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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#431

Post by oa335 »

airstrike wrote: post #415
oa335 wrote: post #381

Earlier quoted context omitted.

This is incorrect, in standard macroeconomics, credit theoretically has no effect on the long term growth rate of an economy. The only thing that grows an economy are increases in worker productivity, theoretically driven be technological advancement. See https://www.stlouisfed.org/on-the-economy/2015/june/what-dri... Loans are just move the money around and create “business cycles” of booms and busts. Which in my op…

I'd say that's a crude reductionist view. See https://www.jstor.org/stable/2118406 to name one paper but there's tons of research on the link between capital markets and economic growth

What part of that crude or reductionist? Technological progress being the sole driver of growth is the dominant view in macroeconomics. Even the paper you link attests to that.

Re: Bank run on Silicon Valley Bank

#432

Post by selimthegrim »

brutusborn wrote: post #349
sanderjd wrote: post #304

Earlier quoted context omitted.

This is so misguided. Just raising interest rates by a few points has resulted in many thousands of people losing their livelihoods in under a year, because companies could no longer justify taking out loans. What you're suggesting is eliminating loans altogether . This is a fun dorm room thought experiment, but it's not even hyperbolic to say that if it were actually pursued, it would result in a huge number of deat…

Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.

I look forward to your interview with the Taliban finance ministry and Afghan central bank - let us know how they’re doing

Re: Bank run on Silicon Valley Bank

#433

Post by regpertom »

wbl wrote: post #396
freddie_mercury wrote: post #389

Earlier quoted context omitted.

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…

So did Louisiana banks issue loans?

How could they issue loans? 10 x 10$ deposits means you can loan 100$? Where as the modern way is more like 100$ in deposits means you can lend out 1000$ because chances are everyone won’t not pay it back? And then can’t you say that since you’ve lent out 1000$ and chances are you’ll get paid back, you’ve basically got 1104.56$ and so can lend out 10k$? And then you bundle those together and sell them to each other depending on what ratio of income to cash you want?

Apologies if no one was meant to answer that.

Re: Bank run on Silicon Valley Bank

#434

Post by AustinDev »

bink wrote: post #189
mmastrac wrote: post #168

SVB was historically such a weird bank - it was the most "famous" tech bank, perhaps solely because of its name - but yet it was so utterly behind in the technology it used for _years_.

Behind other banks or behind tech companies? Every bank I've ever used is about 10 years behind when it comes to tech.

USAA is and has always been leaps and bounds ahead of other banks in terms of tech.

Re: Bank run on Silicon Valley Bank

#435

Post by HFguy »

ticviking wrote: post #93
chollida1 wrote: post #82

Earlier quoted context omitted.

I assume you are trolling, but in case you are not. How would you provide loans to help get businesses started? How would you provide loans to people to buy their first homes? How would you provide loans so people can afford to go to school? How would you provide loans to buy a vehicle so people can get to/from their job before they get a paycheck? How would farmers afford to buy land, equipment and plant crops befor…

Savings. Frugality. Only consuming what we can actually afford. Investment with real skin in the game. If you have to take on much higher risk to get returns we will find ourselves being more careful about those returns actually happening.

How would you pay for university? How would you buy a house? How would a company build a factory?

Re: Bank run on Silicon Valley Bank

#436

Post by dgacmu »

helsontaveras18 wrote: post #77
ericpauley wrote: post #58

I'm really curious why banks like this are popular in the first place. I get why startups would want to lend from them, but what is the advantage of parking cash in a "startup-focused" bank? The rest of the business is exciting/risky enough, wouldn't you want your banking to be as boring as possible?

Banks don't understand startups. Startups have no history and just appear out of thin air with millions of dollars in their bank account. And then they proceed to burn tens if not hundreds of thousands of dollars month on month until they die, or get flooded with more millions. That's some weird stuff!! A bank that understands this, knows it's not fraudulent, and makes it easy to withdraw, deposit, get credit cards,…

+this. We had BoA offer us a $10k credit card limit when we were discussing keeping over $1m on deposit at all times, simply because we're still running a loss. (And they couldn't figure out how to implement two party control for large transfers). Was a headache.

We stayed with SVB.

Re: Bank run on Silicon Valley Bank

#437

Post by selimthegrim »

njarboe wrote: post #132
WJW wrote: post #80

Earlier quoted context omitted.

Thing is, I want to start a business but need several hundred thousand USD in machinery. Lathes or bakery ovens are not free after all. I don't have that right now, and if I need to save up for several decades the opportunity will have passed. How do I convince people to lend me money without any interest? You can replace "want to start a business" with "want to buy a house" if you prefer.

If 30 year housing loans were not available, housing would be a lot cheaper.

Canada would like a word.

Re: Bank run on Silicon Valley Bank

#438

Post by Narkov »

wbl wrote: post #398
Narkov wrote: post #338

Earlier quoted context omitted.

> 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.

No FDIC insured account has ever lost a penny, despite bank failures happening.

I don't disagree with you. Bank runs can still happen even with the (successful) FDIC backstop.

Re: Bank run on Silicon Valley Bank

#439

Post by rabidonrails »

cj wrote: post #400

I just received an email from one of our investors, sent to all portfolio companies, advising everyone to transfer all of their money out of SVB at 8:30am tomorrow morning. 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 sal…

Maybe you'd say it's worth the risk, but founders should be very careful about making transfers from accounts owned by their business to their personal accounts because this is literally the definition of embezzlement. I'd speak to your accountant and get their blessing first.

Re: Bank run on Silicon Valley Bank

#440

Post by nradov »

RC_ITR wrote: post #364
nradov wrote: post #358

Earlier quoted context omitted.

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…

No, you missed the point and that's not what I'm assuming. What you're stating is still not really actionable. Like what else specifically should he have said?
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