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Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nicke
by stephenhuey 4y ago
Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better!
If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
- victor106 4y agoYeah, the cool kids also say/used to say only if they used blockchain this wouldn’t have happened…lol
- capableweb 4y agoThing is, it's probably true for 1% of the cases, that things are slow for no good reason. Trick is how to identify that 1% of times when you can truly make something better. But 99% of the times, it's all shit and ends up like this, or similarly.
- deleted 4y ago[deleted]
- ethbr0 4y agoThe irony is that, as near as I can tell, they cratered their balance sheet because they were heavily into long maturity bonds (i.e. super conservative). https://www.cnbc.com/2023/03/09/svb-financial-falls-more-than-50percent-as-tech-bank-looks-to-raise-more-cash.html https://www.cnbc.com/2023/03/09/svb-financial-falls-more-tha... That seems an odd position to allow to build given the current macro. Post-Fed changing their mind on inflation, the course was charted. I'm guessing they held to avoid taking losses, and at some point it became untenable?
- travisjungroth 4y agoThe problem isn’t what they bought it’s what they sold. It was all correlated. Loans to startups were going bad while startups were pulling deposits since they weren’t getting funded. So you’re taking losses while losing capital. Doesn’t really matter what else you’re holding at that point if it doesn’t happen to be skyrocketing right now. Long term bonds will never be that thing, but at any point in time almost nothing else would be, either.
- kgwgk 4y ago> long maturity bonds (i.e. super conservative) Do you think that long maturity bonds are more conservative than short maturity bonds?
- JumpCrisscross 4y ago> Do you think that long maturity bonds are more conservative than short maturity bonds No. Nobody does. That’s why they typically yield more.
- kgwgk 4y agoMaybe ethbr0 does - considering the quote about super-conservative long maturity bonds. Why do you say that he doesn't?
- JumpCrisscross 4y ago> considering the quote about super-conservative long maturity bonds Within the set of long-maturity bonds, Treasuries are conservative. That doesn’t make them conservative per se.
- kgwgk 4y agoFull quote: "The irony is that, as near as I can tell, they cratered their balance sheet because they were heavily into long maturity bonds (i.e. super conservative)." What exactly makes you think that the "(i.e. super conservative)" remark is not about "long maturity bonds" - which is the think that he just referenced? He didn't mention Treasuries at all. I find quite difficult to interpret the "super conservative" as being about some kind of long-maturity bonds relative to another kind of long-maturity bonds.
- ethbr0 4y agoTreasuries.
- onlyrealcuzzo 4y agoBut SVB wasn't even doing anything sketchy or disruptive, right?
- borski 4y agoCorrect. They were doing the same thing every other bank was doing, and an unnecessary panic run did them in. Depositors will get their money back because my bet is SVB gets acquired, as their balance sheet was actually fairly healthy (relative to other banks) pre-panic, but it's gonna have ripple effects for sure. We shall see.
- yeahsure22 4y agoThey won’t get acquired, they no longer exist. The dream is done.
- jldugger 4y agoThey've been acquired by a newly formed bank from the FDIC. I'm not sure that bank will be around much longer than it takes to mark their assets to market, since the press release said they didn't know: > At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers. No bank is gonna buy another bank until that is cleared up.
- yeahsure22 4y agoAssets - 100b Liabilities - 130b Who is going to buy this bank? I wouldn’t take it if you gave me 40b. That’s why they had to make a new bank.
- makestuff 4y agoProbably the good old federal government. Something something too big to fail.
- cal5k 4y agoIn fairness, it wasn't the risk-taking that did them in... it was the fact that they went all-in on 10-yr bonds at low interest rates and didn't adequately account for duration risk.
- williamtrask 4y agoForgive me but I think this may be a contradiction. “didn’t adequately account for duration risk” == “risk taking that did them in”
- deleted 4y ago[deleted]
- cal5k 4y agoThere's a big difference between accounting for KNOWN risks wrt managing your treasury - something that every bank does as a matter of course - and trying new things.
- CrazyStat 4y agoSurely having your reserves locked up in assets that you can't sell without taking large losses is a known risk?
- nairboon 4y agoWhat kind of bank doesn't know about interest rate risk? That's their whole business.
- cal5k 4y agoThat's what I'm saying. That's not the bank doing anything fancy and failing because of it, it's them not doing the basic things every bank should be doing.
- SteveNuts 4y agoEspecially when the fed is telegraphing every move.
- renewiltord 4y agoHN really is like a ChatGPT version of itself. SVB is a 40 year old bank, bro. They are the old stodgy bank. The Meows and Mercurys are all still around. Their problem was that their risk management didn't keep up with the changing times (rapid interest rate changes). Please go on and tell us more HN tropey things like "oh they shouldn't have sold customer data!" or more things that could be an autogenerated robot comment by ELIZA.
- deleted 4y ago[deleted]
- wbl 4y ago40 years ago is 1983. https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Their risk management might have overeindexed on the post recession era but the bank itself lasted through some pretty wild rate shocks.
- renewiltord 4y agoTrue. It looks like they mostly just made poor decisions in their most recent allocations. Unfortunate. Mostly, though, all this talk about them like they're a neobank is because everyone appears to think they are one.
- stephenhuey 4y agoYour comment is delightfully insightful! I waited too long and cannot edit my comment to say I learned a lot from you and others here today. :P
- sailingparrot 4y ago> Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! SVB was an old stodgy banks that companies went to instead of the new kids like Mercury, specifically because of the trust. They have terrible UX and mobile app but at least they were solid and had a 40 year track record.
- sylvainkalache 4y agoSpeaking of Mercury, they recently announced increasing customers FDIC insurance maximum to $1M for customer accepting to enroll in their sweep program. Not sure SVB offers this but I hope they do.
- xxpor 4y agoHow can they do that? They don't choose FDIC limits.
- dismalpedigree 4y agoMercury is not a bank. It keeps your funds spread across many banks where they open accounts on your behalf. Then they spread the deposits around to stay below the $250k threshold at each bank. Same as Fidelity and many others. I would be shocked if SVB was sweeping deposit funds into other banks.
- iozero 4y agoI've heard from a few people today who have Cash Sweep Accounts at SVB: https://www.svb.com/liquidity-management/deposits-and-investments/svb-cash-sweep https://www.svb.com/liquidity-management/deposits-and-invest... Some claim that these accounts are insured/protected up to $125m, but I can't find any info online to corroborate that.
- dismalpedigree 4y agoThis surprises me. I wonder what the mechanism and incentives are for a bank to sweep deposits to another bank.
- spaceman_2020 4y agoIn all fairness, those stodgy old banks have been bailed out multiple times in the past.
- andrepd 4y agoIf only banks were risk-averse x) Unfortunately they are risk-happy when they know bankruptcy means a taxpayer rescue.