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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

#451

Post by JumpCrisscross »

fisherjeff wrote: post #149
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?

I mean, it’s a balancing act, right? If you plan to be able to accommodate 20% redemption in a single day , you’re left with a portfolio maturity of 5 days. You will be almost unavoidably marked to market but your yield, even when rates are high, is going to be roughly zero and you’re going out of business anyway.

> your yield, even when rates are high, is going to be roughly zero and you’re going out of business anyway

Plenty of banks compete on benefits other than yield.

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

#452

Post by MrMan »

elzbardico wrote: post #11

The author ignores that behind the downfall of SVB was a climate of excess liquidity on the markets, a bonanza created by the authorities that made SVB see itself with a glut of funds. Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. Someone could argue that they could have foreseen that this abundance of liquidity in the markets, alon…

this is a lie, you are trying to deflect blame on to the Fed to cover for the incompetence of the VCs their companies and the SVB bank. and the upvotes show how all your stupid peers in the tech world would rather tell themselves these lies than face up to their collective ignorance and hubris.

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

#453

Post by MrMan »

selectodude wrote: post #341
tripletao wrote: post #333

Earlier quoted context omitted.

The depositors are getting 100% of their money now because the FDIC has guaranteed all deposits, including deposits in excess of the usual $250k limit. Any shortfall will be socialized among all participating banks. The SVB's shareholders didn't get bailed out, but their depositors absolutely just did. https://www.federalreserve.gov/newsevents/pressreleases/mone... If the SVB had been forced to recognize its loss soo…

The depositors are getting 100% of their money because the fed is lending against their assets at par. [1] The FDIC can be confident that they'll be able to make everybody whole because their assets exceed their liabilities. The Fed is going to hold the assets to maturity and get paid back by the Federal Government. "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a speci…

the assets certainly do not exceed their liabilities. stop spreading this lie!

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

#454

Post by MrMan »

fnordpiglet wrote: post #93
swatcoder wrote: post #54

Earlier quoted context omitted.

You say it takes a run, but all it really takes is an aggregate change in deposit behavior. Like, for instance, your disproportionate share of startup clients easing off the cheap loans you had been offering them, because they’re no longer so cheap, and instead drawing down on (or moving) the balances that you had insisted they keep with you as collateral. Trouble was brewing on both sides of the business, not just o…

That’s what led up to the need to create more liquidity. The run happened after that when depositors spooked and drew down faster than the bank could liquidate assets. They were never, even MTM, under water. They just couldn’t raise enough cash in a single day to pay out all the withdrawals. But the cause of the run is the suspicious part to my mind. It feels orchestrated, and I have heard rumblings that Theils found…

this is a lie - they were insolvent and their assets were worth less than their liabilities.

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

#455

Post by MrMan »

fnordpiglet wrote: post #108
ralph84 wrote: post #47

Earlier quoted context omitted.

Why hedge when we privatize the profits and socialize the losses? SVB execs sold tens of $millions in stock before the failure. Are the execs going to be forced to return the compensation they received for showing higher profits by not hedging?

Yes. It’s called clawback provisions. They were summarily fired and their compensation was clawed back. And how are the losses being socialized? The assets of the bank are collateralizing the lines of credit they’re getting to stay solvent. It won’t cost anyone a thin penny, other than bank management and shareholders.

it will directly cost all of us, except those who have no bank account. its unsustainable and wrong.

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

#456

Post by neilwilson »

elzbardico wrote: post #11

The author ignores that behind the downfall of SVB was a climate of excess liquidity on the markets, a bonanza created by the authorities that made SVB see itself with a glut of funds. Now, SVB, loaded with money, could have tried loaning it like crazy, but instead, decided to go the conservative way and buy bonds. Someone could argue that they could have foreseen that this abundance of liquidity in the markets, alon…

"Now, SVB, loaded with money, could have tried loaning it like crazy"

It couldn't because that's not how banks works. Banks create deposits by making loans.

When external deposits show up, they show up with the equivalent loan already - to the central bank in the shape of banking reserves.

What SVB did, foolishly, was to do a floating to fixed exchange at probably the worst possible time and at too high a price.

Once a bank's income drops below that required to fulfil its cash letter with the Fed (ie pay the rate of the lender of last resort), it is finished. Hence the FDIC resolution once the cheap money went out the door.

Vulnerability to a bank run comes from not being able to pay the going rate at the Fed.

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

#458

Post by mtlmtlmtlmtl »

mixmastamyk wrote: post #429
mtlmtlmtlmtl wrote: post #355

Earlier quoted context omitted.

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.

Right I forgot to mention all of the programmers have to be sociopaths with no common goal whatsoever.

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

#459

Post by TuringNYC »

yunwal wrote: post #393
TuringNYC wrote: post #225

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. Once the losses on their bonds approached the totality of the SVB equity tier, they should have either accepted the loss, or they should have hedged it away (with an interest rate swap, and locked in a loss.) At that point they would have had…

> This is not the customers/depositors' fault. To be clear, it's not the customers' fault, but they also shouldn't expect FDIC insurance to cover any of their deposits beyond $250k. Whatever happens to their personal money is their responsibility

>> To be clear, it's not the customers' fault, but they also shouldn't expect FDIC insurance to cover any of their deposits beyond $250k. Whatever happens to their personal money is their responsibility

Note that many customers had their excess funds not in bank deposits, but in US treasury bills / short term bonds via a Money Market Sweep Account. Except it turned out the assets of the MM account were not in their name but in SVB's name via a custodial account, and hence is locked up, and would have been locked up in bankruptcy.

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

#460

Post by DrThunder »

ryan_lane wrote: post #434
DrThunder wrote: post #339

Earlier quoted context omitted.

This is the same reason communism doesn't work. "Oh the people will control everything!" Except humans always give someone power... and that power will want more power if you allow it, until you end up in a terrible spot. The trick is to not let any one big group have too much power. It is not possible to create a society without groups taking charge and without those groups vying for power. One thing Libertarians ha…

> One thing Libertarians have right, is the idea that many government services are out of control with spending and not doing anything to actually help the people they supposedly serve. How many of those services were purposely broken by libertarians, so that they could be targeted for privatization? I've worked in government, and have yet to see a service run more efficiently or cheaper after it's been privatized. T…

"How many of those services were purposely broken by libertarians,"

Umm none? I don't recall a Libertarian ever being in power.

"When something is privatized, it's usually given a monopoly via bid."

Yes, a bid from the government....

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