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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

#421

Post by cm2187 »

pas wrote: post #395
cm2187 wrote: post #354

Earlier quoted context omitted.

Deposits from financials are treated as disappearing at the first opportunity from a regulatory point of view. Corporate deposits are considered volatile but less volatile. So the behaviour we have seen isn’t entirely unexpected. It seems SVB has VC deposits and corporate deposits from startups that were effectively controlled by VC and behaved like financials in term of deposit outflows.

what does financials mean in this? can you explain this term, please?

Financial institution, so any bank, insurance company or institutional investor.

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

#422

Post by scott00 »

jmvoodoo wrote: post #116
sdfghswe wrote: post #50

Earlier quoted context omitted.

> 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. Correct. So, if you have customers and you put THEIR money into a bond and say you're holding it to maturity, but then your customers want their money, what exactly was the plan?

So, your plan is to do away with fractional reserve banking entirely ? How do you think that would impact GDP and the overall functioning of the economy?

Not who you're responding to, but I actually don't think getting rid of fractional reserve banking is as crazy as it may sound at first. Maybe people who need to borrow money for 10 years shouldn't be borrowing it from people who will freak out if the loan isn't paid back in a week.

On the investor side you'd put cash you really need in a non-interest bearing account, and the rest invested at a duration and risk level appropriate for your situation. For most people/organizations the details would be outsourced to a fund manager. On the borrower side, small stuff would get bundled and securitized, big stuff could trade on its own. The industry's already moving in that direction. Modern communication technology has so drastically changed the physical scale over which a marketplace can function I think it's reasonable to ask if we still need the banking smoke and mirrors sitting between borrowers and lenders.

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

#423

Post by aeternum »

tfehring wrote: post #181
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…

> 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. All major US banks - and all or virtually all US banks in general - have assets that are designated as held to maturity. Continuously marking all assets to market would create massive swings in banks' income and obscure the real gains and…

Assets designated as 'held to maturity' should simply be illegal for banks unless depositors also agree to never withdraw until maturity.

Banks are subject to daily reserve requirements, so everything they invest in should also be market priced (aka mark-to-market) each day.

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

#424

Post by jmholla »

givemeethekeys wrote: post #379
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.

> There are plenty of good technical boards out there

Do you have any recommendations?

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

#425

Post by yunwal »

fisherjeff wrote: post #417
yunwal wrote: post #382

Earlier quoted context omitted.

> This is not at all about risky investments 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 n…

It is not at all about risky investments! It’s about poorly managing risk, which is entirely different. The underlying instruments are among the lowest-risk securities on the planet, the risk that killed SVB was in the investment strategy .

You can call it whatever you want. They lobbied to not be subject to liquidity stress tests, and then didn’t have liquid assets when customers came looking for their money. That was risky. They could have invested in shorter term contracts but they didn’t.

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

#426

Post by yunwal »

rashkov wrote: post #411
yunwal wrote: post #118

Earlier quoted context omitted.

Depositors were getting gains (4.5% interest rate which is very high compared to similar banks, and for something that’s supposed to be risk-free). The reason these rates were achievable is because SVB lobbied to remove regulations and allow them to engage in risky behavior.

What specific risky behavior are you referring to? Everything I’ve read points to the fact that they bought a ton of long term US treasury bonds at a low interest rate. Obviously this worked out very poorly for them, but I wouldn’t call this risk seeking behavior.

SVB lobbied congress to not be subject to liquidity stress tests and got caught with their pants down. They didn’t have to buy 10 year bonds. They also didn’t have to buy volatile mortgage securities, which they did. They were obviously playing fast and loose with the rules (or making their own rules as they went).

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

#427

Post by yunwal »

_ktx2 wrote: post #399
yunwal wrote: post #263

Earlier quoted context omitted.

Libertarian is not just a political party. It’s a set of ideas and beliefs. VCs and founders in SV routinely espouse these beliefs and try to pull both major parties in their direction. There are plenty of communists out there voting for democrats but that doesn’t make them not communists.

> Libertarian is not just a political party. Libertarian - a political party libertarian - an ideology I'm pretty unwilling to say that both a journalist and yunwal don't understand capitalization.

Sometimes you capitalize words because they’re the first word in a sentence. What point are you making here?

The OP was

> While libertarian tendencies may be more prevalent in the VC community, they seem to still be a small minority

No caps. Please take your bad faith arguments elsewhere

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

#428

Post by [deleted] »

reducesuffering wrote: post #367
maxbond wrote: post #198

Earlier quoted context omitted.

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 substantia…

[deleted]

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

#429

Post by mixmastamyk »

mtlmtlmtlmtl wrote: post #355
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.

Socialism is not a great ideology if it's applied indiscriminately, but at least it has useful real world applications in some areas. Libertarianism on the other hand is hardly even an ideology, but based on the ill-conceived notion that if we purposely make no collective effort to have a better society, it will somehow magically fall into place for us. If libertarianism was a software project methodology, it would b…

> just lock a bunch of programmers into an office with some computers and let them fend for themselves.

Bad example. This is how just about every technical breakthrough in the industry has happened.

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

#430

Post by JohnFen »

initplus wrote: post #292
JohnFen wrote: post #189

Earlier quoted context omitted.

Splitting deposits isn't the only option and is often not the best one. There are a number of other solutions available, including buying your own insurance. FDIC insurance isn't the only insurance available (and isn't even intended primarily for businesses). It's just the free one.

There isn't enough money in the world to insure the bank deposits of every business. Think about how big insurers would have to be if they needed to insure all the deposits of every business. "Every business should have private deposit insurance" isn't the goal of regulators because it's not a workable solution. So instead the government acts as a sort of "insurer of last resort" by promising they will do everything…

> There isn't enough money in the world to insure the bank deposits of every business.

And yet, that is exactly how it's been done for a very, very long time.

There is, of course, enough money to insure all of the deposits, for the same reason there's enough money to insure all the buildings, all the ships, and so forth.

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