the ec…

This "money multiplier" model is not an accurate description of how money creation actually works in modern central banking.

Besides a minimum reserve requirement, banks also have liquidity and (risk-weighted) capital adequacy requirements, which are practically much more relevant.

The 2008 financial crisis was effectively caused by "laundering"/structuring the risk weights.

Re: Bank run on Silicon Valley Bank

#282

Post by gnicholas »

honeybadger1 wrote: post #262
cm2187 wrote: post #188

Earlier quoted context omitted.

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

[flagged]

TBH I wasn't sure what the commenter was trying to communicate. That she had been cancelled? That she should be cancelled? I definitely wouldn't have flagged such a comment, but I would agree that it wasn't exactly adding to the discourse.

Re: Bank run on Silicon Valley Bank

#283

Post by hackernewds »

FormerBandmate wrote: post #65
antibasilisk wrote: post #55

[flagged]

This destroys the entire economy, making startups and corporations much harder to run to the point of impossibility. Even in countries run on Sharia law, they still find proxies for interest

curious what are these proxies? I thought under Sharia law charging interest is "illegal"

Re: Bank run on Silicon Valley Bank

#284

Post by dan-robertson »

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…

I don’t really understand what you mean. Isn’t ‘in the business of borrowing short-term and lending long-term’ like half the definition of a bank? The other half being that they are licensed by the state to do this short-term borrowing, get state guarantees for deposits, and have to follow a bunch of regulations making them almost an instrument of the state.

It feels to me like saying that evictions wouldn’t be a thing if we simply didn’t allow tenancies.

I roughly believe that if you gave people the choice between paying to store money in ‘cash but it’s a number in a database’ (ie the thing you describe) and investing it in some kind of ‘not a bank’ where they can earn interest and withdraw when they please but the big pot of money is loaned out, there might not be runs of the ‘bank’, but there would likely be runs of the ‘not a bank’.

Re: Bank run on Silicon Valley Bank

#285

Post by originalcopying »

skulk wrote: post #215
originalcopying wrote: post #174

Earlier quoted context omitted.

that machinery being so expensive is part of a long tradition of 'developed countries' (powerful peoples) wielding power over other weaker countries by means of technological availability restrictions. The history of the textile industry is but an instance of this historical pattern of behavior. all I'm saying is that it's all part of the same 'power system' of government and order. in the end, interests is comparabl…

> that machinery being so expensive is part of a long tradition of 'developed countries' (powerful peoples) wielding power over other weaker countries by means of technological availability restrictions. I'm having real trouble unpacking what you mean here. Machinery is expensive because... there's a worldwide cartel keeping prices up to keep out new players? Could it also be that making machines is hard and requires…

[flagged]

Re: Bank run on Silicon Valley Bank

#286

Post by jongjong »

FormerBandmate wrote: post #163
njarboe wrote: post #128

Earlier quoted context omitted.

VCs generally fund startups by giving them funds in exchange for equity, not loans (complicated financial shenanigans aside).

They use discounted cash flows to model them, which are dependent on loans as a key component. VCs also use loans themselves from time to time, and their investors can use loans to invest in them.

Loans by modern banks rely on the issuance of new currency; it's a scheme which relies on diluting the value of citizens' existing currency. It's unethical; it's stealing from the many to enrich the few who will receive the credit once it's spent into the economy (going into friends' businesses).

Kind of like how Carl Icahn sat on the Hertz board, made Hertz take out a huge loan, used the credit to award a huge contract to one of his other businesses and then let Hertz go bankrupt. Citizens footed some of the bill by having their savings and salaries diluted (since Carl kept the proceeds of the loan and spent it into the economy; contributing towards inflation) and of course Hertz shareholders footed most of the bill. It's just theft.

Re: Bank run on Silicon Valley Bank

#287

Post by favorited »

fallingknife wrote: post #57
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.

Every bank is screwed if everybody takes all their money out. And everybody already knows it.

Literally any business is screwed if all of their customers leave.

Re: Bank run on Silicon Valley Bank

#288

Post by makomk »

Retric wrote: post #252
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'…

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.

Higher interest rates decrease the value of long-duration bonds even in nominal terms. Think of it this way: because the interest rate on a bond is fixed at issue, and because newer bonds now have higher interest rates, your existing bonds have to be sold for less in order for someone to buy them over a newer higher-interest bond. This means that the banks' reserves have actually shrunk in value. This is made worse by the fact that the combination of low interest rates and requirements to choose safe investments means that the only way for banks to meet their cost of operations is by picking longer-duration bonds which have higher drops in value, and that they haven't been earning enough interest to really grow their reserves either.

Re: Bank run on Silicon Valley Bank

#289

Post by [deleted] »

PLenz wrote: post #269
volkk wrote: post #112

Earlier quoted context omitted.

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.

[deleted]

Re: Bank run on Silicon Valley Bank

#290

Post by [deleted] »

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…

[deleted]
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