SVB Bank Run: Fed Calling Emergency Meeting

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Because the Fed/FDIC failed at bank supervision first. Whether or not it was Thiel (there’s a whole host of smaller, but still quite noxious fish, that were almost certainly involved), the concentration of economic interests at SVB should *never* have been allowed to happen. The people who matter learned nothing from 2008 and this isn’t the first time that’s been made apparent.

Actually, the issue of risk from uninsured depositors never came up in 2008. In fact, with the exception with Indy Mac, there were no runs. One of the lessons of 2008 is how sticky deposits can be even at very troubled banks. Clear now that can no longer be assumed.

Income inequality has increased since then. SVB had less than 40,000 depositors. It was high net worth individuals that did this run and Credit Suisses. All of our regulations are built around defending against risks from the poors. But it's not the poors that threaten the system today.

So why should we bail out the rich jerks who threaten the banking system?
Screw 'em. Bail out the little guy. Let the wealthy elite hoist themselves on their own petard.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Because unfortunately they had every right to do what they did. Assuming that is that they weren't also shorting the stock. Can't legislate morality. SVB also knew what type of person he is so it still comes back to poor risk management.

In the not too distant past bank regulators would have been very clear that hyper-concentrated deposits would pose a great risk. Unfortunately, banking regulation hasn’t done enough to get smarter since the financial crisis of 2008 to ???. It’s really not about legislating morality, it’s about old fashioned prudence in preventing disaster.

Would they? I can't think of a regulation that would have applied. App makers, influencers and crypto enthusiasts aren't a standardized demographic.

Exactly. There are a lot of people posting here who know nothing about bank regulation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Because unfortunately they had every right to do what they did. Assuming that is that they weren't also shorting the stock. Can't legislate morality. SVB also knew what type of person he is so it still comes back to poor risk management.

In the not too distant past bank regulators would have been very clear that hyper-concentrated deposits would pose a great risk. Unfortunately, banking regulation hasn’t done enough to get smarter since the financial crisis of 2008 to ???. It’s really not about legislating morality, it’s about old fashioned prudence in preventing disaster.

Would they? I can't think of a regulation that would have applied. App makers, influencers and crypto enthusiasts aren't a standardized demographic.

Exactly. There are a lot of people posting here who know nothing about bank regulation.

Many of the people in banking regulation have a history of failure! Playing the whole high-priest game just makes things worse!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Because the Fed/FDIC failed at bank supervision first. Whether or not it was Thiel (there’s a whole host of smaller, but still quite noxious fish, that were almost certainly involved), the concentration of economic interests at SVB should *never* have been allowed to happen. The people who matter learned nothing from 2008 and this isn’t the first time that’s been made apparent.

Actually, the issue of risk from uninsured depositors never came up in 2008. In fact, with the exception with Indy Mac, there were no runs. One of the lessons of 2008 is how sticky deposits can be even at very troubled banks. Clear now that can no longer be assumed.

Income inequality has increased since then. SVB had less than 40,000 depositors. It was high net worth individuals that did this run and Credit Suisses. All of our regulations are built around defending against risks from the poors. But it's not the poors that threaten the system today.

The more Washington DC does, the more income inequality we have.

What does that tell you?

That you're looking for easy answers and quick excuses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

Maybe you ought to look at the CEO who sold millions in SVB stock prior to the fail.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

SVB is not a good poster child for this for this thesis.

SVB announced a loss on sales of securities and said they were were going to raise capital to fill it, without having firm commitments in hand for that capital. This causes people to really look at the financials, and they did not tell a good story. This is what set off the rumors. In other words, this was a case where indeed smoke indicated a fire.

As a former bank regulator I get why there may have been no really firm regulatory action earlier. People on the ground see red flags for months, raise them several times with management, but management demurs because for whatever reason, they don't want to bother using resources for something they think will work itself out. The people on the ground bow out, satisfied they have done their duty in raising the issues, because they don't want to get a reputation as troublemakers.

What I don't get is why all the equity analysts were not all over this bank given its financials. This is perhaps the most mysterious miss.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

SVB is not a good poster child for this for this thesis.

SVB announced a loss on sales of securities and said they were were going to raise capital to fill it, without having firm commitments in hand for that capital. This causes people to really look at the financials, and they did not tell a good story. This is what set off the rumors. In other words, this was a case where indeed smoke indicated a fire.

As a former bank regulator I get why there may have been no really firm regulatory action earlier. People on the ground see red flags for months, raise them several times with management, but management demurs because for whatever reason, they don't want to bother using resources for something they think will work itself out. The people on the ground bow out, satisfied they have done their duty in raising the issues, because they don't want to get a reputation as troublemakers.

What I don't get is why all the equity analysts were not all over this bank given its financials. This is perhaps the most mysterious miss.

This has me rolling my eyes! Forget about ‘equity analysts’ (always a sad profession, recently a dying one!), talk about the failures of government, politicians, the media, the legal profession, academia, civil society, etc in regards not just to banking regulation narrowly (which sucks), but all the related issues around economics and finance that have created these crises and a whole host of other problems. Basically all those worlds play stupid games around denying culpability for their failures, these episodes should lead to lord of questions about all those small worlds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

Psst…the issue is that no bank should be run with a highly concentrated deposit base. This *used* to be an important part of bank supervision. Deposits, while cheap, can be very fast moving. Thiel might have been the biggest fish, but even without him, the other major depositors and their friends could have done the same thing. It turns out Silicon Valley is much more a tight-knit clique than is commonly discussed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

SVB is not a good poster child for this for this thesis.

SVB announced a loss on sales of securities and said they were were going to raise capital to fill it, without having firm commitments in hand for that capital. This causes people to really look at the financials, and they did not tell a good story. This is what set off the rumors. In other words, this was a case where indeed smoke indicated a fire.

As a former bank regulator I get why there may have been no really firm regulatory action earlier. People on the ground see red flags for months, raise them several times with management, but management demurs because for whatever reason, they don't want to bother using resources for something they think will work itself out. The people on the ground bow out, satisfied they have done their duty in raising the issues, because they don't want to get a reputation as troublemakers.

What I don't get is why all the equity analysts were not all over this bank given its financials. This is perhaps the most mysterious miss.

This has me rolling my eyes! Forget about ‘equity analysts’ (always a sad profession, recently a dying one!), talk about the failures of government, politicians, the media, the legal profession, academia, civil society, etc in regards not just to banking regulation narrowly (which sucks), but all the related issues around economics and finance that have created these crises and a whole host of other problems. Basically all those worlds play stupid games around denying culpability for their failures, these episodes should lead to lord of questions about all those small worlds.

I guess I was too subtle in what I said about how management deals with issues. Yes, what I wrote takes place at many levels in many spheres.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

Well what is your proposal for how a cree society can stop a private person from causing a bank run by spreading rumors around his wealthy friends? What could be done other than prosecuting him after the fact? Shouldn’t we prosecute this behavior?

Psst…the issue is that no bank should be run with a highly concentrated deposit base. This *used* to be an important part of bank supervision. Deposits, while cheap, can be very fast moving. Thiel might have been the biggest fish, but even without him, the other major depositors and their friends could have done the same thing. It turns out Silicon Valley is much more a tight-knit clique than is commonly discussed.

While that is true there's no way a regulation could be written to encompass SVB's particular mix of a concentrated depositor base. For instance while the VCs have some level of control over the behavior of the start ups they fund they don't have legal control. There's also a legal distinction between the various founders' money and their company's money. None of that excuses SVB which should have anticipated the risk but thought they were part of the club. But, try and write a sentence that would define this particular concentration. Best that could be done would be something regarding the amount of accounts and average balance. One of the main problems is that regulations don't ever view the ultra wealthy as potential risks.

[Anonymous]

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Anonymous wrote:We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.

This is a lot easier in a country with less than 400,000 people.

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.

And has a robust fishing industry

Plus cheap thermal energy.

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run.

The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.

SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.

Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?

Thiel likely orchestrated this, and the subsequent bailout of the wealthy depositors, so it can be a campaign issue used by the MAGA crowd against Biden. “Biden helped out his wealthy California buddies” — ignoring the reality that many of them are loony libertarians.

I know that's your party line: Thiel did X.

Don't you think if one person can take it down, that's a problem?

This in the face of zillions of pages of regulations in place right now. It's not like these aren't already in place.

What have all these agencies been doing up until now? They're certainly drawing a pay check.

He has precedent. https://www.theatlantic.com/business/archive/2018/02/hogan-thiel-gawker-trial/554132/

[Anonymous]

Anyone notice that SVB *did* seem to have meaningful credit losses? I’m not sure why, but CRE sounds likely.