SVB shows that there are few libertarians in a financial foxhole • Hacker News Board

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

#361

Post by listenallyall » Mon, Mar 13, 2023, 11:40 PM UTC

fnordpiglet wrote: post #36

sdfghswe wrote: post #24

Earlier quoted context omitted.

> 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…

I don’t understand. If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it. The mark to market only comes relevant if you’re experiencing a run, which they were holding sufficient regulatory liquidity for. They should have hedged their rates risk a bit better, especially as infla…

> If you hold a bond to maturity you get it’s NPV

This is flawed logic. The NPV is not a real, tangible dollar amount. It is a calculation, based on the presumed yield of a theoretical set of alternative investment opportunities, of the Net PRESENT (today, right now) Value of the bond. This number is less than the sum of the bond's future payments, because the NPV is attempting to determine the current value of payments scheduled for receipt in the future.

In other words, if you are owed $1000 to be paid on Christmas Day of this year, the Net Present Value is less than $1000.

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

#362

Post by wstuartcl » Mon, Mar 13, 2023, 11:41 PM UTC

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 FDIC charter: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.

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

#363

Post by jiscariot » Mon, Mar 13, 2023, 11:44 PM UTC

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…

> That's like saying the person who leaves their car unlocked is the root cause of the theft.

Funny that should come up. Minnesota Attorney General Kieth Ellison is blaming Kia and Hyundai for our rash of auto theft and associated crime.

https://www.startribune.com/minnesota-minneapolis-keith-elli...

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

#364

Post by braingenious » Mon, Mar 13, 2023, 11:45 PM UTC

fidgewidge wrote: post #308

doctor_eval wrote: post #291

Earlier quoted context omitted.

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.

FWIW, the book synopsis that you quoted does not say that libertarians built a tent city, it says that freedom-loving citizens built a tent city. New Hampshire’s state motto is “live free or die”, and that value of freedom is one of the reasons that NH was chosen by the libertarians to build their utopia.

It’s a very rich and complex story about many different people, and arguing with a handful of sentence fragments from a summary does nothing to impugn the quality of the journalism.

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

#365

Post by ihateyouall123 » Mon, Mar 13, 2023, 11:49 PM UTC

nerdponx wrote: post #222

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.

It nearly killed billions of dollars in real value and required untold thousands of taxpayer-funded employees working through the weekend to unfuck the situation. If I drive recklessly, I am still guilty of reckless driving even though I didn't hit anyone or anything.

[flagged]

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

#366

Post by ajross » Mon, Mar 13, 2023, 11:49 PM UTC

wins32767 wrote: post #179

ajross wrote: post #28

Earlier quoted context omitted.

> Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. That's revisionist and silly[1]. Spending all your liquidity on long term bonds isn't "conservative" if you're a bank . It's not your money! It's your customer's money that you're just holding for them, and you just dropped it all in a vehicle that doesn't mature for 10 years. What if…

Do you really think putting it out as mortgages would lock the money up for a shorter duration? SVB had a reasonable amount of liquidity for normal stresses. They'd gotten close to breaching their regulatory cushion for spare capital which was why they were trying to recapitalize. However once the VCs panicked started a bank run, they folded. Just like literally any bank would. ~45b of net withdrawals in a single day…

Again that's revisionist. They booked a huge loss (something like $1.2B) last week, before the bank run, precisely because they lacked liquidity to handle routine withdrawals. The bank run is the effect, not the cause.

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

#367

Post by reducesuffering » Mon, Mar 13, 2023, 11:50 PM UTC

maxbond wrote: post #198

reducesuffering wrote: post #178

Earlier quoted context omitted.

They didn't buy treasuries, they bought mortgage-backed securities.

You can `s/treasuries/mortgage-backed securities/g` into my comment and it doesn't change much, but my understanding is that they had a lot of treasuries (not to the exclusion of having MBSs). > To fund the redemptions, on Wednesday Silicon Valley Bank sold a $21bn bond portfolio consisting mostly of US Treasuries. https://www.theguardian.com/us-news/2023/mar/10/silicon-vall...

They had very few Treasuries. Latest balance sheet from 2 months ago had $1B Treasuries compared to $91B MBS and $212B assets. https://www.cnbc.com/quotes/SIVB?tab=financials

All your link shows is that Guardian, Reuters, and others have equally as bad reporting as commenters here, just parroting each other constantly...

SVB's actual announcement says "Additionally, earlier today, SVB completed the sale of substantially of its available for sale securities portfolio. SVB sold approximately $21 billion of securities, which will result in an after tax loss of approximately $1.8 billion in the first quarter of 2023."

I haven't seen any evidence that there were substantial Treasuries sold, I just see MBS on their balance sheet.

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

#368

Post by yunwal » Mon, Mar 13, 2023, 11:50 PM UTC

actually_a_dog wrote: post #342

yunwal wrote: post #334

Earlier quoted context omitted.

This is really semantics to me. Customers gave SVB their money because they paid high returns and engaged in risky behavior. That money was used to fund exec and employee salaries. People who take risks should bear the responsibility. Whether the bank still exists or not doesn't really concern me, since the people who ran it into the ground can turn around and do the same thing tomorrow. > "provide for the common def…

You really think employees of SVB bank clients should bear the burden of decisions made by their employers without their input, likely without their knowledge, and very little reason to care 99.99% of the time? Quick, without looking at your paystub, what bank does your employer use? I don't disagree that doing things like addressing medical debt are worthy ways to promote the general welfare, but let's not pretend i…

I believe employees understand that working at a small, highly-leveraged startup is risky, whether or not they know which bank they use. The employees, by law, get 2 months wages guaranteed by the government (under the WARN act), and should have additional savings from their highly-paid SV tech job (which is partially highly paid because the employer engages in risky behavior) which I think is plenty of cushion to get their finances in order.

But the real problem I have is with special treatment. There's plenty of people out there who get screwed by their employer's negligence/malice but the only ones who get bailed out beyond the letter of the law are the ones with the networks, money, and influence to make noise about it.

> but let's not pretend it's an either/or, thing here, either.

But it is. You either spend money in 1 place, or you spend it in another.

> "bank bailout"

This isn't like a well-defined term as far as I'm aware, so 2 situations where banks/customers rely on the government to come to the rescue when risks don't pay out can both be called bailouts, whether or not the company remains in tact. You see plenty of media organizations and people calling this a bailout despite the fact that the bank is being dissolved, because it's a colloquial term.

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

#369

Post by s1artibartfast » Mon, Mar 13, 2023, 11:54 PM UTC

vxNsr wrote: post #314

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.

An actual libertarian I would point out that HSBC is only buying the UK branch of SV Bank and the line about no taxpayer funds is evasive language and a borderline lie.

No tax revenue is being used to bail out the depositors, but every American with a bank account is paying for it. They're just applying a new fee to every Bank in the country to cover the losses

It is still socialized losses.

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

#370

Post by ihateyouall123 » Mon, Mar 13, 2023, 11:54 PM UTC

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.

Yeah this is just weird. Go seek therapy