The article is an attack on Peter Thiel, not SVB. Also seems thin on facts, and just "SVB is getting bailed out, and hence some rich guy stays rich". Given that both the Fed and the Bank of England have decades-old laws protecting the financial system long before (tech) billionaires, this article seems even more ridiculous.
> 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.
I really don't understand the argument against Thiel. He might have help cause the bank run ... but he used his own influence in the market to withdraw all of his money. He took matters into his own hands without leveraging government intervention, right? That sounds as libertarian as it gets. What am I missing?
Yeah, the article opens with Thiel but doesn't actually claim he did anything wrong. It then shifts to comments by David Sacks "who is a friend of Thiel" for hypocrisy in comments. Which, I think, might be fair to say of Sacks but not really fair to attribute to Thiel at all, or to the valley in general.
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.
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.
A standard straw man for the political left is, "These people are libertarian, look how un-libertarian they are!" ignoring all of the evidence and facts.
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.
I agree, and I see three fallouts from this event:
- 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.
"They failed specifically because of business they were servicing."
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.
> They failed specifically because of business they were servicing.
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).
These guys only started all caps tweeting after the bank was closed on Friday. The bank run started on Thursday when $42B (20-30% of all deposits) were withdrawn.
SVB failed because of an interest rate bet gone bad. If they invested in short duration treasuries instead of long duration, none of this would have happened. The main difference is their bonuses would have been lower the past few years.
They couldn’t afford to keep treating founders and VCs like personal royalty[0]: the yields were too low. But they feared what would happen if they stopped. So they made a bad bet to cover the extra expense.
> there will be more. Once the fire is lit, it's hard to stop it)
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.
A bank should keep the money secure. Anything >0% loss is unacceptable. They were greedy and had a duration mismatch. Interest rates rise and the value of the longterm bonds go down. The regulators should have stepped in and stopped that. Why didn't they?
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.
> were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing.
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.
The bank had long term bets if government bonds that after the rate change massively weakened their value, threatening the bank’s capitalisation levels. This has nothing to do with their clients.
SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of Stripe Atlas.
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?
There's clearly a lot of pent up anger directed at VCs and big tech. The collapse of SVB may not actually be their fault, but it still seems to have brought all of this frustration out into the open. I'm not really sure why there is so much anger - yes they were hypocritical here but I'm not sure people would be so keen to point that out if they didn't already have an axe to grind!
> 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.
The main counterpoint (to this article, he seems to mainly talk about others) seems to be "it was no bailout", and "insuring 100% of deposits is small government and totally logical for me as a stance". The former I can see, the latter I’ll have to put clearly in the article’s column.
The points Sacks makes there contain some truth but, make no mistake, they are selectively chosen and completely self-serving.
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.
Funny. First "its collapse was first and foremost a result of its own poor risk management and communications" and then a looong rant how it actually was fault of Biden, Democrats and loose monetary policy.
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.
When I started a company in Denmark, we were made very aware that we were not insured by the national depositors insurance schema and that we had no protections.
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?
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.
The article is kind of low quality. First they name Peter Thiel as the poster child for libertarianism. Second they accuse libertarians being against state intervention. Third they say libertarians are asking for state help, so they think they've found a kind of paradox.
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.
I don't understand why bailing out DEPOSITORS is a big deal:
* 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 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.
You have a big misunderstanding just like the David Sacks and the rest who feel depositors are wholly innocent.
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.
Um, no. The true libertarians would rather burn down the Federal Reserve and enjoy the whipsaw's of market dynamics that actually allow for economic mobility. No one can buy jacksh*t in terms of assets with this 'controlled demolition' aspect. Every single market participant with means is always prepared for a buying opportunity. The ones 'pulling themselves up by their bootstraps' cannot.
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 appreciate that this might be a little tone deaf, but what the article is accusing Thiel of isn't hypocrisy. It is a completely consistent libertarian position to observe that government intervention gives people an unfair advantage and then attempt to take advantage of that advantage if people make it clear they aren't going to change the situation.
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.
The irony is that regional smaller banks would now be supporting larger banks with insurance contributions if unlimited deposit insurance becomes a real perpetual thing.
So the logic here is "it's the right thing to do, but it should have been delayed to annoy our political opponents and maybe cause them harm". I feel it is extremely hard to view such approach with any sympathy.
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...
[+] [-] DrBazza|3 years ago|reply
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.
[+] [-] qudat|3 years ago|reply
[+] [-] elicash|3 years ago|reply
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.
[+] [-] jaytxng|3 years ago|reply
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.
[+] [-] smrtinsert|3 years ago|reply
[+] [-] monero-xmr|3 years ago|reply
https://reason.com/2023/03/13/everyone-is-learning-the-wrong...
[+] [-] sokoloff|3 years ago|reply
I suspect “insolvent” is probably an adequate synonym anytime you have to use a qualifier word on “solvent”.
[+] [-] TheAlchemist|3 years ago|reply
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.
[+] [-] BlandDuck|3 years ago|reply
- 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.
[+] [-] danenania|3 years ago|reply
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.
[+] [-] throwingrocks|3 years ago|reply
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).
[+] [-] drexlspivey|3 years ago|reply
[+] [-] mathattack|3 years ago|reply
[+] [-] dundarious|3 years ago|reply
[0] Video of Jason Calacanis expounding on his love of royal treatment by SVB: https://twitter.com/one4thecashbag/status/163533710637676953...
[+] [-] BurningFrog|3 years ago|reply
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.
[+] [-] nova22033|3 years ago|reply
https://twitter.com/one4thecashbag/status/163533710637676953...
[+] [-] qwytw|3 years ago|reply
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.
[+] [-] loonster|3 years ago|reply
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.
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] Rapzid|3 years ago|reply
[+] [-] colesantiago|3 years ago|reply
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.
[+] [-] nailer|3 years ago|reply
[+] [-] huffmsa|3 years ago|reply
[+] [-] spaceman_2020|3 years ago|reply
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?
[+] [-] fancyfredbot|3 years ago|reply
[+] [-] TechBro8615|3 years ago|reply
[+] [-] IMTDb|3 years ago|reply
> 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.
[+] [-] Semaphor|3 years ago|reply
[+] [-] jmyeet|3 years ago|reply
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.
[+] [-] beefield|3 years ago|reply
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.
[+] [-] nfRfqX5n|3 years ago|reply
[+] [-] synu|3 years ago|reply
[+] [-] madsbuch|3 years ago|reply
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?
[+] [-] tmaly|3 years ago|reply
It seems mostly a fluff piece with little meat to it.
[+] [-] frankreyes|3 years ago|reply
Just like the 2008 crisis let's just blame it on Michael Burry and those who looked under the layers of bureaucracy
[+] [-] jrcplus|3 years ago|reply
[+] [-] usrbinbash|3 years ago|reply
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.
[+] [-] DeathArrow|3 years ago|reply
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.
[+] [-] jjgreen|3 years ago|reply
[+] [-] hospitalJail|3 years ago|reply
[+] [-] exabrial|3 years ago|reply
[+] [-] LatteLazy|3 years ago|reply
* 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".
[+] [-] yathaid|3 years ago|reply
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.
[+] [-] zefalt|3 years ago|reply
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.
[+] [-] anonymouse008|3 years ago|reply
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.
[+] [-] roenxi|3 years ago|reply
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.
[+] [-] gargs|3 years ago|reply
[+] [-] smsm42|3 years ago|reply
[+] [-] SamPatt|3 years ago|reply
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...
[+] [-] hk1337|3 years ago|reply