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Pretty sure banks get audited to prevent this exact scenario from happening.

Kareem71 3y ago
I guess you can call your bank a crypto bank, and skip the audits.
matheusmoreira 3y ago
Not really. No amount of auditing prevents banks from going bankrupt. It wasn't that long ago some Silicon Valley bank became insolvent and suffered a literal bank run. And people got bailed out. Again.
- pylua 3y ago
  There are lots of mechanisms in place compared to other types of financial institutions including bank examiners.
- tsunamifury 3y ago
  You got it backwards. They became insolvent due to a bank run. Based on false speculation that they couldn’t liquidate their treasuries. Which the government then bought back 1:1. So basically Peter Theil caused a run on a bank for no reason other than he got people panicked about their tbill risk ladder. Which by the way want as bad as Bank Of Americas right now.
  - matheusmoreira 3y ago
    Didn't meant to imply an ordering of events when I posted that. Makes no difference either way. They still suffered a bank run and still ended up insolvent to the point the government had to step in and bail them out with taxpayer money.
    - schemescape 3y ago
      Member banks made depositors whole, not tax payers…
      - matheusmoreira 3y ago
        Banks pay the FDIC for insurance. That would be true if only insured deposits were made whole. That's not what happened though. > On March 12, 2023, a joint statement was issued by Secretary of the Treasury Janet Yellen, Federal Reserve Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg > stating that all depositors at SVB would be fully protected and would have access to both insured and uninsured deposits > Regulatory filings from December 2022 estimated that more than 85% of deposits were uninsured. Where'd that come from? Surely not the government?
        schemescape 3y ago
        From member banks: https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Edit: apologies, I should have included this link and blurb in my original comment.
        tsunamifury 3y ago
        You're Both arguing about the wrong thing. SVB never was insolvent, all account holders were made whole with available assets. Whole thing was a farce
- vineyardmike 3y ago
  They didn’t really do the same thing wrong. SVB did everything right, just not right enough. “Real” banks, government approved ones, have laws governing how much cash to keep on hand, and how to “invest” the excess, etc. SVB did everything by the books and they’d probably have made it through to the other side if there wasn’t a bank run. They just had underwater investments if sold (but they’d be fine if held to maturity). FTX was literal fraud and they didn’t protect money. They gave it to friends, and sister companies, and made a lot of bad decisions with it. There’s a big difference between that and SVB. Oh and of course everyone was made whole in the end after SVB
  - matheusmoreira 3y ago
    > There’s a big difference between that and SVB. Not to me. All I see is corporations that accept money, do god knows what with them and cause the money to evaporate into thin air. It doesn't really matter how much the government "approves" of the reserves and investments of banks. They're still all the same: literally one bank run away from insolvency.
    - eropple 3y ago
      A: "We submit to capital controls and while extremely infrequently our investment groups make (occasionally disastrous) mistakes, the system of human finance is arguably more stable than at any point in the history of our species' efforts to trade with people beyond the horizon." B: "We bought a house for the founder's parents while they advised ways to hide it and threw millions of dollars at the insolvent-by-design crypto fund of somebody in the boss's polycule." You: "No difference detected." For real?
      - matheusmoreira 3y ago
        Yeah, for real. A: "We take customer money and risk it." B: "We take customer money and risk it." Just because one puts the money into "safe" investments does not make them any different. It's still a bank doing fractional reserve banking.
- acdha 3y ago
  Auditing meant that taxpayers paid nothing and all of their customers were made whole, and the regulators changed policies to prevent that happening again. It’s not perfect but it’s worlds better than the cryptocurrency goat rodeo where we constantly see large, easily foreseeable losses and most of the “community” reacts by saying that the victims should have known better and bought the speaker’s favorite token instead.
  - matheusmoreira 3y ago
    > Auditing meant that taxpayers paid nothing They literally backstop bank runs with public money. > all of their customers were made whole They shouldn't have been. They loaned money to the bank, they accepted the risk of losses. Should've dealt with the consequences of it. The government should stop bailing out banks every time they screw up. Otherwise they might as well bail out Tether. What's the difference? > the cryptocurrency goat rodeo where we constantly see large, easily foreseeable losses and most of the “community” reacts by saying that the victims should have known better and bought the speaker’s favorite token instead That's exactly what they should do in all cases: avoid putting money into these scams. I just happen to include traditional banks into that same category. You see, the only reason these banks are any different from crypto exchanges is the government will show up to bail them out when things get bad enough. They reason that it's "better" than a total economic meltdown or something.
    - jowea 3y ago
      > The government should stop bailing out banks every time they screw up. I think the bank runs become extremely contagious if you do that, affecting the whole economy. > Otherwise they might as well bail out Tether. What's the difference? The difference is that Tether doesn't have to follow the regulations trying to avoid bank insolvency. SVB was insolvent by a relatively small margin IIRC. For all we know Tether is 50% hot air.
      - matheusmoreira 3y ago
        > I think the bank runs become extremely contagious if you do that, affecting the whole economy. Let them. Why contain it? Maybe the world would be a whole lot better if people faced the consequences of their choices. Maybe after enough people lose everything, they'd learn that banks are dangerous and would stop putting their money in them. With less capital in banks, there would be less loans and credit. That means less inflation. Less planet-destroying credit-fueled exponential growth. > SVB was insolvent by a relatively small margin IIRC. For all we know Tether is 50% hot air. It's either solvent or insolvent. There is no margin. Banks are insolvent by definition. There is not a single bank on this planet that can cover 100% of its withdrawals. If push comes to shove, the governments will have to step in.
ozim 3y ago
Kind of see the point of parent poster “if it would be real crypto, it would never happen”. He is not wrong technically but it happened so he obviously isn’t correct either.
slowhadoken 3y ago
is that why the banks collapsed in 2008?
datavirtue 3y ago
Yes, and they have accounting departments, and controls, and adults.

I guess you can call your bank a crypto bank, and skip the audits.

Not really. No amount of auditing prevents banks from going bankrupt. It wasn't that long ago some Silicon Valley bank became insolvent and suffered a literal bank run. And people got bailed out. Again.

pylua 3y ago
There are lots of mechanisms in place compared to other types of financial institutions including bank examiners.
tsunamifury 3y ago
You got it backwards. They became insolvent due to a bank run. Based on false speculation that they couldn’t liquidate their treasuries. Which the government then bought back 1:1. So basically Peter Theil caused a run on a bank for no reason other than he got people panicked about their tbill risk ladder. Which by the way want as bad as Bank Of Americas right now.
- matheusmoreira 3y ago
  Didn't meant to imply an ordering of events when I posted that. Makes no difference either way. They still suffered a bank run and still ended up insolvent to the point the government had to step in and bail them out with taxpayer money.
  - schemescape 3y ago
    Member banks made depositors whole, not tax payers…
    - matheusmoreira 3y ago
      Banks pay the FDIC for insurance. That would be true if only insured deposits were made whole. That's not what happened though. > On March 12, 2023, a joint statement was issued by Secretary of the Treasury Janet Yellen, Federal Reserve Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg > stating that all depositors at SVB would be fully protected and would have access to both insured and uninsured deposits > Regulatory filings from December 2022 estimated that more than 85% of deposits were uninsured. Where'd that come from? Surely not the government?
      - schemescape 3y ago
        From member banks: https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Edit: apologies, I should have included this link and blurb in my original comment.
        tsunamifury 3y ago
        You're Both arguing about the wrong thing. SVB never was insolvent, all account holders were made whole with available assets. Whole thing was a farce
vineyardmike 3y ago
They didn’t really do the same thing wrong. SVB did everything right, just not right enough. “Real” banks, government approved ones, have laws governing how much cash to keep on hand, and how to “invest” the excess, etc. SVB did everything by the books and they’d probably have made it through to the other side if there wasn’t a bank run. They just had underwater investments if sold (but they’d be fine if held to maturity). FTX was literal fraud and they didn’t protect money. They gave it to friends, and sister companies, and made a lot of bad decisions with it. There’s a big difference between that and SVB. Oh and of course everyone was made whole in the end after SVB
- matheusmoreira 3y ago
  > There’s a big difference between that and SVB. Not to me. All I see is corporations that accept money, do god knows what with them and cause the money to evaporate into thin air. It doesn't really matter how much the government "approves" of the reserves and investments of banks. They're still all the same: literally one bank run away from insolvency.
  - eropple 3y ago
    A: "We submit to capital controls and while extremely infrequently our investment groups make (occasionally disastrous) mistakes, the system of human finance is arguably more stable than at any point in the history of our species' efforts to trade with people beyond the horizon." B: "We bought a house for the founder's parents while they advised ways to hide it and threw millions of dollars at the insolvent-by-design crypto fund of somebody in the boss's polycule." You: "No difference detected." For real?
    - matheusmoreira 3y ago
      Yeah, for real. A: "We take customer money and risk it." B: "We take customer money and risk it." Just because one puts the money into "safe" investments does not make them any different. It's still a bank doing fractional reserve banking.
acdha 3y ago
Auditing meant that taxpayers paid nothing and all of their customers were made whole, and the regulators changed policies to prevent that happening again. It’s not perfect but it’s worlds better than the cryptocurrency goat rodeo where we constantly see large, easily foreseeable losses and most of the “community” reacts by saying that the victims should have known better and bought the speaker’s favorite token instead.
- matheusmoreira 3y ago
  > Auditing meant that taxpayers paid nothing They literally backstop bank runs with public money. > all of their customers were made whole They shouldn't have been. They loaned money to the bank, they accepted the risk of losses. Should've dealt with the consequences of it. The government should stop bailing out banks every time they screw up. Otherwise they might as well bail out Tether. What's the difference? > the cryptocurrency goat rodeo where we constantly see large, easily foreseeable losses and most of the “community” reacts by saying that the victims should have known better and bought the speaker’s favorite token instead That's exactly what they should do in all cases: avoid putting money into these scams. I just happen to include traditional banks into that same category. You see, the only reason these banks are any different from crypto exchanges is the government will show up to bail them out when things get bad enough. They reason that it's "better" than a total economic meltdown or something.
  - jowea 3y ago
    > The government should stop bailing out banks every time they screw up. I think the bank runs become extremely contagious if you do that, affecting the whole economy. > Otherwise they might as well bail out Tether. What's the difference? The difference is that Tether doesn't have to follow the regulations trying to avoid bank insolvency. SVB was insolvent by a relatively small margin IIRC. For all we know Tether is 50% hot air.
    - matheusmoreira 3y ago
      > I think the bank runs become extremely contagious if you do that, affecting the whole economy. Let them. Why contain it? Maybe the world would be a whole lot better if people faced the consequences of their choices. Maybe after enough people lose everything, they'd learn that banks are dangerous and would stop putting their money in them. With less capital in banks, there would be less loans and credit. That means less inflation. Less planet-destroying credit-fueled exponential growth. > SVB was insolvent by a relatively small margin IIRC. For all we know Tether is 50% hot air. It's either solvent or insolvent. There is no margin. Banks are insolvent by definition. There is not a single bank on this planet that can cover 100% of its withdrawals. If push comes to shove, the governments will have to step in.

ozim 3y ago

Kind of see the point of parent poster “if it would be real crypto, it would never happen”. He is not wrong technically but it happened so he obviously isn’t correct either.

slowhadoken 3y ago

is that why the banks collapsed in 2008?

datavirtue 3y ago

Yes, and they have accounting departments, and controls, and adults.