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Bank run on Silicon Valley Bank

techcrunch.com

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Re: Bank run on Silicon Valley Bank

#61

Post by FormerBandmate »

fallingknife wrote: post #57
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.

Every bank is screwed if everybody takes all their money out. And everybody already knows it.

If it becomes an internet meme/viral story however, which it looks like it’s becoming, they’re especially fucked. He should have never said this, this is very concerning

Re: Bank run on Silicon Valley Bank

#63

Post by ffggffggj »

recursivedoubts wrote: post #43
ianferrel wrote: post #28

Earlier quoted context omitted.

Does that provide a better outcome for society than something like FDIC deposit insurance and the occasional run? Seems like for the vast majority of people it does not. Most banks make enough money to pay their FDIC premiums and some interest on demand accounts and profit for their shareholders, and the few that don't are covered by insurance. That seems way better than having to pay a monthly fee to keep my money s…

Yes, it does. Lying is wrong[1]. Therefore, it is bad to base your banking system on it. It's the typical thing where the costs to the system accrete over time and then cause a crisis: the elites are bailed out, the taxpayers eat it. There wouldn't need to be a reserve ratio. A dollar could, in theory, be lent out an infinite number of times, so long as that dollar were lent (and saved) at increasingly shorter durati…

If you think fractional reserve banking is “lying” how are you okay with fiat money at all? If you were consistent you’d be a true goldbug.

Re: Bank run on Silicon Valley Bank

#64

Post by Terretta »

pera wrote: post #52
cdibona wrote: post #14

They're not allowing approval of wires via SMS or their app, and no one is picking up the phone there and most numbers are fast busy. Smells deeply bad. I had an account at a bank that went under a few decades ago and it took a while for ... bofa? to pick up the pieces.

Yeah sounds like textbook bank run or cryptocurrency exchange collapse, it's bizarre that this kind of things keep happening every few years.

It's bizarre a recurring thing recurs?

Particularly when 'venturing' into areas more profitable because of more risk?

Here's their loan risk analysis as of EOY:

https://i.imgur.com/ZWG157R.jpg

Don't miss 14% to "innovation economy influencers"…

Re: Bank run on Silicon Valley Bank

#66

Post by phphphphp »

anon291 wrote: post #19
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.

Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?

Sure, and everyone knows that their favourite person in the world could just run them over in a car and kill them in seconds, but if your best friend says to you, “you know, I could drive my car into you and you would die… your life could be snuffed out with a moments notice” you may start to question your friendship.

Re: Bank run on Silicon Valley Bank

#67

Post by WJW »

KirillPanov wrote: post #53
WJW wrote: post #42

Earlier quoted context omitted.

While that would obviously solve the (relatively minor, all things considered) problem of bank runs, the demand for long term loans is not nearly as large as the supply of long term money. Maturity transformation provides real value to the economy by consolidating short term deposits into things like mortgages and long term business loans. Imagine if you could only get 3-year mortgages, after which the entire cost of…

> the demand for long term loans is not nearly as large as the supply of long term money. It is when the loans are priced correctly. This is a clear and obvious sign that the price of long term loans is wrong.

Perhaps in a pure market sense, but that's not the world we live in. The government (doesn't really matter where you live) has a vested interest in the status quo and wants people to make long term investments. That is good for both societal stability and for longer term economic growth. Therefore, such a government will support financial institutions in providing long term loans even if that sometimes leads to bank runs. Things like FDIC and related systems in other countries make sure the risk gets smoothed out over all participants in the economy.

My point is that when you take the view from the wider society, the price of long term loans should be (nearly) independent from the chance of bank runs. Those are only a problem for the shareholders of the bank itself, but not to the society it resides in.

Re: Bank run on Silicon Valley Bank

#69

Post by frellus »

recursivedoubts wrote: post #21

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…

> telling two or more people they own the same dollar

This is the main issue, and it's called a "reserve requirement", which is a percentage of the deposits that the bank must keep on hand to mitigate risk of issues like this.

https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...

In March 2020 the US Federal Reserve lowered it from 8% to 0%, which is where it is today. Just to give you an idea of how the economy works then, let's say you put $100 into your account at Bank A. Company X takes a loan from the bank for $100. Where do they put their money from the loan? Well, they spend most of it but part of it ends up in, let's say, Bank B. Bank B then takes that money and loans it out 100% to Company Y, who spends some of it and also puts some reserve into their bank account in Bank A. Which lends it out 100%.

So this is an over-simplified example but just to give a visual that this is where inflation is coming from. The "government" isn't printing money -- the banks are. It's a deck of cards with no safety net.

Watch the movie "The Big Short" and tell me how this isn't the same situation.

source: I am also a lot of fun at parties

Re: Bank run on Silicon Valley Bank

#70

Post by toast0 »

WJW wrote: post #42
recursivedoubts wrote: post #21

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…

While that would obviously solve the (relatively minor, all things considered) problem of bank runs, the demand for long term loans is not nearly as large as the supply of long term money. Maturity transformation provides real value to the economy by consolidating short term deposits into things like mortgages and long term business loans. Imagine if you could only get 3-year mortgages, after which the entire cost of…

> Imagine if you could only get 3-year mortgages, after which the entire cost of the house had to be repaid. That would make home ownership unattainable for the vast majority of the population. Alternatively, if you could not access your savings for 10-30 years after depositing I bet a lot of people would not bother at all.

Adding on...

Balloon mortgages exist, although they're usually not very convenient though, because transaction costs are real and the risk of being unable to find acceptable finance terms when the balloon payment is due is also real.

Similarly, lots of people participate in retirement accounts with substantial fees for early access. I guess you could do mortgage lending from retirement funds, but the interest rates aren't compelling (they might be if that was the only source of long term lending though).

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