5 ms·

I consider myself to be pretty libertarian but the idea that an intervention was going to cost the government any amount of money that didn't equate to a roundi

I consider myself to be pretty libertarian but the idea that an intervention was going to cost the government any amount of money that didn't equate to a rounding error is ridiculous. Coupled the contagion it could have caused, this was an easy decision. They had enough in assets to cover 95% of deposits. They weren't just super liquid.

yunwal 4y ago
Socialize the losses, privatize the gains, nice
- ummonk 4y ago
  What gains? Depositors weren't getting gains, they were storing money in very low interest (far below inflation or money market yields) checking and savings accounts.
  - yunwal 4y ago
    Depositors were getting gains (4.5% interest rate which is very high compared to similar banks, and for something that’s supposed to be risk-free). The reason these rates were achievable is because SVB lobbied to remove regulations and allow them to engage in risky behavior.
    - rashkov 4y ago
      What specific risky behavior are you referring to? Everything I’ve read points to the fact that they bought a ton of long term US treasury bonds at a low interest rate. Obviously this worked out very poorly for them, but I wouldn’t call this risk seeking behavior.
      - yunwal 4y ago
        SVB lobbied congress to not be subject to liquidity stress tests and got caught with their pants down. They didn’t have to buy 10 year bonds. They also didn’t have to buy volatile mortgage securities, which they did. They were obviously playing fast and loose with the rules (or making their own rules as they went).
postalrat 4y ago
Not liquid like trying to buy a house with a Pokemon card you guarantee will be worth $300k in 10 years but is only worth $50 now.
- strbean 4y ago
  Are we really comparing treasury bonds to pokemon cards now? Treasury bonds are guaranteed by the government with the worlds largest economy. US treasuries are pretty much the safest investment instrument in the history of mankind. In 10 years, they WILL pay out at face value, unless the USA suffers complete collapse. In which case your dollars in the bank are worthless anyways.

yunwal 4y ago

Socialize the losses, privatize the gains, nice

ummonk 4y ago
What gains? Depositors weren't getting gains, they were storing money in very low interest (far below inflation or money market yields) checking and savings accounts.
- yunwal 4y ago
  Depositors were getting gains (4.5% interest rate which is very high compared to similar banks, and for something that’s supposed to be risk-free). The reason these rates were achievable is because SVB lobbied to remove regulations and allow them to engage in risky behavior.
  - rashkov 4y ago
    What specific risky behavior are you referring to? Everything I’ve read points to the fact that they bought a ton of long term US treasury bonds at a low interest rate. Obviously this worked out very poorly for them, but I wouldn’t call this risk seeking behavior.
    - yunwal 4y ago
      SVB lobbied congress to not be subject to liquidity stress tests and got caught with their pants down. They didn’t have to buy 10 year bonds. They also didn’t have to buy volatile mortgage securities, which they did. They were obviously playing fast and loose with the rules (or making their own rules as they went).

postalrat 4y ago

Not liquid like trying to buy a house with a Pokemon card you guarantee will be worth $300k in 10 years but is only worth $50 now.

strbean 4y ago
Are we really comparing treasury bonds to pokemon cards now? Treasury bonds are guaranteed by the government with the worlds largest economy. US treasuries are pretty much the safest investment instrument in the history of mankind. In 10 years, they WILL pay out at face value, unless the USA suffers complete collapse. In which case your dollars in the bank are worthless anyways.