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The problem is that now everyone will be scrutinizing every bank very heavily and will find similar bad investments like the ones SVB made. It's inconceivable t

The problem is that now everyone will be scrutinizing every bank very heavily and will find similar bad investments like the ones SVB made. It's inconceivable that SVB was the only bank that bet on long-term bonds before the Fed raised rates. If SVB probably isn't the only bank that didn't account for the duration risk either. Just as with SVB, it only takes a few depositors to freak out in order to start a stampede, which is the point Matt Levine made about this being a self-fulfilling problem. For example, if I was a customer of First Republic Bank I'd be seriously thinking about moving my money to JP Morgan.

vba616 4y ago
> it only takes a few depositors I don't think so? I mean if you had everything concentrated in a literal handful of depositors perhaps, but surely no real bank is like that including SVB. The deposits were in the billions; articles say some depositors had amounts in the millions, a billion (American) is a thousand million, you know? Levine was saying, and it sounds right to me, that when your depositors are a mix of ordinary people, they aren't all talking to each other or even paying attention, it prevents a stampede when there isn't any actual problem. Of course, that doesn't mean SVB won't have effects on other things. I halfway expect USDC to collapse first thing Monday. When it rebounded from about 90 cents, I thought "ah, but didn't Coinbase stop withdrawals until Monday?" But I'm making the distinction with any linkage or contagion that it's not going to be the same phenomenon, it's going to be something specific and different.
- twblalock 4y ago
  > Levine was saying, and it sounds right to me, that when your depositors are a mix of ordinary people, they aren't all talking to each other or even paying attention, it prevents a stampede when there isn't any actual problem. I think social media changes that. Plus this is front-page stuff for every major news organization, which is not what would happen if a small regional bank that doesn't matter fails (which happens multiple times per year). Plus it comes at a time when people are already nervous about the economy for a number of reasons, including Fed rate increases which are directly related to the devaluation of SVB's investments.
landemva 4y ago
> now everyone will be scrutinizing every bank very heavily Now no depositors should care to scrutinize anything because the Fed put is back in action. Chase the highest yield because the Fed is backstopping bank losses again.
matheusmoreira 4y ago
> The problem is that now everyone will be scrutinizing every bank very heavily and will find similar bad investments like the ones SVB made. Problem? I don't see the problem. People scrutinizing banks is probably the best thing that could possibly result from this dumpster fire. Banks should be scrutinized down to the smallest detail. No exceptions. If you don't like what you see, you should absolutely pull your money out. If that breaks the bank they only have themselves to blame. Should've kept reserves.

vba616 4y ago

> it only takes a few depositors I don't think so? I mean if you had everything concentrated in a literal handful of depositors perhaps, but surely no real bank is like that including SVB. The deposits were in the billions; articles say some depositors had amounts in the millions, a billion (American) is a thousand million, you know? Levine was saying, and it sounds right to me, that when your depositors are a mix of ordinary people, they aren't all talking to each other or even paying attention, it prevents a stampede when there isn't any actual problem. Of course, that doesn't mean SVB won't have effects on other things. I halfway expect USDC to collapse first thing Monday. When it rebounded from about 90 cents, I thought "ah, but didn't Coinbase stop withdrawals until Monday?" But I'm making the distinction with any linkage or contagion that it's not going to be the same phenomenon, it's going to be something specific and different.

twblalock 4y ago
> Levine was saying, and it sounds right to me, that when your depositors are a mix of ordinary people, they aren't all talking to each other or even paying attention, it prevents a stampede when there isn't any actual problem. I think social media changes that. Plus this is front-page stuff for every major news organization, which is not what would happen if a small regional bank that doesn't matter fails (which happens multiple times per year). Plus it comes at a time when people are already nervous about the economy for a number of reasons, including Fed rate increases which are directly related to the devaluation of SVB's investments.

landemva 4y ago

> now everyone will be scrutinizing every bank very heavily Now no depositors should care to scrutinize anything because the Fed put is back in action. Chase the highest yield because the Fed is backstopping bank losses again.

matheusmoreira 4y ago

> The problem is that now everyone will be scrutinizing every bank very heavily and will find similar bad investments like the ones SVB made. Problem? I don't see the problem. People scrutinizing banks is probably the best thing that could possibly result from this dumpster fire. Banks should be scrutinized down to the smallest detail. No exceptions. If you don't like what you see, you should absolutely pull your money out. If that breaks the bank they only have themselves to blame. Should've kept reserves.