381–390 of 493 posts
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…
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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…
SVB was a bank that mostly served corporate operations accounts for tehc nad healthcare startups and small businesses. People were not banking there for high returns. This is not at all about risky investments (ffs the bank liquidity crunch came from long term bonds being too illiquid -- not exactly exotic asset management). The accounts impacted are mostly payroll, daily operating accounts (for expenses/manufacturin…
Please stop repeating this. It is 100% about risky investments. https://www.theguardian.com/business/2023/mar/11/silicon-val...
Also, if your entire clientbase is in a single groupchat, you should be much more prepared for a bank run. This is like common-sense stuff. The fact that this is a bad business model isn't really my concern.
> The bank managers and investors are not being bailed out -- they have already lost everything.
The bank managers will walk away having earned millions of dollars in salary and bonuses, funded by risky bets, and the investors will walk away without bearing the consequences of the risks SVB took. Their investments in SVB went to zero, but there's still money that's been lost.
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> 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…
This is it. People are quick to point out mismanagement at svb, but it's only because of the run and the following collapse. After the fact, it's easy find data points to explain away anything. Holdkng on to low yield treasuries, really now, this is the telltale sign of a failing bank?
History still needs to be written on this one, don't discount the human factor, debtor's panic because of gossip run wild is not too far fetched.
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?
I understand "libertarian in theory" ... I am waiting however for a libertarian from Silicon Valley to say that we should have let all these Silicon Valley entities fail for being stupid with their finances in this very real-world scenario. Help me understand a more moderate libertarian position.
We tried more libertarianism in the 2018 legislation that removed some of the need for hedging for SVB and look where it got us. How does libertarianism help us from here?
I don't mind a little libertarianism... But it seems to me if the savvy Silicon Valley folks can't manage their payroll risk with all their smarts, what about payroll for a bank in some more ordinary US city? I am not a fan of government intervention particularly and the moral hazard of guaranteeing all depositors disturbs me. But despite that, I also don't really consider SVB a one-off... it seems to me that SVB is just one of many (hopefully smaller) banks with this whole "class" of interest rate maturity risk that is far worse in an environment of raising interest rates. I remember in 2008 how much got sucked out of money market funds in a few days when the previously-theoretical-risk of breaking the buck in uninsured accounts started money moving at velocities that nobody was really prepared for. So while I would have preferred more guardrails around how much depositors were covered, I also can't bring myself to completely condemn FDIC risking moral hazard to ensure stability to try to avoid psychological contagion spreading to a LOT more banks.
The problem is that libertarianism and preventing bank runs just seems to me like problems with "unrestricted short selling" or "calling fire in a crowded theater"... if you don't impose checks on it, the incentives for malicious behavior are so great (and the costs to being malicious so small) as to be counter-productive. Why not go all the way to anarchy? Do you really think market forces will magically govern against abuse and malicious claims without the force of the state? It would seem to devolve to mafia land where powerful factions just agree not to mess with each other and you have to have "pull" to get protection... which is exactly the critique Ayn Rand had of socialistic governments.
I was curious to hear what people say and despite my post getting downvoted to -2 points at present (it wasn't worded particularly well to avoid misinterpretation) I do appreciate all the replies.
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> 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.
This feels like you're agreeing with me. Is that the case? Receiverships have a pretty specific meaning, which explicitly does not include resolving liquidity issues using third-party funding.
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> 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…
To be clear, if banks can improve their risk profile for free, they will do that (because it frees them to invest in other risky stuff). A no-risk 5% return while the fed is giving out sub-5% interest rates is a no-brainer. The reason no banks are coming in to help is because it would be a bad investment.
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Why didn't the fed decide that course of action in this case? Seems the difference is small. Shareholders still lost everything, depositors lost nothing instead of 10% but that's a minor difference. Guess one difference is how long it'll take before depositors can access their money. Now they'll get it immediately. If they were waiting for liquidation of the banks assets, that would probably take longer.
Depositors would have lost up-to $X - 250000, not 10%. SVB is down ~10% but that doesn't mean everyone would have actually been made whole from the money.
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.
I agree with GP that the startup stuff can get a bit dominating at times though; a way to filter out say all submissions regarding YC startups would be the icing on the cake, for what has quickly become my favourite online forum.
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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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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.
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