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The End of Silicon Valley (Bank)

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Re: The End of Silicon Valley (Bank)

#91

Post by trompetenaccoun »

jameshart wrote: post #78
trompetenaccoun wrote: post #26

Earlier quoted context omitted.

Limits were not "ignored", the companies simply have no other choice. The problem is systematic and by design. A medium sized startup/business handling only 25 million would need to bank with 100 different banks, obviously that's inconceivable in practice. And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latte…

So isn’t this one of those cases where the market is supposed to respond? If FDIC genuinely topped out at 250k, and there exist customers who have more than 250k they wish to deposit, the market should be able to respond by providing private insurance for cash balances over 250k. Your premium would presumably depend on the balance and the risk profile of the institution where you’re keeping the balance. Insurance pro…

The above explains how the system is flawed and the solution is not to throw public funds at banks to in a way reward risk taking. I don't generally support bailouts.

Again, the system is intentionally made this way. Insurance would not even be needed if safer banking models were approved, which they're not.

Re: The End of Silicon Valley (Bank)

#92

Post by cultureswitch »

trompetenaccoun wrote: post #26
nsmog767 wrote: post #2

>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…

Limits were not "ignored", the companies simply have no other choice. The problem is systematic and by design. A medium sized startup/business handling only 25 million would need to bank with 100 different banks, obviously that's inconceivable in practice. And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latte…

The answer seems pretty simple. Don't invest much more than you're ready to lose. I'm sure that even in the US there's a way for a business to open an arbitrarily large risk-free zero interest i.e. no investment bank account.

Re: The End of Silicon Valley (Bank)

#93

Post by EMM_386 »

riffraff wrote: post #60
zpeti wrote: post #3

This is still a better situation than 2008, where banks were bailed out to the extent that management even stayed (despite deserving prison), and shareholders lost nothing. So that's the worst possible outcome, today's is probably second worst. But I don't see what would be better. Ben talks about loss of trust now, but we'd actually lose more trust if depositors weren't bailed out, and probably contagion would sprea…

> probably contagion would spread and many banks would fail I see this mentioned a lot, but I have still not seen a valid explanation of why this would be the case. Do we think a lot of companies in random industries will run and pull out their cash from banks to put it... where?

Everything would get moved to the handful of "too big to fail" banks.

Re: The End of Silicon Valley (Bank)

#94

Post by trompetenaccoun »

em500 wrote: post #86
trompetenaccoun wrote: post #26

Earlier quoted context omitted.

Limits were not "ignored", the companies simply have no other choice. The problem is systematic and by design. A medium sized startup/business handling only 25 million would need to bank with 100 different banks, obviously that's inconceivable in practice. And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latte…

Of course they have a choice: money market funds and T-Bills. If you're handling millions in cash, you're supposed to know about these.

Circle needs those dollars highly liquid because otherwise they'd run into issues with their own customers. Exchanges can't give the customers T-Bills when they trade for dollars.

Also startups do not get paid in Treasury Bills when they strike deals. Clearly this system is flawed and prone to bank runs, which happen again and again. Because business people especially are aware of how banking works, they know the bank doesn't actually have the money in full. When there are issues, it's a risk leaving your funds with the bank instead of pulling them out.

Re: The End of Silicon Valley (Bank)

#96

Post by afiori »

nine_zeros wrote: post #8

> There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Because if the bank doesn't give any interest, people will keep the money in either a competing bank that gives interest or in cash or in other ins…

Do people chose banks for interests rates in saving accounts?

Like do people make the financial decision to use saving account rather than stock/bonds/hedge funds as investments?

As far as I understand no reasonable bank anywhere offers interest higher than inflation.

Re: The End of Silicon Valley (Bank)

#97

Post by [deleted] »

coldtea wrote: post #62
micromacrofoot wrote: post #21

Earlier quoted context omitted.

I can go buy a fireproof safe for a few hundred bucks. Or rent a safe deposit box. My money becomes less valuable the longer it sits in either.

Your money becomes less valuable in a bank too, as a bank account is not an investment vehicle anyway. It's just that now you also have the added risk of the bank defaulting like SVB. If you want to invest, invest. If you don't, you shouldn't have the added risk tied to your "sitting in the bank" money, just inflation.

[deleted]

Re: The End of Silicon Valley (Bank)

#98

Post by trompetenaccoun »

cultureswitch wrote: post #92
trompetenaccoun wrote: post #26

Earlier quoted context omitted.

Limits were not "ignored", the companies simply have no other choice. The problem is systematic and by design. A medium sized startup/business handling only 25 million would need to bank with 100 different banks, obviously that's inconceivable in practice. And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latte…

The answer seems pretty simple. Don't invest much more than you're ready to lose. I'm sure that even in the US there's a way for a business to open an arbitrarily large risk-free zero interest i.e. no investment bank account.

What do you mean "invest"? Most of this bank's customers are running a business and need a bank account, it's not an investment.

Re: The End of Silicon Valley (Bank)

#99

Post by commondream »

> Banks are, at their core, facilitators: depositors lend their money to a bank, for which they are paid interest, and banks lend that money out, again for interest.

This may be how banks think about themselves, but I'm pretty sure that most consumers, even businesses, don't think about them this way. Would anyone use a bank if it didn't enable certain types of transactions (credit cards, wires, ACH) and didn't include any sort of risk reduction?

Re: The End of Silicon Valley (Bank)

#100

Post by afiori »

commondream wrote: post #99

> Banks are, at their core, facilitators: depositors lend their money to a bank, for which they are paid interest, and banks lend that money out, again for interest. This may be how banks think about themselves, but I'm pretty sure that most consumers, even businesses, don't think about them this way. Would anyone use a bank if it didn't enable certain types of transactions (credit cards, wires, ACH) and didn't inclu…

> Would anyone use a bank if it didn't enable certain types of transactions (credit cards, wires, ACH) and didn't include any sort of risk reduction?

That is what I always believed hedge funds are.

It might matter that (in my country) I will likely never have enough money to get net profit from my saving account (interests minus price of services), but if I were aiming for that I would invest, not deposit

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