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You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for.

You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like. > If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bearing any of the burden? "The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government, or issue debt through the Federal Financing Bank on terms that the bank decides." https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp... On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds. > And please inform him the recourse he has should he disagree with sharing your loss. You can vote for people who are dumb enough to let the entire banking system collapse because they want to hurt rich people. But of course that would probably put "peasants" out of work while the rich get slightly less rich.

unicornmama 4y ago
> SVB has the money to pay back almost all of the depositors. There seems to be this myth floating around that bond losses aren’t real. They are very real. An 80 cent on the dollar (purchase price) bond is a loss of 20 cents. And it doesn’t matter if the holder holds to maturity. Welcome to interest rates. Edit: Fundamental fallacy here is not understanding the time value of money. Thinking of money without the time dimension is like thinking about space without time. See https://www.investopedia.com/terms/t/timevalueofmoney.asp https://www.investopedia.com/terms/t/timevalueofmoney.asp Secondary fallacy here is equating value in the financial sense with gain/loss in the accounting sense.
- twblalock 4y ago
  You don’t lose money on bonds you hold to maturity. 100% of the principal will become liquid upon maturity.
  - faeyanpiraat 4y ago
    You lose money by not being invested into the better yielding options while you are waiting your bonds to mature.
    - twblalock 4y ago
      Whoosh the goalposts are moving fast on this one. What you are talking about is opportunity cost, not investment losses. If SVB could have held their bonds to maturity they would have gotten back every cent of the principal.
      - barrkel 4y ago
        Yes, but you also need to look at the net present value. A loan today would need to be at below market rate interest in order to match up with the value of the bonds held to maturity. Interest rates rising means products with a fixed rate yield are worth less today. That value isn't gotten back by waiting until maturity. The nominal value is retrieved, yes, but the money in the future is literally worth less. SVB was very poorly run. We can see that easily now in retrospect.
        twblalock 4y ago
        The nominal value is what matters because deposits are also nominally valued. We don't live in a magical world where deposits (aka liabilities) are exempt from inflation and the assets that back them are not. If you owe someone $1000 you owe them one thousand dollars. Not the value or purchasing power of one thousand dollars -- literally one thousand things called dollars. So if you take $1000 in deposits, you buy $1000 in bonds, you wait until the bonds mature, and then your depositor withdraws $1000, you will be fine no matter if that happens in one year or a hundred years, no matter what the rate of inflation is. Your assets and liabilities will cancel out. If your depositor tries to get their $1000 back before the bonds mature, you are screwed. That is what happened to SVB. If all of SVB's bonds had been mature by last Friday it would have been fine. Pretty much every article in the financial press about this fiasco has made that point. It is amazing to see people twist themselves up in knots about opportunity cost and inflation when this is so basic. If liquid assets equal liabilities in the literal number of dollars, you are even, you are solvent, and your depositors get their money back. > A loan today would need to be at below market rate interest in order to match up with the value of the bonds held to maturity. Well, it's a government loan, so they can do that if they want to.
RandomLensman 4y ago
Someone has to pay for the cost of lending the money. If the aim is to ensure that in the future depositors are always safe, then it might be cheaper to offer anyone an account at a risk free institution rather than backstop commercial banks.
- twblalock 4y ago
  Yes but that isn’t going to happen before the market opens on Monday. This is triage. When there is an emergency you solve it and then you have time to think about longer term solutions.
  - RandomLensman 4y ago
    Agreed, but I have severe doubts that we see a longer term solution that basically removes deposits from most banks - so in the end it will amount to some permanent government backstop of all deposits (and it is a government backstop because its borrowing ability is needed). It might then need more regulation as to what can be done with deposits, how much can be paid on them etc.
    - twblalock 4y ago
      Obviously the regulations need to change, and frankly bad regulation is probably complicit in this whole affair. SVB is almost certainly NOT the only bank that invested money like this without the government knowing. What really worries me is that the regulators might have seen these investments and not understood they were risky. Government bonds are pretty safe, right? Duration risk is sneaky and even though it’s obvious now, SVB was locked in back when rates were super low. Realizing the risk anytime after they got locked in is too late! Applying the same stress tests to all banks regardless of the amount of deposits they have would be a good start. Also, the FDIC insurance limit would be a lot higher than $250k if it followed inflation, but even if it did, a lot of businesses need to keep a lot of cash around to make payroll and float expenses. It doesn’t make sense for them to have the same type of insurance, and the same limits, as an individual person’s checking account.
roenxi 4y ago
> You are better off because the government is helping If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated? The whole system seems to be built on one group revealing a sudden crisis that have obviously been building for a while. Then another group of people explaining that they have a plan, there is no time to explain, no need to explain and the objections are all mean-spirited fools who don't understand the plan. The plan which will be clearly explained sooner or later. They're acting like people running a scam. None of these crisises are that surprising. Raising interest rates were likely to lead to this sort of fireworks display at some point in the short term. If the panic is genuine they should all be removed on the basis that they can't spot a tree in a forest. This has to be a long-planned contingency. > You can't let the banking system collapse and expect it will only hurt the people you don't like. The hurt happened a while ago now; banking collapses are the market recognising that it was mistaken about actions that it thought were wealth-creating but turned out not to be. This isn't a question of trying to "hurt" rich people, whatever that means. This is about concentrating the pain on people with skin in the game. If people with skin in the game eat the losses, losses will happen less often. If the losses are diffuse, then losses happen more often. They're trying to cover up for incompetents because they meet them at parties, go to the same schools and have the same friends. And invest in similar assets, one suspects.
- twblalock 4y ago
  > If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated? Because that is what a crisis is, and it’s how crisis response works! > This has to be a long-planned contingency. You can believe that this was a long-running conspiracy or you can believe that the people involved are incompetent screwups, but how can you believe both? Someone would have talked. Do you honestly believe that people with “skin in the game” aren’t being hurt by this? SVB shareholders lost everything. Do you also honestly believe that you can restrict the fallout of a banking system failure only to those who caused it?
  - roenxi 4y ago
dangwhy 4y ago
>no ad hominems >> it will only hurt the people you don't like. >> people who are dumb enough to let the entire banking system collapse when did gp expresses his dislike for people who banked with svb :D
xorfish 4y ago
> So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds. The cost of the loans should be in the same ballpark as the losses on the long term bonds.
- twblalock 4y ago
  > The cost of the loans should be in the same ballpark as the losses on the long term bonds. That’s great, that means it’s zero, because there is no loss of principal on bonds held to maturity!
  - deleted 4y ago
    [deleted]
  - xorfish 4y ago
    No, that is not true. Selling the bonds now at their current valuation or taking on debt and hold them to maturity lead to roughly equivalent outcomes. The MtM losses are real.
    - twblalock 4y ago
      No matter how many times you say this it's not going to be true. If you hold bonds to maturity you get the principal back. If you sell them at market rates you don't. Those are different outcomes. Nobody is talking about taking on debt at market rates to float the bonds. The bank died because it couldn't do that and couldn't raise capital in other ways either. Now we are talking about the government backstopping things, which is a whole different ballgame.
      - rvnx 4y ago
        Also let's not forget that the customers profited from the interests paid by the bonds. If SVB was paying 4.50% (as they claim on their website), then even if the customer takes a 5% loss, it would be only a 0.50% realised loss. I genuinely don't understand why the regulator doesn't push for that unless there is some "lobbying" involved.
wheelerof4te 4y ago
"So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds." From where do you think this money will, or has come from? From Yellen's backside?
- xmcqdpt2 4y ago
  From the FDIC's own Insurance Fund, which is paid by fees assessed on banks. Ultimately I guess taxpayers pay for this because they pay for banking, but it isn't through taxes.
  - wheelerof4te 4y ago
    Trickle down economy at it's finest.
jalapenos 4y ago
This isn't grounded in reality. You make it sound like banks will just end as an enterprise, and we'll have to go back to carrying little bags of silver coins. Depositors are the absolute last group to lose money in a bankrupt bank. When a bank collapses its assets don't just disappear, and depositors (and paychecks) get first scoop from the pot. It would be nice if everyone didn't have such hostility towards personal responsibility. You never put all your eggs in one basket. You diversify where you keep your money. The government can best help by doing what it does best. Let it invest in making bankruptcy courts super efficient. Set up automated systems to drip feed payouts to depositors as assets are sold. The "heads you win tails we lose" deal we give to bankers, which we don't give to anyone else, is fundamentally evil, and we have to stop bowing to their terroristic threats that if you don't give us this deal you're all doomed.
- twblalock 4y ago
  The important role of banks in our economy is lending, funded by deposits. Few businesses can survive, let alone get started, without access to credit. If the banking system collapses most businesses will fail.
  - ivanche 4y ago
    Actually deposits are funded by lending. Source: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
  - wheelerof4te 4y ago
    Sounds like a deeply flawed system to me, no? Almost like some scam? Why should banks have such priviledge? Who gave them that?
    - jalapenos 4y ago
      We did, by acquiescence.
deleted 4y ago
[deleted]
kgwgk 4y ago
> On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. Imagine another bank BVS of similar size that didn’t quite have the money. It has lost part of it in monkey NFTs or whatever. They have a loss similar to the mark-to-market loss of SVB. Can they buy the same bonds that SVB has to patch the hole in their balance sheet? Can they then say “we have the money, we just don’t have it liquid right now because it's in bonds that won't mature for a while ”? If not, why not? Both banks would have the same assets.
- unmole 4y ago
  > If not, why not? Both banks would have the same assets. Unlike NFTs or whatever, the bonds held to maturity will pay out the full amount.
  - kgwgk 4y ago
    The second bank has just bought - because it has enough money to do so selling its NFT or whatever - the same bonds that SVB has. There is no difference at all between the assets of liabilities and the two banks in this example. I don’t mean just that the amounts are the same: every asset is identical. Can both use the “I have the money but just not right now” excuse or not?
    - unmole 4y ago
      > every asset is identical. You lost me there. > Can both use the “I have the money but just not right now” excuse or not? No.
      - kgwgk 4y ago
        Bank 1 starts with $1000 in t-bills and $1000 in t-bonds (face value $1000) The bonds lose 20% (for simplicity the t-bills gain 0%) Bank 1 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) According to some people Bank 1 can say “I have $2000 it’s just that I don’t have them right now” Bank 2 starts with $1800 in t-bills and $200 in NFTs In the same period the NFTs lose 100% Bank 2 still has $1800 in t-bills, sells $800 and buys $800 of those t-bonds which are trading at a 20% discount to par Bank 2 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) Bank 1 and Bank 2 are in the same exact situation Bank 1 can say “I have $2000 it’s just that I don’t have them right now” but Bank 2 cannot do the same?
yonifei 4y ago
> "The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government, or issue debt through the Federal Financing Bank on terms that the bank decides." If you're trying to say "look, 'taxpayer' isn't mentioned, all good", you're either in self-delusion or you're playing dumb. It doesn't matter how you dress it - "taxpayer money", QE, Sammy's piggybank - the inflationary repercussions will affect everyone. > On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. This is a self-contradiction, yet it's written as an explanation. Bravo. > You can vote for people who are dumb enough to let the entire banking system collapse because they want to hurt rich people. But of course that would probably put "peasants" out of work while the rich get slightly less rich. This isn't about "hurting rich people", you can throw away that straw man (along with the twitter favorite "it's not a bailout, the bank equity goes to zero!"). It's about the response to a complex system's failure. Most would agree injecting liquidity ASAP is mandatory in the short-term, but that does not mandate insuring 100% of deposits. Any sort of response has negative repercussions, but it isn't a matter of fact that the banking system would collapse otherwise. Nobody has "the answers", it's a complex system. The VC tech bro take draws a line in the sand and cries wolf for any approach that doesn't cover them 100%, and it's done under the guise of looking out for others; "the workers", "the banking system", "the economy", "a generation of technological progress evaporated". Is it possible that the best thing to do for the long-term is to allow a worse short-term outcome (affecting a small part of the economy more drastically), so that the system is altered in a way that actually fixes/improves it? Even if we grant that hypothetical, should it be done? It's a complex question with no right answer. The VC tech bro take on technological advancements that have negative short-term side effects, wiping industries and causing people to lose jobs usually falls in the range of "learn to code" to "that sucks, but we must march forward". There is a poignant sense of hypocrisy when grandstanding holier-than-thou "technologists" who claim in abstract that progress and efficiency trump all, find themselves on the other side and act oh so predictably. The cynical responders aren't partaking in the question of "what is the correct response", but just because they don't gobble up the predictable VC tech bro take as gospel doesn't make them dumb.
p0pcult 4y ago
>You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like. The only problem with this line is that a ton of people on here are explicitly against social safety nets. Now that they need one, all kinds of equivocation and hand waving. Safety nets for all (or none)! FWIW, I prefer the former.

unicornmama 4y ago

> SVB has the money to pay back almost all of the depositors. There seems to be this myth floating around that bond losses aren’t real. They are very real. An 80 cent on the dollar (purchase price) bond is a loss of 20 cents. And it doesn’t matter if the holder holds to maturity. Welcome to interest rates. Edit: Fundamental fallacy here is not understanding the time value of money. Thinking of money without the time dimension is like thinking about space without time. See https://www.investopedia.com/terms/t/timevalueofmoney.asp https://www.investopedia.com/terms/t/timevalueofmoney.asp Secondary fallacy here is equating value in the financial sense with gain/loss in the accounting sense.

twblalock 4y ago
You don’t lose money on bonds you hold to maturity. 100% of the principal will become liquid upon maturity.
- faeyanpiraat 4y ago
  You lose money by not being invested into the better yielding options while you are waiting your bonds to mature.
  - twblalock 4y ago
    Whoosh the goalposts are moving fast on this one. What you are talking about is opportunity cost, not investment losses. If SVB could have held their bonds to maturity they would have gotten back every cent of the principal.
    - barrkel 4y ago
      Yes, but you also need to look at the net present value. A loan today would need to be at below market rate interest in order to match up with the value of the bonds held to maturity. Interest rates rising means products with a fixed rate yield are worth less today. That value isn't gotten back by waiting until maturity. The nominal value is retrieved, yes, but the money in the future is literally worth less. SVB was very poorly run. We can see that easily now in retrospect.
      - twblalock 4y ago
        The nominal value is what matters because deposits are also nominally valued. We don't live in a magical world where deposits (aka liabilities) are exempt from inflation and the assets that back them are not. If you owe someone $1000 you owe them one thousand dollars. Not the value or purchasing power of one thousand dollars -- literally one thousand things called dollars. So if you take $1000 in deposits, you buy $1000 in bonds, you wait until the bonds mature, and then your depositor withdraws $1000, you will be fine no matter if that happens in one year or a hundred years, no matter what the rate of inflation is. Your assets and liabilities will cancel out. If your depositor tries to get their $1000 back before the bonds mature, you are screwed. That is what happened to SVB. If all of SVB's bonds had been mature by last Friday it would have been fine. Pretty much every article in the financial press about this fiasco has made that point. It is amazing to see people twist themselves up in knots about opportunity cost and inflation when this is so basic. If liquid assets equal liabilities in the literal number of dollars, you are even, you are solvent, and your depositors get their money back. > A loan today would need to be at below market rate interest in order to match up with the value of the bonds held to maturity. Well, it's a government loan, so they can do that if they want to.

RandomLensman 4y ago

Someone has to pay for the cost of lending the money. If the aim is to ensure that in the future depositors are always safe, then it might be cheaper to offer anyone an account at a risk free institution rather than backstop commercial banks.

twblalock 4y ago
Yes but that isn’t going to happen before the market opens on Monday. This is triage. When there is an emergency you solve it and then you have time to think about longer term solutions.
- RandomLensman 4y ago
  Agreed, but I have severe doubts that we see a longer term solution that basically removes deposits from most banks - so in the end it will amount to some permanent government backstop of all deposits (and it is a government backstop because its borrowing ability is needed). It might then need more regulation as to what can be done with deposits, how much can be paid on them etc.
  - twblalock 4y ago
    Obviously the regulations need to change, and frankly bad regulation is probably complicit in this whole affair. SVB is almost certainly NOT the only bank that invested money like this without the government knowing. What really worries me is that the regulators might have seen these investments and not understood they were risky. Government bonds are pretty safe, right? Duration risk is sneaky and even though it’s obvious now, SVB was locked in back when rates were super low. Realizing the risk anytime after they got locked in is too late! Applying the same stress tests to all banks regardless of the amount of deposits they have would be a good start. Also, the FDIC insurance limit would be a lot higher than $250k if it followed inflation, but even if it did, a lot of businesses need to keep a lot of cash around to make payroll and float expenses. It doesn’t make sense for them to have the same type of insurance, and the same limits, as an individual person’s checking account.

roenxi 4y ago

> You are better off because the government is helping If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated? The whole system seems to be built on one group revealing a sudden crisis that have obviously been building for a while. Then another group of people explaining that they have a plan, there is no time to explain, no need to explain and the objections are all mean-spirited fools who don't understand the plan. The plan which will be clearly explained sooner or later. They're acting like people running a scam. None of these crisises are that surprising. Raising interest rates were likely to lead to this sort of fireworks display at some point in the short term. If the panic is genuine they should all be removed on the basis that they can't spot a tree in a forest. This has to be a long-planned contingency. > You can't let the banking system collapse and expect it will only hurt the people you don't like. The hurt happened a while ago now; banking collapses are the market recognising that it was mistaken about actions that it thought were wealth-creating but turned out not to be. This isn't a question of trying to "hurt" rich people, whatever that means. This is about concentrating the pain on people with skin in the game. If people with skin in the game eat the losses, losses will happen less often. If the losses are diffuse, then losses happen more often. They're trying to cover up for incompetents because they meet them at parties, go to the same schools and have the same friends. And invest in similar assets, one suspects.

twblalock 4y ago
> If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated? Because that is what a crisis is, and it’s how crisis response works! > This has to be a long-planned contingency. You can believe that this was a long-running conspiracy or you can believe that the people involved are incompetent screwups, but how can you believe both? Someone would have talked. Do you honestly believe that people with “skin in the game” aren’t being hurt by this? SVB shareholders lost everything. Do you also honestly believe that you can restrict the fallout of a banking system failure only to those who caused it?
- roenxi 4y ago

dangwhy 4y ago

>no ad hominems >> it will only hurt the people you don't like. >> people who are dumb enough to let the entire banking system collapse when did gp expresses his dislike for people who banked with svb :D

xorfish 4y ago

> So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds. The cost of the loans should be in the same ballpark as the losses on the long term bonds.

twblalock 4y ago
> The cost of the loans should be in the same ballpark as the losses on the long term bonds. That’s great, that means it’s zero, because there is no loss of principal on bonds held to maturity!
- deleted 4y ago
  [deleted]
- xorfish 4y ago
  No, that is not true. Selling the bonds now at their current valuation or taking on debt and hold them to maturity lead to roughly equivalent outcomes. The MtM losses are real.
  - twblalock 4y ago
    No matter how many times you say this it's not going to be true. If you hold bonds to maturity you get the principal back. If you sell them at market rates you don't. Those are different outcomes. Nobody is talking about taking on debt at market rates to float the bonds. The bank died because it couldn't do that and couldn't raise capital in other ways either. Now we are talking about the government backstopping things, which is a whole different ballgame.
    - rvnx 4y ago
      Also let's not forget that the customers profited from the interests paid by the bonds. If SVB was paying 4.50% (as they claim on their website), then even if the customer takes a 5% loss, it would be only a 0.50% realised loss. I genuinely don't understand why the regulator doesn't push for that unless there is some "lobbying" involved.

wheelerof4te 4y ago

"So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds." From where do you think this money will, or has come from? From Yellen's backside?

xmcqdpt2 4y ago
From the FDIC's own Insurance Fund, which is paid by fees assessed on banks. Ultimately I guess taxpayers pay for this because they pay for banking, but it isn't through taxes.
- wheelerof4te 4y ago
  Trickle down economy at it's finest.

jalapenos 4y ago

This isn't grounded in reality. You make it sound like banks will just end as an enterprise, and we'll have to go back to carrying little bags of silver coins. Depositors are the absolute last group to lose money in a bankrupt bank. When a bank collapses its assets don't just disappear, and depositors (and paychecks) get first scoop from the pot. It would be nice if everyone didn't have such hostility towards personal responsibility. You never put all your eggs in one basket. You diversify where you keep your money. The government can best help by doing what it does best. Let it invest in making bankruptcy courts super efficient. Set up automated systems to drip feed payouts to depositors as assets are sold. The "heads you win tails we lose" deal we give to bankers, which we don't give to anyone else, is fundamentally evil, and we have to stop bowing to their terroristic threats that if you don't give us this deal you're all doomed.

twblalock 4y ago
The important role of banks in our economy is lending, funded by deposits. Few businesses can survive, let alone get started, without access to credit. If the banking system collapses most businesses will fail.
- ivanche 4y ago
  Actually deposits are funded by lending. Source: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
- wheelerof4te 4y ago
  Sounds like a deeply flawed system to me, no? Almost like some scam? Why should banks have such priviledge? Who gave them that?
  - jalapenos 4y ago
    We did, by acquiescence.

deleted 4y ago

[deleted]

kgwgk 4y ago

> On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. Imagine another bank BVS of similar size that didn’t quite have the money. It has lost part of it in monkey NFTs or whatever. They have a loss similar to the mark-to-market loss of SVB. Can they buy the same bonds that SVB has to patch the hole in their balance sheet? Can they then say “we have the money, we just don’t have it liquid right now because it's in bonds that won't mature for a while ”? If not, why not? Both banks would have the same assets.

unmole 4y ago
> If not, why not? Both banks would have the same assets. Unlike NFTs or whatever, the bonds held to maturity will pay out the full amount.
- kgwgk 4y ago
  The second bank has just bought - because it has enough money to do so selling its NFT or whatever - the same bonds that SVB has. There is no difference at all between the assets of liabilities and the two banks in this example. I don’t mean just that the amounts are the same: every asset is identical. Can both use the “I have the money but just not right now” excuse or not?
  - unmole 4y ago
    > every asset is identical. You lost me there. > Can both use the “I have the money but just not right now” excuse or not? No.
    - kgwgk 4y ago
      Bank 1 starts with $1000 in t-bills and $1000 in t-bonds (face value $1000) The bonds lose 20% (for simplicity the t-bills gain 0%) Bank 1 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) According to some people Bank 1 can say “I have $2000 it’s just that I don’t have them right now” Bank 2 starts with $1800 in t-bills and $200 in NFTs In the same period the NFTs lose 100% Bank 2 still has $1800 in t-bills, sells $800 and buys $800 of those t-bonds which are trading at a 20% discount to par Bank 2 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) Bank 1 and Bank 2 are in the same exact situation Bank 1 can say “I have $2000 it’s just that I don’t have them right now” but Bank 2 cannot do the same?

yonifei 4y ago

> "The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government, or issue debt through the Federal Financing Bank on terms that the bank decides." If you're trying to say "look, 'taxpayer' isn't mentioned, all good", you're either in self-delusion or you're playing dumb. It doesn't matter how you dress it - "taxpayer money", QE, Sammy's piggybank - the inflationary repercussions will affect everyone. > On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. This is a self-contradiction, yet it's written as an explanation. Bravo. > You can vote for people who are dumb enough to let the entire banking system collapse because they want to hurt rich people. But of course that would probably put "peasants" out of work while the rich get slightly less rich. This isn't about "hurting rich people", you can throw away that straw man (along with the twitter favorite "it's not a bailout, the bank equity goes to zero!"). It's about the response to a complex system's failure. Most would agree injecting liquidity ASAP is mandatory in the short-term, but that does not mandate insuring 100% of deposits. Any sort of response has negative repercussions, but it isn't a matter of fact that the banking system would collapse otherwise. Nobody has "the answers", it's a complex system. The VC tech bro take draws a line in the sand and cries wolf for any approach that doesn't cover them 100%, and it's done under the guise of looking out for others; "the workers", "the banking system", "the economy", "a generation of technological progress evaporated". Is it possible that the best thing to do for the long-term is to allow a worse short-term outcome (affecting a small part of the economy more drastically), so that the system is altered in a way that actually fixes/improves it? Even if we grant that hypothetical, should it be done? It's a complex question with no right answer. The VC tech bro take on technological advancements that have negative short-term side effects, wiping industries and causing people to lose jobs usually falls in the range of "learn to code" to "that sucks, but we must march forward". There is a poignant sense of hypocrisy when grandstanding holier-than-thou "technologists" who claim in abstract that progress and efficiency trump all, find themselves on the other side and act oh so predictably. The cynical responders aren't partaking in the question of "what is the correct response", but just because they don't gobble up the predictable VC tech bro take as gospel doesn't make them dumb.

p0pcult 4y ago

>You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like. The only problem with this line is that a ton of people on here are explicitly against social safety nets. Now that they need one, all kinds of equivocation and hand waving. Safety nets for all (or none)! FWIW, I prefer the former.