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We will not pursue the potential acquisition of FTX

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Re: We will not pursue the potential acquisition of FTX

#301

Post by coffeebeqn »

twblalock wrote: post #169
pavlov wrote: post #70

Why does anyone trust Binance either? They’re notoriously shady about where they operate and what assets they actually hold, to the point that they’re officially not headquartered anywhere. If you have $100k at Binance, is there any reason to believe you could withdraw it tomorrow? Any contract you may have with Binance is made with a local shell company that could just as well be a hot dog stand. Any money you’ve se…

Why did anyone trust FTX either? The trust was really based on the credibility of the person running it, and the fact they had bailed out some other failing exchanges. But there were no hard facts. In fact it seemed like all it took was a public quarrel with the founder of another exchange to start the ball rolling toward total collapse -- again, because it was all based on personal credibility.

> the fact they had bailed out some other failing exchanges

That happened after they were buying stadiums and had a Larry David spot on the superbowl. They were the archetypal dumb money, top of the bubble, company. No one should be surprised they couldn’t handle a financial stress test. Sam was great at PR and maybe not much else?

This year this guy has been on every major podcast being touted as a genius philanthropist / “good” capitalist. Remember he just crashed TWO companies. Alameda and FTX. The bubble keeps popping. I’m curious who’s next. This almost certainly will ripple beyond crypto to general tech companies given how.. all the top VCs have billion dollar funds in crypto as my “exhibit A”

Re: We will not pursue the potential acquisition of FTX

#302

Post by bagels »

dragontamer wrote: post #146
kristjansson wrote: post #136

Earlier quoted context omitted.

The problem with MBS was always the zero-sum nature of the alchemy. They took 100 low-quality loans in, and returned 10 high-quality loans, 30 ok-ish loans, and 60 dog-shit loans. No harm no foul, until the dog-shit tranches were marketed as ok-ish, and alchemists believed they we're really creating gold.

CDOs weren't the problem. You see, mixing together dog-shit __ONCE__ isn't that big of a deal. CDO-squared (CDOs of CDOs) were a problem. If you took those 60 dog-shit loans, mixed them together, and created 10 high quality loans out of them, problems began to occur. Even then, it wasn't the CDO-squared that collapsed the whole thing. It was the CDS: the "insurance" (so to speak) on the CDO-squared that made things g…

Were the risk models assuming no correlation between the risk of the underlying securities?

Re: We will not pursue the potential acquisition of FTX

#303

Post by JackFr »

throw474374383 wrote: post #234
PathOfEclipse wrote: post #207

Earlier quoted context omitted.

"Certainly more study is needed on this issue. But the degree to which the Community Reinvestment Act (renewed and strengthened in 1995; see attached chart), the Home Mortgage Disclosure Act and the many other planks of the raft of federal regulation which have built up over the past couple of decades has pushed the banking industry into making the loans for which they are now being criticized is far and away the mos…

Right so it's the government's fault for encouraging the corporations to do something they didn't really want to do, which inevitably led to the corporations naked inhuman amoral greed running amock.

Do you think there was a sea change in the base level of greed in the run up to the financial crisis? (Remembering of course that it’s impossible for a corporation to be greedy, only a human being can be so.)

I’ve been beating this drum for more than 10 years. The big story of the financial crisis is that while there was fraud and corruption at the margins, the bulk of the economic dislocation was caused by well intentioned people making good faith decisions that in hindsight proved very foolish. People who had no business buying a home or taking out that loan were. Banks were making the loans not just because there was a global capital glut chasing returns, the credit tranching structures were working, and the ever rising house prices hid any risk. No one in the industry had seen house prices broadly go down in generations. In retrospect there were a number of systemic issues that now seem obvious, but having been there it wasn’t that obvious at the time.

Re: We will not pursue the potential acquisition of FTX

#304

Post by toomuchtodo »

tim333 wrote: post #223
SilasX wrote: post #152

Earlier quoted context omitted.

That’s why I hate when people in these discussions refer to needing/providing “liquidity”. It feels like such a weasel word. Unless you know enough to conclude it’s really a cash flow mismatch, then don’t mince words or overcomplicate it. Money. They need some g/d m/fing money. Maybe they need it as arms-length loans on legitimately illiquid capital. Maybe they need underpriced loans for the risk of the business. May…

I agree "liquidity" is a cop out implying they need time to sell things. In my case I deposited some USDC coins and have asked them to return said USDC coins but it seems no. I think theft is a more accurate term. As in we stole some customer funds to gamble with and having lost them need more funds to cover it up. Not really "liquidity".

There is a reason stablecoins are not the same as fiat in a deposit account: a government will make you whole via deposit insurance if something happens to your USD due to institutional failure.

Re: We will not pursue the potential acquisition of FTX

#305

Post by jcpham2 »

scrlk wrote: post #135

Just a PSA for any FTX users out there: please make sure you get details of your balances, deposits, withdrawals and trade history whilst the site is still up. You can download it as a CSV - I'd also take screenshots to be on the safe side. Save yourself a potential headache when you come to do your taxes down the line.

^ This I had sparse information for the first OG BTC lending website and that information would’ve been super useful to all sorts of three letter authorities in retrospect. It was only $7500 at the time but that has slightly ballooned over the years

Re: We will not pursue the potential acquisition of FTX

#306

Post by ETH_start »

churchill wrote: post #159
zomglings wrote: post #142

Earlier quoted context omitted.

By getting greedy and treating FTX user funds as capital to deploy in the prop trading firm.

I know, right? Soon the defi community will be calling for the own version of Glass-Steagall. What is old is new again, I guess. Knowing when to stop is genius.

This is not DeFi. This is CeFi that caters to crypto. The major DeFi apps have had no problems this cycle.

So perhaps not surprisingly, Uniswap - which is a preeminent DeFi app - now has deeper liquidity on many important trading pairs than the largest CEXes:

https://uniswap.org/blog/uniswap-v3-dominance

Re: We will not pursue the potential acquisition of FTX

#307

Post by JackFr »

SantalBlush wrote: post #225
PathOfEclipse wrote: post #207

Earlier quoted context omitted.

"Certainly more study is needed on this issue. But the degree to which the Community Reinvestment Act (renewed and strengthened in 1995; see attached chart), the Home Mortgage Disclosure Act and the many other planks of the raft of federal regulation which have built up over the past couple of decades has pushed the banking industry into making the loans for which they are now being criticized is far and away the mos…

That banks extended bad loans under pressure from the government suggests they did so at a loss; otherwise, they would have done it anyway in search of profit. Moreover, Sowell makes bold claims and offers little evidence beyond references to redlining, while the evidence that banks were engaged in unethical and fraudulent practices are backed up by cold-hard data and an abundance of testimony from people within the…

You understand the borrowers weren’t the victims of the fraud —- in fact they were engaged in it. The banks settled on charges of selling securities backed by loans that they had not sufficiently vetted, of which many turned out bad.

Re: We will not pursue the potential acquisition of FTX

#308

Post by ThrustVectoring »

kristjansson wrote: post #136
pseudosavant wrote: post #111

Earlier quoted context omitted.

FTX going under due to magic beans reminds me so much of Lehman Brothers going under in 2008. That time the magic beans were "mortgage backed securities" that somehow took low-quality debt, mixed it up with some magic, and out came high-quality debt, only it didn't.

The problem with MBS was always the zero-sum nature of the alchemy. They took 100 low-quality loans in, and returned 10 high-quality loans, 30 ok-ish loans, and 60 dog-shit loans. No harm no foul, until the dog-shit tranches were marketed as ok-ish, and alchemists believed they we're really creating gold.

Mortgage-backed securities weren't exactly the problem, it was merely the vehicle in which a trans-Atlantic banking regulation arbitrage trade was carried out, and the trade accidentally became fully self-financing. US mortgage originators and banks were allowed to take risk if they sold it off onto the capital markets, and EU banks were allowed to take risk as long as it was deemed "safe" by ratings agencies.

The truly pernicious part is the self-financing spiral. Banks issued mortgages, which deposit cash in the home seller's account. Seller puts the cash into a money market fund. MMF gets short-term interest by financing AAA-rated securities. EU banks use this financing to buy senior tranches of MBSes. These MBS purchases allow banks to issue more mortgages by freeing up their capitalization.

Like, zero-sum alchemy will only generate small frauds and relatively limited losses. You need large amounts of leverage and some kind of self-financing spiral to generate catastrophic de-leveraging events.

Re: We will not pursue the potential acquisition of FTX

#309

Post by quickthrower2 »

JumpCrisscross wrote: post #13

In the thick of it, illiquidity and insolvency blur. But not after the fact. As usual, Levine put it best: “the problem is not a timing mismatch, in which FTX’s customers asked for their cash back but FTX did not have enough ready cash because it had long-term but money-good loans out. The problem is that FTX took its customers’ money and traded it for a pile of magic beans, and now the beans are worthless and there’…

So if I go to the loan shark, borrow money and stick it on a donkey the 10:15, if I get lucky and the donkey wins, I was just illiquid, but if he collapses half way around the course, I was actually insolvent.

Re: We will not pursue the potential acquisition of FTX

#310

Post by quickthrower2 »

SilasX wrote: post #152
JumpCrisscross wrote: post #13

In the thick of it, illiquidity and insolvency blur. But not after the fact. As usual, Levine put it best: “the problem is not a timing mismatch, in which FTX’s customers asked for their cash back but FTX did not have enough ready cash because it had long-term but money-good loans out. The problem is that FTX took its customers’ money and traded it for a pile of magic beans, and now the beans are worthless and there’…

That’s why I hate when people in these discussions refer to needing/providing “liquidity”. It feels like such a weasel word. Unless you know enough to conclude it’s really a cash flow mismatch, then don’t mince words or overcomplicate it. Money. They need some g/d m/fing money. Maybe they need it as arms-length loans on legitimately illiquid capital. Maybe they need underpriced loans for the risk of the business. May…

Liquidity means something though. Think of a bank. If everyone withdraws their funds at the same time they may not have the liquidity to pay out. In order to be able to pay out everyone at the same time, they would need to keep it all uninvested/unlent, and then charge you a banking fee instead of paying you interest on it. So there is a tradeoff there.
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