3 ms·

Is that how people are talking about it? At this point the thread of most conversations here seems to follow this pattern: lots of deposits > overallocated to i

by reb 4y ago

Is that how people are talking about it? At this point the thread of most conversations here seems to follow this pattern: lots of deposits > overallocated to interest-rate-sensitive long-term bonds > short-term withdrawal pressure forces SVB to sell assets at a loss and then attempt to sell itself > Thiel urges pawns to pull based on that knowledge (and possibly more) > word gets out, wider bank run > FDIC takeover. A potential issue become a concrete issue through panic. The rationale presented alongside the urging to pull out doesn’t have to be fabricated, just hypothetical. That the risk become real as a consequence of being suggested is potentially interesting, but ya know.

zhte415 4y ago
Another way of dealing with a run would have been to simply replace the funding through interbank lending: Take a deposit from another bank to offset the deposits being withdrawn. Through funds or repo. If it was a short term funding issue, this is normal (at a system level, interbank lending always balances, just an accounting identity). But that wasn't done. Whether that's because other banks were unwilling to step in may be interesting to see.
- startupsfail 4y ago
  And another way was for VCs to step in and help saving their piggy bank. There was an easy mechanism for that - simply purchase the shares SVB was offering. But no, community that claims they are going to save the world couldn’t exercise enough long-term thinking to even save their piggy bank. There should be no bailout by the Fed. This community has enough resources. If they can think long term and act together, they’ll reorganize themselves in a responsible way. If they can’t, then they deserve to fail financially and they’ll have less resources to control.
- gruez 4y ago
  >. If it was a short term funding issue, this is normal (at a system level, interbank lending always balances, just an accounting identity). But that wasn't done. Whether that's because other banks were unwilling to step in may be interesting to see. It wasn't done because the assets SVB had at current market values was worth less than their liabilities. You'd be crazy to lend money to SVB.
- paulddraper 4y ago
  That LITERALLY exists. https://en.wikipedia.org/wiki/Interbank_lending_market https://en.wikipedia.org/wiki/Interbank_lending_market But people weren't withdrawing because of a funny Reddit meme; they were withdrawing because SVB was underwater. And creditors don't like underwater debtors
pfannkuchen 4y ago
> the urging to pull out doesn’t have to be fabricated, just hypothetical Isn't any identification of a run risk hypothetical? I think the question is whether it was a reasonable concern or not. If it was a reasonable concern, then the run is simply rational behavior for an uncoordinated group. If it was not a reasonable concern, then the run was irrational and panic driven. My issue with it being an unreasonable concern is that I haven't seen anyone claim this explicitly or provide a rationale. If anyone has a rationale for how it was an unreasonable concern, I am interested..
- reb 4y ago
  Again, I haven’t seen (or can’t recall) seeing anyone credibly make the case that the concern was unreasonable. I have seen some saying that promoting the concern within Founder’s Fund triggered the bank run, but that seems like a distinct position to me.

by reb 4y ago

zhte415 4y ago

Another way of dealing with a run would have been to simply replace the funding through interbank lending: Take a deposit from another bank to offset the deposits being withdrawn. Through funds or repo. If it was a short term funding issue, this is normal (at a system level, interbank lending always balances, just an accounting identity). But that wasn't done. Whether that's because other banks were unwilling to step in may be interesting to see.

startupsfail 4y ago
And another way was for VCs to step in and help saving their piggy bank. There was an easy mechanism for that - simply purchase the shares SVB was offering. But no, community that claims they are going to save the world couldn’t exercise enough long-term thinking to even save their piggy bank. There should be no bailout by the Fed. This community has enough resources. If they can think long term and act together, they’ll reorganize themselves in a responsible way. If they can’t, then they deserve to fail financially and they’ll have less resources to control.
gruez 4y ago
>. If it was a short term funding issue, this is normal (at a system level, interbank lending always balances, just an accounting identity). But that wasn't done. Whether that's because other banks were unwilling to step in may be interesting to see. It wasn't done because the assets SVB had at current market values was worth less than their liabilities. You'd be crazy to lend money to SVB.
paulddraper 4y ago
That LITERALLY exists. https://en.wikipedia.org/wiki/Interbank_lending_market https://en.wikipedia.org/wiki/Interbank_lending_market But people weren't withdrawing because of a funny Reddit meme; they were withdrawing because SVB was underwater. And creditors don't like underwater debtors

pfannkuchen 4y ago

> the urging to pull out doesn’t have to be fabricated, just hypothetical Isn't any identification of a run risk hypothetical? I think the question is whether it was a reasonable concern or not. If it was a reasonable concern, then the run is simply rational behavior for an uncoordinated group. If it was not a reasonable concern, then the run was irrational and panic driven. My issue with it being an unreasonable concern is that I haven't seen anyone claim this explicitly or provide a rationale. If anyone has a rationale for how it was an unreasonable concern, I am interested..

reb 4y ago
Again, I haven’t seen (or can’t recall) seeing anyone credibly make the case that the concern was unreasonable. I have seen some saying that promoting the concern within Founder’s Fund triggered the bank run, but that seems like a distinct position to me.