671–680 of 889 posts
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.
Banks even at their simplest "Main Street local level", need to keep, say, 15% or 20% of their deposited funds available, as determined centrally e.g. the Fed or the Bank of England.
The rest by design is to be lent out, that's how banks offer loans, mortgages etc.
So "we can't immediately return 40% or 60% or 80% of deposits" really isn't any kind of gotcha or big secret. No bank in the world can handle such a situation.
So: runs can and do happen, and are always a threat, and currently might be happening.
The question is: how to handle it in a grown up manner.
Earlier quoted context omitted.
It's really amazing that both Thatcher and Reagan came to power at around the same time, delivered such fabulous witticisms, and caused very similar societal harm.
UK before Tatcher was a depressed society with stagflation, rising crimes, crumbling infrastructure; that couldn't even clean its own streets. It was a society completely hamstrung by old unions that would happily collapse the economy in face of global competition, as long as their jobs gave the same pay - nominally. Thatcher won two landslide re-elections for a reason.
Just to be clear for everyone: banks don't keep 100% deposits in a big vault, where a full-customer-withdrawal can and should be expected and permitted. Banks even at their simplest "Main Street local level", need to keep, say, 15% or 20% of their deposited funds available, as determined centrally e.g. the Fed or the Bank of England. The rest by design is to be lent out, that's how banks offer loans, mortgages etc. S…
Shares just fell 60%, not this year, but today, which is the biggest drop I can think of. This is after a $1.25B common stock offering in an attempt to shore up its cash reserves. Keep in mind they are raising cash by selling equity with their shares at $100 when they were at $500 a less than a year ago. That's pawn shop levels of selling. To say they are in trouble is like saying it would be tough to sell a house th…
That conjecture seems wrong. Sure, 2% 30-y treasuries dropped a lot in value, but you still can easily liquidate them.
Earlier quoted context omitted.
UK before Tatcher was a depressed society with stagflation, rising crimes, crumbling infrastructure; that couldn't even clean its own streets. It was a society completely hamstrung by old unions that would happily collapse the economy in face of global competition, as long as their jobs gave the same pay - nominally. Thatcher won two landslide re-elections for a reason.
> Thatcher won two landslide re-elections for a reason. Arguably the reason was the war, not domestic policy [0] [0] https://history.com/news/margaret-thatcher-falklands-war
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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.
Just to be clear for everyone: banks don't keep 100% deposits in a big vault, where a full-customer-withdrawal can and should be expected and permitted. Banks even at their simplest "Main Street local level", need to keep, say, 15% or 20% of their deposited funds available, as determined centrally e.g. the Fed or the Bank of England. The rest by design is to be lent out, that's how banks offer loans, mortgages etc. S…
But isn't this the point of FDIC? Even if SVB becomes insolvent, your account value is insured by the federal government? I'm not very familiar with all of this, so please help me understand what I'm missing.
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Poor move by the CEO. It's like he wanted to be honest with everyone but that wasn't a strong signal. Also out most of the banks - you would expect that the clients of SVB are a little more sophisticated than your retail bank demographic being start-up companies and all (big assumption).
> you would expect that the clients of SVB are a little more sophisticated than your retail bank demographic being start-up companies and all Sometimes you can be too smart for your own good: in this case the CEO might have assumed that everyone knows that all banks inherently carry a risk in case of a bank run, but all the market hears is the word “risk” and panics correspondingly.
I imagine it like this:
1. Place some money in bank.
2. Wait till bank bought bonds, treasuries and all that jazz.
3. Short the banks stock.
4. Withdraw huge amounts of money and cause liquidity crunch.
5. As the bank needs to keep its capital ratio above 5%, it will close positions at a loss, causing a death spiral (the bank run. As more people want to secure what’s left, the bank needs to unwind more positions at a loss. Which will cause even more people wanting to withdraw, which results in even more selling of the bank.
6. Eventually the bank becomes insolvent.
7. Buy stock back.
There might be more variables to it, such as the price of the treasuries itself (you might want to wait for a rate hike, inflation, credit rating change or whatever before you make the bank sell), but generally this is how imagine such a trade.
Earlier quoted context omitted.
How could they issue loans? 10 x 10$ deposits means you can loan 100$? Where as the modern way is more like 100$ in deposits means you can lend out 1000$ because chances are everyone won’t not pay it back? And then can’t you say that since you’ve lent out 1000$ and chances are you’ll get paid back, you’ve basically got 1104.56$ and so can lend out 10k$? And then you bundle those together and sell them to each other d…
Especially in contemporary times banks make money in an immense amount of ways that don't involve touching customer funds: debit transaction fees, international exchange rate "adjustments", ATM fees, the million 'special processing fee' type fees, and so on. In other countries I've even had to pay a fee when depositing, which was quite odd. Of course this all is going to pale in comparison to the amount that banks ma…
Is real economic growth even determined by anything but technological development?
Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.