Miscellaneous And Off Topic Subjects

[Dr. Strangelove]

Turns out a lot of Tech Bros might not be as smart as they regard themselves to be.

[iam416]

I've gone back and forth on it, but I'm now very much inclined to apply the FDIC limits and actual guarantees and nothing else. Everyone at risk knew the risk -- it is/was a small risk, but a risk nonetheless. There are clear safety net rules and boundaries.

[Dr. Strangelove]

I think there's reason to fear a capital flight from the regional banks so I fall slightly on the side of protecting the deposits. But yeah, plenty of reasons to be on the other side of it too.

[Dr. Strangelove]

Apparently, a significant proportion of the west coast wine industry banks with SVB. So do it for the vino.

[Mike]

Looks like they'll be banking with someone else now.

[Dr. Strangelove]

They can switch to Grayson Moorhead, like I did.

[Da Geezer]

I've gone back and forth on it, but I'm now very much inclined to apply the FDIC limits and actual guarantees and nothing else. Everyone at risk knew the risk -- it is/was a small risk, but a risk nonetheless. There are clear safety net rules and boundaries.

Correct.

SVB loaned billions to green energy startups. They gave many more billions to promote green energy. All of this was heavily subsidized by the government, " and the business plans of the startups relied on free money". Now, the Woke Overlords are being bailed out from their idiotic risk management policy. The best thing for the country is for them to lose their deposits Deposits can be privately insured, and the depositors should have had private insurance.

Let the market work.

If this had been a bank loaning on the Willow Project in Alaska, and it was driven to bankruptcy by the Federal Government, do you figure there would be a bailout? Yesterday, Biden, by executive order, withdrew 13 million acres from an Alaskan oil reserve that had been reserved for drilling and exploration by Congress. The stupidity is extraordinary.

[iam416]

I think there's reason to fear a capital flight from the regional banks so I fall slightly on the side of protecting the deposits. But yeah, plenty of reasons to be on the other side of it too.

Certainly from regional banks that do a bad job. And I understand it could bleed into "competent" regional banks, but that will/should eventually equal back out as water again finds it level.

I dunno -- I never really thought it about when it happened in 2008 -- and that was way more "general welfare" threatening. But the more I think about it -- and, for that matter, student loan forgiveness -- the more I see the giant gaping hole for populism that even a massively flawed candidate can get through. I mean, these are both cases of poor people regressively paying off debts of rich people.

[iam416]

Correct.

SVB loaned billions to green energy startups. They gave many more billions to promote green energy. All of this was heavily subsidized by the government, " and the business plans of the startups relied on free money". Now, the Woke Overlords are being bailed out from their idiotic risk management policy. The best thing for the country is for them to lose their deposits Deposits can be privately insured, and the depositors should have had private insurance.

Let the market work.

If this had been a bank loaning on the Willow Project in Alaska, and it was driven to bankruptcy by the Federal Government, do you figure there would be a bailout? Yesterday, Biden, by executive order, withdrew 13 million acres from an Alaskan oil reserve that had been reserved for drilling and exploration by Congress. The stupidity is extraordinary.

Yeah, I don't what their investments are or where they're losing money. I don't doubt what you're saying in terms of green energy investments. I don't know if that's the cause of their demise or not. But, yeah, the overall point is correct.

[Dr. Strangelove]

They were having fewer and fewer depositors because they were known as the bank of choice for Venture Capital and there's been fewer and fewer of new VC's with interest rates quickly going up. To raise cash and increase their liquidity they sold $20+ Billion worth of bonds at a significant loss. Last Wednesday this was revealed to shareholders. By Thursday people were freaking out. Peter Thiel (hardly Mr. Woke) ordered his companies to withdraw their fairly significant stake in the bank. The run was on.

Basically they had a business plan developed for permanently low interest rates and doesn't seem like they made any serious adjustments along the way.

Incidentally I have also heard that because SVB was more forthcoming with loans that other more traditional banks, in exchange they imposed a condition that you had to keep your entire company's assets banked with them for a certain length of time. So at least for a time many of these companies could not spread out their exposure. I don't know if that's common across the banking industry or not.

[THE_WIZARD_]

....just another example of going woke...going broke...

Nothing to see here...

[Dr. Strangelove]

September 7, 1957. It's Wiz's first day of classes at Chadron State. Finance 101. As the Professor introduces himself and starts to go over the syllabus, Wiz stands and shouts "Go Woke, Go Broke". The stunned Professor gapes in silence for 5 seconds, picks up the textbook he co-authored, and tosses it in the trash. He walks over to Wiz and looks him square in the eye. "I award you an A for this course, Mr. Biershitz." He then hands him the chalk and takes a seat himself.

[THE_WIZARD_]

....you must be clairvoyant...that's the exact dream I had last night!

[THE_WIZARD_]

...except for the fact I was minus 6 years old in 1957...very plausible story...

[Dr. Strangelove]

Certainly from regional banks that do a bad job. And I understand it could bleed into "competent" regional banks, but that will/should eventually equal back out as water again finds it level.

I dunno -- I never really thought it about when it happened in 2008 -- and that was way more "general welfare" threatening. But the more I think about it -- and, for that matter, student loan forgiveness -- the more I see the giant gaping hole for populism that even a massively flawed candidate can get through. I mean, these are both cases of poor people regressively paying off debts of rich people.

Incidentally I may be swinging back in your direction after reading a few more things about how oblivious to risk the bank executives were. Bloomburg got a hold of internal communications in which lower level execs kept trying to get the bank to switch to shorter term bonds and were consistently denied by upper level management who were pursuing short-term profits. SVG in fact had it's alltime highest profit ever in 2021, but at the cost of screwing themselves silly if interest rates were to ever rise fast.

And I'm less concerned about contagion now. First Republic may collapse but probably not much else.