521–530 of 889 posts
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This is literally the definition of fractional reserve banking, used by almost every bank worldwide.
Maybe the whole economic system just isn't viable, as we've seen time and time again?
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…
But why? Because everyone else is doing it? Is this a power play by another bank? Is there an actual structural problem at SVB?
So, in cases where you think this is a risk, it's best to move swiftly.
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Maybe the whole economic system just isn't viable, as we've seen time and time again?
Citation needed. Also, I’m all ears for a viable replacement that doesn’t devolve into autocracy or government-endorsed corruption, and still allows for taking risk and forward progress.
https://en.wikipedia.org/wiki/Great_Recession
Here's some citation for ya.
As for viable replacements that allow for forward progress: https://en.wikipedia.org/wiki/Workers%27_self-management
(Also, for that matter, it's not like capitalism doesn't tend to devolve into autocracy and corruption)
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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,…
I feel like this is unlikely. Startups didn't spring into existence in 2005. Every business was a startup at one point. Even venture capital isn't new. I'd wager every suit and tie wall st old guard firm knows how to handle startups just fine. SVB just had the right branding for young entrepreneurs who assumed JP Morgan wouldn't talk to them.
Daily reminder that bank runs wouldn't be a thing if we did duration matching, forbidding banks from borrowing short and lending long. As always, the underlying problem in banking is that the banks are lying, telling two or more people they own the same dollar at the same point in time. If they locked deposits for a period of time they could safely (and morally) loan that money out without lying, and, in fact, there…
I don’t really understand what you mean. Isn’t ‘in the business of borrowing short-term and lending long-term’ like half the definition of a bank? The other half being that they are licensed by the state to do this short-term borrowing, get state guarantees for deposits, and have to follow a bunch of regulations making them almost an instrument of the state. It feels to me like saying that evictions wouldn’t be a thi…
https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
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Today, Credit Suisse delayed its 2022 report after the last minute call from SEC: https://www.cnbc.com/2023/03/09/credit-suisse-to-delay-its-2... I don't know what to make of it.
Credit suisse has been on the rocks for a year
Compare their numbers to any other investment bank.
https://www.macrotrends.net/stocks/charts/CS/credit-suisse-g...
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.
Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” It seems that CEOs of banks haven't learned anything since 1873 when this was observed.
I Don't think you can make that call for all CEO's of Banks 1873.
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Nah, especially among older folks, 100K+ in a bank account is fairly common. My mom does, my grandmother did, my stepmother does, and trust me none of these folks are 1%ers or even close.
Huh. Well, I'm surprised. $100k in a bank account is earning next to nothing, and is probably (opportunity) costing at least $5k/year. I would have assumed that people that can afford not to care about that would be in the highest tiers of wealth.
Plus, their situations are different from a typical younger person today. All of the folks in my family who keep large amounts of cash in their checking account are mostly not relying their own savings to live. They all have pensions and social security, they're not pulling from an IRA at this point. They've never had the habit of directly investing in their own retirement.
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You're right, but that doesn't necessarily make it a good thing. As a consumer (or a business client in the case of SVB), how does it benefit you that the bank doesn't simply hold your deposits in a figurative safe somewhere? At a minimum, I wish I could say it benefits us by banking being free. Lending could be opt-in. There could exist banks who charge a premium for simply being the custodian of your money. (These…
Loans are what drive the economy. I’ve used loans for cars and my home, as have most people in the country. Many people make decisions based on income, and not on cash they already have, as few people have massive accumulated cash wealth. Loans are not always a bad thing.
If someone misjudges the value, volatility, etc, of collateral used for loans, those loans could be a bad thing if the borrower stops paying.
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.
Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” It seems that CEOs of banks haven't learned anything since 1873 when this was observed.