• Welcome to OGBoards 10.0, keep in mind that we will be making LOTS of changes to smooth out the experience here and make it as close as possible functionally to the old software, but feel free to drop suggestions or requests in the Tech Support subforum!

Bank Run

bym051d said:
And that's why this is a discussion.

Without regulation, there's little to prevent bad actors from gaming the system for profit.
Click to expand...

I really don’t think this is the best angle here.

The executives could have also continued in their jobs, made more salary and bonuses and also not tanked their own likely substantial remaining holdings of SVB by just making better management decisions.

They fucked over a lot of people including themselves; I hardly think they’re laughing all the way to the (different) bank.
 
bmoneydeac said:
In this case I don’t think regulation was needed to prevent greed, just incompetence.

I guess marginally they were greedy by not absorbing the cost to hedge their HTM portfolio better but it’s not like they were all in on crypto (Hi SBNY!) and if it went bust they’d just say oh well.

Long term the more profitable outcome for all these execs would be to not collapse a bank. I think they just done goofed.
Click to expand...

Woke and Greedy is a bad combo.
 
bmoneydeac said:
In this case I don’t think regulation was needed to prevent greed, just incompetence.

I guess marginally they were greedy by not absorbing the cost to hedge their HTM portfolio better but it’s not like they were all in on crypto (Hi SBNY!) and if it went bust they’d just say oh well.

Long term the more profitable outcome for all these execs would be to not collapse a bank. I think they just done goofed.
Click to expand...

Silicon Valley's 'greed and avarice' have 'finally come home to roost' in SVB collapse, trader says

www.msn.com

This guy says greed played a part.

"With regard to who's to blame here, I think that the greed and avarice that has long been present in Silicon Valley has come home to roost," Keith Fitz-Gerald, a trader and principal of the Fitz-Gerald Group, told CNBC's Capital Connection on Monday.

"We had the Federal Board of Reserve change from fractional reserves to no reserves, and that let banks like SVB go out and start buying assets instead of simply loaning money," he said. "My contention is banking should be boring, a lot like watching paint dry — and any time it's not, you've got a problem. Which is unfortunately what happened."
Click to expand...
 
Plenty of actions feel criminal but they either aren’t or they are and go unpunished.

We have a system designed to allow wealthy people to hoard wealth without consequences.

I like that quote about how banking should be boring. Take money. Loan money to people and they pay it back. Simple stuff. Low risk.

There are too many weird ways to make money nowadays aside from providing valuable goods and services for other people.
 
Well, the DOJ has opened an investigation so I guess we'll hear something in a few years.
 
06deacon said:
I really don’t think this is the best angle here.

The executives could have also continued in their jobs, made more salary and bonuses and also not tanked their own likely substantial remaining holdings of SVB by just making better management decisions.

They fucked over a lot of people including themselves; I hardly think they’re laughing all the way to the (different) bank.
Click to expand...
Yeah I’m sure the executives have made plenty of money but they are losing a huge amount in stock holdings.
 
bym051d said:

Silicon Valley's 'greed and avarice' have 'finally come home to roost' in SVB collapse, trader says

www.msn.com

This guy says greed played a part.
Click to expand...
They had a huge influx of cash from the biggest startup funding boom in history. They just did a dumb thing by tying up too much capital in long term securities that then declined in value by a significant amount. At the same time, startup funding declined dramatically and companies burning through cash reduced their deposits by ~$25B in Q4 alone. And they still would have been fine it depositors hadn’t withdrawn $42B in one day. It’s not like they were doing anything that every other bank in the world isn’t.
 
I think the moral of this story is: Silicon Valley -- Stick to computers, man.
 
bmoneydeac said:
meh - i disagree. tbills and MBS are pretty fucking boring. if they wanted to grow profits in a splashier way and ignore the downside risk, that's not how they would have done it.

bad risk management =/= greed
Click to expand...
Much more succinct explanation than my post. This wasn’t about excessive risk taking at all.
 
Man what ever happened to TraderDeac. Thought his insights on this stuff were always pretty solid.
 
Wasn't a big problem with this bank that most of their customers got VC funding and so didn't need loans for shit that other banks do a lot of? So they had to park cash in other places and just made bad decisions of where to park it
 
BeachBumDeac said:
Wasn't a big problem with this bank that most of their customers got VC funding and so didn't need loans for shit that other banks do a lot of? So they had to park cash in other places and just made bad decisions of where to park it
Click to expand...
Their Chief Risk Officer left, cashed out stock and wasn't replaced for 9mo. That feels real bad in retrospect.
 
BeachBumDeac said:
Wasn't a big problem with this bank that most of their customers got VC funding and so didn't need loans for shit that other banks do a lot of? So they had to park cash in other places and just made bad decisions of where to park it
Click to expand...

Those clients raise a ton of cash (deposits go up disproportionately fast compared to established cos) but then burn it fast (deposits go out disproportionately fast compared to established cos).

So yeah, SVB made bad decisions on where to park the deposited cash - long term low interest bonds instead of something far more liquid.
 
bym051d said:
It feels criminal, but I'm not sure it is. It was a scheduled bonus payment, which I bet is for last year's performance.
Click to expand...
every company tries to pay out bonuses prior to March 15, as that is the deadline for taking a 2022 tax deduction for that expense.
 
PhDeac said:
Plenty of actions feel criminal but they either aren’t or they are and go unpunished.

We have a system designed to allow wealthy people to hoard wealth without consequences.

I like that quote about how banking should be boring. Take money. Loan money to people and they pay it back. Simple stuff. Low risk.

There are too many weird ways to make money nowadays aside from providing valuable goods and services for other people.
Click to expand...
How do you think banks make money?

1 - They take in deposits (i.e. these are liabilities)
2 - They loan out money or invest in longer term investments, in each case to make money

That's it. By definition there is risk in that equation - including issuing loans. The bank in this case managed the risk poorly not because the term assets in which they invested were super risky (they weren't) but because they didn't move quickly enough to modify their exposure to those term assets.
 
What’s your point? You listed two ways to make money. I said banks should stick to one of them as part of an economy built around paying people for providing goods and services to people.
 
PhDeac said:
What’s your point? You listed two ways to make money. I said banks should stick to one of them as part of an economy built around paying people for providing goods and services to people.
Click to expand...

His point 1 and 2 are not two ways, they’re the 1 way you listed in your prior post.

Unless you’re referring to a different post of his.
 
DeacMan said:
How do you think banks make money?

1 - They take in deposits (i.e. these are liabilities)
2 - They loan out money or invest in longer term investments, in each case to make money

That's it. By definition there is risk in that equation - including issuing loans. The bank in this case managed the risk poorly not because the term assets in which they invested were super risky (they weren't) but because they didn't move quickly enough to modify their exposure to those term assets.
Click to expand...
i feel like i pay out the ass on fees too

which is part of loaning out money, but not money they're making on the spread between their borrow rate and interest rate
 
You must log in or register to reply here.
Back
Top