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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#811

Post by ashwagary »

lumb63 wrote: post #232
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…

I mean, yes, that is a problem, but it’s also their only benefit. The entire reason banks came into existence is to multiply the availability of currency (i.e. fractional reserve).

>The entire reason banks came into existence is to multiply the availability of currency (i.e. fractional reserve).

I thought they came into existence, atleast initially, purely for the secure storage of funds.

Re: Bank run on Silicon Valley Bank

#812

Post by ashwagary »

majormajor wrote: post #39
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…

> If they locked deposits for a period of time they could safely (and morally) loan that money out without lying, and, in fact, there wouldn't need to be a reserve ratio at all. Until the borrower doesn't (or can't) pay back the loan... "Safe" and "moral" seem like inherently relevant words here and I'm unconvinced that you're proposal would be overall beneficial compared to the increased circulation we enable today.

>Until the borrower doesn't (or can't) pay back the loan...

I suspect the OP would state "That's where adequate collateral comes into play."

Re: Bank run on Silicon Valley Bank

#813

Post by ashwagary »

simple-thoughts wrote: post #489
favflam wrote: post #462

Fed should have mandated bigger reserves and done better stress testing before raising interest rates so fast. Anything long duration tanked like 20% in mark to market value. SVB is probably not the last shoe to drop in this story.

Ah yes, the solution is more restrictions on banks to hold exactly the types of assets that are underwater! No, sorry you are wrong. The financial crisis that just started this week is due to banks holding securities that they are required to hold by law - the law considers mortgages and government debt to be safe yet it is now proven (and anyone with basic finance knowledge knew ahead of time) to be extremely unsafe…

>banks holding securities that they are required to hold by law

Not an expert in this area but when distilling everything I understand about this topic, it seems like big banks (too big to fail?) collude with the federal reserve to rob smaller banks (of clients and value) using interest rate games and these "requirements" every x years.

If anyone has an explanation as to why that's a wrong conclusion, please share.

Re: Bank run on Silicon Valley Bank

#814

Post by jedberg »

kmlx wrote: post #704
kortilla wrote: post #622

Earlier quoted context omitted.

If you’re reading stories like this, it’s too late. The short interest has already exploded, the stock has already lost 40%, and now we’re in takeover/bailout territory. You’re a day late. Try again on the next bank failure.

> The short interest has already exploded, the stock has already lost 40%, and now we’re in takeover/bailout territory. > You’re a day late. just one sec: SVB Financial Group Pre-market 57.50 −48.54 (45.78%)

Yes but OP is right. I posted that after hours, which means the earliest you could buy your short was at the open this morning, when the stock would have been down already.

But also, trading on SVB was halted before the market opened. :)

Re: Bank run on Silicon Valley Bank

#815

Post by throwwwaway69 »

cj wrote: post #447
rabidonrails wrote: post #439

Earlier quoted context omitted.

Maybe you'd say it's worth the risk, but founders should be very careful about making transfers from accounts owned by their business to their personal accounts because this is literally the definition of embezzlement. I'd speak to your accountant and get their blessing first.

Citing the justice department’s website: “The requirement that the defendant act with the intent to deprive the owner of his property makes embezzlement a specific intent crime.” Meaning your safe as long as your intent is not to steal the money. But if your concerned definitely ask your lawyer. (Accountant won’t be able to provide that sort of legal advice)

Putting yourself in a position to prove intent (which is basically impossible) still isn't a great idea

Re: Bank run on Silicon Valley Bank

#816

Post by simonh »

raspberry1337 wrote: post #694
simonh wrote: post #681

Earlier quoted context omitted.

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 Corby…

>"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. " The…

Where we differ is I just don’t see any of the problems you list as actual problems. I’m in favour of immigration, it does us a lot of good which is why conservative policies actually encourage it, and illegal immigration is a tiny fraction of it overall. Crime rates are down significantly from the 80s. Even in the EU we had all the sovereignty we could ever need, and negotiated opt outs of huge swathes of regulation we decided wasn’t for us.

A friend of mine tried that line about manufacturing on me a few years ago and I asked him what kind of factory he wanted his so. To work in when he grew up. He looked at me as though I’d just shot his dog. We don’t need factory jobs, we’ve git near full employment anyway. That’s why we need immigration to solve our demographic issues with our ageing population. We’ve got plenty of jobs much higher up the value chain, the main problems are around training and education.

Re: Bank run on Silicon Valley Bank

#817

Post by throwwwaway69 »

plonk wrote: post #806
Havoc wrote: post #360

Earlier quoted context omitted.

>Moody If the subprime crisis taught us anything it was that ratings go for marginally usefull to utterly useless the second sht gets real and there is actual stress in the system

Why does everyone make these huge generalizations based on one crisis that happened 15 years ago? The problem in 2008 was that splitting an investment into a senior "low-risk" one and a higher-risk one led to higher ratings overall than the initial investment warranted. Do you have any evidence that something like this is happening here, or that this is a systemic problem?

The mistake they're potentially making today doesn't have to be identical to the one made 15 years ago. The that they were so wrong 15 years ago means that we have to question literally every rating they have, and we can't just assume it's right

Re: Bank run on Silicon Valley Bank

#818

Post by plonk »

throwwwaway69 wrote: post #817
plonk wrote: post #806

Earlier quoted context omitted.

Why does everyone make these huge generalizations based on one crisis that happened 15 years ago? The problem in 2008 was that splitting an investment into a senior "low-risk" one and a higher-risk one led to higher ratings overall than the initial investment warranted. Do you have any evidence that something like this is happening here, or that this is a systemic problem?

The mistake they're potentially making today doesn't have to be identical to the one made 15 years ago. The that they were so wrong 15 years ago means that we have to question literally every rating they have, and we can't just assume it's right

> The that they were so wrong 15 years ago

That seems like a weak signal. If the only example of egregiously wrong ratings we have is from the subprime crisis, that means they got them right enough a lot more often than not.

Re: Bank run on Silicon Valley Bank

#819

Post by lostlogin »

smcl wrote: post #716
raspberry1337 wrote: post #702

Earlier quoted context omitted.

Gulf war didn't save Senior Bush from the bad-economy, neither did the Iraq War help Tony Blair's popularity. It's a lot more complex than war-helps-current-leader, at least outside the US. It depends on the war and the context.

Fair point, these are actually great counterexamples

They are. That war was also unusual in that it was an attack on a country far away that wasn’t a threat to the US or UK, and there was little to be gained.

It was a strange time.

Re: Bank run on Silicon Valley Bank

#820

Post by ashwagary »

nemo44x wrote: post #774
asimpletune wrote: post #767

Earlier quoted context omitted.

I think the problem is that inflation is bad for everyone, whereas if rates rise it hurts only the weakest players in the financial system. It's a bit like a controlled forrest burn. Still though, it's too early to say. If there was a more widespread contagion and a panic, then I guess it could be bad. To me though the real culprit is the super lower interest rates we had just a few years ago. Without that, we would…

No doubt but my concern is that it spreads and suddenly healthy organisms begin collapsing because whoever they relied on is suddenly insolvent because of who they relied on, etc.

Are they really "healthy organisms" if they have unknown insolvency risks in their chain?
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