441–450 of 889 posts
Earlier quoted context omitted.
My anecdotal experience is jokes/poorly supported takes get downvotes. If you want to get flagged, the best way to do that is to make an irrefutable strong argument that ruffles political or economic feathers of a popular ideology on HN. There's nothing that enrages people here more than an unpopular but sound argumen they don't like, so they flag it to make it go away. If they can quickly disprove you or make you to…
Please link examples.
Earlier quoted context omitted.
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 $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. That's akin to saying my house won't burn down because I have insurance. Don't underestimate the stupidity of large crowds of people.
This "don't underestimate the stupidity..." might feel like a clever or wise speech to give, but history suggests the FDIC has been incredibly successful at reducing bank runs. Insert "those who don't learn history...." speech here.
Earlier quoted context omitted.
So did Louisiana banks issue loans?
How could they issue loans? 10 x 10$ 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 d…
10 people put $10 in your bank. You give someone a loan for $50 and leave $50 in the vault. 7 of your customers take $10 out, you are screwed.
Earlier quoted context omitted.
They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can be akin to the nuclear option)
FTX's actions have nothing to do with what is happening with SVB, it's not even close. Why make a bad parallel?
Earlier quoted context omitted.
respectfully, I'm not so sure. The decline in bonds applies to all fixed-rate securities. The only alternatives would have been just straight up cash (bad with inflation) or riskier, less-liquid assets (non-tradable loans with floating rates, for example). They are limited on the latter by risk weighting, and I'm not sure having looser risk controls on the asset side would really help confidence in the banking sector…
Could they instead hold short-term treasuries (as short as 4 weeks, I believe) and refuse to honor large withdraws until they mature?
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.
“The requirement that the defendant act with the intent to deprive the owner of his property makes embezzlement a specific intent crime.”
Meaning your safe as long as your intent is not to steal the money.
But if your concerned definitely ask your lawyer. (Accountant won’t be able to provide that sort of legal advice)
Earlier quoted context omitted.
> 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'…
Why would customers be pulling deposits unless you are offering lower than market interest rate? If T-bills are 3%, they can pay depositors 2% now and so whatever condition kept the customers there at -1% risk premium would still keep them there. No run on the bank. And given they are T-bills, duration is minimal, so $1000 might be worth $990 even before coupons. Whoop-de-doo! There would only be a problem if the ban…
Any number of reasons, particularly if all your customers are in the same industry. If you're "Silicon Valley Bank" and there's a downturn in Silicon Valley, well, here you are.
Earlier quoted context omitted.
This pre-supposes a pretty radical (yet normalized nowadays) economic philosophy: that growth per se is good. A more nuanced approach would be to value and triage lending opportunities according to how much they contribute to the heating up of the economy, and how much opportunity for future sustainability they provide.
I'll ask then. What happens to an organism when it stops growing? It's an exponential process and there are really only 2 states except for an infinitesimally small space between.
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.
> 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. True, but isn't it possible that if he omitted this clarification, his statement about "ample liquidity" could be on shaky ground, from a legal perspective?
You can lie, and say everything is great. If enough people believe you, your bank is safe and you live happily ever after. If they don't believe you and pull their money, then you committed fraud and will go to court.
Or you can tell the truth, and say everything will not be great if everyone pulls their money. Then people will definitely pull their money. You will be sad, because your employer has turned into a smoldering crater and your equity is worth zero, and everyone will blame the bank run on you, but you are probably legally safe.
I think the only real thing you can do is make sure no one with credibility ever asks you if you are solvent. That is hard to avoid though, if you are a bank and you have to raise money by selling equity.