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SVB shows that there are few libertarians in a financial foxhole

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

#311

Post by kurthr »

sdfghswe wrote: post #24
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…

> But in the end, even if we could argue that SVB should have been more prescient, it is clear that the root cause of the problems is the actions of the government and the FED. No. SVB hid market to market losses by saying "these securities are held to maturity so I don't have to realize losses". THAT is the source of the problem. Not all banks did this. Sure excess liquidity was necessary for this behavior to be pos…

And they wouldn't have been able to do that, if not for the regulations being rolled back (from $50B to $250B by a friend of Thiel and lobbying by SVB). Lots of sowing and reaping going on.

https://www.reuters.com/article/us-usa-trump-dodd-frank/trum...

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

#312

Post by originalcopying »

elzbardico wrote: post #176
originalcopying wrote: post #76

Earlier quoted context omitted.

> Being called a libertarian would be an enormous source of shame and disgust for my mom. But you are not your mom. you don't have to share on the disgust and shame, however you may chose to do so if you want. the points being: the disgust is your mom's not necessarily yours. whether to partake on your parent's shame of being called a libertarian is a choice .

A choice that I deliberately made years ago.

good for you!

therapy for me has been about finding subconscious choices like those

on the other hand, sorry for you... why would one choose to feel negative emotions like shame?

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

#313

Post by anigbrowl »

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.

Directly, nobody was injured. Proximately, we really have no idea. I am in favor of strict liability for a broader variety of negligent behavior. Losing one's career over bad judgment is of course a kind of deterrent, but realistically lots of people fuck up and then go on to have moderately profitable second careers by writing a book and giving talks with titles like 'Learning Hard Lessons'. If they're entrepreneurial they can become stars of the MBA circuit.

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

#314

Post by vxNsr »

smugma wrote: post #223

The key line says it all about how the US (in agreement with tech tycoons) does things: "Just like many of the banking titans after the global financial crisis of 2008, tech tycoons appear to favour the privatisation of profits and the socialisation of losses. There are few libertarians in a financial foxhole."

Didn’t they announce HSBC is buying SVB. And they specifically said that no tax payer funds would be used here. The only loses here are for the shareholders of SVB. Did the gov broker the deal, sure, but it sounds like most of that brokering happened on the other side of the ocean. Basically it sounds like exactly the sort of thing a libertarian would support.

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

#315

Post by em500 »

initplus wrote: post #165
JohnFen wrote: post #95

Earlier quoted context omitted.

> They're following standard practice They weren't mitigating the risk of how they were using their deposit accounts. That's not following standard practice.

Splitting deposits to stay under the 250k limit is artificial behaviour that doesn’t change the overall risk profile for FDIC. The total amount of money covered by insurance is the same regardless of how it’s subdivided. Splitting up deposits isn’t the intended outcome by regulators here. It doesn’t actually achieve anything meaningful.

Splitting deposits to stay under the 250k limit would have reduced funding for this specific, narrow focused bank with an exceptionally high duration risk. It's less likely that the customers would try to pull 250k from 4 bank accounts at once because they believe all of them are unsafe than 1M from a single account. How could that not change the overall risk profile for the FDIC?

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

#316

Post by anon291 »

FormerBandmate wrote: post #204
Animats wrote: post #42

Right. Without a bailout, each customer would have $250K today (if they had that much n deposit) and probably another 10-20% this week, as assets were sold off. The FDIC could have worked a deal so that depositors were paid off in a few weeks, but in Treasury bonds with 5-10 years to maturity, to match the maturities of SVB assets. Depositors who really had to could sell their bonds immediately at a discount. That wo…

There would have also been massive bank runs. Check out regional bank stocks, tons of them were down 30% this morning for no reason and a lot are still down. The rich panicked, which destroyed Washington Mutual and Wachovia in 08 and caused both the Great Recession and Great Depression

Okay well banks are not owed existence. If the banks went out of business give the deposit holders the choice of holding the underlying assets or the choice of selling them on the market.

If you held the same portfolio as the bond, you too would not be able to withdraw at full face value.

You are believing a lie if you think a ten million dollar deposit can be immediately withdrawn anywhere in its entirety.

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

#317

Post by nerdponx »

ip26 wrote: post #302
nerdponx wrote: post #234

Earlier quoted context omitted.

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.

I'd say they are. And I agree with you that it's necessary overhead. The action is what "cost the taxpayers money" because it required enforcement action. Crime is actually a great example: we all pay when crimes are committed, so we should all take interest in preventing crime rather than just reacting whenever it happens. The same is true for things like rail freight safety, air travel safety, and banking.

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

#318

Post by fisherjeff »

yunwal wrote: post #305
wstuartcl wrote: post #281

Earlier quoted context omitted.

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.

The only risk for other banks is opportunity cost: right now, there are much more productive uses of their money than buying old agencies at par. If you had $200b or whatever laying around, you could buy their portfolio and make about the lowest risk $10b there is. But if you just bought new agencies at the same durations instead, you could easily double that.

EDIT: To clarify, this is the primary risk at large banks, where they could absorb a chunk of the bonds without significantly affecting their average maturity. Smaller banks obviously risk replaying the SVB run.

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

#319

Post by vxNsr »

mtlmtlmtlmtl wrote: post #122
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'm probably wrong more often than I'm right when it comes to politics on average. But libertarianism has been obviously illogical to me since I was about 15, half my lifetime ago. Since then I've spoken to some very intelligent libertarians at length and... nope, it still doesn't make any sense. It makes less sense than ever, in fact. At least when I was 15 I just thought they must be stupid, but no, not necessarily…

Cool, now do socialism.

Anything in the extreme is bad. Can any system work if everyone acts perfectly rationally and and the same time with full empathy? Sure, but such people in reality are few and far between so instead we need to account for the edge cases of which there are many. And as any good software engineer knows you end up spending 80% of your time chasing down the last 1% of your edge cases.

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

#320

Post by ElfinTrousers »

zac23or wrote: post #192

I read a lot of hackernews, for the technical part. But I never liked or believed in the VC/Startup bullshit. If HN had a filter just for technical stories, that would be great. I never believed in the talk of “let the market decide”, “we invested in that startup to change the world”, “disruption”, “good product will win” and other nonsense. Everything revolves around money, money and money. And there's nothing wrong…

> If HN had a filter just for technical stories, that would be great.

You might be ready for https://lobste.rs.

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