General > General Technical Chat
Silicon Valley Bank Collapses
nctnico:
--- Quote from: bdunham7 on March 20, 2023, 04:09:06 pm ---
--- Quote from: TimFox on March 20, 2023, 03:40:30 pm ---Full-reserve banking is basically paying for a safe-deposit box.
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But if you limit the full-reserve requirement to actual demand deposits and thus explicitly differentiate between demand and time deposits, the whole thing becomes workable.
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But it would not be as profitable. In the end it is the customers wanting low banking costs that drive banks towards partial reserve banking.
Back in the old days it was even worse. Banks would sit on a money transfer for a couple of days and increase their cash position that way. As an upside you got a bank account for free. Nowadays bank transfers are near instant (even within the EU) but banks charge money for having an account. Heck, some even have a surcharge to cover the costs for mandatory background checks.
Rick Law:
--- Quote from: EEVblog on March 18, 2023, 09:31:52 pm ---
--- Quote from: floobydust on March 18, 2023, 08:14:18 pm ---SVB ex-CEO was spotted in Hawaii, Greg Becker and his wife have escaped to their Maui townhouse worth $3.1 million source
Must be nice to cash in $3.6M of stock ($84M over the past 2 years) and sit on a beach.
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That's the CEO game.
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The unintended consequences of government action. This is a reminder for us all why government "pain relief" may cause even more pain.
In the Clinton era, tax (rules on deductability when amount exceeded a certain magic numbers) was change to reduce pay-differential between fat-cat level senior executive salaries vs average worker salaries. While the President can claim that he reduced the huge pay differential between senior exec and average employees, almost immediately senior exec's stock-based "incentive" ballooned to compensate for the salary drop. That came with very negative side effects, short time stock prices become way too significant to the executives personally -- share prices matters when they cash-in their options or grants.
So while one may want the government to act to relief pains caused by the SVB collapse, the relief itself may end up being more painful.
coppice:
--- Quote from: coppice on March 15, 2023, 09:44:42 pm ---
--- Quote from: Gyro on March 15, 2023, 08:15:10 pm ---I didn't know about Deutsche Bank. I thought the EU, like the UK, had put strict liquidity rules and 'financial challenge tests' in place [Edit: following 2008]. Credit Suisse on the other hand have had a somewhat chequered history, scandal wise, lost money for the past two years and aren't predicting profitability until 2024 (that's probably a maybe now). Saudi Bank have said that they won't inject any more money.
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From a quick look it seems Deutsche Bank's position may have improved. The rating agencies considered them dodgy for a long time, but seem to have upgraded them a few months ago. Then again, the rating agencies are worth about as much as a campaign promise.
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From the news today it seems my original comment about Deutsche Bank might have been more accurate one. For all the Europeans have done about liquidity requirements for their banks, a bank who's plays in derivatives markets go poorly can be in hock for staggering amounts that they can't fudge indefinitely.
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