Great way to trigger more bank runs. I don’t think this will help.
The latter function is particularly salient for tech people (which many of us who follow HN are).
It's hard to take defense of startups seriously where startups are blatantly going to screw others over for their own sake. Do I get it? Yes. But it's more than me vs them; they made it an "us" vs them.
In such a situation, you can't cry foul on those seeking to move their money into safer banks, even if doing so precipitates a bank run.
Where are all these people who don't know how the system works coming from? Who is advising them?
>that fact is self-evident.
What part of this very simple sentence was unclear?
The 2008 crisis showed FDIC at their most effective but the vast majority of the ~100/per yr banks taken over were known well before any customer found out. The difference between them and SVB was that w/ SVB served plenty of well connected VCs who dedicated their lives to being connected to the latest market information before other VC/angel/wall st players found out. Mom and pop shops even with larger banking businesses never faced the same sort of bank run risk.
Their financial state could be kept hidden without it turning into a bank run 100x easier than a bank serving VC-connected types. So as long as the FDIC learned of problems all they had to do was move before the regular consumer bank client found out their small town bank branch was at risk, which was a much easier ask. Then once FDIC finds a larger buyer to stabilize it the customer didn't worry too much and the business is saved, although typically owned by some mega bank.
SVB was the last sort of business to survive such an information risk almost by design of their clientele.
Not so easy for BSDs, REITs, ponzi schemes, etc., but should be dreadfully easy for banks
SVB held a lot of MBS but it was a safe tranch — the risk was not of default, but rather of a market value decrease if interest rates rose.
Which they did.
Which would not have been a problem, because the full value would eventually be paid back in full, as long as the bank didn’t need to sell them.
Which they did, because more depositors were withdrawing funds than expected, because the investment market tanked and startups were drawing down funds.
Which resulted in selling a loss.
Which spooked VCs.
Which caused a run on the bank.
This was not a 2008-style “Wall St. gambling” problem — if anything it was a misunderstanding of risk, but not in the “wow, 50% annual returns, who cares how safe it is” sense.
If so, how do you suggest banks make money?
And First Republic Bank looks like it could be the next to fail, likely within days, barring intervention. Without a systemic backstop the runs will almost certainly continue
Stock price can only be treated as an indicator of what the market thinks.
First Republic has been singled out as one of the more vulnerable, and thus, likely to experience a bank run over the coming days.
Many pics of people withdrawing their money en masse from the bank earlier today: https://twitter.com/Dr_PhillipB/status/1634632068058722304?s...