Business, Economics, and Taxes: Capitalism. Yay? >=(

[Slap Shot]

So bidding for the next Expo (formerly World's Fair) is happening. tbh I don't think I knew this was even still thing:

Future bids and candidate cities

Expo 2027 or Expo 2028

Five countries have submitted bids to the BIE for a three-month specialized exposition take place in either 2027 or 2028.: the United States of America (in Minnesota), Thailand (in Phuket), Serbia (in Belgrade), Spain (in Malaga), and Argentina (in San Carlos de Bariloche).

Would this require the host spending a significant amount, and if so is it generally Olympics level stupid? I haven't found much data around previous events including the one recently held in Dubai.

 

[Slap Shot]

https://twitter.com/adamjohnsonNYC/s...460848642?s=20

Chris Hayes @chrislhayes
Btw, I know everyone gets righteous about moral hazard, understandably, but there are thousands and thousands of workers who did nothing wrong who might just have their incomes completely disappear. So I don’t actually think let it burn is an option.

Adam H. Johnson @adamjohnsonNYC
Great then bail out the workers directly and let the bankers eat shit rather that using them as a superfluous go-between who we prop up so they can pay the lowbies dependent on them. Ultimately this tweet is an argument for nationalizing & putting under democratic control banking.

If it’s too big to fail it’s too big to be private, otherwise they’re just running a risk free business with all the upside privatized. Someone rich has to suffer, like sleep on their uncle’s couch suffer, or the whole social arrangement is seen, correctly, as a fucking scam

 

[Bronco]

Every deregulation plan is a confession.

 

[FadeToBlack&Gold]

Large bank in California goes belly up. FDIC has to step in. Major US banks stock tank following concerns about what happened to Silicon Valley Bank.

All on a Friday afternoon. Weeee!

As a former contractor for SVB, the general incompetence and terrible decisionmaking I experienced while there makes this absolutely no surprise whatsoever. I spent about 4 months billing them $200+/hr to give process and solution advice to a different third party team of external consultants who were trying to deliver a transformation strategy, but didn't know the technology platform at all. Of course, as is the case when you consult for consultants, most of my recommendations were ignored.

I could tell you all sorts of fun stories about their offshore development team trying to lecture me and others from my firm on implementation best practices.

 

[rufus]

Millionaire and billionaire VCs are begging for the government to make them whole for their bad investment decisions, saying it's a pittance compared to the aid we've sent Ukraine.

Sorry, your current situation is due solely to your poor life choices. Government giving you handouts will only breed your continued dependence on it.

Bootstraps, baby.

 

[Handyman]

The moron wing is saying this was due to Woke Banking. Yes diversity training caused a run on the bank...

 

[Drew S.]

Millionaire and billionaire VCs are begging for the government to make them whole for their bad investment decisions, saying it's a pittance compared to the aid we've sent Ukraine.

Sorry, your current situation is due solely to your poor life choices. Government giving you handouts will only breed your continued dependence on it.

Bootstraps, baby.

They’re not even going to lose very much. At most a 10-20% haircut.

 

[dxmnkd316]

They’re not even going to lose very much. At most a 10-20% haircut.

Kind of. In the worst case scenario (almost zero percent chance of this happening), something like 94% of the deposits at SVB were uninsured. So in the extremely unlikely scenario that no one bids and the FDIC has to actually shell out cash for the insured, 90%+ lost everything over $250k

Now, if they find a buyer of the bank (likely), it's also likely 100% of the insured and uninsured will be covered. The people in line are the insured deposits, then the uninsured, then the bond holders, then the stockholders. So pretty much the first people to get fucked are the shareholders (good!), then the owners of the corporate debt (don't buy bonds from shitty corps who have no idea what they're doing), then the uninsured.

 

[Drew S.]

Kind of. In the worst case scenario (almost zero percent chance of this happening), something like 94% of the deposits at SVB were uninsured. So in the extremely unlikely scenario that no one bids and the FDIC has to actually shell out cash for the insured, 90%+ lost everything over $250k

Now, if they find a buyer of the bank (likely), it's also likely 100% of the insured and uninsured will be covered. The people in line are the insured deposits, then the uninsured, then the bond holders, then the stockholders. So pretty much the first people to get ****ed are the shareholders (good!), then the owners of the corporate debt (don't buy bonds from ****ty corps who have no idea what they're doing), then the uninsured.

They have substantial assets though so the depositors aren’t going to take that big of hit. I’m sure the FDIC will liquidate SVB’s very quickly if they can’t find a buyer.

 

[dxmnkd316]

Millionaire and billionaire VCs are begging for the government to make them whole for their bad investment decisions, saying it's a pittance compared to the aid we've sent Ukraine.

Sorry, your current situation is due solely to your poor life choices. Government giving you handouts will only breed your continued dependence on it.

Bootstraps, baby.

So, it's not that simple here. The VCs you're referring to didn't necessarily make a bad investment decision, they made a terrible risk decision. Virtually no corporation has 100% of its cash insured by FDIC. That would be insane and probably impossible at scale.

What I believe most do is spread their cash between like three to five banks. The big ones. JP, BOA, Citi, etc. they're basically spreading the risk out between banks to make sure that in the event of one of those banks being run, they only lose some fraction of their cash. (It's way more complicated than this, but this is my rudimentary understanding.). If two, or god forbid, more than two of those banks are run then we're talking about global financial Armageddon anyways so it won't matter. The governments would step in way before two of these mega banks got taken over by FDIC. They're also subject to much, much more stringent requirements for capitalization and most don't have idiots running their risk management departments. Or rather, they at least fundamentally understand how to hedge interest rates.

anyways, these VC firms got hoodwinked into putting all of their deposits into this single bank and that was true for so many VC and startup firms, this really is a problem. It's not widespread and won't cause runs on banks that you and I are familiar with. They're far more protected. It's just that the entire universe of VC/SU forms lived in that bank and it has now failed.

They're panicking for good reason but they aren't using their brains. The FDIC already laid out a plan and is already holding an auction for the bank. They'll be bought (contingent) at the latest by next week and the system will have worked exactly like it was supposed to.

I hope this is an incredibly well understood shot across the bow for a lot of these firms and I hope they actually put someone in charge of managing their finances that understands how to limit catastrophic risk from a single point of failure.

 

[dxmnkd316]

Oh, and the bad investment was by the execs at SVB. They had all this money ($200B!) and put a massive amount of it into then ultra safe treasuries. Great idea, low risk, right? Wrong. While it's a safe place to preserve value, people don't want to be locked into long term treasuries at garbage interest rates in a high rate environment. So they start pulling money to put it elsewhere.

SVB then has to sell those treasuries at a huge discount to make capital to fund the withdrawals. Feedback loop ensues and the bank becomes insolvent and can't fulfill its obligations.

It's insane to me to think that the safety of the treasuries is what did them in here. But that's why you pay people huge sums of money who understand this crap.

 

[dxmnkd316]

Lmao. They've already made whole 100% of depositors at SVB and another bank none of us have heard big but seems to be related to this event. 100% of depositors will have access to their funds on Monday.

$0 will come from the taxpayers.

 

[French Rage]

Oh, and the bad investment was by the execs at SVB. They had all this money ($200B!) and put a massive amount of it into then ultra safe treasuries. Great idea, low risk, right? Wrong. While it's a safe place to preserve value, people don't want to be locked into long term treasuries at garbage interest rates in a high rate environment. So they start pulling money to put it elsewhere.

SVB then has to sell those treasuries at a huge discount to make capital to fund the withdrawals. Feedback loop ensues and the bank becomes insolvent and can't fulfill its obligations.

It's insane to me to think that the safety of the treasuries is what did them in here. But that's why you pay people huge sums of money who understand this crap.

SVB also had the majority of their customers concentrated in one industry, which was great for them when that industry was flying high, but when it hit a speedbump you had a much large percentage of customers needing to pull money to cover losses and expenses than you would have at a bank with a more diversified customer base. Knowing this, they should as you point out not put so much into long term bonds when interest rates were so historically low. I mean, really, no one should have gone long on long term bonds before the recent uptick in rates, given how low rates were post-Covid, and that says a lot considering how low they had gotten in the 10+ years before then. If rates are basically 0, go short and wait for some movement. That said, some of that is moot if you don't have to sell them early and can get the full principal back at maturity, which they would have done had the recent trouble with tech companies not forced the issues of needing to sell something to cover withdrawals. And then the whole thing gets in a spiral and builds upon itself until you get this situation.

 

[Drew S.]

Fed going to let banks borrow on government securities at par for the next year. This is a good plan but you have to wonder how many other banks were in trouble and what happens a year from now if rates don’t go way down.

 

[rufus]

I didn't say it was a bad investment decision. But as you pointed out, it's still a bad decision, that they made all by themselves. Poor lifestyle decisions.

Can't have government bailing people out for the poor choices they've made with their lives. That way leads to dependence on government, and all those rich folk and powerful pundits tell me that's bad.

 

[aparch]

Signature Bank in NY also shut down and taken over by the FDIC.

Apparently Signsture competes in the same market as Silicon Valley Bank, and they had a run on their funds when they heard SVB went under.

Problem is, Signature Bank is heavy into crypto. So to get the money out to cover their funds, they would need to cash out their holdings in crypto, but the volume they needed to withdraw would have crashed their crypto holdings value and they wouldn't have had enough to cover.


The White House has announced that both banks are being "bailed out," and before our Conservative friends type their fingers raw, this bailout is 100% self funded from an emergency fund crested after 2008 no thanks to the Republicans, and is flush with 100 Billion cash. And it also comes on the heels of the FDIC explaining how allowing the Dodd/Frank rollback to happen allowed this along with allowing banks to get into crypto with no oversight (again, thanks Republicans!).

 

[dxmnkd316]

the whole point of raising rates was to see which boats float. The crypto world didn't. It was built on and could only survive in a low and/or falling interest rate world. When money isn't free, they withered on the vine. I would have let that shit crash onto the mountain and used it to roast marshmallows.

 

[Drew S.]

Hopefully today isn’t a circuit breaker day.

 

[Spartanforlife4]

This “Ohio mother of 4” posts a 25 tweet thread about how her humble little company could have been wiped out if the Feds didn’t help.

https://twitter.com/lcmichaelides/st...wZFJ8zBRgGpPbw

Highlights:
Former McKinsey consultant (straight from bio)
Owns 800k house
Husband makes at least 140k a year
Rugged story of working while pregnant
The “small company” with “folks from flyover country” as employees is an app that costs $600 a month and is essentially a scheduling assistant for the super wealthy.
For some reason she chose to bank in California rather than a bank around Columbus (or 5/3, a national bank from Cincinnati!)

 

[dxmnkd316]

She's a fraud.