391–400 of 889 posts
"It is possible today we found our Enron." https://twitter.com/michaeljburry/status/1633972243909705730 Is it that bad?
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except when all of banks failed their stress tests, a) who remembers, b) who cared when it was announced?
Regulators have been putting immense pressure on big banks to hold adequate capital reserves since 2008 and they have been especially turning up the heat for the last 5 years. Moreover, it is clear that regulators will never allow a US bank to hold more than 3% of assets as crypto ever again.
Just curious. As mentioned, I'm pretty ignorant about this and would like to educate myself.
From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.
Meanwhile, Peter Theil is openly encouraging everybody to tell each other that SVB is sinking and to pull their money [0]. What a guy. [0] Thiel Fund, Venture Firms Advise Companies to Pull Money From SVB
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> if you're CEO of a bank that's facing a bank run Or just don't mess with money that belongs to customers. Be the world's first reliable bank.
Not a finance guy but I think that would literally be the opposite of how banks work. They have to lend out customers money in various forms, including giving that money to other customers in the form of loans, loaning it in huge chunks to companies for larger percentage rates than they give customers who keep their money in said bank, and so forth. Not sure how a bank that kept every customers money on hand all the…
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What is there to learn? That's not an actionable statement. A bank can follow a lower risk strategy and accept lower profits, but that's not necessarily what shareholders want. Some risk of failure is acceptable.
The point is not what you’re assuming it to be. The point is that a bank run is a liquidity event (i.e. we still own more than what we owe, it’s just hard to turn it into cash fast enough). SVB has a fine balance sheet for now, they’re just running out of easy things to sell. The quote is referencing liquidity events, where the problem is everyone wants their money because they’re nervous about the bank, but the only…
His statement didn't project confidence. My "we are adequately capitalized" shirt is raising questions answered by my shirt is the meme way of expressing it. The right move would be to find a recapitalization transaction and complete it, which they tried to do but issued the press release right after a crypto-focused bank went into receivership due to falling account levels. That did not help matters.
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This is how every bank has always worked since banks were invented
The very earliest banks didn't do fractional reserve banking so it isn't true to say it is how every bank worked since banks were invented. The first known instance of fractional reserve lending was with an medieval Italy but banks have been around since 2000BCE. You are right that it definitely explains 99.99% of banks in history. But there are a handful of historical examples -- even after "modern banking" began in…
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Interest on loans should by increase a banks reserves every year barring massive defaults. The ROI for the actual reserves aren’t particularly relevant by comparison. Similarly from a reserve standpoint they don’t need to worry about inflation as they need to pay back deposits in nominal terms not what the money is worth when withdrawn.
> Similarly from a reserve standpoint they don’t need to worry about inflation as they need to pay back deposits in nominal terms not what the money is worth when withdrawn. The issue is that the sale value of their reserves has dropped below that nominal value. If you take in $1000 of deposits that you're paying 1% interest on and your reserve against that is a 10-year $1000 T-bill with a 2% coupon, you'd think you'…
There would only be a problem if the bank's credit deteriorated in its risky assets, enough to freak depositors out.
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Everyone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more…
> The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. That's akin to saying my house won't burn down because I have insurance. Don't underestimate the stupidity of large crowds of people.
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Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?
Everyone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more…
Per depositor, per insured bank, per account category.
It’s not that difficult to keep significant excess deposits insured.
Investment/VC funds are doing the same (we’re talking many, many billions of deposits lost in a span of a few days).
There is a chance SVB will freeze assets while they deal w liquidity crunch which may impact startup ability to pay bills, pay salaries, etc.
If you use SVB, transfer your money out now (as in Friday morning at 8:30am), even if it’s to your personal account while you set up a business account elsewhere.
This is a serious issue and may result in wide ranging damage to the entire tech industry.
SVB is the most commonly used bank by startups and investors. This isn’t media trying to hype a story for clicks, this is a real an major issue.