4 ms·
Great way to trigger more bank runs. I don’t think this will help.
by calvin 4y ago
Great way to trigger more bank runs. I don’t think this will help.
- dmix 4y agoNor would it ever be public. If it was the banks at the top would be under FDIC tomorrow or being pressured to not be within the next month. The 2008 crisis showed FDIC at their most effective but the vast majority of the ~100/per yr banks taken over were known well before any customer found out. The difference between them and SVB was that w/ SVB served plenty of well connected VCs who dedicated their lives to being connected to the latest market information before other VC/angel/wall st players found out. Mom and pop shops even with larger banking businesses never faced the same sort of bank run risk. Their financial state could be kept hidden without it turning into a bank run 100x easier than a bank serving VC-connected types. So as long as the FDIC learned of problems all they had to do was move before the regular consumer bank client found out their small town bank branch was at risk, which was a much easier ask. Then once FDIC finds a larger buyer to stabilize it the customer didn't worry too much and the business is saved, although typically owned by some mega bank. SVB was the last sort of business to survive such an information risk almost by design of their clientele.
- readthenotes1 4y agoOr, a good way to force the bank owners to face reality. Not so easy for BSDs, REITs, ponzi schemes, etc., but should be dreadfully easy for banks
- dmix 4y agoIndeed. Which is what has diluted this conversation so heavily. Everyone wants to point at the tech Startups using SVB for boring banking as the why (and the "I told you VC was a bubble") instead of the 2008 style wall St gambling the bankers engaged in using tech startup money. The VCs might be responsible for the bank run but they aren't why the bank made stupid mortgage investments and ultimately failed.
- zamfi 4y agoNot really. What SVB invested in was NOT the same kind of thing that tanked 2008 — in 2008, it was (basically) lies about the creditworthiness of MBS and default rates going through the roof. SVB held a lot of MBS but it was a safe tranch — the risk was not of default, but rather of a market value decrease if interest rates rose. Which they did. Which would not have been a problem, because the full value would eventually be paid back in full, as long as the bank didn’t need to sell them. Which they did, because more depositors were withdrawing funds than expected, because the investment market tanked and startups were drawing down funds. Which resulted in selling a loss. Which spooked VCs. Which caused a run on the bank. This was not a 2008-style “Wall St. gambling” problem — if anything it was a misunderstanding of risk, but not in the “wow, 50% annual returns, who cares how safe it is” sense.
- pickovven 4y agoYou think banks putting money in bonds is gambling? If so, how do you suggest banks make money?
- kevinventullo 4y agoBuying long-term bonds with short-term debt is risky, yes.
- oefrha 4y agoThey betted that interest rates would stay low long term. They were damn wrong and paid for it.
- adam_arthur 4y agoPublic companies file public records, so yes, it is public. And First Republic Bank looks like it could be the next to fail, likely within days, barring intervention. Without a systemic backstop the runs will almost certainly continue
- dmix 4y agoFirst Republic Bank stock has already tumbled. If you want a DB of bank's with obvious issues that are already public just track their stocks.
- adam_arthur 4y agoThe stock price has nothing to do with whether the bank is solvent. It's about the balance sheet and if they can service a large amount of withdrawals within a short timespan. Stock price can only be treated as an indicator of what the market thinks.
- dmix 4y agoSo make the database then with your foresight. I'm sure it would be extremely valuable. Prove me wrong if it is indeed public.
- adam_arthur 4y agoThere are hundreds of threads on twitter already analyzing the balance sheets of the public banks and ranking them based on risk levels. First Republic has been singled out as one of the more vulnerable, and thus, likely to experience a bank run over the coming days. Many pics of people withdrawing their money en masse from the bank earlier today: https://twitter.com/Dr_PhillipB/status/1634632068058722304?s=20 https://twitter.com/Dr_PhillipB/status/1634632068058722304?s...
- ummonk 4y agoThere are political forces on both the left and the right against bailing out depositors because the startup industry is hated. We need to protect our industry from further damage, including by being ahead of bank runs on other banks. If that results in triggering those bank runs, so be it.
- flangola7 4y agoStartup industry is bad, why should we protect it? There's very few things awful enough to attract bipartisan hate.
- ummonk 4y agoDrives economic growth, creates jobs, and increases labor market competition amongst employers which leads to higher wages. The latter function is particularly salient for tech people (which many of us who follow HN are).
- flangola7 4y agoA heap of parroted buzzwords is not very convincing.
- SkyMarshal 4y agoNeither is evidence-less overly-general assertions like “startup industry bad”.
- swsieber 4y agoHere's (admittedly weak) evidence: calling for actions that lead to bank runs. It's hard to take defense of startups seriously where startups are blatantly going to screw others over for their own sake. Do I get it? Yes. But it's more than me vs them; they made it an "us" vs them.
- 4y ago