> The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. [1]

1: https://www.fdic.gov/resources/deposit-insurance/brochures/d...

Edit: It seems I am incorrect.

> The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.

Per account "type" and structure. For DDAs if you are married it will be:

You: $250k

Your+your wife: $250k

You POD your wife : $250k

Your wife: $250k

Your wife POD you: $250k

My understanding is that this might cause an unwelcome surprise to (for example) someone with a personal account at Bank A, and a sweep account at Brokerage P that sends its funds into accounts at Banks A, B, and C.

Although the Assets, Liabilities, and Capital reporting available if you click "create financial reports for this institution" estimates 5.69% of deposits are insured. Is a corporate account limited to $250K of deposit insurance? If so, I imagine many of them may have much more than that, and the reporting does show almost 75% of the deposits are in accounts with greater than $250K, assuming I'm reading the report correctly.

yes

An individual could easily have that much let alone a startup with millions.

I'd much rather lose 0.4% of my money than lend it out at +0.01% to whatever checking accounts pay nowadays while they lend out to some asshole that does business with the bank.

and not that it matters but this is specifically about a startup or business not talking about personal finances of an individual

I'm going to go out on a limb and say that that might not be common knowledge.

Obviously there are important differences between the scenarios, but that critical aspect is what‘a relevant in this context.

It is indeed quite common to hear aphorisms like "live every day like it's your last" which make the same point as your analogy, but remove the suggestion that the speaker could be a murderer and are thus much more analogous to the bank CEO's statement.

SVB's customers are weighted significantly more towards businesses who will have more than $250k in the bank. So, they have to be ready to take action fast, so a bank run on SVB is much more likely.

FDIC was invented for the great depression when banks were not as large or concentrated, nor were they as globally connected and intertwined with day to day business. The reality is that FDIC is far from being sufficient insurance to calm down a collapsing market, that's why we had to do bailouts in 2008, because of what was coming down the road in that regard if the contagion were to spread further.

https://archive.fdic.gov/view/fdic/4116

If you have that much money, FDIC is not adequate for you (and isn't intended to be). There are other mechanisms for those sorts of depositors. Surely, those businesses got solid financial advice and are using them, right?

So, let's say you are a company with 4 banks accounts. Each has $500k in it. One of them is SVB. You probably just move the $500k into one of the other bank accounts. It's no big deal per se, but you do it. That's a run on the bank if lots of companies do the same thing.

This is a chicken and egg situation.

JPM has assets of ~15% of GDP and has 66 million household clients.

I'll take the odds that it's too big to fail.

There are better options than playing these odds. Spread across banks, hold short term treasuries etc. Treasury functions at a company exist for a reason.

However, the FDIC covers all banks, and is generally involved with smaller banks fail and they are they to insure whatever balance the bank could not cover with its remaining assets when it failed.

I’m not actually aware though what the last incident they actually had to pay out was though. Looking through their historical data on bank failures every one I’ve seen says the insured accounts were assumed by another bank purchasing up the failing bank.

But worse, thousands of the individual depositors and businesses who banked at IndyMac were over the FDIC limits and they lost, collectively, hundreds of millions of dollars. The FDIC insurance limit at that time was $100k per separately-named account per bank; it is now $250k. And the $250k raise was, in a surprisingly kind move, purposely made retroactive to help cover some of the losses that people had suffered during the GFC under the previous lower limit.

And still, despite all that, lots of people lost lots of money when the bank went under:

https://www.latimes.com/archives/la-xpm-2010-may-31-la-fi-in...

That's akin to saying my house won't burn down because I have insurance. Don't underestimate the stupidity of large crowds of people.

I still have cheques that say Washington Mutual on them; literally no disruption to my life when they started floating upside down.

This "don't underestimate the stupidity..." might seem feel a clever or wise speech to give, but history suggests the FDIC has been incredibly successful at reducing bank runs. Insert "Those who don't learn history.. " speech here.

Per depositor, per insured bank, per account category.

It’s not that difficult to keep significant excess deposits insured.

A run might be more likely for investment funds like Questrade and Fidelity if their customers liquidate their holdings en mmasse and move to cash deposits and CDs, which would be covered by depositor insurance.

That’s the kind of thing that only gets said when there’s some concern that there will be a run.

How does your statement make any sense?

SVB had to liquidate good assets quickly, so it sold them at a loss. That means its capitalization compared to liabilities (deposits) could be in “uh oh” territory.

So it sells capital on the open market to shore up its liquid capital. Yes, most every capital raise works mostly like this. But it’s notable here because of what it portends.

A healthy company doesn't generally sell shares in itself (except perhaps to fund a major expansion). Selling equity is a last resort when you don't have better funding options (retained earnings, debt, ...).

https://www.federalreserve.gov/newsevents/pressreleases/bcre...

Similarly from a reserve standpoint they don’t need to worry about inflation as they need to pay back deposits in nominal terms not what the money is worth when withdrawn.

The US banking system has been given a great deal of regulatory leeway due to recent economic turbulence, including setting reserve requirements to 0%. So market value is only relevant if they need to sell before maturity.

Which is exactly what needs to happen when depositors ask for their money back.

Banks generally have liquid reserves to handle significant fluctuations in deposits. If that’s insufficient they have incoming cash flow and the option to borrow money to make up the difference rather than instantly selling assets.

Thus in practice extracting 5% over a week is fine but there’s a threshold that will kill any bank.

The issue is that the sale value of their reserves has dropped below that nominal value. If you take in $1000 of deposits that you're paying 1% interest on and your reserve against that is a 10-year $1000 T-bill with a 2% coupon, you'd think you're fine, right? But if interest rates go up to 3%, you can't sell that T-bill for $1000 any more; if you can hold it to maturity you're fine, but if your customers start pulling their deposits you're in trouble.

There would only be a problem if the bank's credit deteriorated in its risky assets, enough to freak depositors out.

Any number of reasons, particularly if all your customers are in the same industry. If you're "Silicon Valley Bank" and there's a downturn in Silicon Valley, well, here you are.

As Levine put it, it’s not an asset problem, it’s a liability problem.

Right now there will be a lot of chatter if the root cause was industry concentration, mark to market, junior VCs scaring gulible founders, or as you pointed out: duration risk.

I think in five years the common narrative will be about duration risk.

To spell out what you hinted at: SVB will collapse at some point in the next few years. The only scenario they survive is if they survive this bank run, and then soonsih the fed lowers interest rates by a ton.

Otherwise even without this bank run SVB will still slowly be forced to sell off more and more HTM assets. Core reason being they cannot cashflow wise offer market rate interest on deposits. Clients _would_ move their money to better paying banks, not everyone but too many.

Thus this bank run only accelerates the inevitable. The interest broader note is how other bigger banks have or have not managed their exposure to duration. And special eyes towards the Japanese MegaBanks, double so if the bank of Japan does raise rates.

If the T-Bill has a maturity beyond 90 days it doesn’t qualify as a liquid asset.

We’re currently in some interesting times: “As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.“. https://www.federalreserve.gov/monetarypolicy/reservereq.htm

please feel free to disagree!

The problem is, the underlying assets that SVB owns will only pay them back at 1% APY, and only in 20 years or whatever, and the billionaire has been promised 4.5%APY and is expecting to have access to one months worth of interest next month. that 3.5 difference is thus a huge problem for SVB.

Just curious. As mentioned, I'm pretty ignorant about this and would like to educate myself.

You are right that it definitely explains 99.99% of banks in history. But there are a handful of historical examples -- even after "modern banking" began in medieval Italy -- that don't fit. A recent example is The Narrow Bank which was shutdown by the Federal Reserve. But in the past you had things like the Bank of England in 1844 which went to 100% reserves for a period. Or banks under the Louisiana Banking Act of 1842 -- which was why banks in Louisiana were unaffected by the financial crisis of 1857.

Apologies if no one was meant to answer that.

10 people put $10 in your bank. You give someone a loan for $50 and leave $50 in the vault. 7 of your customers take $10 out, you are screwed.

Of course this all is going to pale in comparison to the amount that banks make by d̶u̶m̶p̶i̶n̶g̶ ̶c̶o̶n̶s̶u̶m̶e̶r̶ ̶f̶u̶n̶d̶s̶,̶ ̶h̶e̶a̶v̶i̶l̶y̶ ̶l̶e̶v̶e̶r̶a̶g̶e̶d̶,̶ ̶i̶n̶t̶o̶ ̶h̶i̶g̶h̶ ̶r̶i̶s̶k̶ ̶a̶s̶s̶e̶t̶s̶ responsibly investing deposits. But of course banks under '100% deposits maintained' type systems could then engage in more typical behavior with their own funds above and beyond what's made from deposits. Under such a regime no bank would ever be "too big to fail", customer deposits would be 100% guaranteed at all times, and more. In exchange you'd see substantially slower overall economic growth and monetary multiplication, but I'm increasingly convinced that would not have been a bad thing.

That's normal for business banking I think. Trucking cash and coins around isn't free, that stuff is heavy.

Is real economic growth even determined by anything but technological development?

Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.

Other loans go to people who were going to buy a doodad after saving up for 12 months, who instead get the doodad immediately and pay for it for 14 months. That looks like economic growth, because in month 1 doodad sales have risen. But if the sale would have happened anyway, the 'growth' is lot more debatable IMHO.

Did the loan actually increase economic growth? I think the only reasonable answer is: Yes, if the bank issuing the loan had a better idea than the market about the future profitability of the investment. However, that doesn't seem very likely to me.

That is just the end result, the question is how do you get there? How do you organize an economy to reach that outcome in the most optimal way?

More like 20,000$, but yes.

I am certain they all did it, but in secrecy. Even when banks stocked grains and not gold.

Also out most of the banks - you would expect that the clients of SVB are a little more sophisticated than your retail bank demographic being start-up companies and all (big assumption).

Is that worth it?

Assuming these people have any level of sophistication is what gets us into these messes. It’s good to remember they are betting billions of dollars based on nothing but fomo and don’t know anything special at all.

Sometimes you can be too smart for your own good: in this case the CEO might have assumed that everyone knows that all banks inherently carry a risk in case of a bank run, but all the market hears is the word “risk” and panics correspondingly.

I imagine it like this:

1. Place some money in bank.

2. Wait till bank bought bonds, treasuries and all that jazz.

3. Short the banks stock.

4. Withdraw huge amounts of money and cause liquidity crunch.

5. As the bank needs to keep its capital ratio above 5%, it will close positions at a loss, causing a death spiral (the bank run. As more people want to secure what’s left, the bank needs to unwind more positions at a loss. Which will cause even more people wanting to withdraw, which results in even more selling of the bank.

6. Eventually the bank becomes insolvent.

7. Buy stock back.

There might be more variables to it, such as the price of the treasuries itself (you might want to wait for a rate hike, inflation, credit rating change or whatever before you make the bank sell), but generally this is how imagine such a trade.

It seems that CEOs of banks haven't learned anything since 1873 when this was observed.

I try not to make too many jokes on HN. They have to be very clearly funny and/or very spot-on to survive HN's this-isn't-reddit ethos, which seems to be pretty strictly enforced.

If you want to get flagged, the best way to do that is to make an irrefutable strong argument that ruffles political or economic feathers of a popular ideology on HN. There's nothing that enrages people here more than an unpopular but sound argumen they don't like, so they flag it to make it go away. If they can quickly disprove you or make you to look an idiot, they'll downvote rather than flag so that everyone can see their moral or intellectual superiority in the full thread.

I downvote jokes even if they are funny, and it is (partly) the "HN-isn't-reddit" methos. Reddit has so much noise-to-signal that it's not particularly valuable. It's like junkfood.

HN is better because every comment (per the official rules) is supposed to be substantial. Jokes that are funny but not satirical or insightful aren't substantial in my opinion.

(I should also say that I often find reddit to be hilarious, but that's not what I'm looking for when I come here.)

Not shocking the voters wanted something different.

The economy was pretty much in the dumpster for most of the 70’s in both countries.

Not unusual for the old guard to be turfed out when that happens.

Thatcher won two landslide re-elections for a reason.

For example the UK has also had subsequent Conservative victories for the last 12 years or so but every single argument made in 2010 about their approach has been proven true. To the detriment of every person in the UK.

So it doesn't necessarily follow in my eyes that an election win means that what you're doing is the right thing, only that you are popular and you can convince people you will do something to help them.

There certainly was an aspect of that back in the 80s. In the early years Labour was lead by Michael Foot, basically a likeable version of Corbyn but just as unelectable. But then, the Labour Party back then was properly Marxist and had actually pushed forward a programme of nationalisation and unionisation that worked out about as well as you'd expect.

The most egregious example of waste was the coal industry, hence the strikes. The tax payer was subsidizing coal to the tune of £1.3 billion a year which was real money back then, just under 1% of total national GDP, not including the increased costs to power and steel industries that were prevented from using cheaper alternatives. When the mining union leader Arthur Scargill appeared before a Parliamentary committee and was asked at what level of loss it was acceptable to close a pit he answered “As far as I can see, the loss is without limits.” That's what we were dealing with. That's just coal, but swathes of industry had been nationalised and was a horrible rotting carcass of waste and losses dragging the country down. Reforming that lot was incredibly painful but it had to be done.

Maggie is generally portrayed as being incredibly unpopular, and the way she was lampooned by a generation of up coming British comics was cruel though frankly hilarious, but she won resounding election victory after victory. The economy she built transformed the country into the modern nation it is today. Notably when Blair and Brown brought in a Labour government in 1997 they changed essentially nothing substantive because her reforms palpably worked. All the proposed changes reverting Britain towards a statist socialist economic agenda were quietly shelved and never talked about agin until Corbyn came along.

Since then Conservatism on both sides of the pond has suffered an appalling moral and intellectual collapse. The conservative and republican parties are mocking parodies of their former selves. Back in the 80s there were serious, major economic and social problems that desperately needed fixing and economic liberalism had the answers. Nowadays that's just not even vaguely controversial, instead the focus of the right has shifted towards damaging reactionary dog whistle issues like culture wars and blind nationalism. That tendency has always been there, but now it's all they have.

The conservatives of the 80's had a problem to solve, stagflation, inefficient socialism, big state. Neo-liberalism solved those problems, but created new ones.

The conservatives today have another problem to solve, mass immigration, rampant crime, loss of sovereignty and ability to reform to foreign bureaucracy, dependency on foreign manufacturing, etc.

Part of these problems are residues of the same economic neo-liberalism that was enacted in the 80s. Reagans immigration act and Thatcher's neo-liberalism saved society from the socialist dystopia, but over time it has thrown society in a neo-liberalist dystopia that few people like, beside the elites.

The conservatives have moved on to new, real problems. You seem stuck in the past.

A friend of mine tried that line about manufacturing on me a few years ago and I asked him what kind of factory he wanted his so. To work in when he grew up. He looked at me as though I’d just shot his dog. We don’t need factory jobs, we’ve git near full employment anyway. That’s why we need immigration to solve our demographic issues with our ageing population. We’ve got plenty of jobs much higher up the value chain, the main problems are around training and education.

As for the crime rate the perception is divorced from reality, I’ll quote from Wikipedia: “The United Kingdom's crime rate remains relatively low when compared to the rest of the world, especially among first world countries.” Our crime rate is a fraction of that in Ukraine before the war. Their murder rate is three times ours.

Maybe if you define immigrants with passports as Britons. There's a reason why the BNP, British National Party, won the two seats they ever won in counties most affected by immigration. This effect would also be exact opposite of that in Sweden, which is intriguing, because here the sub-urb ghettos are split between social democrats, which the immigrants vote for, and the nationalists, which the few non-immigrants left vote for.

The fact that you are trying to argue that areas affected are the least concerned, when the case is exactly the opposite across Europe; says a lot about your "reality". Modern leftists are a scourge.

Arguably the reason was the war, not domestic policy [0]

[0] https://history.com/news/margaret-thatcher-falklands-war

I should add that as a Scot I'm definitely not a fan of hers (you just grow up there knowing "Thatcher Bad") but I'm not quite at "put a stake through her heart and garlic round her neck"[0] :)

[0] - https://twitter.com/halaljew/status/1294414600566382598

It's a lot more complex than war-helps-current-leader, at least outside the US. It depends on the war and the context.

It was a strange time.

Hardly a problem local to Britain, and hardly something Thatcher solved. It was a crisis that also passed in countries that did not elect viciously anti-state, anti-working class governments.

> crumbling infrastructure; that couldn't even clean its own streets

Bit of an exaggeration, and I'm not sure how Maggie "Minimal State" Thatcher has supposedly helped with that.

> Thatcher won two landslide re-elections for a reason

If it weren't for the Falklands she would have been a one term president.

"Neither the strong nor the weak version of the proposition that American defense spending bankrupted the Soviet economy and forced an end to the Cold War is sustained by the evidence."

https://www.theatlantic.com/past/docs/politics/foreign/reagr...

"Fabulous witticisms" feels good to listener and is funny, because it validates what people want to hear. It is rarely actually correct or actually correctly describes world.

Currently, for example, there is Wokeism in general, with particular emphasis on transgenderism. Transgenderism only "affects" a very small percentage of the population, nobody paid it any mind a decade ago, and yet today it's a thing.

I think what we’ve discovered is that, thanks to the Internet, that’s a strategy that’s significantly easier to employ than ever before. In the past ups at least need to have mainstream media outlets onboard. Nowadays you can do that with a hashtag

"Denis, listen, I am president of this country, I am 42"

https://twitter.com/DenisRogatyuk/status/1510419008457039874

They played air raid sirens for Biden[3], after Biden got assurances from the Kremlin for his visit[4], all the while even CNN reporters said that there were no signs of any strikes.

Why not just providing sources instead of slandering people that ask for them? Even if the person above is right, asking for sources and providing is the correct behaviour in an adult conversation on a platform that prides itself to be full of scientists.

[1] https://www.youtube.com/watch?v=zckV1bYrGdQ

[2] https://www.vogue.com/article/portrait-of-bravery-ukraines-f...

[3] https://www.youtube.com/watch?v=VfaCc1feMaM

[4] https://www.theguardian.com/us-news/2023/feb/20/how-biden-pu...

Anyway, I'm not replying to all your other crap, but you should check yourself b/c you're really buying into some obvious BS here.

However, not to defend the guy, but as a CEO of this bank he ... has to say something. And whatever he says it will be bad anyway.

I never thought much of public relations until i had to work with the team.

It’s really an art.

A bank can follow a lower risk strategy and accept lower profits, but that's not necessarily what shareholders want. Some risk of failure is acceptable.

The point is that a bank run is a liquidity event (i.e. we still own more than what we owe, it’s just hard to turn it into cash fast enough).

SVB has a fine balance sheet for now, they’re just running out of easy things to sell.

The quote is referencing liquidity events, where the problem is everyone wants their money because they’re nervous about the bank, but the only thing that can hurt the bank is them taking out their money (because then the bank is in fire sale mode).

A CEOs job in this time (something SVB CEO did not do) is to project confidence. That’s literally all they can do.

His statement didn't project confidence. My "we are adequately capitalized" shirt is raising questions answered by my shirt is the meme way of expressing it. The right move would be to find a recapitalization transaction and complete it, which they tried to do but issued the press release right after a crypto-focused bank went into receivership due to falling account levels. That did not help matters.

There’s no deeper point.

Do they?

If SVB is sitting on a pile of Treasury bonds that mature in 20 years, they can “hold to maturity” and get their principal plus some very low interest rate. But this is useless! In a fantasy world in which all their depositors leave and they keep those bonds for 20 years, they are indeed worth that amount in 20 years, which has a rather lower net present value today, and maybe their investors care and maybe they don’t.

But this is, of course, a fantasy. Those bonds are collateral for deposits, SVB pays 4.5% APY on savings, and that 4.5% doesn’t materialize from the ether. In 20 years, 4.5% multiplies money by 2.4, those T-bonds will not multiply by 2.4, and SVB will slowly but surely end up in the hole. Unless they convince a very large fraction of their depositors to forego interest.

It boggles my mind that banks are apparently permitted to do accounting on a hold-to-maturity basis. Holding a bond to maturity avoids paying a spread and maybe has some tax effects. And that’s it. Otherwise you might as well sell it and buy a new one with the same present value.

(I am not an expert, and I’m going off HN comments for how these rules work. But if the banks really do get to say they plan to hold a fixed-income instrument to maturity and they can value it as something like face value, then I think the system is broken.)

It's hilarious that banks serving crypto and startup ecosystems aren't failing because their crypto and startup loans went bad, they're failing because of the duration risk from holding long-term Treasurys on their balance sheet.

That is the number one reason why banks go bankrupt...

It's not hilarious, duration risk is the biggest risk a bank has to deal with and it gets worse the more and more people keep their money as demand deposits. This is why the Fed does QE, the duration of deposits has shrunk so low, that the banks can't buy treasuries as the duration of the treasuries has become too long in relation to instantaneous demand deposits that can switch from bank to bank. The only solution that the Fed came up with, is to do the duration transformation themselves by buying long duration treasuries and giving instantly transferrable central bank reserves with no duration risk. This works because the system as a whole cannot go bankrupt, but individual banks can. If you take your money out of the bank, the CB reserves just get turned into cash. If you transfer between banks, the recipient bank now holds the reserves.

Also, plenty of crypto specific banks did fail because their loans went bad.

If a bank has $100 of deposits and has lent out $90 on a 30-year adjustable rate basis, the bank is exposed to potentially liquidity issues, default risk, and second-order effects like changes in the yield curve. But if the bank lends that $90 as a fixed rate mortgage or buys a 30-year T bond, they are directly exposed to interest rate changes.

(Also, as I understand it, and this is far outside my expertise: banks usually try repackage their debt and sell it to investors. The banks presumably can’t carry those 30 year fixed mortgages on their books without accounting for interest rate risk. Why are T bonds special?)

No it isn't. Any other bank would be happy to write a loan backed by US treasury holdings, at no more than a moderate profit. If you're sitting on that, it has value. But it doesn't have value in literal dollars by tomorrow morning to pay out a withdrawal. That's what "liquidity" is all about.

This has nothing to do with liquidity. If I had a 0 interest, $100 T bond maturing in 30 years, I cannot sell it today for $100. But anyone who lent me $90, nonrecourse, using it as collateral and asking for only a moderate profit is nuts because this bond is not worth $90 — not even close. Maybe I can get a loan that is based on my own credit-worthiness, but that’s a different story entirely.

If I have this $100 T bond, and I’m a bank, and that T bond is collateral for a $100 savings account paying 4.5% APY, I am in the hole. If my depositor sticks around, I can gamble and hope I can make up my losses (e.g. by interest rates going way down), or I can try to be such an awesome bank going forward that my profits can make up for my losses, and maybe I’ll get away with it, but I don’t really deserve to get away with it.

Not to a retail investor looking at short term returns (and irrationally obsessed with Inflation! due to media consumption), but to a bank with regulatory deposit requirements and a longer term outlook? Seems not unreasonable.

Anyway it doesn't have to be worth the full face value. It just needs to be worth enough to back a short term loan big enough to honor current withdrawal demands.

I wonder if this is the problem.

> to a bank with regulatory deposit requirements and a longer term outlook?

Maybe with some generally accepted accounting principle, but not by any sensible business standard.

If that bond trades for $80, no one would buy it for $90. It’s worth $80. Similarly, if you already own it, it’s not magically worth more.

And if you are a bank with a long term outlook, you expect interest rates to hold near current levels, and you pay 4.5% APY to depositors, your long term outlook of paying 4.5% to deposits where that deposit money is locked up in a very safe bond earning 1.8% APY, you are losing a lot of money, very safely, in the long term. Almost exactly as much as you would lose by booking the loss right away and investing in something else.

Other than tax or regulatory arbitrage, complex accounting is no substitute for actual profits and losses :)

But they wouldn't continue to pay 4.5% interest for 20 years would they? This is just a brief moment of high interest rates, so I think that's the main detractor from this argument. In other words, it's not like 4.5% APY on savings is anywhere close to the norm.

You are welcome to make that bet for your personal finances or on behalf of your company. You should not make that bet with someone else’s money unless they have signed up for it.

For most banks, it is fine to assume a 20 year deposit window because deposits are fungible and for most of recent history deposit bases have gone up.

SVB was wrong for not assuming that the 2021 deposit spike was (in hindsight obviously) a short term blip, but you can look at their loan book on page 19 of [0].

It's not immediately clear to me that there's some sort of systemic risk in VCs/PE firms not paying back their loans, but given how circular the tech ecosystem is, maybe we get there.

[0]https://s201.q4cdn.com/589201576/files/doc_financials/2022/q...

Let me try again. You're still thinking about liquidity -- assuming a 20 year deposit window seems okay to me.

But the problem is solvency. It's not that the assets are illiquid -- it's that they insufficient. If you run a bank, assume a 20 year deposit window, and invest those deposits in safe assets that carry similar interest rate risk to the deposits themselves, then you are solvent. If depositors leave faster than expected, you may be forced to pay a spread or other haircut to sell your long term assets early, but that's a small effect and can be managed gradually as long as you stay on top of it.

This isn't SVB's problem AFAICT. SVB bought assets that were perfectly liquid (T bonds!) and (if I read the filings right) assets that are still fairly liquid (MBSes), but they had interest rate exposure that did not match the deposits. Savings account interest rates (at SVB!) were up to 4.5%, and those T bonds had much lower fixed interest rates. [0]

If depositors held their money at SVB for 20 years and SVB didn't have a bank run right now, SVB would still be in trouble: SVB would be paying more interest on those deposits than they would receive on their investments, and their portfolio would slowly go negative.

[0] Whether you think about them as paying low interest for a long time or as being marked to market at a loss and then paying current interest rates at maturity is immaterial. You end up with the same number of actual dollars at the same times.

You are confusing price today with the actual characteristics of the instrument.

A T-bill pays back it's face value always, it just trades below face when interest rates are higher than when it was purchased.

That is the definition of a liquidity problem. You'll get the face value back eventually (it is sufficient), but not if you sell today.

A liquid market is not the only characteristic of liquidity. There's a liquid market for anything at a low enough price...

>If depositors held their money at SVB for 20 years and SVB didn't have a bank run right now, SVB would still be in trouble: SVB would be paying more interest on those deposits than they would receive on their investments, and their portfolio would slowly go negative.

This is a true statement people are making that has nothing to do with what happened here. The point of a bank is interest rate arbitrage, so I agree SVB would have to do their job better over those 20 years, but this thing that happened over 3 months is a liquidity crisis. They weren't running out of money to pay interest on deposits, they were running out of money to give those deposits back and were veering into the problem discussed above - selling things below value to create liquidity.

I Don't think you can make that call for all CEO's of Banks 1873.

  #notallceos!

It’s on par with the Big Short in terms of telling a great story about the economic crisis.

Is that terribly worded or is it just me? I figure it’s supposed to be poetic but I find it tedious. I think it could be simplified like this:

“A banker who argues his creditworthiness has none.”

I realize it’s a quote but holy shit.

I figure you’re just being snarky but still.

That said, it doesn't seem to have emerged into widespread use until well after the 1950s, so would have been a peculiar choice for a 19th century author:

<https://books.google.com/ngrams/graph?content=creditworthine...>

It's just you.

Ugh. Give me a break.

True, but isn't it possible that if he omitted this clarification, his statement about "ample liquidity" could be on shaky ground, from a legal perspective?

You can lie, and say everything is great. If enough people believe you, your bank is safe and you live happily ever after. If they don't believe you and pull their money, then you committed fraud and will go to court.

Or you can tell the truth, and say everything will not be great if everyone pulls their money. Then people will definitely pull their money. You will be sad, because your employer has turned into a smoldering crater and your equity is worth zero, and everyone will blame the bank run on you, but you are probably legally safe.

I think the only real thing you can do is make sure no one with credibility ever asks you if you are solvent. That is hard to avoid though, if you are a bank and you have to raise money by selling equity.

Or just don't mess with money that belongs to customers. Be the world's first reliable bank.

But the Fed won't let TNB open an account. The basic reason seems to be that they worry that this model is destructive to the US economy, which relies on banks making loans so people can buy houses and cars, and businesses can operate. If everyone banked at a narrow bank, the economy would seize up from lack of capital.

Whether or not you agree with this take, the reality today is that you cannot run a bank like you've described in the US.

(This is all covered in more detail by Matt Levine: https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...)

What a guy.

[0] Thiel Fund, Venture Firms Advise Companies to Pull Money From SVB

That's assuming a traditional short, and not something like selling naked calls. In the latter case they just expire worthless.

Trading Halted. They were down 66% on the day before halt

On 08-March-2023, they were trading at $267.90, by the end of the 9th, 106.08. By trading halt today, $39.49. Now, it's worthless. Imagine thinking you got a bargain at $106, or $39...

[0] https://finance.yahoo.com/quote/SIVB

[0] https://www.fastcompany.com/90864395/silicon-valley-bank-an-...

I don't think this is damning in any capacity. It's well known that all banks in the world keep part of their reserves in other vehicles. If a bank run happens, they'll have liquidity issues.

Every bank would be in trouble if everybody took their money out