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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#561

Post by dang »

FactKnower69 wrote: post #558
dang wrote: post #492

Earlier quoted context omitted.

Please don't post flamebait and/or unsubstantive comments to HN. We're trying for something different here. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful. (We detached this subthread from https://news.ycombinator.com/item?id=35087135 .)

What exactly is the substance of this post you've just made? Just attacking the parent with no argument?

Perhaps I should have spelled out the argument more explicitly: taking this thread on the generic flamewar tangent of "lending is evil" is so off-topic and so inflammatory as to be trollish in effect if not in intent. It's exactly the thing the site guidelines ask commenters not to do here - note this from https://news.ycombinator.com/newsguidelines.html:

"Eschew flamebait. Avoid generic tangents."

But you have a good point anyhow: moderation responses are tedious, repetitive, and mostly uninteresting, so in that sense there isn't a lot of substance in what I posted. However, at a meta level they're signals to the community (not just the commenter being replied to) about the kind of culture we want here, and in that way they're important.

In case it helps at all, moderation comments are even more tedious to write than they are to read (https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...). Unfortunately, I don't know how to preserve this forum for its intended purpose without posting a lot of them. They're neither on topic nor interesting; rather, they're an out-of-band feedback mechanism without which the system would rapidly degrade (https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...). That's the theory, at least.

It's a pity that the system can't self-regulate. If we could get by with just community mechanisms (like upvotes and flagging) plus software, that would be awesome. Then I could just work on the code! Unfortunately, it doesn't work that way—there needs to be humans in the loop to jig the system out of its failure modes. So for better or worse you're stuck with this kind of thing.

Re: Bank run on Silicon Valley Bank

#562

Post by nonethewiser »

dublinben wrote: post #176
rippercushions wrote: post #15

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.

> “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.”

Is that terribly worded or is it just me? I figure it’s supposed to be poetic but I find it tedious. I think it could be simplified like this:

“A banker who argues his creditworthiness has none.”

I realize it’s a quote but holy shit.

Re: Bank run on Silicon Valley Bank

#563

Post by kragen »

kentonv wrote: post #375
ericpauley wrote: post #58

I'm really curious why banks like this are popular in the first place. I get why startups would want to lend from them, but what is the advantage of parking cash in a "startup-focused" bank? The rest of the business is exciting/risky enough, wouldn't you want your banking to be as boring as possible?

To add to the other comments, SVB also courts startup founders for their private banking arm, and there, too, the benefit is that they actually understand startup founders. Example: After our startup went up in flames in 2017 my wife and I (co-founders) got "regular jobs" with nice salaries. Some time later, we tried to refinance our mortgage with Chase. The banker at Chase was very happy to serve us right up until t…

interesting, i didn't realize sandstorm.io had gone up in flames; that explains why i don't hear much about it any more

Re: Bank run on Silicon Valley Bank

#565

Post by thehumanmeat »

cs702 wrote: post #103

In theory, a bank can borrow reserves from/via the Fed to fulfill redemption requests, so long as the Fed and other lenders in the financial system think the bank has a sound balance sheet (i.e., its assets, including the loans it has made, are truly worth more than its liabilities, including the deposit balances it owes to depositors). The Fed can never run out of money to lend; it creates it out of thin air to lend…

Tell me, when is the last time you went to the grocery store and they accepted a bank reserve? Bank reserves are useless.

https://en.wikipedia.org/wiki/Eurodollar

Re: Bank run on Silicon Valley Bank

#566

Post by nonethewiser »

xur17 wrote: post #501
tootie wrote: post #497

Earlier quoted context omitted.

But why? Because everyone else is doing it? Is this a power play by another bank? Is there an actual structural problem at SVB?

Tbh, yes - a bank run by definition occurs if "everyone else is doing it", and in this case it sure seems like we're moving in that direction. And it's beneficial to be the first out, with no real benefit to waiting and seeing.

But what started it?

Re: Bank run on Silicon Valley Bank

#567

Post by danielmarkbruce »

notch898a wrote: post #557
trogdor wrote: post #399

Earlier quoted context omitted.

>The FDIC insures deposits up to $250k Per depositor, per insured bank, per account category. It’s not that difficult to keep significant excess deposits insured.

... until you find out the FDIC itself has a weak reserve ratio against their insured accounts, meaning they will be as broke as everybody else in a systemic banking failure.

They've been around almost 100 years now... They went through 2008. The reserve ratio seems low, but when you consider the likely asset coverage for the first ranking creditors across the entire industry, the FDIC doesn't need to cover much.

Re: Bank run on Silicon Valley Bank

#568

Post by ulfw »

nonethewiser wrote: post #562
dublinben wrote: post #176

Earlier quoted context omitted.

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.

> “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.” Is that terribly worded or is it just me? I figure it’s supposed to be poetic but I find it tedious. I think it could be simplified like this: “A banker who argues his creditworthiness has none.” I realize it’s a quote but holy shit.

Do you realize people spoke differently 150 years ago than they speak today?

Re: Bank run on Silicon Valley Bank

#569

Post by subroutine »

diordiderot wrote: post #248
subroutine wrote: post #224

Earlier quoted context omitted.

Can't be cheaper than the materials and labor costs to build it. If house prices get too cheap house builders / contractors will stop building. This will pinch supply and keep house prices high enough that only cash rich (corps and banks) can afford them. Most people will have no choice but to rent indefinitely. Those who manage to save up some $400k may finally afford to buy a house just in time for retirement.

But if house prices (and therefore rents) go down, people will need lower salaries for an equally comfortable life, pushing labour costs down, making housing cheaper. Man economics is easy

Why would rent go down if a large part of the market is owned by a monolith (banks/institutional investors) who can impose price control? This is already slowly happening. Also the median price of rent in a market is not so much a function of house ticket prices, but rather house affordability. A $400k house in a cash-only market is not more affordable than a $600k house in a market with loans. That is, in a cash market, few people will be able to say ya know, with these rent prices it actually makes more sense to buy than rent - let's go buy a house in full with cash.

That all said, I'm not trying to be a lending market lobbyist. I personally avoid borrowing whenever possible, and don't even have a credit card. My contention is simply that current lending practices are the cause a lot of societal issues, but if lending did not exist whatsoever things would be substantially worse.

Re: Bank run on Silicon Valley Bank

#570

Post by nonethewiser »

Animats wrote: post #536

This is what a US bank failure looks like.[1] This 2009 picture shows the CEO of a failed bank near Chicago at the moment the 80-person FDIC team has arrived to take over. He's being told that it is no longer his bank. The bank re-opened for withdrawals the next day under FDIC control, and was later sold off to another bank. [1] https://i.postimg.cc/zGQNQmmf/bankfailed.jpg

What impression is this picture supposed to make? It doesn’t seem interesting nor adds anything.
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