Silicon Valley Bank unmasks the hypocrisy of libertarian tech bros
newstatesman.com
newstatesman.com
Context: https://en.wikipedia.org/wiki/New_Statesman
> Today, the magazine is a print–digital hybrid. According to its present self-description, it has a liberal and progressive political position.[3] Jason Cowley, the magazine's editor, has described the New Statesman as a publication "of the left, for the left"[4] but also as "a political and literary magazine" with "sceptical" politics.
All the quotes are barely one sentence, and with zero context, and no link back to when or where they were said. I know modern journalism is lazy and just quotes tweets, but the author could have put a bit more effort in.
> when Zuckerberg came up with his mantra, “move fast and break things”, he didn’t just mean code.
> Thiel himself is so committed to libertarianism that he has established an eponymous foundation to “defend and promote freedom”
> Larry Page, the co-founder of Google, has previously suggested a “limit” on laws to “some set of pages”. “When you add a page, you have to take one away,” he said.
> “This is an extinction level event,” warned Garry Tan, the CEO of Y Combinator.
> “Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks
So what exactly is your argument here? That Thiel and co. aren't libertarians? That they are generally pro-regulation and government bailouts? Or that the article's thesis is invalid simply because it didn't meet your standard of empirical representation, regardless of whether it's true or not?
If he has not denounced those Libertarian friends, yes you can. If he has not lobbied the government with his disproportionate power and privilege to not socialize investment losses the way he has lobbied in the name of pro wealthy elite anti state "intervention" in the past, yes you can. It is an incongruity in values.
But there are alot of laws that favor tech and most of the tech billionaires take lots of credit for winning with a stacked deck. And call for less regulation.
- sales tax exemptions for ecommerce.
- green credits
- section 230
- lack of stricter anti trust
Anti-regulation on the business side, their political donations show they are very much into regulations when it comes to people and ideas that aren't "typical" and or "straight".
"Official" donations from the companies split them 50/50 between the major parties while worker donations are almost 99% Democrat. SVB itself primarily donated to Democrats, despite it being maligned as "libertarian".
https://www.politico.com/news/2021/05/17/peter-thiel-senate-...
Sigh, when will the left learn this rhetoric only destroys the country, it doesn’t help them win more.
Continuing to justify “judging” others only results in the destruction of the country. Political parties are the problem. You’ll change nothing though, that’s for sure.
Anyway, as for the substance: a bank had risky behaviour and lost out. Now everyone, including those who never did and never will benefit from that risk, are called to pick up the check. This is, objectively speaking, a transfer of wealth from the poor to the rich.
Now you may justify that with trickle-down economics, but I'm not arguing that point, and neither is the writer. He is merely pointing out how the "leave free enterprise alone" crowd is now suddenly in favour of handouts :)
It's pointing out that the left hates libertarianism and Peter Thiel, leftism is literally the opposite of libertarianism, and so you would expect a left wing news outlet to try and trash Thiel and libertarians whether or not the argument makes any sense or whether it's actually their fault. It's a bias warning.
Corporate Libertarianism which seems to be the predominant modern one is very right wing though.
> It's pointing out that the left hates libertarianism
It's worth pointing out that the word "libertarian" was coined for its namesake left-wing movement, what you might also call "anarcho-syndicalism", "mutualism", or similarly aligned ideologies. It's only since the 1960s that the word has been used as a synonym for ancap, and then mostly in the USA.
What a wonderful concept, a news organization that just spits dry facts and doesn’t spin at all. Kinda like Axios. We really should use AI to write unbiased news articles and fire all the journalists who can’t get rid of their biases. The world would overnight be a better place.
> a news organization that just spits dry facts and doesn’t spin at all
There's no such thing. Even the paragons of neutral and factual reporting, like AP or Reuters, do at the very list have an editorial bias on what they do and do not report, and in what detail.
> Kinda like Axios
Lol
> We really should use AI to write unbiased news articles and fire all the journalists who can’t get rid of their biases. The world would overnight be a better place.
Outstanding idea. Let's get rid of the ability of humans to present thoughts and opinions, and delegate that to chatbots controlled by some tech-bro's definition of "acceptable speech". Truly an inspired idea.
> Lol
What unique insight does this provide? Do you have counter evidence? Do you have a more neutral news site to use as evidence?
I don’t understand this comment. The article doesn’t pretend to not be an attack on people like Thiel. It’s in the title. So what’s your point—is Thiel above criticism?
And since you imply that a publication somehow automatically loses credibility on this topic by leaning left, here’s a Financial Times opinion piece with a similar premise: https://archive.is/6MBEL
The entire premise that Silicon Valley has a libertarian culture is flawed, which is they the article can't back it up.
The stereotype is that rich investors have these 'libertarian' ideals where they believe that, freed from burdensome taxes and living in a world where bailouts don't happen, they will invest wisely and create a tech utopia thanks to 'survival of the fittest' principles. However, people feel these rich investor types behave more along the lines of 'libertarian principles when we make money, socialism when we are losing money'.
I don't know the extent to that which is true but obviously when rich people have their money threatened it makes sense that they would want a bailout even according to their own 'principles' they shouldn't get it.
> Thiel at least a is a noted libertarian.
I actually respect him a little more than the average libertarian just because of that.
I had no 'point' other than to state that the article headline was misleading, the content was weak at best with sound bite quotes and zero context.
I referenced the wikipedia article so that non-UK readers have some context regarding the publication.
Yes, using left/right instead of something like a radar/pizza chart for political leanings is extremely limited.
Funny how so many of the replies are shocked by this idea when virtually every single story posted to HN from a right leaning outlet is flooded with comments of the form "you can't trust this story, it comes from a right leaning outlet" and the post itself will often be quickly flagged to death. What goes around comes around.
Those laws don't insure deposits over $250,000. The response to SVB is relatively novel in some ways.
https://reason.com/2023/03/13/everyone-is-learning-the-wrong...
Would that we respond as fast to the needs of ordinary people as to SVB depositors.
Didn’t they? And aren’t we on the brink of recession due to massive gov handouts? This comment seems to ignore recent history to try to promote socialism.
In defense of the article, it never directly states that Thiel is a hypocrite. He's at first included just because it lists actions he took. But there's an obvious implication being made later, and not just because of the title. That said, I think Thiel's anti-democracy views ("I no longer believe that freedom and democracy are compatible") are terrible and worthy of criticism for different reasons altogether.
The fact that he states the fundamental logical issue with his ideology so clearly and at the same time in defence of it, is fascinating.
This is a classic prisoner's dilemma. Thiel just happened to be one of the first VCs to tell portfolio companies to get their money out. If [another VC name] had done so, it'll be their name on these articles. The point being, whoever went first avoided massive pain, so someone would've started it.
I suspect “insolvent” is probably an adequate synonym anytime you have to use a qualifier word on “solvent”.
There was no panic to begin with - in the worst case scenario, the cut for depositors was definitely less than 10%, most probably 0.
The Jason Calacanis, David Sacks & co, decided that even that small % of losses were enough to start a bank run in order to get government involved - and make sure they are made whole.
Stress on 'THEY'. Just look at their recent tweets - did Mark Cuban said today that unlimited FDIC is a very bad thing - should 'Never' be a thing ? Amazing stuff. (edit: Here is the link => https://twitter.com/mcuban/status/1635282882259476486?s=20 )
Make no mistake - the 3 banks in trouble (there will be more. Once the fire is lit, it's hard to stop it) were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing.
Thing is, this bank was servicing people basically juicing the system of free money. This cut both ways.
JPM banks in the trillions; SVB, 200 billion.
But so did the client base - we're not talking about small depositors here - if I read the documents correctly, Circle had >8B $ in SVB and they moved 5B $ before the week-end. It was a handful of wealthy individuals that organized this bank run.
Which is the definition of insolvent.
A normal bank just goes to the Fed as the lender of last resort but, apparently, they won’t lend money to insolvent banks so here we are.
Wrong. Banks whose assets are worth more than liabilities can get unlimited low interest loans from the fed.
If Company A wants a bank account with x% interest and instant access to all their deposits at any time (which might be impossible to provide)
and Company B offers them such a bank account, wagering that they won't use that instant access at the same time as everyone else
who is at fault?
They are companies - they just go to court with that. They are or should be prepared to deal with this stuff.
What I'm saying is that this bank run has nothing to do with small depositors withdrawing their money here.
Agree.
Now that the crypto industry in the US have no banks supporting them, perhaps it is time for crypto completely die (and it should) which should reduce the amount of VCs fueling the ponzi scheme.
Most of the scams in crypto probably don't need direct banking services because they aren't running long-term businesses, just quick marketing schemes to pump their token value before cashing out. Unless exchanges world wide are shutdown, this are unlikely to stop.
There are plenty of non-scam blockchain companies that aren't hurting anyone, just building interesting tech. I don't see any reason other than personal bias to want those startups to be debanked since they aren't any worse than the typical startup.
Bitcoin went up a fair bit during the SVB/SBNY crisis.
I don't think so. All banks are facing major markdown issues right now due to the Fed raising rates. SVB and the crypto banks were just canaries in the coal mine.
First Republic also needed a bailout even though they're a lot more diversified in their client base.
Edit: before you downvote, please read this analysis by our friend patio11 - https://www.bitsaboutmoney.com/archive/banking-in-very-uncer...
TLDR: The U.S. banking system (as a whole) has $620 billion in unrealized losses due to the Fed raising rates. This is way bigger than SVB and crypto.
Why didn't The Fed anticipate the downside of their actions?
Follow up by: Isn't The Fed supposed to prevent bank failures, not cause them?
Mind you, there are other (loop) holes that enable such things. Nonetheless, are these random-y bank failure or failures of The Fed and its associated regulatory friends?
Everybody in banking is able to see the inflation prints and aware that increasing inflation may cause the central bank to raise rates. A bunch of people failed to spot this and have since been sacked and/or lost their equity in SVB.
Translation: due to the banks not being sufficiently stress-tested to assure resiliency under reasonable rate fluctuations.
so they expected rates to stay at near zero indefinitely? It's obvious the banks did a bad job on their analysis. It seems like everyone but these banks knew the spigot of easy money was going to stop sooner or later. It just wasn't sustainable.
Why was it the VCs impacted by the SVB collapse, and not the wider banking world, who stood to lose more, who were loudest to make that claim?
1. firearms
2. people needing to be terrified
3. bank runs
If you're of the opinion that their Tweets (ignoring what may or may not have happened in certain private chats leading up to) did not lead to the public start of SVB's bank run, maybe? How much pressure did this add on regulators to act NOW to avert an IMMEDIATE and CATASTROPHIC COLLAPSE?
However, is it really a stretch to say that those Tweets may have downstream effects on other banks?
edit: in an attempt to be more clear, I thought the reason SVB was used by startups was because "regular" banks were not open to startup finances. Is this not the case?
- Yellen folded fast, so the market will test her again (moral hazard)
- Powell will hesitate to raise rates further, concerned about hidden stresses building up in the system. This was basic duration risk, and the fact that they missed it entirely will raise the worry of what else they are missing.
- FDIC will probably have to be reformed. You cannot guarantee everything, all the time. Maybe an opt in system where large depositors can buy individual coverage.
Why? Isn't the guaranteed deposits above 250k mainly 'insured' through Fed offering unlimited loans back by the nominal price of bonds owned by affected banks?
This doesn't work. The only way to draw a new line in the sand is some sort of reform.
The key issue is that the new line has to be "subgame perfect", meaning it has to be credible that if a bank steps over the new line, it will not simply be bailed out again.
That was one of the questions on the call/presentation I was recently on and no one has a clear answer at the moment ( I suppose it is not a surprise since we can't take Yellen at her word ). Some clarity will be needed and sooner rather than later if stated policy and rules are to be believed to be real policy and rules.
FWIW, odds are, just about every bank by now has either reviewed or scrambling to review their exposure.
I do not envy the weight of Yellen's decisions, because from where I sit it is still hard to tell if it was a 'less bad choice' available.
The lesson they learned is to shout global emergency when your regional bank can't meet withdrawals due to poorly managed finances.
Banks will not be more prudent, in the long run. They've just been taught that the government will protect depositors beyond federally insured limits. So now they can make riskier bets.
The people who make the poor decisions absolutely took a hit. The Board and management of the bank all took a hit and lost their jobs.
I don’t see a big problem with depositors being made whole. The bonds that backed their deposits are fully intact.
Right after they cashed out significant amounts of SVB stocks.
I see nothing there about "we will guarantee deposits of any amount over $250k."
The decision to guarantee SVB may wreak havoc on the financial system as banks feel comfortable continuing to make risky bets and thus attracting more customers, knowing that the fed will rescue the customer deposits that backed those bets.
Greg Becker isn't going to jail, and he isn't going to be financially ruined. There are thousands of people willing to fill the role of extracting money from the government. The trick is to not give into their attempts to bend the rules.
0.5: 1
0.5: -1
For the bank the profit before paying interest to depositors:
0.5 * 1 - 0.2 * 0.5 = 0.4
For the insurer the cost is: 0.5 * -1* 0.8 = -0.4
If you want to run a ‘scam’ bank that makes money from looting the FDIC fund then having your capital going to zero sometimes is part of the cost of doing business. This is why it’s important for the insurer to try and control risk and insure there is enough capital so the loot equation does not work.
If rich people think that, I think they deserve to be taxed at more than 80%, because that's stupid.
FDIC move was perfectly rational and cost-optimized. Had they not done that, there would have been more bank runs, and they would have to actually pay out 250k/account on many more accounts than just SVB's, while ""saving"" SVB cost almost nothing.
The thing is .. the FDIC is already funded by banks.
https://www.fdic.gov/about/what-we-do/index.html
"The FDIC receives no Congressional appropriations - it is funded by premiums that banks and savings associations pay for deposit insurance coverage. The FDIC insures trillions of dollars of deposits in U.S. banks and thrifts - deposits in virtually every bank and savings association in the country."
How the banks choose to pass that cost on to customers/shareholders is up to them.
It's instructive to read https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/... for the last available quarter; the insurance fund is on page 24. I can quote you two numbers and you can decide whether they are big or small: there is $128 billion in the fund, and this covers 1.27% of total US banking deposits.
Surely the logical counterparty for the insurance is not the bank, but the third party insurer? i.e. that people should explicitly have to pay for FDIC coverage themselves?
> of which there is no insurance coverage, optional or of any kind, available today.
This is basically a credit default swap for bank accounts, and if you wanted to insure the reported $450m that Roku allegedly had with SVB, someone would have sold you a product I'm sure.
edit: remembered "insured cash sweep", which is the product that everyone should have been using. See https://www.intrafinetworkdeposits.com/ or https://www.cbhou.com/Resources/Customer-Corner/entryid/237/...
The money pipe was opened then and SVB showed it will never be closed. The capture is complete.
Not with 2 though. The BTFP (not to be confused with BTFD :) ) program is removing completely the duration risk (for a year). This lets the FED raise the rates as high as they want without putting banks balance sheets at risk (barred some other unforeseen consequences).
So in this universe, when you go to get insurance at SVB, you see that it costs you 1% per year, which seems high to you. You go to the insurance company's website, and see that insurance for Chase is only 0.5%, so you switch to them instead. SVB is pressured to change to a less risky strategy by the market, not b the government.
(NB I'm not a libertarian, nor am I recommending this approach; I'm just saying that in theory such a system could work.)
EDIT: Upon reflection, this might just punt the issue down the road: Suppose SVDI (Silicon Valley Deposit Insurance) gives you a rate of 0.1% per year at SVB. Everything is fine until SVB fails, and then it turns out SVDI didn't have enough capital to back their insurance, and you lose anyway.
Maybe there are ways you could fix this, but my preliminary conclusion would be that you need some kind of regulation somewhere.
(or, as an argument I made earlier, if your company is completely dependent on a single other company to function, such as AWS, is there really any more risk in having only one bank account?)
> maybe they already do
"Insured cash sweep" (which is basically "RAID for banking")
Cash sweep is insured but only to a limit, there's nothing magical there and the underlying securities have default risk (or breaking the buck).
When the bank fails, they end up living on the streets for their mistakes, and will never (hopefully) be able to do it again to another bank.
In 2008/9, The fact that a solidly red administration (Bush) wrote the check and a solidly blue administration (Obama) delivered it on bended knee to the banking industry made it clear who really ran things.
“Paying your bills is a moral hazard” - guy in the background of a tv interview that birthed the tea party in the US.
Q: Aren't large depositors already free to buy individual coverage from whomever offers it?
Seems we also need to force others to have insurance because they can’t be bothered and will just get bailed out — next time probably with taxpayer dollars.
The regulators failed massively, allowing banks to mask their duration losses. Obviously this needs to change, but they probably need to fix the other banks first (that are still hiding their losses).
As far back as 2019 the FDIC was sounding the alarm about regional banks. In 2020, SVB’s risk committee told them to change their asset mix, they were over ruled because it would lower profits.
If we are going to allow lax regulations fine, then the market (including depositors) have to do the regulation, but you can’t blame regulators in that case.
When I read "regulators failed", I don't think of Joe Regulator phoning it in at work. If Congress creates and oversees regulations, then they are the regulators in my book. This may be what the comment you replied to meant as well.
Limiting the feds power is broadly popular with the population. This is one of the outcomes of those desires, Congress representing their constituents wishes seems hard to call a failure just because the outcomes have some negative outcomes (all laws have negative outcomes for someone).
Thus, state regulators are the ones with the oversight power and the ability to really do things.
California Financial Regulator Takes Possession of Silicon Valley Bank - https://dfpi.ca.gov/2023/03/10/california-financial-regulato...
> SAN FRANCISCO – The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Silicon Valley Bank.
> Silicon Valley Bank is a state-chartered commercial bank based in Santa Clara and is a member of the Federal Reserve System, with total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022. Its deposits are federally insured by the FDIC subject to applicable limits.
---
Note California and "state-chartered" in there.
From https://en.wikipedia.org/wiki/Bank_regulation_in_the_United_...:
a Nevada state bank that is a member of the Federal Reserve System would be jointly regulated by the Nevada Division of Financial Institutions and the Federal Reserve.And from https://www.fdic.gov/about/what-we-do/index.html
> The FDIC directly supervises and examines more than 5,000 banks and savings associations for operational safety and soundness. Banks can be chartered by the states or by the Office of the Comptroller of the Currency. Banks chartered by states also have the choice of whether to join the Federal Reserve System. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. In addition, the FDIC is the back-up supervisor for the remaining insured banks and savings associations.
The California bank in that example is regulated by FDIC because it's not a member of the Federal Reserve System.
They had no interest rate risk hedges the entire time.
Edit: Downvotes with no replies. I hate it when that happens.
SVB got blown up on a trade that is kind of at the core of what banks do (this is also why every bank is hurting). To even exist the bank has to be stuffed full of people very knowledgeable about rates risk at all levels of management. There should have been no shortage of people at any level, including executive, that understood the risks.
It wasn’t even like this was some weird bespoke product or something, they got blown up by plain treasuries afaiu. This is the sort of thing that’s “introduction to rates 101” material. They didn’t need a CRO to tell them this.
Because HoldForMaturity assets can't be hedged? Or it cuts into profit and affects your stock and management bonuses which they weren't used to giving up, and your share losses due to the hedge imperil your company but just in a different way?
As for the hedge, it’s probably a greed/returns question. If you buy then 10 year and sell everything between say 2 to 10 years as a curve hedge, you’ve basically bought the two year with extra steps. There’s no free lunch where you get returns of ten year without the risk on ten year.
You could imagine some imperfect hedge might be better but sort of same problem.
If the gap in finances was discovered earlier, would they have just converted more equities and other long-term higher-yeild instruments into treasuries and then go under because they couldn't get returns to match their deposit interest rates?
Deposit interest is not fixed so that wouldn’t make them go under, they’d have to reduce their interest paid.
Lending long (10 year) on money deposited for only a year is a recipe for disaster.
[1] https://en.wikipedia.org/wiki/Janet_Yellen
[2] https://en.wikipedia.org/wiki/Mary_C._Daly
[3] https://www.reuters.com/markets/us/ceo-failed-silicon-valley...
Rules don't metter from now on or what?!
Why not? What’s keeping the Fed from working with Treasury and the FDIC to provide unlimited liquidity as needed for deposits? No doubt there will be higher order consequences, but I don’t know of any operational reason why it isn’t possible so long as the current monetary regime exists at all.
The duration problem is that banks have bonds/CDOs on their books marked-to-maturity, but when faced with outflows banks are forced to sell them at market prices (much lower because interest rates went up). This turns an illiquidity problem into an insolvency problem if a bank bought too many low interest long duration bonds.
Last week, when a bank had balance sheet consisting of bonds with a market price of $75 but valued at $100 marked-to-maturity they would get into trouble when faced with too many withdrawals. Today, they can borrow $100 from the Fed at a modest interest rate with the bond worth $75 as collateral. This fixes the bank run problem, because the bank can go to the fed to get the money they need to cover any outflows. This deal only covers quality bonds and only those bought before last week. This fix is not an invitation to start lending recklessly, it's just a stopgap measure to allow banks to lose money slowly on the bad debt they already have.
This all means Powell can continue to raise interest rates without having to worry too much about bank failures.
Edit: a better term might be Zombie Banks.
I agree it's not a solution, but it's smart and effective stopgap measure.
As you describe it, banks can post collateral with a market value of $75 in return for $100 of loans from the Fed. This is not a panacea. There is a reason why this is not normally done.
The problem arises when this loan has to be repaid. At that point, the bank will have to repay $100 to recover $75 worth of collateral. There is a gap between what the bank must repay and the value of the collateral it gets back. This means that, at that point, banks may find that they are insolvent and unable to repay the loans. This is the banking version of "jingle mail", sending the bank's keys to the Fed instead of repaying the loan.
The higher the rates, the lower the value of the collateral, the greater the gap, and the more likely the banks are to default on their loans when they come due ...
... silly me, of course not ... at that point the banks will expect the Fed to bail them out again and cover the gap through some "repurchase" voodoo where the banks can "repurchase" their collateral at market value and have their loans forgiven.
In the US alone banks are underwater to the tune of 650bn (that we know of). It will take a while to pay off.
The banks might get an outright bailout -- it wouldn't be the first time -- but nobody wants that. Not Powell, not Yellen, not Biden, and certainly not you or me.
It’s not about a high vs low interest rate environment. It’s about a falling versus rising interest environment. In a rising interest rate environment, a banks bond holdings is continually losing value.
This is not much of a problem if the Fed allows the loan to be rolled until the bond matures. Then, at maturity, the loan's principle is paid by face value of the bond.
The only issue is that, in the meantime, the bank does have to pay interest to the Fed on the loan. This is a tightening; it's just not as tight.
The face valve of the bond cancels the principle, the bond's coupon cancels some portion of the loan interest, and the only thing left at the end is a cashflow from the bank to the Fed representing the remaining interest. Heck, the Fed could make this cancellation explicit, create a bond representing this cash flow, and sell it to somebody else.
This also doesn't prevent Powell from raising rates further. If anything, it eliminates a reason why he couldn't.
Assuming an absence of default, and the Fed being able to wait being paid back until the bond matures, then the collateral will be worth its par value (ie. $100).
> This all means Powell can continue to raise interest rates without having to worry too much about bank failures.
Do you think banks will stop buying bonds? Otherwise I don’t see how the latter follows from the former.
You absolutely can (should is the question)?
The second question is whether you want depositors to care about the financial health of their banks or not. I'm on the no side of that conversation. So you let regulation take care of the capital requirements and so on whilst allowing people to feel safe with deposits.
But it's not everything, not even close. It's only the amounts deposited in the standard class of bank accounts. Companies with large amounts of cash keep very little of that in bank accounts, it's in money market funds and other cash-equivalents.
It's certainly feasible and possible to have the "risk" part of the bottom of the risk-reward curve to be at the same level as the viability of the federal government. The risk isn't quite 0, but if the federal government collapses you have bigger problems anyways.
Especially in a high interest rate environment. Bank accounts essentially have a 0% nominal rate, which in a high interest rate environment is a very negative real rate so there is lots of margin for implicit or explicit insurance.
https://www.nytimes.com/2023/03/13/business/svb-collapse-com...
"Roku, the maker of the streaming media player, said in a U.S. Securities and Exchange Commission filing on Friday that roughly $487 million, or 26 percent, of its $1.9 billion in cash was tied up with Silicon Valley Bank"
(this was not very clever of them! But it seems to have been encouraged among the SV community?)
Companies above a certain treshold (and all citizens for that matter) should be able to bank with the Fed, and have peace of mind that the money they deposit there is not being put to work in any way, shape or form.
What developed over the last week is a victory for those who long for CBDCs .
Banks being able to lend out money is generally considered a good thing though.
There certainly are alternatives though for depositors that want to have more control in how their money is put to work: money market accounts, short term treasuries, etc
Banks are lending not their own money but depositors.
In a perfect world every citizen , small LLC and startup would be able to issue their own bonds if they need credit for purchases or entrepreneurial efforts
Could banks learn something from companies here, and drop the volatile long term bonds from their assets in favor of money market funds?
Why can't you when you can literally print money? Just banks will have to be forced to pick up the tab for that, by limiting their money printing ability so that in case of emergency it can be safely printed.
Dollar deposits in a bank should be 100% safe operation regardless of the amount.
And investors can burn. Every investor is reaponsible for their own risk.
FDIC does not guarantee everything all the time, that's the whole reason for what happened at these banks being controversial.
No one should be made whole. Looks like the stock holders will have a 0 and bond holders will take a significant cut. Depositors will be safe.
The executives should all be in prison for this. Only have to do this once. The other banks would wisen up and get their act together.
Shouldn't they were in prison (the CFOs, for wealthy individuals - it's just their money) too ? They were fully aware of the 250k$ limit of FDIC insurance.
The problem is inflation and the lack of interest rates means that just holding cash is a losing proposition (inflation will eat away at it).
With inflation running at 9%ish percent if you hold 20K for 10 years at 9% inflation, it's real worth at the end will be ~8.5K.
Can you describe what the Fed blocking action was and where I can read about it? I'm tempted to conclude that it doesn't exist without additional evidence.
Also there was a narrow bank proposal the Fed banned in 2019: https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
The Fed and other regulators greatly fear banks that do not justify their overreach (and also make existing banks look bad)
However, thanks to the yield curve being inverted, you can approximate this and make decent interest by rolling 4-week T Bills and putting all of your purchases on a credit card (effectively giving you net 30 payment terms).
These are not the same thing and I would expect people on a tech website to know that it's not 1971 any more.
100k$ of gold as 100g bars + their certificates of analysis/authenticity fits in a small lunch box. Bigger bars allow greater storage density, but are harder to offload.
The problem is you now are exposed to fluctuations in the gold market, and offloading gold in any sizeable amount is a pain in the arse.
Which is ironic because it entirely relies on the Fed paying interest on reserves, which they never did until 2008 when they started as part of the bank bailouts.
With current levels of normal account fees, likely less so. There is lot of staff and operational expenses even if these were set at minimum.
There's about $2trn in banknotes https://www.uscurrency.gov/life-cycle/data/circulation and from my earlier reading of the FDIC statements there's about $24trn in total US bank deposits. So if you want to have everybody keeping their own individually serialled banknotes that's a non-starter.
You can keep it at the central bank, whether that's "postal banking" or "the deposit window" or "a CBDC", but that seems to be politically unpopular for incomprehensible reasons.
You're wrong about this part at least. Borrowing short and lending long is what banks do (among other things). The alternative is either:
- banks asking for 10+ year time deposits to match your 10+ year mortgages , or
- banks only willing to do mortgages that are < 1 year
The risks can be managed somewhat, and SVB *definitely* were too greedy (and stupid), but you're mistaken if you think the other banks are qualitatively different than SVB in their exposures to interest rate risks...
That's why most bank's stocks are down. Most people don't think they will fail, but recent events do highlight that they have a bunch of long term securities that lost value.
For now bonds yields have come down significantly so most banks in a similar situation should be in a much safer position until/unless yields start going back up again.
That sounds great in a libertarian, everything goes world. But the reality is that there are plenty of bad actors and they will abuse it to launder money and commit fraud. Every other bank was conservative enough to avoid this by enforcing some basic in-person kyc/aml processes.
But not SVB. If you were banking with them, you should have asked yourself at least once: why is my bank doing something no other bank does? And is my money as safe there as it would be with a more conservative bank?
The very fact that it was catering to startups was high risk behavior.
And let's not pretend that extending loans to 15 year old "startups" that have never made a dime in profits and have no clear exit path was a sound business.
Their depositors were simply more flighty than average.
The failure of SVB had nothing to do with extending loans to their client base.
It's business 101 that you need a diversified customer base. If you're too heavily concentrated in one industry, you're entirely exposed to any downturn in that industry.
In this case, things were made even worse since SVB's customers were VC-funded startups, and VCs have an outsized say in the decisions made by VCs. Particularly in 2023 when we've seen startups shed more and more equity to VCs.
If I was running a business similar to SVB, I would have asked myself if I was too over-exposed to VC-funded startups, and if those VCs were always going to play nice.
Well, that's an easy answer in techbro circles: because it's the smartest one, duuh.
There are plenty of others, Ally being the next off the top of my head. This doesn’t, at all, free you from AML or KYC.
This is so disingenuous. They failed because they made risky investments, interest rate hikes put their investments in jeopardy, and when they tried to raise extra capital (responsible thing to do), people were alerted of the problem and left the bank (responsible thing to do).
[1]: https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...
Even if the worst case scenario was only losing 10% of deposits, that's a very good reason to remove your money.
But in reality, everyone knows this will trigger a bank run, which will lose much more, so the only thing that matters is to get out ahead of it.
This is just the inherent logic of the situation, not the fault of whoever realized it first.
I mean, I kind of get it. That first 10% could very likely be people who know something you don't. So you use it as an indicator. But then the very perception of instability causes that same instability.
https://twitter.com/one4thecashbag/status/163533710637676953...
[0] Video of Jason Calacanis expounding on his love of royal treatment by SVB: https://twitter.com/one4thecashbag/status/163533710637676953...
Maybe because you are one of the beneficiaries?
https://news.ycombinator.com/newsguidelines.html
Edit: you've been breaking the site guidelines a great deal and we've already warned you a bunch of times. If this keeps up, we're going to have to ban you.
I am surprised there is so little anger.
I can offer an explanation, but I am not sure how accurate that is. As I tried to explain to my friends in different industry what has, apparently, happened, their eyes quickly glazed over. There seems to be a lot of confusion floating around and no clear 'bad guy' to blame ( I have a pet theory about this, but this may be a bad time to introduce it ).
<< if they didn't already have an axe to grind!
Absolutely correct. Based on what I heard so far, adherents of each political spectrum in US went to their respective corners with their specific talking points. Super annoying as it only adds to the confusion ( its not like we have a systemic risk on our hands ).
Because it's unfair to have millionaires bailed out. When the poor make bad decisions they don't get bailed out.
To be clear, I think it’s a good thing. Just let’s not pretend the government is only ever helping the rich.
So the difference here is that individuals get the safety net because they are just trying to exist. They're not getting "bailouts", they're getting assistance for things like food and shelter and medical bills.
Firstly not clear that this is really a bail-out in the usual sense. No tax-payer money is going to these millionaires, and any costs (if there are any, which isn't entirely clear) are going to go to other banks and their shareholders.
Secondly not clear that depositing money in SVB was a "bad decision" - doing this wasn't a risky thing VCs did to try and get rich.
And now their bank, which behaved recklessly, failed and they suffer no consequences, the costs of 100% deposit insurance offloaded onto every other sector of the economy.
So far I have not seen any evidence that the real reason was anything but "poor risk management and communications" A couple of percentage points change in interest rates is not a thing that should bring your bank down. If it does, you have failed, no excuses.
In context, it's even more egregious — Rates after that "couple of percentage points change" are still historically quite low, it's just that we've had a completely aberrant run of near-zero rates for the last decade or so. It was a matter of time until this correction happened, so preparedness was about "when", not "if", it happened.
> Any depositor who could read the WSJ or watch the stock ticker could understand that there was no upside in waiting to see what would happen next.
The whole point of regulations is precisely that I don't have to read a journal or scrutinise a stock ticker to watch my money. As it turns out I have more productive and useful ways to spend my time. Maybe he doesn't have anything better to do all day; but pretending that regulation are not needed because there is some way for some people to get some insight about what's going on under the hood is just not a receivable argument.
What are you going on about?
If you listen to the All-in-podcast, where Sacks and the other guys talked about what happen, they actually point out that the problem was improper regulation that allowed banks to get in that state in the first place.
Banks want deregulation so they can have riskier investment profiles, but suddenly when that risk materializes, it's somebody else's fault that they can't cover their obligations.
In this case the bank shareholders should take the hit and not be bailed out at all.
I'm on the side that the depositors got screwed here and they are the ones that need help, not the bank.
1. Talk of inflation doesn't mention a way more effective tool for tackling it: taxation. Inflation is offhandedly blamed on the government too for not being "transitory". Sacks is actually torn here. Non-zero interest rates hurt the VC model but as a rich guy he certainly doesn't want, say, a corporate windfall profits tax;
2. He claims he wanred about pumping trillions of dollars into the economy. Why 2 years ago and not 14-15 years ago when the zero-interest QE started? What's the difference? Oh, who got the money in 2020? This is part of a consistent narrative from rich people that it's only ever a problem when poor people get government money. Then it's a moral hazard.
3. Further to the "2 years ago" narrative, we should remember that Covid relief started under Trump, not Biden. So why not "3 years ago"? Is Sacks trying to avoid criticizing Trump? Weird. I wonder why.
4. Not one mention of deregulation. Weird.
The inflation we have now is opportunistic and self-referencing. "We have to raise prices because prices are rising". In truth it's really "we're raising prices because we can".
At least taxation would encourage companies to use those profits to invest in the business, possibly even pay people more (God forbid) and not necessarily profiteer. All instead of just using those huge profits for share buybacks.
Interest rates increase the cost of everything. They will cause businesses to fail. I mean just look at SVB.
And even if increased taxation changes nothing price-wise, it will fill government coffers and allow the government to help those most impacted.
It is literally the best solution for absolutely everyone except for about 500 billionaires.
Inflation is too much money chasing too little stuff. Taxation is less money that the people have, but more money that the government has. If the government just set the money on fire, that would help with inflation, but they won't. They'll spend it. At that point, we will have the exact same amount of money chasing the exact same amount of stuff; the only difference will be who has the money. So we'll have the same amount of inflation, but people (and businesses) will have less money to try to deal with the inflation. That doesn't sound like an answer at all.
We were offered to buy insurance for e-banking theft and other types of fraud _and_ insurance for our deposits.
Is it really the case, that Americans assume to have all these sorts of insurances taken care of automatically?
So your insurer will be able to meet their obligations.
If not, then it is so bad that it is societal. And then we all have an interest in having it resolved no matter what.
For consumers, yes. For businesses, this falls under the "treasury management" responsibilities of the CFO position.
If they make this assumption (i.e. by foregoing insurance, T-bill ladders, etc.), they're a poor fiduciary. The VCs and relatively mature startups that stood to lose money in the last week have come out of this looking really bad to the adults in the industry.
It seems mostly a fluff piece with little meat to it.
Just like the 2008 crisis let's just blame it on Michael Burry and those who looked under the layers of bureaucracy
But rest assured, it's not just the libertarians and not just in the US.
Europe is currently facing shortages of skilled labour in many sectors of industry and business, what with the baby boomers entering retirement age in droves. Market forces of supply and demans would dictate that since the resource (skilled labour) demand increases, and the supply decreases, the price (wages) has to go ... upwards.
Basic economic theory of free markets.
So, does that happen? With few exceptions, nope. Wages continue to stagnate. Instead, lobbyists clamour for slashing social security to make part time jobs and retirement less desirable.
My parents worked a few years into retirement, but that was only because my country's pension budget is far from balanced, so they needed the extra income.
Adding 24 months is the only presented option. I’ve discuss with people ready to strike for a while, since they are gonna have to work 2 more years otherwise.
And that’s on top of the fact that the budget it’s kinda fine. Needs attention, sure, but the entity governing it says it’s fine. ( independent from the gov )
I wonder how pissed these people would be if the government continued to pretend that everything is fine, did nothing, and in a few years the pension system simply crashes, due to being no longer feasible.
The current system in many european country relies on assumptions that were true in the 60s and 70s, when many of these systems basics were designed: Continuous population growth generating net positives in the pension funds, a certain life expectancy, and taxable incomes rising with economic power.
None of these assumptions hold true any more: Population growth has stalled or even reversed, people live a lot longer, and incomes stagnate despite decades of economic growth.
So the systems can either be adjusted, or they will stop functioning at some point. Even if the budgets are balanced at the moment, the factors listed above are not going to change in the other direction. Sooner or later, adjustments need to take into account the new reality.
However, you’re right about market forces in European salaries.
But Peter Thiel withdraw his money from SVB in time and he didn't ask for the government's help. So the article authors are kind of contradicting themselves.
Also, blaming libertarians for being against massive state intervention in economy is akin to blaming a fish because he swims in water. It's all what that fish is about and knows to do.
But yes, one former libertarian = Libertarian tech broooo
* when I put money in a bank, I am just depositing it, I am not "investing". If I wanted to invest (take risk for a chance of profit) I would buy bonds or shares etc. I expect the money to be safe and accessible.
* the "product" being sold by SVB is a bank account. It's low interest (if any at all) and comes with a bunch of charges (so most people will not even break even). If they were offering a 10% interest current account, that might be different. But until then no one has been compensated for the risk of losing their "capital".
If I leave clothes with a dry cleaner or tools at a storage unit, those are mine. I am not "investing" my clothes in the dry cleaner. The same should apply for standard, low interest, current accounts for individuals and businesses.
Maybe in the 1950s, people only used accounts for saving, and they were expecting a return and it was the main way for people to invest. At the same time people/businesses did most of their business in cash (literal folding notes etc). But the opposite is true now. People and Businesses need a risk free account to make a receive payments. They're not looking to be "on risk".
The bailing out was needed due to risky behavior.
The risky behavior was enabled by de-regulation starting from Clinton. (Most de-regulation related systemic flaws today can be traced back to his admin)
"Tech bros" support this de-regulation. Any regulation is govt. overreach. "We know how to handle our shit" attitude all over the place.
Yet when the downside of the risk comes, it is govt. money that bails them out.
Regarding your last line. How much of your stuff (something that is fungible, like money) needs to be actually be in the unit while the storage company can loan out the rest is the question. There can be more of the stuff in circulation than there are resources. As long as not everyone is asking for their stuff back, the storage company can keep juggling balls in the air.
>"Tech bros" support this de-regulation. Any regulation is govt. overreach. "We know how to handle our shit" attitude all over the place.
Surely this doesn't apply to all SVB depositors? Or do you think the entire SVB deposit base was card carrying "tech bro" members? Or suppose 80% are, what of the remaining 20%? Should they get ruined because they dared to associate with "tech bros" and/or didn't do financial risk modeling properly? Or maybe the government should make the bailout conditional on whether you were a "tech bro" or advocated for deregulation?
I think no one really disagrees about whether people who knowingly take risks should be bailed out - they shouldn't.
To me, the deeper question is who actually knowingly took the risks and should people/businesses have an opportunity NOT to take such risks but to still access basic banking services?
I have zero objection to shareholders, bond holders and even senior management getting nothing in these cases. They absolutely should not. And the second government has to step in, that should be the case.
I am just not convinced that depositors count as having knowingly taken risk. It does not seem to me that the average depositor (including businesses or individuals with more than 250k in cash) ARE or SHOULD BE knowingly taking risks just by depositing their cash.
Perhaps I am wrong, maybe that should be the case and bank accounts should continue to be a "risky" product? But if so, then I think we should offer (either via private banks or direct from the FED etc) a risk free product that lets you do the things we rely on from bank accounts (store, send and receive cash).
It is an accident of history otherwise that the only way to access those services is to invest in a private firm. If I proposed that we should ban cash transfers and if people wanted to move money electrically, they should buy shares, send the shares, then have the recipient sell the shares, people would think I was crazy. But this is the same system really if depositors are really to be treated as "investors". I should not have to invest in a bank to transfer money anymore than I have to invest in a moving company to transfer a package.
It's another aside but... The system in Scotland a few hundred years back was that each bank would issue it's own currency. Then the value of a "pound" from one bank would fluctuate compared to others depending on how stable that bank was considered to be. So even the bundle of bank notes under your bed could become worthless overnight. Personally I think that sounds crazy, and a sound, transferable deposit system sounds like the same sort of boring obvious infrastructure we should really have...
Thanks for reading! :)
Most everyone involved in finance knows that banks treat 'depositors' as creditors. Banks view deposits as a liability. Anything over $250k is uninsured. There are multiple ways to insure deposits over $250k. These are simple concepts.
To say that you shouldn't know how to manage your own money is like saying you shouldn't know the traffic rules when you're driving. Where you decide to keep your money is your own choice. Everyone participating in the economy takes risks. It doesn't matter where money are assets are kept...there is always risk.
In terms of depositors, they neglected counterparty risk. In terms of SVB, they poorly managed interest rate risk.
Why does someone with 250,001USD in an account deserve what they get but someone with 249,999USD here and 100bn elsewhere get bailed out? Why is the only way to transfer cash to take counterparty risk? Why are the amounts for businesses and individuals the same (250k is huge for an individual but tiny for a business!?)? Especially since it is individuals that will miss their salaries when their employer finds they're bankrupt, and is that also their own fault for not assessing counterparty risk?
We could avoid all these contradictions by just having "basic function" accounts that let people/companies use banking services that pay no interest and have no risk (fully insured). Then separately offer "investment" accounts for people that want them (with no insurance). If I want to use a hospital or an insurance company, I just use it and pay accordingly. Why is are banking services the only thing where to access the service I have to become an investor in the provider!?
Bailout SVB, or don't. I don't know if people deserve it or not. I make no moral judgement. I just think this whole system makes no sense, is unfair/arbitrary and is not effective. It should be changed irrespective of what we do in this one case...
Edit: I should have been clearer in my original comment. I didn't mention the 250k limit because to me at least it doesn't matter. I can see being an investor (risk AND reward) or not (no reward but no risk) at any amount...
The FDIC insurance coverage limit is an arbitrary number. It was enacted during the era of the Great Depression to protect the common people's money from bank failures. The limit was raised from $100k to $250k during the GFC. It was always meant as a deposit insurance to protect the common person...not the wealthy. To offer full insurance to all bank deposits would cost $18-20 trillion. This has never been the normal and is just not feasible.
You always have counterparty risk when you have someone else hold your money. Even if the fed starts CBDCs (central bank digital currencies) and gives everyone a fully 'insured' bank account, the fed is still your counterparty. These risks should always be managed.
You can avoid counterparty risk by holding your own money. You can transact in cash if you want to avoid banks. You would have to take care of your own security and safekeeping which makes it unfeasible in large amounts.
To think that companies or VCs would not be advised of standard corporate finance practices seem like a huge failure.
One of the axioms in finance I've run across is that you can never eliminate risk. You can only move it around.
So, heck yes, you scream and yell at the fools that started all of this. We gave away too much money, made money artificially cheap, then tried to pull the e-brake when it was too late.
Truthfully the only critique is the hypocrisy of enjoying high valuations due to the idiocy of monetary and fiscal policy.
I'm of a very libertarian bent and think the money printing is stupid, but I'm careful to position my assets to take advantage of the money printing. That is not necessarily honourable, but it is consistent.
All my feeds right now are full of libertarians who are upset about this.
The bailout itself isn't the main issue, it's mainly the Fed's irresponsible policies over decades.
They kept interest rates too low for too long, contributing to high inflation, then quickly jack rates to fix the problem they caused, then when banks begin to fail because of this rapid interest rate swing they fix that problem by rendering the FDIC $250k deposit insurance meaningless, furthering moral hazard, and to fix that problem they will...
Libertarian has become an amorphous category partisan writers can hurl at their opponents. Meanwhile, canonical libertarian content is highly restricted on this site. When it is posted it is often dismissed out of hand based upon the source.
Perhaps it is worth looking at what prominent libertarians are actually saying here?
https://news.ycombinator.com/from?site=mises.org
Intellectual curiosity indeed.
First they build their case against libertarians going at length against Peter Thiel, Elon Musk, and Larry Page.
Then, they point at the hypocrisy citing Garry Tan, David Sacks, and Bill Ackman.
These are different people.
Where is the hypocrisy of Thiel, Musk, or Page? It makes me think there is none since they can't provide examples and they have to switch. But I guess building an article on the second set of people, which is far less known than the first, would have not attracted enough clicks.
I have no horse in this race. I work for a retail/porn company in LA.
??
He is, at the end of the day, a bored billionaire with some very pedestrian ideas. He does go to great effort to shout them louder. He does seem to have some serious ego issues, but I guess what politician doesn't?
I think the hilarity of Calacanis literally tweeting his own similar ideas is that it was a transparent attempt to be louder. ie: he just didn't feel heard about his ideas, so they needed amplification.
Anyone that believes to the death libertarian bros exist doesn’t understand the people they’re referring to — which to me is a larger issue than people behaving rationally.
It’s only the liberties of others that are up for debate.
So when I see “libertarian tech bros”, I laugh, because it’s clear that it is only envy speaking.
Enlisting the arm of the state to protect your liberties is always “just” - when someone else’s liberties are protected, it is “unjust”.
Bearing the consequences of one’s own actions is now widely considered as fundamentally unacceptable - the consequences must be borne by society: ideally, by your political adversaries, to be most “just”.
This is unlikely to end well.
The people trying to play both sides as it suits them are just selfish and unprincipled and in both cases the movement they profess to support would be better off without them.
At some point a line has to be drawn. If you advocate for X or Y you cannot in good faith claim to be a member of political movement Z.
Sure there is. Pick a bank that offers more.
https://www.difxs.com/ "The DIF is a private, industry-sponsored insurance fund that insures all deposits above Federal Deposit Insurance Corporation (FDIC) limits at our member banks."
https://www.bankrate.com/banking/savings/ways-to-insure-exce... "Wintrust Financial has a business model that works well for excess deposit coverage. The company owns 15 separately chartered community banks in the greater Chicago area and Wisconsin. It offers the MaxSafe account, which allows an individual to insure up to $3.75 million by opening CD and money market accounts with Wintrust’s chartered banks."
If you're mega, mega wealthy, someone like Lloyds would probably be willing to write a bespoke policy.
So, no, there's no better choice :)
If you think the FDIC will always insure depositors over their statutory limits, by all means, make that choice, but don't complain you don't have one.
That's you, complaining about your available choices. Not me.
Good luck with your choices :)
Capitalism is failing and its on its way out. It doesn't work and only enrichs a hand full of people. No matter how many rules you put in place to regulate it.
It's not hypocritical to call on the people in charge to clean up the mess they created.
[1] Not to say that a purely libertarian system would be perfect and without other problems.
Bringing the startups they invest in begging to their knees, putting all their eggs into one bank. It almost works like a ponzi scheme.
socialism for them, capitalism for everyone else.
>Bringing the startups they invest in begging to their knees, putting all their eggs into one bank. It almost works like a ponzi scheme.
Why blame the VCs and not the bank itself for its poor investment choices (ie. buying a bunch of long dated bonds/MBS)?
I'm against a gold standard because it's dumb. Gold standard worked in a time of industrial revolution, which cancels out the negative side of gold standard. Costs and prices went order of magnitude down and then there was more gold for everyone.
Literally the steam engine and electricity and light bulb and radio were brought at the time of gold standard.
We can't eat, drink or use money as shelter. It's with food, liquids or bricks that we can do that.
There was an argument to be made during the start 1900 about "availability" (liquidity) of money. That's all gone in the past.
Money is just an account system, and it's all just numbers in a computer database.
We can't eat numbers.
Technology made money extremely available. That also made it extremely fragile.
The best system we have so far is to have a "free market" of currencies, banks, and customers. The three of them together via trial and error decide what's best. And during that process, mistakes will be made.
Is that like... denigrating a person based on their gender... ?
https://www.newstatesman.com/business/2023/03/childcare-cost...
In her lefthand (main thread article): Denigrates men interested in technology jobs which pay well and are intellectually arduous to even learn let alone practice.
In her righthand (article I link to above): Complains that women need more money for childcare.
Gee, it's almost as though left-leaning journalists are trying to drive men and women apart.
"Men, as a woman, I tell you: You're terrible! Now go fund women's lifestyles, we need your money!"
If you call out neon hair safe space ("leftist") hypocrisy... your comment is flagged within minutes.
(Note: I don't care if it's "tech bro" or "tech gal" - not everything is about indoctrination)
>>Is this seriously the kind of discussion you want to be having?
No, that's the discussion you'd prefer to have to detract from the actual subject of conversation in attempt to push your own agenda.
Because free expression matters.
You don't have a "right" to not be offended.
Adults are able to participate in conversations that make them uncomfortable.
Children require protection from certain forms of speech until they've developed the maturity to be able to handle it.
Censorship of the type that you're advocating is infantile. We don't need to keep adults safe from speech.
And yes, btw, I also find the phrase "tech bros" offensive.
It's difficult to have a meaningful conversation without risking offense.
So should we all just discuss weather and sports? Or only allow speech around us that agrees with our current beliefs?
I've only ever known one masculine programmer, out of dozens I've met.
Programming is a sedentary & solitary activity.
It doesn't seem to attract masculine, sex-god type males. If anything, it's the opposite scenario.
The "move fast and break things" types who shout down opposition because they always outnumber the diligent quiet types. Who have their memes, foosball, beanbags, etc. Who were successful in SV because they didn't give a damn. Who then used DEI as a shield to progress politically.
Who then set up crypto schemes under the "effective altruism" flag.
So no, gender or masculinity is not central to the term. Complete lack of morals and deception is.
Isn't "whore" more demonstrative of lack of morals, compared to "brother"?
It's a silly conversation-- Clearly "tech bro" is misandrist.
It enviously discounts men for success in technology, often while simultaneously expecting something from said men (such as emotional or financial support, again, while simultaneously insulting them... yeah, not productive).
The term "bro" refers to the clique aspect, same as "fraternity" or "sorority". It could have been "tech sis", but the majority of tech bros were male, certainly at the time the term was coined.
Because the vast majority of programmers are men, hence we use men related adjectives/words. These things describe stereotypes, there is no "tech hoe" stereotype as far as I can tell
https://www.statista.com/statistics/1126823/worldwide-develo...
Same reason why in France we say "infirmieres" (feminine) to say nurse although the neutral should be "infirmiers" (masculine): because 85%+ nurses are women
> Clearly "tech bro" is misandrist.
Yet no one ever complained about it ever
American reading way to much into these gender stuff should be an Olympic sport
Can we find a smaller and more biased sample ?
As opposed to a few decades ago when my experience was more “I like computer and want to know how they work. Being payed for it is nice”
Not a judgement values. I just advise people who want a tech job that programming is tedious and frustrating. If you’r ok with that, everything is on the table really. And I don’t mind working with new folks type
I suppose I've not really thought about the gendered nature of it being short for brother.
To me its like calling a group of people 'guys'.
What an utterly silly claim, demonstrating the author's ignorance. The IT industry, based in Silicon Valley, worked hand-in-hand with governments at all levels from municipal to federal-- taking subsidies and giving innovations in return.
Not only that, but technologists rejecting state intervention?! California is THE nanny state-- California & the Bay Area are hot beds for demands for government intervention-- particularly of the neomarxist variety.
She doesn't bother to state a premise, she just assumes the reader takes it at face value.
"People should be free to do whatever they want except for these specific conditions which I consider important and do not negatively impact me very much but may negatively impact others a lot"
One thing universally agreed is that everyone should stay away of them at parties.
Between libertarians and Lisp people.. I don’t know man.. :)
(And, no, Libertarianism is not Anarchism. It is Libertarian Capitalism.)
Anarchism is a political philosophy and movement that is skeptical of all justifications for authority and seeks to abolish the institutions it claims maintain unnecessary coercion and hierarchy, typically including, though not necessarily limited to, governments, nation states,[1] and capitalism. Anarchism advocates for the replacement of the state with stateless societies or other forms of free associations. As a historically left-wing movement, usually placed on the farthest left of the political spectrum, it is usually described alongside communalism and libertarian Marxism as the libertarian wing (libertarian socialism) of the socialist movement.
Libertarianism of any stripe has this same bootstrap problem: if I’m not free to redefine words, then I’m not free.
Of course it's well known by now, and even most modern economists have accepted this: the vast majority of people are not in fact wholly self interested. Though they are still rational in the sense that preferences are transitive.
This is not a problem of a few "libertarian tech bros". The capitalists run the show, they run the government.
Only half kidding.
It was the USSR that were using heavy machine industry to finance and subsidize unproductive companies, leading to monopolies and corruption.
Except that's not capitalism. America is real, actually existing capitalism, and only poor people get bankrupt, not banks or bankers. Capitalism is not about fairness or justice or whatever ideal. Is about maximizing profits and exploiting wage labor. "Socializing" loses maximizes profits, so that happens. Poor people getting bankrupt maximizes profits, so that also happens.
"It was the USSR that were using heavy machine industry to finance and subsidize unproductive companies, leading to monopolies and corruption."
I'm not sure what the argument is here. Nationalizing industries is not socialist per se. But you said it yourself "subsidize unproductive companies". So the objective was not to maximize profits, but to protect national interests and the development of socialism. Also, the USSR has a long and complicated history, from Lenin's War communism to NEP, to rapid industrialization, to perestroika, to liberalization. So we can't make sweeping generalizations.
But is unfair to talk about "monopolies and corruption" if you look at "western democracies" today. Monopolies. You realize that today only 5 or 6 companies (Unilever, Nestlè, Pepsico, etc.) control the vast, vast majority of food in the world? And "corruption". Corruption is legalized in the USA and banks and tech companies freely decide what the government should or should not do, get tax cuts, grants, subsidies, low-interest loans and so on. That's corruption through and through.
Watch this space. The narrative ofn this will shift to how the FDIC's actions were unnecessary once the capital-owning class realizes they got hosed here. The depositors got paid, banks (through the FDIC insurance fund) paid for any shortfall and SVB shareholders were left holding the bag.
We could tackle inflation with taxation. We certainly can't have that. So we're left with interest rates. Well, VCs like--even depend on--zero interest rates. So they don't like that either. But it's better than getting taxed. So Sacks, Calacanis, Elon and the like will chirp about this on the timeline and frame it as a government failure.
These libertarians are really just conservatives. That too is self-serving ultimately. Don't lose sight of that.
This is a separate concept from Credit Risk, which is how risky the borrower is. The bank did not manage its risks, but it was salvageable, they just needed to raise money, but then the VCs organized the bank run.
The problem was that the bank didn't have the collateral or the income to pay the Fed's rate.
The assets the bank had were poor quality and didn't generate enough income. If the Fed won't lend, why would anybody invest in the bank. Far better to turn up at the auction and pick up the assets for cents on the dollar.
These arguments have a fundamental flaw, arguing that a libertarian enjoying some government benefit is "hypocrisy." This is nonsense.
Libertarian tech bros pay into our system just like everyone else. Given the progressive income tax, those who are billionaires likely pay more in years where they make money than just about anyone else. So if the government is in the position to offer money, what good does it do for them to refuse? If they refuse, will the government be embarrassed and adopt libertarians' preferred policies? It's no more hypocritical than a socialist defending her private property.
Personally, I think if libertarians are serious, they should seek out every government benefit they're qualified for, and encourage everyone else to do the same. If libertarians are right, then the shaky foundations of the Progressive system can be toppled over by overuse.
I think the real thing being unmasked is that libertarianism is often ideology without grounding in reality. They can't account for the world of second bests, and the Progressive system has twisted and destroyed so much of what was once free that getting to a libertarian world would be like a society-wide kernel panic.
Thiel deserves credit for being one of the (quasi-)libertarians who seems to recognize this and has attempted alternatives like that seasteading thing, though they typically haven't gotten off the ground.
I guess you could make the broader point that people comfortable with government intervention would have argued for full depositor guarantees, so in some since libertarians are playing the same game but that seems much more tenuous to me.
Per your general point, it was very well written! I like to say that you aren't a hypocrite for playing by the rules of checkers even if you wanted to be playing chess but were overruled.
The underlying problem here is the naturalistic fallacy. Libertarianism is a set of statements about how the world should be, not about how it is. I think this is a flaw with the ideology, because I don't see a path from the "is" world to the "ought" world, but that's beside the point. Your chess vs checkers analogy is right on.
David Sacks had a concise statement about what he thought the world should be based on what it is.[0] I'm not sure how it works in practice, but it is a coherent worldview. Given that we don't live in a world corresponding to his proposal, but in one where certain people making loud noises can get their way, I don't see any hypocrisy, even though it may be embarrassing.
Thanks for the upvote – I'm at -3 so far. :D
[0] https://mobile.twitter.com/DavidSacks/status/163436339349803...
Nonsense. Rich people assets (i.e. stocks) aren't taxed. That's why Amazon doesn't pay any taxes.
https://www.cbsnews.com/news/amazon-taxes-1-2-percent-13-bil...
Amazon is a corporation, not an individual billionaire tech bro. Not sure what relevance Amazon's tax situation has to this discussion.
Equity and bond investors are the only ones who should lose their shirts when a bank fails.
If we're the have a distributed payment system, then full deposit insurance and a flexible lender of last resort is the only sensible approach.
The alternative is everybody has their payment accounts at the central bank, which will then mean, by accounting identity, that the central bank will end up as the only depositor in every bank.
Which given that the central bank is the regulator who should be checking asset quality is perhaps the way to go. That way when a bank fails, the entity responsible for ensuring they don't stands the loss.
We need heterogenous banks who will lend on different criteria. Otherwise we'll end up in the situation where only the propertied will get bank liquidity.
However heterogeneity means that some banks, like SVB, will inevitably fail when they get it wrong.
> you should have had to accept the risk that you might lose anything above those $250k.
This laughably impractical. If you run any medium/large SaaS company you have payments continuously rolling in and you have to build up a balance to pay the salaries. The bank account is in a constant state of flux and a lot of times its at multiples of the insurance limit because a certain payment hasn't gone through yet, and a large advance just came in. Are you expecting every company to risk manage these large amounts in real time? Is that where companies should be spending their resources on? What's the point of having financial institutions and regulations when you're expected to micro manage basic aspects of the financial rails the whole economy runs on.
Just like banks bigger than SVB remember to hedge their currency risks (Which one could argue that SVB with a 88b$ position probably should have considered also).
Actually, having started a company in Denmark, this was an offer the bank we got bank account with had.
It is actually laughable that you can assume that one can run a million dollar company without considering insuring your deposits.
Ideally we as a society, should be able to offer people peace of mind to deposit large sums of money and not worry about it being lost. Expecting everyone to perform financial gymnastics just to keep their money feels like a complete waste of resources.
Maybe the solution is to create a tier A bank that gives you no returns, charges you a flat fee, and any amount of money deposited is guaranteed. I know people do that with treasuries, but thats a lot of extra steps to put money in and out.
Keep in mind, tiny teams with no "finance person" easily receive more than 1M as part of seed or series A. Very rarely is their first hire for managing that money. Should it be? Is it worth it? Or should you rely on the financial system and regulation protecting your own money.
You could go down and withdraw your 20mil dollars and put them in your couch. But you kind of like that the bank takes care of security for you.
But you don't want to pay for that insurance?
When you start a company, you already insure tonnes of things. You employees, etc. Why not your financial position.
Do you also expect the society to take care of your liability insurance? or health insurance?
(It is actually laughable, that Americans think that the government should insure their deposits but not their health)
Like maybe it's a default line item monthly fee to insure your deposits and you can choose to opt out of it. The default is to protect your funds. My guess is very few people will opt out, including me.
I think this just shows the irresponsibleness of people with large deposits.
The article points out that the libertarians turn authoritarian after they loose the amounts they have not insured - they call for somebody to ad-hoc insure it.
(In the same vein as this comment: Why should I risk loosing my expensive paintings to fire of theft when I deposit it with a storage company?)
Some did that. Other tech bros, such as myself (and my next job was on the line, since the company that extended me an offer banked there), called to let the bank fail.
The deal was you had a government guarantee (well FDIC, a government corporation) up until $250k, and anything past that was best effort. Typically, this effort involved finding a new private bank to guarantee the deposits. For amounts over the insured limit, typically there would be a delay. The whole "We're just going to loan the money and print it into existence and we're also going to do that for other banks and oh yeah we will charge every American account holder for it" is novel.
Responsible executives should too (and I don't just mean whatever remaining equity that they hadn't cashed out yet).
You're saying that like only investors should be exposed to risk.
Everything you do has an implied risk. If I buy a house I am not an investor. Yet if it gets destroyed and I don't have insurance the government won't make me whole again.
Why should big bank depositors be protected when home owners, farmers, cancer patients, &c are not? They are not investors either.