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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

#371

Post by em500 »

initplus wrote: post #337
em500 wrote: post #315

Earlier quoted context omitted.

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?

Imagine a world where this splitting is normal. If SVB depositors had split their deposits up and stored them at other banks, other banks depositors would have done the same and split their deposits up - and stored some of them at SVB. So from FDIC's perspective, the total amount of deposits at every bank (and so the risk they take as an insurer) after this splitting is the same. FDIC insurance limited to 250k and a…

Ok, but since they now only have a small fraction instead of everything stored at SVB, they wouldn't have to withdraw all their deposits from all their different accounts when word gets out that SVB is unsafe. An being explicitly fully insured, a lot of them might not even have bothered to withdraw from SVB. How would that result in the same risk profile?

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

#372

Post by s1artibartfast »

This reminds me of the bad faith argument that libertarians should not take social security, or that communists should not ask for a paycheck.

It is bad faith because it willfully ignores the fact that neither person currently lives in a libertarian or socialist society. The libertarian still has to pay SS taxes they don't want to and the communist still has to pay rent.

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

#373

Post by lotsofpulp »

oblio wrote: post #326
lotsofpulp wrote: post #184

Earlier quoted context omitted.

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?

Depositors who want to earn interest.

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

#374

Post by gdy »

actually_a_dog wrote: post #352
gdy wrote: post #351

Earlier quoted context omitted.

"very little reason to care" Maybe they should care. Why shouldn't an employee care about financial stability of their employer?

Be honest: have you ever asked an employer what bank they use when you were interviewing? Is this your general policy? 10:1 says it's not, and you haven't. Even if you're the exception, I'm sure 99% of employees have literally never asked this question. Think about why that might be.

When I cared about stability I picked a big employer from which one would expect prudency. When I worked at a small company, I expected it to get ruined at any moment and planned accordingly. Since I became self-employed, I care a great deal about which bank I use and never put all eggs in one basket.

As I said: maybe they should.

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

#375

Post by tripletao »

selectodude wrote: post #341
tripletao wrote: post #333

Earlier quoted context omitted.

The depositors are getting 100% of their money now because the FDIC has guaranteed all deposits, including deposits in excess of the usual $250k limit. Any shortfall will be socialized among all participating banks. The SVB's shareholders didn't get bailed out, but their depositors absolutely just did. https://www.federalreserve.gov/newsevents/pressreleases/mone... If the SVB had been forced to recognize its loss soo…

The depositors are getting 100% of their money because the fed is lending against their assets at par. [1] The FDIC can be confident that they'll be able to make everybody whole because their assets exceed their liabilities. The Fed is going to hold the assets to maturity and get paid back by the Federal Government. "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a speci…

> The depositors are getting 100% of their money because the fed is lending against their assets at par.

And FMV is less than par, so that's an undercollateralized loan. That's another component of the subsidy to SVB depositors, and also a subsidy to shareholders of other banks that overexposed themselves to long-term debt (though too late for the SVB shareholders). There's no rational economic basis for this change in policy, and it goes against all modern central banking theory.

https://twitter.com/DanielaGabor/status/1635167154042716161

I hope you don't think holding the bond to maturity somehow means the loss isn't real? All bonds get held to maturity by someone (unless they default, but that's not the problem here). The FMV of a bond is ultimately determined by the value of those cash flows to that person; so if the FMV went down, then that should be a clue that value was fundamentally lost, regardless of who holds it.

The SVB's problem was that their HTM accounting treatment didn't model economic reality. The government is leaning into that fiction somewhat here, out of some combination of favoritism and concern for systemic risk. That doesn't make the fiction true though, and it doesn't mean the loss disappears; it just means the loss gets socialized.

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

#376

Post by mtlmtlmtlmtl »

braingenious wrote: post #359
vxNsr wrote: post #319

Earlier quoted context omitted.

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.

>Cool, now do socialism. I didn’t “do” libertarianism? I recommended a book that I found interesting that’s related to the topic of the article that this discussion thread is in response to. Socialism has been brought up a couple times in response to my book recommendation and I’m a little confused by that. Is the assumption that the reporter that spent years meticulously researching, interviewing, and documenting th…

There is an increasing tendency to interpret these things in false dichotomies, I've found. If you criticise libertarians you must be a socialist and vice versa. I had a similarly frustrating encounter the other day, where my critique of the interaction between capitalism and democracy in the US was constantly construed as some sort of glorification of socialism, even when I never mentioned it. My patience for this type of thinking is worn pretty thin these days.

My view is simply this: there are numerous different consensus methods in our society. Democracy, academia, courts, markets, bureaucracy, technocracy, and hierarchical command structures. They all have strengths and weaknesses for different problems on which a consensus must be reached. But democracy sits above all these and plays the important role of slowly figuring out where these should be applied and how they should be weighted. This is a very hard problem, no ideology has a self-contained solution. Democracy must be an evolutionary process. The ideas that work stick around after a change of power, and the ones that don't go away, ideally.

Based on this it's crucial for democracy and therefore the government to have some measure of regulatory power over all of these. This is where libertarianism really breaks down. It's far too corrosive to the usefulness of democracy, which is the only thing keeping everything together in the end.

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

#377

Post by anigbrowl »

jalapenos wrote: post #325
anigbrowl wrote: post #313

Earlier quoted context omitted.

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.

If we have strict liability for truck drivers nobody will sign up to drive hazardous cargo.

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

#379

Post by givemeethekeys »

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…

There are plenty of good technical boards out there, but there are few good startup communities. I'd rather have the startup discussions over everything else.

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

#380

Post by lotsofpulp »

relaxing wrote: post #378
lotsofpulp wrote: post #373

Earlier quoted context omitted.

Depositors who want to earn interest.

But… that’s a bank…

Yes. If you want to invest your money with a chance you will lose it in exchange for earning interest, invest it into a bank savings account.

If you just want an electronic money account with which you can send and receive and store electronic funds, and not risk losing it, keep it with the government.

And add legislation with it that requires the government to provide everyone with an account, even criminals, and it cannot be closed, and any seizures have to be from court orders, but the ability to transfer/store money electronically remains an inalienable right.

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