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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

#311

Post by lokedhs »

quickthrower2 wrote: post #310
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…

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.

But banks don't really pay interest anymore, so in some sense I'd expect them to keep it uninvested.

Re: We will not pursue the potential acquisition of FTX

#312

Post by seabrookmx »

FormerBandmate wrote: post #282
chii wrote: post #254

Earlier quoted context omitted.

and this is why banks are not allowed to use customer deposits for such activities. And if they do, they must have equity value to back it up - aka, the bank's share holders lose value _first_ when shit hits the fan, before customer deposits. Then lastly, the gov't has put up guarantees on the deposits in case bank equity cannot cover customer deposits when shit hits the fan. Crypto has none of the above - so basical…

Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse . They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenis…

> Banks inherently gamble with customers deposits, every loan is a gamble

While there's a ton of nuance here, in the general case it doesn't work how you've implied.

When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserve banking system.

Re: We will not pursue the potential acquisition of FTX

#313

Post by [deleted] »

cannaceo wrote: post #22
snowypine wrote: post #5

Wow, after only one day of due diligence.

My personal belief is that binance agreed with no intention to carry out the deal. CZ tapdanced on FTX's grave on twitter with critical comments yesterday. It is now unlikely that anyone else will want to step up to look at the deal.

[deleted]

Re: We will not pursue the potential acquisition of FTX

#316

Post by fspeech »

seabrookmx wrote: post #312
FormerBandmate wrote: post #282

Earlier quoted context omitted.

Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse . They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenis…

> Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserv…

It's not exactly out of "thin air", since we are trying to be nuanced here. If you take out a mortgage to buy a house the bank does loan you the money out of their own funds. It's just that the seller who receives your funds will put the money back into the banks (not necessarily the same bank, but the money market is there for the banks to settle among themselves). So in effect the sellers make the loans to buyers, intermediated through the financial system.

Re: We will not pursue the potential acquisition of FTX

#317

Post by uncletammy »

mumbisChungo wrote: post #112
cellis wrote: post #86

Earlier quoted context omitted.

There’s a Bloomberg article that goes over why this is a bit more nuanced than “gambling with customers funds”. In short, it’s either one or both of poor risk management ( margin traders can’t post collateral and the collateral they had was FTT which went to zero ) and black swan bank runs ( Binance CEO tweets about risky FTT causing bank run causing further drops ). In fact “gambling with customer funds” was by desi…

>In fact “gambling with customer funds” was by design. This is not accurate. The ToS for FTX explicitly said that customer funds would not be used for investment purposes. While it didn't explicitly say it wouldn't be used for lending, it was a broad assumption in the industry that the exchange was solvent and could back user assets on a 1:1 basis. It is widely believed now that Alameda went deep underwater during th…

> ... it was a broad assumption in the industry that the exchange was solvent and could back user assets on a 1:1 basis.

Anyone in crypto who makes this assumption about any other entity in crypto is either brand spanking new or a fool.

Re: We will not pursue the potential acquisition of FTX

#318

Post by JumpCrisscross »

fspeech wrote: post #316
seabrookmx wrote: post #312

Earlier quoted context omitted.

> Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserv…

It's not exactly out of "thin air", since we are trying to be nuanced here. If you take out a mortgage to buy a house the bank does loan you the money out of their own funds. It's just that the seller who receives your funds will put the money back into the banks (not necessarily the same bank, but the money market is there for the banks to settle among themselves). So in effect the sellers make the loans to buyers,…

> the bank does loan you the money out of their own funds

Nope. This is the toy model of money and banking taught in high school.

When a bank makes a loan, it creates money. The fact that there are stabilising deposits is a fortunate convenience. This is why leveraged finance is inherently unstable. The BoE had a good paper about this.

Re: We will not pursue the potential acquisition of FTX

#319

Post by vba616 »

seabrookmx wrote: post #312
FormerBandmate wrote: post #282

Earlier quoted context omitted.

Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse . They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenis…

> Banks inherently gamble with customers deposits, every loan is a gamble While there's a ton of nuance here, in the general case it doesn't work how you've implied. When you take out a mortgage, the bank doesn't take a bunch of money other people have deposited. It's literally created out of thin air and marked as a liability on their balance sheet. This is how the majority of money is created in a fractional reserv…

Don't you have that backwards? My mortgage is the bank's asset. My checking or savings account is the bank's liability.

Re: We will not pursue the potential acquisition of FTX

#320

Post by eitland »

FormerBandmate wrote: post #282
chii wrote: post #254

Earlier quoted context omitted.

and this is why banks are not allowed to use customer deposits for such activities. And if they do, they must have equity value to back it up - aka, the bank's share holders lose value _first_ when shit hits the fan, before customer deposits. Then lastly, the gov't has put up guarantees on the deposits in case bank equity cannot cover customer deposits when shit hits the fan. Crypto has none of the above - so basical…

Banks inherently gamble with customers deposits, every loan is a gamble. They also can invest in certain types of debt securities, there’s security regulations but that isn’t bad on its own. What FTX did is much worse . They spent their customer’s money on stupid shit like the Miami Heat stadium, political donations, and charity work (which was legitimately really good but not their choice to make), and then replenis…

> Banks inherently gamble with customers deposits, every loan is a gamble.

I wouldn't exactly call a residential mortgage a gamble.

Not the loan for my car either, the bank has first priority in both and demands I insurance them for the full value and for all eventualities.

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