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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#681
post #661

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.

Honestly, I'm not an economist, even worse I was not a fully functioning and critical thinking adult before the Thatcher era, you could well be right but I find it really hard to believe. For example the UK has also had subsequent Conservative victories for the last 12 years or so but every single argument made in 2010 about their approach has been proven true. To the detriment of every person in the UK. So it doesn'…

I can't argue with you on the recent Conservative track record, they're a pale shadow of the party they once were. The only thing that's saved them is that Labour under Corbyn was plainly, obviously such an utter catastrophe in the making the Cons couldn't help looking good.

There certainly was an aspect of that back in the 80s. In the early years Labour was lead by Michael Foot, basically a likeable version of Corbyn but just as unelectable. But then, the Labour Party back then was properly Marxist and had actually pushed forward a programme of nationalisation and unionisation that worked out about as well as you'd expect.

The most egregious example of waste was the coal industry, hence the strikes. The tax payer was subsidizing coal to the tune of £1.3 billion a year which was real money back then, just under 1% of total national GDP, not including the increased costs to power and steel industries that were prevented from using cheaper alternatives. When the mining union leader Arthur Scargill appeared before a Parliamentary committee and was asked at what level of loss it was acceptable to close a pit he answered “As far as I can see, the loss is without limits.” That's what we were dealing with. That's just coal, but swathes of industry had been nationalised and was a horrible rotting carcass of waste and losses dragging the country down. Reforming that lot was incredibly painful but it had to be done.

Maggie is generally portrayed as being incredibly unpopular, and the way she was lampooned by a generation of up coming British comics was cruel though frankly hilarious, but she won resounding election victory after victory. The economy she built transformed the country into the modern nation it is today. Notably when Blair and Brown brought in a Labour government in 1997 they changed essentially nothing substantive because her reforms palpably worked. All the proposed changes reverting Britain towards a statist socialist economic agenda were quietly shelved and never talked about agin until Corbyn came along.

Since then Conservatism on both sides of the pond has suffered an appalling moral and intellectual collapse. The conservative and republican parties are mocking parodies of their former selves. Back in the 80s there were serious, major economic and social problems that desperately needed fixing and economic liberalism had the answers. Nowadays that's just not even vaguely controversial, instead the focus of the right has shifted towards damaging reactionary dog whistle issues like culture wars and blind nationalism. That tendency has always been there, but now it's all they have.

Re: Bank run on Silicon Valley Bank

#682

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.

i wonder if this is the accidental downside we have to pay for the incredible speed of information these days. not just information in the sense of journalistic report, but also information in the sense of acknowledging and processing transactions. the older i began the more i come to be wary of speed, just for the sake of it (i'm looking at all of you performance engineers). latency might as well be an extremely cheap security/life-sustaining feature (i'm looking at its reincarnation in cryptography/security as constant time algorithms).

Re: Bank run on Silicon Valley Bank

#683

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.

I wouldn't call defeating communism and winning the Cold War "societal harm".

"Defeating communism" like this: https://www.youtube.com/watch?v=7AfPFlWnww8

Re: Bank run on Silicon Valley Bank

#684
post #188

Earlier quoted context omitted.

A variant of Thatcher's "Being powerful is like being a lady, if you have to tell people you are, you aren't".

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.

Fabulous witticisms is usually take down of someone or something that is hard to argue against, but rarely actually factually correct. People who deploy it are arguing by emotion and insult, which would explain why they are also people capable to cause a lot of societal harm.

"Fabulous witticisms" feels good to listener and is funny, because it validates what people want to hear. It is rarely actually correct or actually correctly describes world.

Re: Bank run on Silicon Valley Bank

#685

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…

Banks are required to keep 0% in reserves as of March 26, 2020.

Re: Bank run on Silicon Valley Bank

#686
post #497
post #400

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?

No. They had a liquidity problem and sold bonds at a huge loss to shore up liquidity. There is a real problem here.

Re: Bank run on Silicon Valley Bank

#687
post #477

Earlier quoted context omitted.

its almost like making bets with money you don't actually have yet is a bad idea

This is literally the definition of fractional reserve banking, used by almost every bank worldwide.

Fractional reserve banking isn't a thing anymore.

Re: Bank run on Silicon Valley Bank

#688
post #522

Earlier quoted context omitted.

I have no clue about the actual internals at SVB, but an example of why: say a bank has $200bn in assets that they put into mortgage backed securities yielding 1.5% for 10 years. Lets say that means they paid $86 per $100 bond. Now rates rise to 6%, so they're worth $60 per bond. They just lost 30% of $200bn. If their net capital had been +$10bn before this, it's now -$50bn. So, if every single person demanded their…

But why did they pile into bonds all at once? Wouldn't you normally do the equivalent to Dollar Cost Averaging? Did they have no other choice but to park a huge chunk of money into various government bonds at exactly the wrong time?

What makes you think they did it all at once?

Re: Bank run on Silicon Valley Bank

#689
post #477

Earlier quoted context omitted.

This is literally the definition of fractional reserve banking, used by almost every bank worldwide.

Fractional reserve banking isn't a thing anymore.

What? This is literally how nearly all banks around the entire world work.
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