Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

SVB shows that there are few libertarians in a financial foxhole

ft.com

Post reply on HN
Print view View original

301–310 of 493 posts

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

#301

Post by tracker1 »

watwut wrote: post #277
tracker1 wrote: post #262

Earlier quoted context omitted.

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".

Exactly... they liquidate the bank's assets, payout the FDIC insured, and most of the depositors only lose about 10%... the shareholders would lose more... and the executives and board potentially lose everything to pay shareholders. That's how this is supposed to work under existing rules.

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

#302

Post by ip26 »

nerdponx wrote: post #234
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.

I imagine taxpayers did pay at least something in the form of treasury and fed employees working over the weekend and getting paid overtime. Or is that not how it works?

Are police wages “socializing the cost of crime”? I consider enforcement necessary overhead.

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

#303

Post by em500 »

lotsofpulp wrote: post #58
spaceman_2020 wrote: post #3

A while back, a small regional coop bank defaulted here in India and could not pay its depositors. The depositors had to protest and camp outside the bank for several days. Most of these were ordinary folks, many retirees, who were just trying to keep their savings in a neighborhood bank. Of course, since this was a political issue and the depositors were innocent, the government stepped in and promised to make them…

The question is, now that we have computers and money is just an entry in a database, why are banks even necessary for storing and moving money? The whole small bank and big bank issue is moot. Technology has long solved this problem so the government could roll out a solution where no one ever risks any deposits, no FDIC is needed, and no bailouts are ever needed.

It's not a technological problem. The Fed doesn't want narrow banks that only only keeps deposits safe and are deliberately blocking their formation. John Cochrane speculated that the Fed is forcing deposits into risk taking lenders in the believe that it makes lending to businesses and consumers cheaper:

https://johnhcochrane.blogspot.com/2019/03/fed-vs-narrow-ban...

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

#304

Post by opportune »

strbean wrote: post #128
worksonmine wrote: post #53

Earlier quoted context omitted.

SVB locking money they might need access to is the FEDS fault do I understand you correctly? Did they hold a gun to their head? I'm not saying they're doing anything different than their competitors, but that's a stupid excuse. The only thing that's broken is the financial system. A customer should be aware when depositing money that that money might be locked away, and agree to those terms, and get a cut. This is SV…

[flagged]

Bonds of any kind are not safe if you need the capital before they mature (which SVB did) in the face of interest rate increases. The longer duration the bond, the harder it hurts when interest rates increase.

There are financial instruments like interest rate swaps specifically for banks to hedge against this exact scenario.

Let’s not extrapolate some simplified personal finance advice to financial professionals who should have known better

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

#305

Post by yunwal »

wstuartcl wrote: post #281
yunwal wrote: post #270

Earlier quoted context omitted.

The whole argument is whether uninsured deposits should be provided by the FDIC. I have no problems with the insured amount being returned to customers. The FDIC is a government owned business and shouldn’t be acting outside of it’s financial interests and obligations.

The other good news is that it will probably net out to costing little to nothing in the long term as they had enough assets to cover liabilities -- it was a liquidity crunch. Seems very much relevant to what the FDIC was created for -- to make depositors whole and stop contagion. It would be different if the bank was not properly asset backed.

> The other good news is that it will probably net out to costing little to nothing in the long term

If it cost nothing with no risk, surely a larger banking institution would have been willing to step in to solve it.

> Seems very much relevant to what the FDIC was created for

The FDIC was created to be an insurance corporation, not to bail out banks at their discretion.

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

#306

Post by karaterobot »

braingenious wrote: post #15

This reminds me of one of my favorite books from the past couple years, A Libertarian Walks Into a Bear. It’s a fascinating deep dive into an attempt to create a sort of libertarian utopia in a small town called Grafton, New Hampshire. The speed at which they arrive at “we need government services” after they eviscerate government services is… unsurprising. 10/10 I highly recommend it for anyone that’s interested in…

I know a few libertarians, and I've never heard any of them say "we don't need government services". I think that's the straw man version of libertarianism, the one that's easiest to dismiss.

It's always a question of which services are best provided by the government, and which are best provided by private entities, or partnership of the two. Different libertarians arrive at different definitions of "state capacity".

I really don't think of that philosophically as being quite as simple as it's portrayed a lot of the time. In fact, I'd say it's harder to predict what a libertarian believes, since that group has more than its share of contrarians.

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

#307

Post by mtlmtlmtlmtl »

JabavuAdams wrote: post #286
mtlmtlmtlmtl wrote: post #190

Earlier quoted context omitted.

Who's that quote from? It's funny you should use that one, I happen to be an avid Tolkien nerd, starting around that age :D Bit of a tangent, but it continues to amaze how relevant Tolkien continues to be to this day considering he started developing his legendarium almost a century ago now. Gender issues, sexism, addiction, free will, the allure of power and wealth, all explored in an amazingly prescient way that st…

It hasn't aged well in some other ways. I was a die-hard Tolkien fan from an early age -- I think I read LotR at around age 10 or so. But ... it's kind of hard to read to your beautiful brown daughter when you constantly have to stop and do teaching moments because Tolkien goes on and on about how fair and beautiful all the good guys are, and how swarthy etc. the nasty Southrons are.

True, it hasn't held up in that sense.

Although diving deeper into the legendarium, there is the fact that the southrons and easterlings were corrupted by Sauron to worship him as a god. So you could choose to view those descriptions as consequences of that rather than perceived racial or cultural inferiority. And indeed the "fair and beautiful" Numenoreans were at one point corrupted by Sauron in very much the same way.

But yeah, you definitely have to give Tolkien a lot of help on this one, and it's not terribly helpful in the context of reading to your children :/

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

#308

Post by fidgewidge »

doctor_eval wrote: post #291
fidgewidge wrote: post #236

Earlier quoted context omitted.

This book isn't about libertarians. It's about anarchists. "Once upon a time, a group of libertarians got together and hatched the Free Town Project, a plan to take over an American town and completely eliminate its government ... They built a tent city in an effort to get off the grid. The bears smelled food and opportunity." Nobody who knows anything about libertarians and is trying to accurately represent it would…

OK, but US style right-libertarianism is also known as anarcho-capitalism [0], and the line between that and anarchy - which resists hierarchy, not organisation - is pretty thin. The main difference is that anarcho-capitalism, unsurprisingly, deeply favours those who own property. [0] https://en.m.wikipedia.org/wiki/Anarcho-capitalism

Libertarianism isn't the same as anarcho-capitalism. If some people are claiming they're the same thing then, well, see above.

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

#309

Post by anigbrowl »

elzbardico wrote: post #11

The author ignores that behind the downfall of SVB was a climate of excess liquidity on the markets, a bonanza created by the authorities that made SVB see itself with a glut of funds. Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. Someone could argue that they could have foreseen that this abundance of liquidity in the markets, alon…

You understand the fundamental problems here and have chosen to share your insights for free. Banks have professional employees who are paid decent money to make these kind of risk assessments even more rigorously. Why would we accept the idea that they can get by with being less objective? I am not an investor at all and even I understand that when the Fed is raising rates to control inflation portfolio owners need to rebalance their asset mix as the financial environment changes.

Stop giving these guys a pass just because of your residual (and justifiable) skepticism about fiscal/monetary policy. I have similar doubts about how government manages public finances, but I also know that depending on a low-yield bond purchased before a pattern of graduated interest rate hikes is gonna leave you with a cash flow problem.

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

#310

Post by [deleted] »

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.

[deleted]
Post reply on HN