As someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?
The collapse of SVB exposes the largest crack in the economy
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Re: The collapse of SVB exposes the largest crack in the economy
#32Earlier quoted context omitted.
> Downside: this also means bank is going to be less profitable. What are the downsides to society if banks are less profitable? They invested in T-Bills, I don't see how that investment served society in any way.
Literally funds the government lol
Taxes fund the government. Bonds are just a way to avoid managing a budget.
Re: The collapse of SVB exposes the largest crack in the economy
#33https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.
I don't think the statement is completely misplaced as other comments on this thread indicate. Everyone has to be wondering if their bank is next. Just an anecdote, but, I'm sitting here wondering if I should sell the bank bonds I bought because the counterparty risk just skyrocketed. It doesn't take much to get the snowball going.
Re: The collapse of SVB exposes the largest crack in the economy
#34As someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?
Only indirectly; the tide is receding for the first time in many years, and it's exposing a variety of... issues.
Re: The collapse of SVB exposes the largest crack in the economy
#35SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…
> SVB used an exemption from Basel III,
Really?
That is interesting. Why? How? Who else?
Re: The collapse of SVB exposes the largest crack in the economy
#36https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.
Is that universally a bad thing? Are all US Banks so thinly capitalized that none of them could survive a run? If so, then doesn't that make one question why you'd ever keep money in a Bank in the first place? I get that the FDIC insurance is supposed to make you whole as long as you have less than $250K in a bank. But then you have to ask if the FDIC can actually cover that for several banks at a time - particularly…
Though I’ve never connected the dots the way you have, the last time major commercial banks (like WaMu) failed it was because of being caught swapping much riskier assets than this article is pinning the blame of SVB failing for. Also, when it was clear that there was a risk for cascade collapse of major commercial banks, fed leadership and potentially people from the fdic went to congress and told them to stop playing partisan football, and TARP was passed within a week.
If SVB really failed because it misstepped and believed it would make more money off of government bonds and didn’t, I don’t really see there being a risk of the major banks collapsing. If lots of smaller banks banked on (no pun intended) doing the same thing though…
Re: The collapse of SVB exposes the largest crack in the economy
#37SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…
The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
> The exemptees just need to be fucking careful
You mean “need to have sheer luck in their gambling”.
Re: The collapse of SVB exposes the largest crack in the economy
#38SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…
> Downside: this also means bank is going to be less profitable. What are the downsides to society if banks are less profitable? They invested in T-Bills, I don't see how that investment served society in any way.
> They invested in T-Bills
They invested in T-Bonds (10Y or longer) and MBS (mortgages) it seems like, not T-Bills (1Y or shorter)
The distinction is extremely important in this case. If they were trading T-Bills, they would have survived. Instead, they took on much riskier T-Bonds (probably hoping to make more money).
Re: The collapse of SVB exposes the largest crack in the economy
#39Earlier quoted context omitted.
The especially funny thing to me is that some VCs were telling their portfolio companies to get their money out of SVP first thing this morning. So Sacks is a VC asking for a bailout on a bank run triggered by VCs. Cry me a river. It's nice that he took time from his busy schedule decimating Twitter to share his views. But in my opinion VCs can't simultaneously claim to be such financial geniuses that they deserve lo…
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Ah yes, a classic for sure. That pairs well with the libertarians who demand freedom to do anything they want to others, with a state just large enough to keep their inferiors from doing anything in return.