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Comment by partiallypro | Hacker News Reader

Most community banks aren't in a similar situation though. This is mostly caused by panic, not reality. If people didn't panic about SVB eating a loss, even it wouldn't have likely failed. Now people are not using logic and causing panic across the board. Mostly caused by VC tech bros going around stirring up things in a hope to get a bailout. That's why the Fed/Treasury/FDIC stepped in this morning to hopefully instill confidence.

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This is mostly caused by panic, not reality. If people didn't panic about SVB eating a loss, even it wouldn't have likely failed

That's not "reality" though. The phenomenon of people "panicking" (ie acting sensibly when their savings are at risk and getting them out while they still can) is a fundamental part of the crisis-process of any bank when it is badly managed.

Saying "well if people just ignored history and group psychology and hope nothing bad will happen and risk all their savings by doing nothing, then nothing bad will happen" just isn't remotely realistic.

They just want to blame the users

> people didn't panic about SVB eating a loss, even it wouldn't have likely failed

Silvergate, SVB and Signature were insolvent. This wasn't a fire sale prompting a decline in their asset values, i.e. classic illiquidity. It was their assets being worth less than their liabilities. If it were purely a liquidity issue, they could have borrowed at the Fed's discount window. (As First Republic appears to be doing.)

SVB was literally insolvent though. Not only that, but they couldn't put together a rescue stock sale - it fell through. This was not a bank run caused by panic, but a run caused by an already failed, insolvent institution.

"Most community banks aren't in a similar situation though. This is mostly caused by panic, not reality." Nothing prevents panic from overriding reality at other banks.

Of course, but the underlying books aren't the same, the SVB problem was fairly unique. Once the panic is over, most all other regional banks will be fine. The only way they will fail is if the mob creates additional panic for either a false perception or a political gain (bailout.) That's basically what happened on Friday.

Isn't the fact that people are panicking part of the reality of the situation? Or do we exclude human behaviour from financial calculations. Am I stupid for predicting other people will panic?

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