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I would consider myself a reasonably sophisticated financial advisor. however, within thousands of pages of SEC disclosures and fine print, I have not the time

I would consider myself a reasonably sophisticated financial advisor. however, within thousands of pages of SEC disclosures and fine print, I have not the time nor the resources nor the skill sets to do due diligence on a bank's daily operations. I just consider that my zero yielding no interest deposits (not investments) are safe and in a competent banking system this should be a fair assumption, should it not? especially for a bank that wasnt investing in subprime mortgage loans or car loans, they literally got punished for investing in long-term US treasuries! a fair financial system should be afforded for everybody, and the idea that they should only be presented for the poor seems baffling

logifail 4y ago
> thousands of pages of SEC disclosures and fine print, I have not the time nor the resources nor the skill sets to do due diligence on a bank's daily operations The FDIC deposit insurance limit isn't hidden away in disclosures or in any fine print.
- tomhoward 4y ago
  This just indicates that the $250K insured threshold makes no sense these days for corporate bank accounts. It makes no sense for every business owner (and a business doesn't have to be very big to have more than $250K in the bank) to have to spread their funds across multiple banks and do ongoing due diligence across each bank's investment activities. We're talking about farmers, used car dealerships, builders, and countless other kinds of businesses who would suddenly be expected to develop an aptitude for financial hedging and risk assessment. It would be incredibly inefficient and make it not worthwhile for many people to be in business at all. The whole point of a regulated financial system is that regular depositors can expect that if the regulations are being met and the regulators are verifying that the banks are in good shape, you can trust that your funds will be safe. The right response to this situation is to change the guaranteed limit for corporate bank accounts, and, sure, increase the fees that banks (and indirectly, corporate banking customers) pay for that. The wrong response would be to tank the entire banking system to stick it to the tech bros.
  - logifail 4y ago
    > The right response to this situation is to change the guaranteed limit for corporate bank accounts, and, sure, increase the fees that banks (and indirectly, corporate banking customers) pay for that "We demand more regulation", not something you'd typically hear from the US tech sector. I can't help think about the moral hazard aspect of this mess.
    - tomhoward 4y ago
      Sam Altman literally called for more regulation on banking (and also AI) today, though I think may be misplaced and self-serving. The regulation of SVB doesn’t seem to have been particularly lacking. The shortfall is not very large and should be covered by asset sales and some fairly small industry levies. What exactly is the moral hazard here? The executives and investors should lose everything. That will send the right signal to other bank execs and investors. And regulators should make some minor changes to balance sheet requirements and perhaps insurance thresholds/charges. What do we expect corporate depositors to learn, aside from that their deposits are never safe, which would crash the whole banking system? I share your concern about moral hazard. What I think you’re doing is letting your desire of an idealized outcome eclipse consideration of the least-worst workable outcome, which is realistically all we can hope for.
      - logifail 4y ago
        > The regulation of SVB doesn’t seem to have been particularly lacking. The shortfall is not very large and should be covered by asset sales and some fairly small industry levies. What exactly is the moral hazard here? If regulation wasn't lacking, the shortfall isn't large, and (I paraphase) SVB and the sector can sort itself out, why would Yellen and POTUS need to hold press conferences? If you hold cash in a bank and your balance exceeds the FDIC insurance limit, it's at some risk. This isn't new, yet seems to have come as a complete surprise to a whole bunch of people, many of whom really should have known better. They've been loudly demanding a bailout for having been on the wrong end of their risky decision. Isn't that pretty much the definition of moral hazard?

logifail 4y ago

> thousands of pages of SEC disclosures and fine print, I have not the time nor the resources nor the skill sets to do due diligence on a bank's daily operations The FDIC deposit insurance limit isn't hidden away in disclosures or in any fine print.

tomhoward 4y ago
This just indicates that the $250K insured threshold makes no sense these days for corporate bank accounts. It makes no sense for every business owner (and a business doesn't have to be very big to have more than $250K in the bank) to have to spread their funds across multiple banks and do ongoing due diligence across each bank's investment activities. We're talking about farmers, used car dealerships, builders, and countless other kinds of businesses who would suddenly be expected to develop an aptitude for financial hedging and risk assessment. It would be incredibly inefficient and make it not worthwhile for many people to be in business at all. The whole point of a regulated financial system is that regular depositors can expect that if the regulations are being met and the regulators are verifying that the banks are in good shape, you can trust that your funds will be safe. The right response to this situation is to change the guaranteed limit for corporate bank accounts, and, sure, increase the fees that banks (and indirectly, corporate banking customers) pay for that. The wrong response would be to tank the entire banking system to stick it to the tech bros.
- logifail 4y ago
  > The right response to this situation is to change the guaranteed limit for corporate bank accounts, and, sure, increase the fees that banks (and indirectly, corporate banking customers) pay for that "We demand more regulation", not something you'd typically hear from the US tech sector. I can't help think about the moral hazard aspect of this mess.
  - tomhoward 4y ago
    Sam Altman literally called for more regulation on banking (and also AI) today, though I think may be misplaced and self-serving. The regulation of SVB doesn’t seem to have been particularly lacking. The shortfall is not very large and should be covered by asset sales and some fairly small industry levies. What exactly is the moral hazard here? The executives and investors should lose everything. That will send the right signal to other bank execs and investors. And regulators should make some minor changes to balance sheet requirements and perhaps insurance thresholds/charges. What do we expect corporate depositors to learn, aside from that their deposits are never safe, which would crash the whole banking system? I share your concern about moral hazard. What I think you’re doing is letting your desire of an idealized outcome eclipse consideration of the least-worst workable outcome, which is realistically all we can hope for.
    - logifail 4y ago
      > The regulation of SVB doesn’t seem to have been particularly lacking. The shortfall is not very large and should be covered by asset sales and some fairly small industry levies. What exactly is the moral hazard here? If regulation wasn't lacking, the shortfall isn't large, and (I paraphase) SVB and the sector can sort itself out, why would Yellen and POTUS need to hold press conferences? If you hold cash in a bank and your balance exceeds the FDIC insurance limit, it's at some risk. This isn't new, yet seems to have come as a complete surprise to a whole bunch of people, many of whom really should have known better. They've been loudly demanding a bailout for having been on the wrong end of their risky decision. Isn't that pretty much the definition of moral hazard?