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Or, 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
by readthenotes1 4y ago
Or, 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.