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The amount of victim-blaming astroturfing I've seen on hn this week has been quite surprising. Depositors are never, ever to blame for bank runs. Edit: From th

The amount of victim-blaming astroturfing I've seen on hn this week has been quite surprising. Depositors are never, ever to blame for bank runs. Edit: From the about page: > Who I am is not important. Holding accountable the hypocrites responsible for Silicon Valley Bank’s collapse is. I can be reached at svbhallofshame@protonmail.com. All correspondence will be kept anonymous. It's just missing a PAC called something like "Citizens for Depositor Accountability."

croes 4y ago
Can't you kill any bank with a bank run?
- throw123123123 4y ago
  If you are solvent, in principle, you can get a loan from another bank to cover illiquidity. Yes, runs can kill any bank, but insolvency killed SVB first.
  - fastball 4y ago
    I don't think that's true? SVB was insolvent because they had to sell bonds at a massive loss in order to cover illiquidity that was a problem due to the bank run.
    - zaroth 4y ago
      They’ve been insolvent for some time. The bank run didn’t cause the insolvency, the bank run exposed it, and laid it bare.
      - fastball 4y ago
        What is your source for this? From everything I have read, the first point at which they were clearly insolvent was what I mentioned previously, when they sold a huge swath of bonds at a massive loss at or around March 8th 2023, which was less than two weeks ago.
        drc500free 4y ago
        My read is that they were either holding the MBSs as tradeable assets (in which case they had taken a massive real loss that wiped out their equity) or until maturity decades away (in which case they didn't have enough current assets to remain solvent as a bank). The depositor withdrawals forced them to admit that they had taken a massive loss because of insufficient hedging against interest rate hikes, but they didn't really seem to have a path to unwinding their underwater positions in any realistic timeframe. HTM was an accounting misdirection to try to hide the hole in their ship while they bailed water, but it was a massive hole and they had a tiny bucket.
        fastball 4y ago
        But the withdrawals didn't force them to admit they had taken a massive loss, the withdrawals forced them to take the massive loss at all. It's not a loss until you sell, right? They sold to cover withdrawals. Apparently they had $48B in withdrawals in a one-day period. Trying to imagine any bank that wouldn't need to take losses (to the point of being potentially insolvent) in order to deal with that. Yes, obviously SVB was still very poorly hedged given current interest rates, but they probably could've unwound their position in a much, much more favorable way without the run, to the point where it's possible they could've done so without ever being "insolvent".
        zaroth 4y ago
        There are two different definitions of the same word. One is balance sheet insolvency, the other is cash flow insolvency. But it’s two forms of the same thing! Cash flow insolvency is usually a result of holding illiquid assets that can’t be turned into cash. In this case the assets were perfectly liquid though, so it wasn’t just a cash flow insolvency. The bank was reporting the future value of the bonds, the problem was the present value was much lower.
- borski 4y ago
  Yes.
deleted 4y ago
[deleted]
dang 4y ago
Please make your substantive points without resorting to the "astroturfing" canard. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. I don't disagree with you on the topic, but I promise you that the volcano of anger and indignation that spewed forth about this is basically all from entirely legitimate users.
- drc500free 4y ago
  Fair point, you're right. I appreciate how you cultivate things around here, thanks for keeping us centered.

croes 4y ago

Can't you kill any bank with a bank run?

throw123123123 4y ago
If you are solvent, in principle, you can get a loan from another bank to cover illiquidity. Yes, runs can kill any bank, but insolvency killed SVB first.
- fastball 4y ago
  I don't think that's true? SVB was insolvent because they had to sell bonds at a massive loss in order to cover illiquidity that was a problem due to the bank run.
  - zaroth 4y ago
    They’ve been insolvent for some time. The bank run didn’t cause the insolvency, the bank run exposed it, and laid it bare.
    - fastball 4y ago
      What is your source for this? From everything I have read, the first point at which they were clearly insolvent was what I mentioned previously, when they sold a huge swath of bonds at a massive loss at or around March 8th 2023, which was less than two weeks ago.
      - drc500free 4y ago
        My read is that they were either holding the MBSs as tradeable assets (in which case they had taken a massive real loss that wiped out their equity) or until maturity decades away (in which case they didn't have enough current assets to remain solvent as a bank). The depositor withdrawals forced them to admit that they had taken a massive loss because of insufficient hedging against interest rate hikes, but they didn't really seem to have a path to unwinding their underwater positions in any realistic timeframe. HTM was an accounting misdirection to try to hide the hole in their ship while they bailed water, but it was a massive hole and they had a tiny bucket.
        fastball 4y ago
        But the withdrawals didn't force them to admit they had taken a massive loss, the withdrawals forced them to take the massive loss at all. It's not a loss until you sell, right? They sold to cover withdrawals. Apparently they had $48B in withdrawals in a one-day period. Trying to imagine any bank that wouldn't need to take losses (to the point of being potentially insolvent) in order to deal with that. Yes, obviously SVB was still very poorly hedged given current interest rates, but they probably could've unwound their position in a much, much more favorable way without the run, to the point where it's possible they could've done so without ever being "insolvent".
        zaroth 4y ago
        There are two different definitions of the same word. One is balance sheet insolvency, the other is cash flow insolvency. But it’s two forms of the same thing! Cash flow insolvency is usually a result of holding illiquid assets that can’t be turned into cash. In this case the assets were perfectly liquid though, so it wasn’t just a cash flow insolvency. The bank was reporting the future value of the bonds, the problem was the present value was much lower.
borski 4y ago
Yes.

deleted 4y ago

[deleted]

dang 4y ago

Please make your substantive points without resorting to the "astroturfing" canard. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. I don't disagree with you on the topic, but I promise you that the volcano of anger and indignation that spewed forth about this is basically all from entirely legitimate users.

drc500free 4y ago
Fair point, you're right. I appreciate how you cultivate things around here, thanks for keeping us centered.