As someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?
FTX was simple fraud. This isn't really related and is more standard bank taking on wayy too much risk.
The collapse of SVB exposes the largest crack in the economy
51–60 of 311 posts
Re: The collapse of SVB exposes the largest crack in the economy
#52Earlier quoted context omitted.
The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…
I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?
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Re: The collapse of SVB exposes the largest crack in the economy
#53Earlier quoted context omitted.
Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper. We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only b…
Dunno if you’re being intentionally tongue in cheek, but a monkey jpeg startup is pretty lazy/scammy/bs-y
I believe it is a reference to the NFT craze.
So, yes to all 3.
Re: The collapse of SVB exposes the largest crack in the economy
#54SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…
The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
Please name one “banking innovation” the banking industry has implemented in the last decade which has benefitted consumers.
Re: The collapse of SVB exposes the largest crack in the economy
#55Earlier quoted context omitted.
The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…
I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?
It means that the bank was gambling, lost, and wants to externalize those losses onto the rest of us who weren't gambling.
Re: The collapse of SVB exposes the largest crack in the economy
#56Earlier quoted context omitted.
The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
So, you're essentially proposing a weaker, informal version of Basel III. In which case, why have such an exemption in the first place? What innovations does it lead to? Restrictions on banking typically exist for a _really_ good reason. After all, we saw what happened when retail and investment banking were allowed to mingle because it 'lead to [...] innovations'. If you're going to advocate for something beyond say…
Yes.
And the pace of innovation in US banking was very slow, essentially stalled, for a generation from the consumer's POV
Here in Aotearoa we have ATMs on every street corner since the 1980s. All but the tiniest traders have had pos electronic transactions for nearly thirty years
Other countries are even more advanced (our banks are all like yous now, consumers now viewed as pests)
I want innovation in customer services, but what we get is innovations in financial engineering.
May they all rot...
Re: The collapse of SVB exposes the largest crack in the economy
#57https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.
I don't use Twitter. The Tweets I see when I click this link are 80% political shitflinging from one side of US politics (even the replies to each one are 100% one-sided), and 20% non-political. Why?
Twitter attempts to manipulate your emotions by showing you controversial things to keep you looking at ads as long as possible, just like every other social media company.
Re: The collapse of SVB exposes the largest crack in the economy
#58Earlier quoted context omitted.
Yes, another way to think about this is that if you bought an .80 t-bill today it would have the return on investment equivalent to a 1.00 bill bought last year. That’s because the new t-bill has a much higher interest rate. So in effect, as the fed raises interest rates, they are destroying the principle of every existing bond on the market. That’s a big problem for anyone owning bonds, especially if they are using…
> they are destroying the principle of every existing bond on the market What principle are they destroying? Bonds are not, and never were, immune to economic changes. They're just less volatile and react differently than stocks and, if you hold them to maturity, will pay what what they promised. It seems to me that the problem is that a whole bunch of people made investments assuming that there was effectively no ri…
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Re: The collapse of SVB exposes the largest crack in the economy
#59So between the tech angle and the housing-related investment vehicles, are we remixing 2000 with 2008 now?
Self inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).
> The issue becomes when the fed suddenly raises rates faster than any time in their history
No. That is a fact. But it does not collapse properly run banks.
Re: The collapse of SVB exposes the largest crack in the economy
#60So between the tech angle and the housing-related investment vehicles, are we remixing 2000 with 2008 now?
Self inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).
Nobody forced SVB to buy up long bonds at negative real yields.