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What's really scary about the SVB situation is the dynamic that there's no cost to causing a bank run, so now you've got all these VC guys who are disingenuousl

What's really scary about the SVB situation is the dynamic that there's no cost to causing a bank run, so now you've got all these VC guys who are disingenuously claiming that every bank in America is now at risk because of SVB. We all know what they're doing - they're trying to create panic so that the government has to step in, but it's a massively dangerous game to be playing. If other regional banks do start failing it's going to be in no small part due to these people preaching doomsday scenarios. Will they pay a price for their behaviour. Of course not.

zug_zug 4y ago
Maybe the standard banking model is broken. Banks offer a theoretical guarantee of the ability withdraw your money at any time and then just hope the situation that prevents that doesn't happen. Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit).
- daveguy 4y ago
  It's not the bank that guarantees it. It's the US Government through FDIC insurance. And that is working perfectly. There is no guarantee implied or explicit over 250k / entity / bank. There are distribution facilities that allow higher amounts to be guaranteed and that is working too.
- gruez 4y ago
  > Maybe the standard banking model is broken. Banks offer a theoretical guarantee of the ability withdraw your money at any time and then just hope the situation that prevents that doesn't happen. In this case it's not just a case of the depositor's money being tied up in illiquid assets, it's that the asset's market value dropped so that they're worth less than the deposits. This is slightly different than just the assets being "illiquid", because if were only illiquid, you can presumably pay off your depositors once a sale can be arranged. In this case even if they were able to sell the bonds, there won't be enough money to pay back the depositors. >Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit). That's... basically how banks implicitly work and one of their core functions (maturity transformation).
  - fspeech 4y ago
    You could go stronger with your assertion, that the MBS are actually fairly liquid (defintion: a quick sale will not cause a large drop in their value) but have large losses in market value compared to when they were bought. SVB should not have been allowed to use HTM accounting on such a large portfolio of their assets generated from hot money inflows.
  - mankutimma 4y ago
    Liquidity vs Solvency
JumpCrisscross 4y ago
> VC guys who are disingenuously claiming that every bank in America is now at risk because of SVB They’re deflecting blame. A bailout is unrealistic given the House. And there is no contagion to the systemically-important banks. VCs should have advised their founders to adopt reasonable treasury procedures. Instead, they funnelled them into an easy solution.
- andrewstuart 4y ago
  You're speaking with confident 20/20 hindsight. Who, realistically until now has had “bank goes bust” on their risk list? “Crypto exchange goes bust”, almost a certainty, but “major bank goes bust”, I don’t think it’s reasonable to criticize for not having five distributed bank accounts.
  - hn_throwaway_99 4y ago
    This line of thinking infuriates me. As an individual, I risk manage my deposits by making sure I remain under federal insurance limits by spreading my investments among multiple institutions (the FDIC limit isn't that relevant to me but the $500k SIPC limit is). Yet somehow "sophisticated" VCs aren't able to tell their partner companies how to manage the millions they hand them? There are straightforward, simple ways to increase insurance limits (primarily by services that automatically distribute deposits among multiple banks, like MaxSafe and IntraFi). The was just fundamentally poor asset management by VCs who got on the "well, everyone else uses SVB you should too" bandwagon.
    - MomoXenosaga 4y ago
      "well, everyone else uses SVB you should too" Which is not even true because it is a tiny no name bank. Prior to this debacle if you asked an American to name a bank nobody would have said SVB.
      - benglish11 4y ago
        Most Americans not being able to name it is not a good standard for bank size. Banks like SVB exclusively have businesses as customers and most Americans do not run businesses. It’s not a tiny no name bank by any reasonable measure.
AnimalMuppet 4y ago
If by "cause" you mean "say lots of scary-sounding stuff in public", then no, there probably isn't. If by "cause" you mean "take your money out", then yes, there is a cost. It takes time and effort to do. It especially costs if you're playing dodgeball, trying to get out of every institution that everyone says might possibly be in danger of failing.
paulddraper 4y ago
What % is federally insured tho? For SVB it was tiny. I'm guessing other banks it is bigger but idk
- dsugarman 4y ago
  It's 250k at every bank. The comment section on hn makes this seem like it was obviously risky to bank with svb but to everyone making treasury decisions, it looked to be the same as banking with any significantly old and significantly large bank. They are very large, publicly traded, regulated like everyone else, have their assets primarily in us treasuries and all fdic member banks have the same insurance policy. There really can be a run on other large banks, svbs balance sheet wasn't upside down unless you marked to market their hold to maturity assets. If people start withdrawing you have to sell those and you get exposed and all of the banks are holding us treasuries that are worth a lot less due to rapidly rising interest rates. If people start withdrawing from other banks they get exposed too.
BeFlatXIII 4y ago
How long until we have a 4chan-inspired bank run spill into real banks?
- emkemp 4y ago
  DON"T GIVE THEM IDEAS.
  - BeFlatXIII 4y ago
    Or a YouTuber making "Fun financial pranks [gone wrong] [gone sexual]"

zug_zug 4y ago

Maybe the standard banking model is broken. Banks offer a theoretical guarantee of the ability withdraw your money at any time and then just hope the situation that prevents that doesn't happen. Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit).

daveguy 4y ago
It's not the bank that guarantees it. It's the US Government through FDIC insurance. And that is working perfectly. There is no guarantee implied or explicit over 250k / entity / bank. There are distribution facilities that allow higher amounts to be guaranteed and that is working too.
gruez 4y ago
> Maybe the standard banking model is broken. Banks offer a theoretical guarantee of the ability withdraw your money at any time and then just hope the situation that prevents that doesn't happen. In this case it's not just a case of the depositor's money being tied up in illiquid assets, it's that the asset's market value dropped so that they're worth less than the deposits. This is slightly different than just the assets being "illiquid", because if were only illiquid, you can presumably pay off your depositors once a sale can be arranged. In this case even if they were able to sell the bonds, there won't be enough money to pay back the depositors. >Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit). That's... basically how banks implicitly work and one of their core functions (maturity transformation).
- fspeech 4y ago
  You could go stronger with your assertion, that the MBS are actually fairly liquid (defintion: a quick sale will not cause a large drop in their value) but have large losses in market value compared to when they were bought. SVB should not have been allowed to use HTM accounting on such a large portfolio of their assets generated from hot money inflows.
- mankutimma 4y ago
  Liquidity vs Solvency

JumpCrisscross 4y ago

> VC guys who are disingenuously claiming that every bank in America is now at risk because of SVB They’re deflecting blame. A bailout is unrealistic given the House. And there is no contagion to the systemically-important banks. VCs should have advised their founders to adopt reasonable treasury procedures. Instead, they funnelled them into an easy solution.

andrewstuart 4y ago
You're speaking with confident 20/20 hindsight. Who, realistically until now has had “bank goes bust” on their risk list? “Crypto exchange goes bust”, almost a certainty, but “major bank goes bust”, I don’t think it’s reasonable to criticize for not having five distributed bank accounts.
- hn_throwaway_99 4y ago
  This line of thinking infuriates me. As an individual, I risk manage my deposits by making sure I remain under federal insurance limits by spreading my investments among multiple institutions (the FDIC limit isn't that relevant to me but the $500k SIPC limit is). Yet somehow "sophisticated" VCs aren't able to tell their partner companies how to manage the millions they hand them? There are straightforward, simple ways to increase insurance limits (primarily by services that automatically distribute deposits among multiple banks, like MaxSafe and IntraFi). The was just fundamentally poor asset management by VCs who got on the "well, everyone else uses SVB you should too" bandwagon.
  - MomoXenosaga 4y ago
    "well, everyone else uses SVB you should too" Which is not even true because it is a tiny no name bank. Prior to this debacle if you asked an American to name a bank nobody would have said SVB.
    - benglish11 4y ago
      Most Americans not being able to name it is not a good standard for bank size. Banks like SVB exclusively have businesses as customers and most Americans do not run businesses. It’s not a tiny no name bank by any reasonable measure.

AnimalMuppet 4y ago

If by "cause" you mean "say lots of scary-sounding stuff in public", then no, there probably isn't. If by "cause" you mean "take your money out", then yes, there is a cost. It takes time and effort to do. It especially costs if you're playing dodgeball, trying to get out of every institution that everyone says might possibly be in danger of failing.

paulddraper 4y ago

What % is federally insured tho? For SVB it was tiny. I'm guessing other banks it is bigger but idk

dsugarman 4y ago
It's 250k at every bank. The comment section on hn makes this seem like it was obviously risky to bank with svb but to everyone making treasury decisions, it looked to be the same as banking with any significantly old and significantly large bank. They are very large, publicly traded, regulated like everyone else, have their assets primarily in us treasuries and all fdic member banks have the same insurance policy. There really can be a run on other large banks, svbs balance sheet wasn't upside down unless you marked to market their hold to maturity assets. If people start withdrawing you have to sell those and you get exposed and all of the banks are holding us treasuries that are worth a lot less due to rapidly rising interest rates. If people start withdrawing from other banks they get exposed too.

BeFlatXIII 4y ago

How long until we have a 4chan-inspired bank run spill into real banks?

emkemp 4y ago
DON"T GIVE THEM IDEAS.
- BeFlatXIII 4y ago
  Or a YouTuber making "Fun financial pranks [gone wrong] [gone sexual]"