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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 m
by 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 agoA: "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 agoYeah, 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.
- vineyardmike 3y agoFTX: Ee stole money. We lied. We gave it to friends to gamble. Illegally. SVB: our shitty compliance department bought bonds (a government requirement) with too long of a maturity date to sell in a bank run. One is incompetent and the other is malicious. Also fractional banking is literally required by law.
- jowea 3y agoI'm no expert but from what I understand SVB didn't do everything right. Failure of risk management. Invested too much in long-term securities in search of higher rates than short-term securities when interest rates were already low. Failed to appreciate how fast they could suffer a bank-run with a clientele of highly interconnected and tech industry individuals and companies. Also failed to appreciate its clientele was exactly the ones who would suffer when interest rates rise and would start withdrawing money.
- vineyardmike 3y agoBy “did everything right” I should have said “did everything legal”. SVB didn’t break laws, just as you said, didn’t properly manage risk. If there was no run, they’d have made it through, just with low earnings expectations. FTX took customer money, gave it to friends, and used sticky notes and slack channels for accounting. FTX spent customer funds on beach houses and political ads and god knows what not on government bonds with a slightly too long maturity.
- jowea 3y agoAgreed. I think it just hit a new pet peeve of mine of people thinking treasury bonds are always zero-risk.