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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

#321

Post by vxNsr »

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.

Or you could just explain that fair and beautiful refer to the content of their character and swarthy is a synonym for smarmy, or evil and has nothing to do with skin color at all.

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

#322

Post by [deleted] »

JohnFen wrote: post #91
gregw2 wrote: post #61

From a Libertarian perspective why would we not: 1) have Congress+FDIC create a new form of deposit insurance that goes up to 10-25 million dollars[1] that is to be used for a new form of account legally dedicated to payroll; funded by a new set of fees since the private market clearly is not handling this issue well (Everybody knows about FDIC limits, and people who spend more than a fraction of time thinking about…

> have Congress+FDIC create a new form of deposit insurance Such insurance exists on the private market already and is commonly used by businesses who have large sums of cash on deposits. Presumably, the depositors at SVB didn't do that because they didn't want to pay for it. Wouldn't a libertarian prefer that over having the government do it?

[deleted]

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

#323

Post by actually_a_dog »

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.

Banks are not being "bailed out." Depositors are. SVB no longer exists. Now, you can certainly argue over the merits of bailing out depositors, but disingenuously framing it as a "bank bailout" is not the position to start from.

On that point, the government does have an obligation to "provide for the common defense and the general welfare of the United States," and that is clearly one of the overarching purposes of the Constitution itself. I find it hard to argue that saving tens of thousands of jobs[0] but by making the depositors whole, when the assets of SVB, illiquid though they may be, can cover 60-90% of the cost, is at all the wrong thing to do. This is literally part of why we have a government, and why markets are regulated at all.

[0]: I couldn't find a good source on the number of jobs, but that seems like the correct order of magnitude, anyway.

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

#324

Post by geysersam »

anigbrowl wrote: post #313
concordDance wrote: post #208

Earlier quoted context omitted.

> 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 entrepreneuri…

Yes people make mistakes. That's legal and it should be.

Especially in a business such as finance where the job literally is to estimate risk, someone will make the (in hindsight) wrong decision.

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

#325

Post by jalapenos »

anigbrowl wrote: post #313
concordDance wrote: post #208

Earlier quoted context omitted.

> 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 entrepreneuri…

Strict liability for negligence would just mean sending business overseas where that rule isn't in play, and chilling it domestically.

No one is interested in the deal "if you get it right, you make some money; if you get it wrong, we obliterate you".

The move from caveat emptor to caveat venditor has coincided with everyone legally ringfencing things with corps & LLCs. People find ways back to a fair deal.

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

#326

Post by oblio »

lotsofpulp wrote: post #184
frankreyes wrote: post #109

Earlier quoted context omitted.

This is the argument for CBDC. the Fed taking over deposits. The issue comes when you want to get a loan or mortgage. How does the Fed know if you're financially stable? How on earth can the Fed know how to centrally decide? In general the answer is: split the savings and investments in two different entities. One entity that saves but has forbidden to invest, and an independent entity that invests.

If you want to borrow money, you can go to a lender, just like you do now. Lenders do not have to be banks that take deposits.

Where do the lenders get their money from?

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

#327

Post by epistasis »

david927 wrote: post #297
FormerBandmate wrote: post #204

Earlier quoted context omitted.

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

> for no reason For reason. This is far from over.

The only thing we have to fear is fear itself!

Bank runs are quite often a crisis of unreason, and I think this one is mostly caused by poor communication. The contagion effect is as much a mental virus as it is an assessment of liquidity.

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

#328

Post by colinsane »

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.

that might (or might not) be arguable from a moral viewpoint, but it definitely isn’t arguable from the actual statistics. about half of the US state prison population is there for non-violent crimes.

https://en.wikipedia.org/wiki/Incarceration_in_the_United_St...

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

#329

Post by selectodude »

tripletao wrote: post #230
notch898a wrote: post #132

Earlier quoted context omitted.

So put it where? Narrow banking is illegal by virtue of denying the banking license. You're basically left with what, something like recallable loans/margin? What are the other options?

Put it in bonds of whatever duration the bank chooses, but require sufficient equity that the shareholders will bear the loss and not the depositors? Interest rates didn't increase in a single step. If the SVB had been forced to recognize their losses on a continuous MTM basis, then they'd have been forced to raise capital (or liquidate if they couldn't) by late 2022, when they were undercapitalized but not insolvent…

>Put it in bonds of whatever duration the bank chooses, but require sufficient equity that the shareholders will bear the loss and not the depositors?

But that's literally what they did. They put it in 10 year treasuries that they had to sell for 87 cents on the dollar because every "thought leader" in Silicon Valley had the same idea at the same time and triggered a bank run on their own bank.

Everybody who has deposits will get 100 percent of their money back and everybody who holds equity in SVB will be (mostly) wiped out.

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

#330

Post by oblio »

vxNsr wrote: post #321
JabavuAdams wrote: post #286

Earlier quoted context omitted.

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.

Or you could just explain that fair and beautiful refer to the content of their character and swarthy is a synonym for smarmy, or evil and has nothing to do with skin color at all.

But that's not what he meant and we both know it.
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