ummonk

56 ms·

781.
by ummonk 4y ago
That makes a big difference though. The risk of losing 10-20% (or even of getting back the full 100% but only after a few months) with no reward for the risk taken would be enough to drive depositors away from regional banks and into the m
782.
by ummonk 4y ago
How would punishing depositors disincentivize this behavior from executives?
783.
by ummonk 4y ago
No, because if everyone else keeps their money in SVB and it avoids going under, there is no payoff for defecting - you simply disrupt your own operations for no reason by trying to switch banks.
784.
by ummonk 4y ago
Going by stock market losses, some of these charts, and Twitter sentiment, looks like SBNY, WAL, and FRC are next on the chopping block for bank runs.
785.
by ummonk 4y ago
Right now it's the billion dollar corporations that are subsidizing your FDIC insurance, since the assessment base for FDIC insurance is proportional to its total liabilities, not to the amount insured.
786.
by ummonk 4y ago
Agreed. I wish the VC community had come together and financed a stock purchase with SVB to recapitalize it instead of running for the hills. Unfortunately, VCs aren't exactly known for their community-oriented mindset.
787.
by ummonk 4y ago
The "them" in this case are those who gleefully point out that only 250k is insured by the FDIC and any startup that deposited more than that was engaging in risky behavior and deserves to lose their money. In such a situation, yo
788.
by ummonk 4y ago
Drives economic growth, creates jobs, and increases labor market competition amongst employers which leads to higher wages. The latter function is particularly salient for tech people (which many of us who follow HN are).
789.
by ummonk 4y ago
There are political forces on both the left and the right against bailing out depositors because the startup industry is hated. We need to protect our industry from further damage, including by being ahead of bank runs on other banks. If th
790.
by ummonk 4y ago
It's not the only Nash equilibrium. The other Nash equilibrium is that everyone keeps their money in SVB. That would have also been the Pareto optimal Nash equilibrium. The fact that VCs settled on the suboptimal Nash equilibrium actua
791.
by ummonk 4y ago
I want to see a database of banks that are the least solvent (when considering mark-to-market losses) and have the largest portions of their deposits uninsured by the FDIC. Have to know which ones are going to have bank runs next so one can
792.
by ummonk 4y ago
No I think more likely than not it's outright solvent if you look at current market value of the bonds. We'll find out by Monday whether it has been acquired or not.
793.
by ummonk 4y ago
I mean we'll find out shortly enough. If they can't find a buyer for SVB, then it's likely insolvent. If they do then it's obviously solvent.
794.
by ummonk 4y ago
Ah yeah you're correct good catch.
795.
by ummonk 4y ago
Only inasmuch as they knew other VCs and depositors would be panicking in response to the signal. There's another possible stable equilibrium where no one panics because they know no one else will panic and that the bank is solvent.
796.
by ummonk 4y ago
To be fair if there's a run on a bank happening you want to be following the people creating the run so you can be one of the first ones out the door. Incidentally there's a major moral hazard problem for bank runs in that unlike
797.
by ummonk 4y ago
It's frustrating that we don't even have one day settlement for most transactions.
798.
by ummonk 4y ago
"I've seen it happen (thankfully never to me) - over and over again they would say "whoops, it will be there next week". Two months later people - one by one - just stop showing up..." That's the kind of delay
799.
by ummonk 4y ago
The tech sector has been withdrawing money in aggregate (because they continue paying payroll and rent but haven't been raising as much money recently) which increases liquidity pressure, and furthermore tech depositors are more skitti
800.
by ummonk 4y ago
The article headline is clickbait. They're immediately doing payouts through JP Morgan Chase now; the only delay is because some payouts were in flight when they got stuck in SVB, so if a payout was started via SVB a few days ago and w
801.
by ummonk 4y ago
No one's going to be liable for a paycheck that's late by a few days due to the collapse of the bank through which the paycheck was being wired.
802.
by ummonk 4y ago
The decrease in value was due to exposure to long duration securities yes. The closure of the bank was due to a classic bank run after depositors panicked upon hearing of the decrease in value. They had 45 billion in withdrawals in a single
803.
by ummonk 4y ago
It's insolvency if the current market value (not the hold to maturity value) of the assets is less than the liability. As far as I can tell though, SVB was solvent despite its losses, and just needed to raise money to cover reserve req
804.
by ummonk 4y ago
I understand how they ended up with losses, having bought long duration securities at the top. I'm saying they were still solvent despite the losses. They just weren't liquid.
805.
by ummonk 4y ago
They had 45 billion in withdrawals before they ran out of liquidity and were taken over by FDIC, so that analysis would appear to be incorrect, since it implied they only had 80-55 = 25 billion of liquidity available.
806.
by ummonk 4y ago
They were still solvent despite the mark to market losses - they just couldn't meet reserve requirements (and planned to raise money through a stock sale to that effect) after the assets were marked to market. Meeting reserve requireme
807.
by ummonk 4y ago
They were probably chasing higher yields in a low yield environment.
808.
by ummonk 4y ago
SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.
809.
by ummonk 4y ago
Stripe doesn't have the assets to acquire SVB. As it is they're looking for funding to pay employees' stock tax bills.
810.
by ummonk 4y ago
They're just saying that many of the assets are insufficiently liquid to be instantly sold off to cover all the withdrawals during a bank run.

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