Comment by dragontamer | Hacker News Reader

Comment by dragontamer | Hacker News Reader

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We literally have Dodd-Frank rules built up over the last 15 years to prevent these things from becoming a systemic failure.

I get that people are still squeamish about 2008. But our banking system is quite different today compared to back then. We built up these rules so that we wouldn't have to bailout banks in these situations anymore. That's what the entire damn point was.

If it doesn't work, then it doesn't work. But I for one am more than willing to test out these rules... at least for the next few weeks... to see if they actually work. If they don't work, then we strengthen our regulations over the next 10 years. If they do work, then... success.

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We absolutely shouldn't just hit the bailout button before understanding this problem. 2008 + Dodd Frank was supposed to prevent this from being a systemic cataclysm.

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What probably needs to happen is for Thursday's bank run to be undone. Issue a clawback so that the $46 Billion that escaped on Thursday and punish those who bankrun / collapsed the bank in a panicky stampede.

That's far, far more fair than a bailout. Redistribute the money in a more fair way, but accept the risk that SIVB made for itself and its community.

How do you expect Dodd-Frank to prevent every regional bank depositor with half a brain cell attempting to move their deposits to a big 4 first thing Monday morning?

Do you understand the consequences of that? If that happens, dozens and perhaps eventually hundreds of regional banks will fail and many many more depositors will be out money.

Do you understand how crap SIVB's books were? 50%+ held to maturity? Long dated 10Y and 30Y bonds? A complete lack of a Risk Officer from April 2022 through January 2023?

Given how utterly terribly SIVB was run, I'm not exactly expecting a major issue come Monday. I'm looking at the books of like Ally Bank, and they're way better. https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb406...

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If there are other banks as poorly run as SIVB, they probably do deserve to collapse. But I also don't expect there to be many banks with that level of stupidity.

At Silicon Valley Bank, we're basically looking at a bank, whose Risks were completely slept on during the entire period of the fastest rising federal funds rate in the last half-century. (Or really, the position of Chief Risk Officer was vacant for this entire period). I assume the other banks had better risk management.

Mostly agree, but panic isn't always rational and I suspect most people will react emotionally rather than look at their bank's books like you did.

If the banks books are solid, they should survive a 25%ish decline in deposits, which was roughly the level of SIVB on Thursday.

I don't expect a 25% decline across the industry however. The knock-on effects will be smaller. With a smaller "shockwave" of runs, combined with stronger bank fundamentals, I really don't think we're looking at a big domino-effect 2008-like collapse here.

There is zero precedent for clawbacks from on demand accounts at a regulated financial institution. This isn't even a "capital B" Bankruptcy, so I have doubts clawbacks would be legal.

That would also throw gasoline on the fire as people cease to trust even withdrawn money as whole. It's now in your interest to get your money out of any bank showing any weakness as early as possible.

Clawback SVB money Monday and we'll have a run on First Republic Tuesday and possibly 20 other institutions by the end of the week until we get to Ally and that will empty the FDIC piggybank.

Which is why the cooler heads at the FDIC try to make all depositors whole. Hopefully they can find someone to take SVB's assets on in HTM valuation and maybe some government equity in exchange for ownership. (Remember the government made money on its equity deals in 2008).

> It's now in your interest to get your money out of any bank showing any weakness as early as possible.

Wouldn't it be the opposite? It would lead to there being no incentive to withdraw since you'd only have to give it back.

What happened from a regulatory perspective is pretty straightforward; in 2018 large regional banks like SVB successfully lobbied for a partial Dodd-Frank exemption. (https://www.npr.org/sections/thetwo-way/2018/05/22/613390275...)

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