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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

#461

Post by pnt12 »

ihateyouall123 wrote: post #365
nerdponx wrote: post #222

Earlier quoted context omitted.

It nearly killed billions of dollars in real value and required untold thousands of taxpayer-funded employees working through the weekend to unfuck the situation. If I drive recklessly, I am still guilty of reckless driving even though I didn't hit anyone or anything.

[flagged]

This reminds me of that dumb meme: "you criticize society, and yet you participate in it... Interesting".

In a capitalistic system, money is power, and messing with it has serious consequences.

I'd rather be punched in the face than have all my savings drained, for example (as long as it's not Mike Tyson doing the punching).

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

#462

Post by pg314 »

shagie wrote: post #194
pg314 wrote: post #163

Earlier quoted context omitted.

> The bonds are worth exactly what they thought they'd be worth if held. That's wrong. A 10 year treasury bond with a .60% you bought in august 2020 is now worth significantly less. Whether you hold it or not is irrelevant. If you disagree, I'm willing to give you one, if you give me a 7 year treasury bond at the current interest rate of 3.86%.

Has the amount that it pays when it reaches maturity changed? The yield curve has gone negative - the shorter term bonds are worth more than the longer term ones (and certainly the longer term ones bought back in 2021). And if you were trying to sell me a 10 year note at 0.6% I'd want a serious discount because even your 7 year note at 3.86%, I can do better with a 3 month note at 4.794% or a 6 month note at 5.086%.…

> The amount it will pay at maturity remains unchanged and in 10 years it will be worth exactly the same no matter what the financial history that brought it to that point was.

Wrong. You're forgetting about inflation. Interest rates increased because inflation spiked. In 2022 alone, that nominal payout at maturity has lost 8% of its real value.

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

#463

Post by enaaem »

yunwal wrote: post #193
fisherjeff wrote: post #149

Earlier quoted context omitted.

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.

If your customers actions are all highly correlated, you need to be planning for things like this. The fact that having your whole customer base in a single group chat is a bad business model for a bank should not be the taxpayers’ problem.

Compared to other banks they also have relatively few customers with very high deposit each.

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

#464

Post by norswap »

trilobyte wrote: post #253
tfehring wrote: post #181

Earlier quoted context omitted.

> 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…

Any investment strategy will require addressing various forms of risk and making tradeoffs, but it is a choice. SVB did not properly hedge against this risk which, as soon as interest rates started rising, should have been a priority for their leadership to have a plan to address.

Could they have done better? Sure. Hindsight is 20/20.

Would it have been a reasonable assumption? No. As pointed out in the parent, every bank pretty much works like this, they're all liable to go under in the presence of a big enough run.

Also if it must have been so obvious to them, it probably should have been obvious to the regulatory agencies in charge of monitoring banks and avoiding exactly these situations, as well as the Fed who set the policies leading to this in the first place.

It just wasn't part of anyone's threat model.

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

#465

Post by enaaem »

tracker1 wrote: post #262
nerdponx wrote: post #215

Earlier quoted context omitted.

And to the original point about libertarians, this would only ever not happen in the face of regulation.

As a libertarian, I'm perfectly fine with letting a business fail, and holding the management and board to personally account/liability for their actions.

The issue with that is that there’s often no adequate compensation for damages done. Individuals can get extraordinary rewards for high risk behaviour and positive tail outcomes but there is a limit how much you can take from them in case of a catastrophic (societal) outcome. Regulation is really the only way manage this asymmetry.

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

#466

Post by tracker1 »

colinsane wrote: post #338
tracker1 wrote: post #285

Earlier quoted context omitted.

I think that government should exist to implicitly ensure essential infrastructure. What is essential is up for debate, but generally can include, common defense, upholding contract law and enabling transportation, trade and commerce. In this day and age, I think internet, telephone and radio communications would be included as well. Anarchists will often identify as Libertarians, as there are also left-leaning Liber…

> Anarchists will often identify as Libertarians, as there are also left-leaning Libertarians that I don't really get as well. of the anarchists i’ve met i have yet to hear any accept the label of “Libertarian”. most of the handful i know used to be Libertarian but then passed through that into anarchism as they chased some ideal of rights/freedoms that turned out to be incompatible with the Libertarian views toward…

Yeah... I'm moderately active in some Libertarian groups, so do see a lot of left-libertarian and anarchist views, though I don't quite share them... I'm probably a bit more conservative/statist than a "pure" libertarian, again on the point of pragmatism. But I do believe we've become so statist, and I feel propping up corporations is an extension of the state, not limited because of it (executive/board liability especially).

I just feel there's plenty of room for closer to libertarian solutions without expanding govt, and in some cases actually reverting to prior state in terms of dealing with certain issues. The lack of accountability is probably the single biggest issue I've seen in the past few years. The lack of limits on patents and production around patent protection, extension and licensing is also very concerning.

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

#468

Post by spiralx »

relaxing wrote: post #378
lotsofpulp wrote: post #373

Earlier quoted context omitted.

Depositors who want to earn interest.

But… that’s a bank…

He's correct in that you'd get a loan or mortgage from a bank still, but incorrect that banks lend out deposits though - a bank loan directly creates new money, so if everyone was using a CBDC and had their money kept in their digital wallet you would no longer need a bank account for storing money, but the only thing that would change about getting a mortgage is that repayments would come from your wallet, not your bank account.

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

#469

Post by fisherjeff »

JumpCrisscross wrote: post #451
fisherjeff wrote: post #149

Earlier quoted context omitted.

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.

My point was more that if the bank’s yield on assets is zero-ish, their net interest income will be <= 0 and they will run out of money

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

#470

Post by anon291 »

kevingadd wrote: post #360
anon291 wrote: post #316

Earlier quoted context omitted.

Okay well banks are not owed existence. If the banks went out of business give the deposit holders the choice of holding the underlying assets or the choice of selling them on the market. If you held the same portfolio as the bond, you too would not be able to withdraw at full face value. You are believing a lie if you think a ten million dollar deposit can be immediately withdrawn anywhere in its entirety.

Startups were in fact able to withdraw large amounts of money from SVB. That's why it collapsed, they did this to the tune of 42 billion, and lots of the pending transfers completed.

In my book, having your bank fail when you withdraw large amounts of money is an equivalent statement to 'you cannot withdraw large amounts of money from your bank'.
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