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The collapse of SVB exposes the largest crack in the economy

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Re: The collapse of SVB exposes the largest crack in the economy

#41

Post by cplusplusfellow »

fshbbdssbbgdd wrote: post #8
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare.

What am I missing?

Re: The collapse of SVB exposes the largest crack in the economy

#42

Post by 7speter »

spamizbad wrote: post #25
m348e912 wrote: post #3

https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper. We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only b…

Dunno if you’re being intentionally tongue in cheek, but a monkey jpeg startup is pretty lazy/scammy/bs-y

Re: The collapse of SVB exposes the largest crack in the economy

#43

Post by bequanna »

layer8 wrote: post #37
xwdv wrote: post #11

Earlier quoted context omitted.

The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.

> The exemptees just need to be fucking careful You mean “need to have sheer luck in their gambling”.

Head, we get bonuses

Tails, taxpayers bail us out

Re: The collapse of SVB exposes the largest crack in the economy

#44

Post by arez »

phkahler wrote: post #32
PKop wrote: post #19

Earlier quoted context omitted.

Literally funds the government lol

Taxes fund the government. Bonds are just a way to avoid managing a budget.

government doesn't need taxes to fund anything, it can just create money and sell bonds. Taxes are just for steering money flows

Re: The collapse of SVB exposes the largest crack in the economy

#45

Post by JohnFen »

dougmwne wrote: post #17
nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

Yes, another way to think about this is that if you bought an .80 t-bill today it would have the return on investment equivalent to a 1.00 bill bought last year. That’s because the new t-bill has a much higher interest rate. So in effect, as the fed raises interest rates, they are destroying the principle of every existing bond on the market. That’s a big problem for anyone owning bonds, especially if they are using…

> they are destroying the principle of every existing bond on the market

What principle are they destroying? Bonds are not, and never were, immune to economic changes. They're just less volatile and react differently than stocks and, if you hold them to maturity, will pay what what they promised.

It seems to me that the problem is that a whole bunch of people made investments assuming that there was effectively no risk in doing so. Like the good times would last forever or something.

Re: The collapse of SVB exposes the largest crack in the economy

#46

Post by nostromo »

nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

Owning bonds that pay 1% for 20 years when inflation is running at 7% is a great way to lose lots of money.

You’ll get that money back come 2041, it just won’t be able to buy you much.

Re: The collapse of SVB exposes the largest crack in the economy

#47

Post by TacticalCoder »

nodesocket wrote: post #9

> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

> Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.

100% back in, say, 9 years at 1.5%. Or take the 20% hit today, buy back bonds giving 4% yearly and end up with the same amount. I mean: it's literally how the price drop is calculated right?

Re: The collapse of SVB exposes the largest crack in the economy

#48

Post by [deleted] »

cplusplusfellow wrote: post #41
fshbbdssbbgdd wrote: post #8

Earlier quoted context omitted.

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…

I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?

[deleted]

Re: The collapse of SVB exposes the largest crack in the economy

#50

Post by toomuchtodo »

TooSmugToFail wrote: post #2

SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…

https://archive.is/Fx1is
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