MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 902 votes

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

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Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
3y

If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

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  • Member since 2022 · 485 posts · 216 votes
    3y

    All that said between credit suisse and now FRC again today. I’ll say the banking system defaults have me more and more concerned. If liquidity drys up your predictions could come true. 


    And Csuisse was one of the big call outs I had lats year as an outside risk to the system. I didn’t really expected idiots like Thiel to cause SVB collapse though. And now it looks like the PE firms will be buying up SVB - such a joke.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Michael Wooldridge:
    I didn’t really expected idiots like Thiel to cause SVB collapse though.

    Follow the money. 

    Where did billions of dollars from SVB go in the days following the collapse?

    Brex. 


    Who is a significant investor in Brex?

    One guess...

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @J Scott:
    Quote from @Michael Wooldridge:
    I didn’t really expected idiots like Thiel to cause SVB collapse though.

    Follow the money. 

    Where did billions of dollars from SVB go in the days following the collapse?

    Brex. 


    Who is a significant investor in Brex?

    One guess...

    I’m in tech. I’m very aware of why (how he benefits) and how he also went outside to other PE firms to do it. The fact that he is going to get away with it blows my mind. I’m also not real sure why Signature had fast buy for assets but SVB does not from banking. PE Firms will make a fortune off of causing a crash and then buying up the assets. 

    It’s beyond frustrating that regulators aren’t stepping in on this.

     

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @James Hamling:
    Quote from @Michael Wooldridge:
    Quote from @Bruce Woodruff:

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"


    Well said but weren’t you calling for housing market values resetting 7-8 month ago? his whole post argues against the idea of housing values dropping. 
     


     Me? Housing prices 'resetting", as in back to pre-covid? No, never have said anything of the sort. 

    Fall '22' I forecasted a market Consolidation Event over winter '22'/'23', with median home prices stepping back 7-14% on national average, with localized market specific deviations ranging as high as +/- 30%, market specific dependent.  

    And with that i detailed how winter markets have a normalized "step-back" action so in many markets it would be a "more normal" market cycle. But most on BP called me nutz, argued the sky was falling, no way prices would hold, that everything would collapse and crumble and we were on verge of a huge discount buying spree. Well, here we are, what are the #'s.    Turn's out what people called me nutz for was actually a bit pessimistic because results were even stronger than I forecasted.     I did accurately forecast the volume collapse, which was a primary driver to people arguing with me saying I made no sense forecasting such a big volume drop but prices holding so strong at same time, people said not possible. Well, obviously was because that's exactly how it happened. 

    Bit a "reset", lol, no, 2019 is long gone and never coming back. That's always been the reality. 

    Now going forward, Oh-Man this is "the" most epic of uncertainty. I would coin this chapter "Zeus's Decision" because we will experience massive differences all decided upon what comes down from "Mount Olympus" and the "God's Of $". 

    They could choose to abandon inflation focus, press on economic strength, even actions that act as liquidity injection, feed wage inflation, and let things run "hot" justifying it as facilitating maximum velocity of the market to allow the market find it's equilibrium. I doubt this direction but, there is lot's of political pressure for it. 

    Or, it could be "damn the warning bells, FULL SPEED AHEAD" and as inflation readings come out which by all forecast measure is considerably higher than J-Pow's desire, jest keep drawing the noose tighter and tighter, strangling the life out of the middle-class, until inflation falls into his "happy-zone" at the expense that things could be in cardiac arrest to do so, and than it's a tail-spin, so than they start injecting liquidity rapidly, and "shizam" we have a bi-polar on-off, hot-cold, economic cycle of big swings. 

    I think the later is more probable. 

    But we also have major election cycle, and telegraphing already of major political meddling, so what new x-factors will that bring. 

    This is going to be a very interesting ride for sure. I am not willing to make any forecast as of yet, and I and those around me say "oh wow, you the "Oz" who predicts the un-predictable, will dare a call on the most wild of call, not willing to even say anything, holly-cow that's not good", yeah, exactly. When it's too big a jump for Evil Knievel to even dare, that's saying something. 

    I do know this, I would NOT want to be dollar heavy, NO WAY! And, NOT in margin on a brokerage account, uh-uh. Follow what the big $ is doing, and they are racing into ASSETS.    I have NEVER, in all my decades in Real Estate and investing, ever seen or heard of the kind of capital deployment into assets I am seeing now. TODAY.    

    Investing alone does not justify these kind of levels, especially not at these returns. This is a "life-boat" action, this is about securitization more than returns. 

    All this talk about SVB and $ leaving it for last while, has anyone asked where that $ has gone? Where it was going? Here's a fun fact, look up the Real Estate holdings by some of big names of silicon valley, yeah that may shock some. And that's just what you can find. Anyone curious how many millions meta dumped in R.E.? Anyone interested why Bezos is a R.E. billionaire now? Doesn't it seem odd that tech is moving capital into R.E.? Why oil is moving $ into R.E.? Why every sector/investor of big $ is moving capital into R.E.? 


    You are confusing my point Bruce was one of the folks arguing that prices would reset and that you, Carlos and i were nuts for saying they would not.

    Of which he admitted actually today. anyway wasn’t meant as a jab to him but I found it interesting he was so supportive eof your post when he kept claiming RE was bad to invest and housing would reset on prices.
     


     Ah, ok, totally makes sense. I was confused. 

    And yes, I remember the absolute freak-out people were having against us for saying what we did. And where are they now? 

    I don't recall Bruce being too brutal, but that's just my immediate memory, I recall a handful of persons who were thoroughly freaking out throwing every insult imaginable at us, and especially myself, just shy of "yeah, well, YOUR MOM....". 

    And the results...... They should name use the 3-Wise-Men because remember how so many say nobody can know the future of things? yeah, well, we did. To a really high level of accuracy to boot. 

    We saw the volume collapse coming, forecasted what prices would do, listings in relation, etc etc.. So at what point will people wake-up that economies and especially the Real Estate economy is not some mysterious unknown that makes random impossible to comprehend movements. No, it works on data, facts, math, psychology and sociological factors of economics. No, it's not easy to forecast how all kinds of inputs process int he system but it is possible to a level, as we proved. 

    The volume collapse was a simple fact created by math. The sociological response to such as just obvious, it was. That presents a R.E. market 'set-up" from which developer actions are also a bit obvious, throttling supply. 

    Housing inputs are simple known factors, and the inputs for those inputs also equally simply known. We have skilled labor shortage, a labor force addition time-delay of 4-5yrs for new labor at effective skill/experience level, at minimum (in large part it's 7yrs for a person to go from 0 too effective journey level as a skilled labor). So labor is not going to make any radical swings any time soon. That's math. 

    Material supply. Again, kind of simple obvious factors. Raw material custody chain for things to go from raw product inputs too ready to install finished products, there is no "glut" of any 1 raw product supply out there, no entity in that chain has had any massive decrease to cost of operations. Nor do any in that manufacturing chain have any marketable reason to incentivize price decreases and slash profit margins, only competition drives profit margins down and there has been demand far outstripping supply so no downward pressure on pricing and margins via such. Nor any decrease in operational impacts from say, lowered taxes, actually only INCREASE of such and wage-inflation pressures. So again, all simple math to project material side of things. 

    Direction of labor being MATH, direction of material being MATH, housing supply-demand curve being MATH. Yup, it WAS just a matter of math. 

    Sociology comes in fact of the giant # of person who have purchased in recent years, sitting sub 4/5% mortgages making extend stays in existing residence, vs the traditional move every 7yrs. We could see at minimum a decade before any sizable moves. Why? Again MATH, because of the cost vs benefits. The COST of moving far exceeds the BENEFITS of making such move. So while it's Sociology, it's math based sociology. So I argue, again, MATH. 

    For any not in the know of previous threads from last year, above is the highlight of what us 3 argued as factors facilitating the market in R.E. we saw happen through winter and today. Others argued, we were nuts, the sky is falling, it would be mass foreclosures, mass layoff's in the many MANY millions, total economic calamity on level of '08' and WORSE.     The reasons for such varied but most cited the month to month market moves, argued to look at nothing else, some said some shadow inventory of deferred foreclosures, many made the common mistake of "this time it's different" arguing history has no applicability. 

    And I will say it because those won't; they were WRONG, so very, very WRONG. But, I am sure there is soon to be a new "the sky is falling" post and they will all be there, yet again. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @J Scott:
    Quote from @Michael Wooldridge:
    I didn’t really expected idiots like Thiel to cause SVB collapse though.

    Follow the money. 

    Where did billions of dollars from SVB go in the days following the collapse?

    Brex. 


    Who is a significant investor in Brex?

    One guess...

    I’m in tech. I’m very aware of why (how he benefits) and how he also went outside to other PE firms to do it. The fact that he is going to get away with it blows my mind. I’m also not real sure why Signature had fast buy for assets but SVB does not from banking. PE Firms will make a fortune off of causing a crash and then buying up the assets. 

    It’s beyond frustrating that regulators aren’t stepping in on this.

     


     It just reinforces the saying: 

    "do small crimes, go to prison. Do BIG crimes, go to D.C.".

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.


     Woah woah WOAH Bruce..... Didn't you hear? There from the Government, and here to help you....... 

    Government is your friend, Government is all knowing, all seeing, all helping. We the people are just too dumb to figure anything out for ourselves, so thank goodness we have these brilliant genius's to help control.... er direct.... er mandate.... er GUIDE, yeah "guide" all your lives........ 

    Come on, can you imagine trying to figure out what to ever do without the "guiding hand" of our government to tell us what to do. Baaahhhh, gee what do I do about these flavored vapes. Baaahhhhh, what should I do for when I get old. Baaahhhhh, how do I do anything. Baaahhhhhhh, tell me what to do Uncle Sam. 

    And DON"T dare ask questions! How DARE any sheepl..... er, people ever dare question the all seeing eye! SHUT-UP and take that Gov. "help", or it will get rammed down your throat! Take it, take the "HELP", TAKE IT, and your gonna like it! 

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @James Hamling:

     It just reinforces the saying: 

    "do small crimes, go to prison. Do BIG crimes, go to D.C.".


    I come from the Silicon Valley VC world and I've seen the behind the curtain on how these guys do their lobbying and the checks they write.  No shot any of these guys will be investigated by anyone in the legislative branch.

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.


     On a serious note. 

    Doesn't it seem a bit obvious, and simple to connect Capital Gains Tax to capital positioning? 

    Parked capital get's taxed. 

    RE-DEPLOYED Capital Gains get rewarded with a taxation deferment, with forgiveness if deployed for a minimum of ____ time. 

    Seems almost too simple. 

    #1 problem with "wealth" in the U.S. is not the actual concentration of wealth in hand's of 2%. It's that the wealth concentrates, and sits. It just goes there and stops there, a cul-de-sac of wealth. 

    So, INCENTIVISE to not end it's flow in a cul-de-sac. Duh. 

    Would that not appease BOTH the "tax-the-rich" crowd and the "love the rich" crowds?     

    With this, could put Capital Gains Tax at 40%. Capital will keep in the flow. 

    AND convey a foreign earnings tax exclusion for repatriation of capital that if deployed into domestic deployment in ___ time-frame, again, tax deferment, with forgiveness if deployed for ___ time. This get's it BACK into U.S. and KEEPS it into U.S. investments. 

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @James Hamling:
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.


     On a serious note. 

    Doesn't it seem a bit obvious, and simple to connect Capital Gains Tax to capital positioning? 

    Parked capital get's taxed. 

    RE-DEPLOYED Capital Gains get rewarded with a taxation deferment, with forgiveness if deployed for a minimum of ____ time. 

    Seems almost too simple. 

    #1 problem with "wealth" in the U.S. is not the actual concentration of wealth in hand's of 2%. It's that the wealth concentrates, and sits. It just goes there and stops there, a cul-de-sac of wealth. 

    So, INCENTIVISE to not end it's flow in a cul-de-sac. Duh. 

    Would that not appease BOTH the "tax-the-rich" crowd and the "love the rich" crowds?     

    With this, could put Capital Gains Tax at 40%. Capital will keep in the flow. 

    AND convey a foreign earnings tax exclusion for repatriation of capital that if deployed into domestic deployment in ___ time-frame, again, tax deferment, with forgiveness if deployed for ___ time. This get's it BACK into U.S. and KEEPS it into U.S. investments. 

    So this is a line of thinking I could get behind. I would say parked capital shoudl have some allowed limit .i.e. don’t destroy general population 401k. And on that note we’d probably have to defined what parked vs deployed capital is. But it’s an interesting path to discuss. 
  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @James Hamling:
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.


     On a serious note. 

    Doesn't it seem a bit obvious, and simple to connect Capital Gains Tax to capital positioning? 

    Parked capital get's taxed. 

    RE-DEPLOYED Capital Gains get rewarded with a taxation deferment, with forgiveness if deployed for a minimum of ____ time. 

    Seems almost too simple. 

    #1 problem with "wealth" in the U.S. is not the actual concentration of wealth in hand's of 2%. It's that the wealth concentrates, and sits. It just goes there and stops there, a cul-de-sac of wealth. 

    So, INCENTIVISE to not end it's flow in a cul-de-sac. Duh. 

    Would that not appease BOTH the "tax-the-rich" crowd and the "love the rich" crowds?     

    With this, could put Capital Gains Tax at 40%. Capital will keep in the flow. 

    AND convey a foreign earnings tax exclusion for repatriation of capital that if deployed into domestic deployment in ___ time-frame, again, tax deferment, with forgiveness if deployed for ___ time. This get's it BACK into U.S. and KEEPS it into U.S. investments. 

    So this is a line of thinking I could get behind. I would say parked capital shoudl have some allowed limit .i.e. don’t destroy general population 401k. And on that note we’d probably have to defined what parked vs deployed capital is. But it’s an interesting path to discuss. 

     Done! We solved Capital Gains tax, what's next on the list, peace in the Middle East, lol. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @J Scott:
    Quote from @James Hamling:

     It just reinforces the saying: 

    "do small crimes, go to prison. Do BIG crimes, go to D.C.".


    I come from the Silicon Valley VC world and I've seen the behind the curtain on how these guys do their lobbying and the checks they write.  No shot any of these guys will be investigated by anyone in the legislative branch.


     So if I understand correctly, you'd fully endorse that not only you'd agree, but have seen in action with your very own eyes, that the U.S. is a Plutocracy, wearing the costume of a Democratic Republic. 

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @James Hamling:
    Quote from @Michael Wooldridge:
    Quote from @James Hamling:
    Quote from @Bruce Woodruff:
    So this is a line of thinking I could get behind. I would say parked capital shoudl have some allowed limit .i.e. don’t destroy general population 401k. And on that note we’d probably have to defined what parked vs deployed capital is. But it’s an interesting path to discuss. 

     Done! We solved Capital Gains tax, what's next on the list, peace in the Middle East, lol. 

    hahaha why do you need peace in the world lol
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @James Hamling:
    Quote from @J Scott:
    Quote from @James Hamling:

     It just reinforces the saying: 

    "do small crimes, go to prison. Do BIG crimes, go to D.C.".


    I come from the Silicon Valley VC world and I've seen the behind the curtain on how these guys do their lobbying and the checks they write.  No shot any of these guys will be investigated by anyone in the legislative branch.


     So if I understand correctly, you'd fully endorse that not only you'd agree, but have seen in action with your very own eyes, that the U.S. is a Plutocracy, wearing the costume of a Democratic Republic. 

    No, I would never apply such a broad term to such a complex system.  I'm not saying it's right or wrong, but outside of a very small niche, I don't have exposure to the inner workings of the US political or economic system.  So, I'm pretty sure I'mnot qualified to make generic wide-ranging assertions like that, except as merely hyperbolic opinion.

    Just like anyone else, I have my beliefs.  But, I recognize that I also succumb to confirmation bias -- again, like anyone else.  So, it would be easy for me to take the one or two small data points I have and extrapolate that to a political and economic system encompassing $25T and 400M people.

    But, I'm not going to do that.

    As Einstein was fond of saying, "Make everything as simple as possible, but no simpler."  Applying a simple set of terms to a complex situation doesn't invite nuanced debate.  It merely invites some combination of partisan bickering and circle-jerk.  And I have no desire to participate in that.

    Btw, I don't know about anyone else, but when it comes to most discussions related to our economics or politics, I'm willing to admit that on the Dunning-Kruger chart, I'm at the peak of Mount Stupid (okay, perhaps I'm tumbling down the other side at this point).

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    @J Scott Oh, go ahead, we could use some hyperbolic opinion around here... :-)

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @J Scott:
    Quote from @James Hamling:
    Quote from @J Scott:
    Quote from @James Hamling:

     It just reinforces the saying: 

    "do small crimes, go to prison. Do BIG crimes, go to D.C.".


    I come from the Silicon Valley VC world and I've seen the behind the curtain on how these guys do their lobbying and the checks they write.  No shot any of these guys will be investigated by anyone in the legislative branch.


     So if I understand correctly, you'd fully endorse that not only you'd agree, but have seen in action with your very own eyes, that the U.S. is a Plutocracy, wearing the costume of a Democratic Republic. 

    No, I would never apply such a broad term to such a complex system.  I'm not saying it's right or wrong, but outside of a very small niche, I don't have exposure to the inner workings of the US political or economic system.  So, I'm pretty sure I'mnot qualified to make generic wide-ranging assertions like that, except as merely hyperbolic opinion.

    Just like anyone else, I have my beliefs.  But, I recognize that I also succumb to confirmation bias -- again, like anyone else.  So, it would be easy for me to take the one or two small data points I have and extrapolate that to a political and economic system encompassing $25T and 400M people.

    But, I'm not going to do that.

    As Einstein was fond of saying, "Make everything as simple as possible, but no simpler."  Applying a simple set of terms to a complex situation doesn't invite nuanced debate.  It merely invites some combination of partisan bickering and circle-jerk.  And I have no desire to participate in that.

    Btw, I don't know about anyone else, but when it comes to most discussions related to our economics or politics, I'm willing to admit that on the Dunning-Kruger chart, I'm at the peak of Mount Stupid (okay, perhaps I'm tumbling down the other side at this point).


     Slope of Enlightenment sounds like a ride at "Dalai Lama World", doesn't it. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Bruce Woodruff:

    @J Scott Oh, go ahead, we could use some hyperbolic opinion around here... :-)


  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @James Hamling:
    Quote from @Michael Wooldridge:
    Quote from @James Hamling:
    Quote from @Bruce Woodruff:
    So this is a line of thinking I could get behind. I would say parked capital shoudl have some allowed limit .i.e. don’t destroy general population 401k. And on that note we’d probably have to defined what parked vs deployed capital is. But it’s an interesting path to discuss. 

     Done! We solved Capital Gains tax, what's next on the list, peace in the Middle East, lol. 

    hahaha why do you need peace in the world lol

     See, as a Greek, I think I got the secret to peace in the Middle East. HUMMUS! 

    Yes, it's all about Hummus. 

    Who doesn't love hummus? Arabs love hummus, Israelis love hummus, Persians do hummus, Greeks, Turks, Egyptians, everyone agrees on hummus! I wonder, how much hummus was at the various negotiations? I bet not enough! HUMMUS! Love it in Lebanon, savor it in Syria, indulge in Israel, joy in Jordan all for the HUMMUS! 

    I am telling ya, it's all about the HUMMUS!

  • Developer · LA, Nashville TN · Member since 2015 · 295 posts · 75 votes
    3y
    Quote from @Nathan Grabau:

    If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

    They chose incorrectly. 
    You could make the same argument that they bought physical gold and stored in a safe. 

    They invested in in-appropriate termed bonds based on their customers needs for cash at sooner dates than maturity of the investments. Therefore, they had mismatched capital investments of their depositors credits. 

    This was identified 2 years ago by some bloggers on Seeking Alpha.
  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Leland S.:

    This was identified 2 years ago by some bloggers on Seeking Alpha.

    and seekingalpha and zerohedge guys also found the mistake of greenspan and powell since ten years ago ;-)
  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @James Hamling:
    Quote from @Carlos Ptriawan:
    Quote from @James Hamling:
    Quote from @Michael Wooldridge:
    Quote from @James Hamling:
    Quote from @Bruce Woodruff:
    So this is a line of thinking I could get behind. I would say parked capital shoudl have some allowed limit .i.e. don’t destroy general population 401k. And on that note we’d probably have to defined what parked vs deployed capital is. But it’s an interesting path to discuss. 

     Done! We solved Capital Gains tax, what's next on the list, peace in the Middle East, lol. 

    hahaha why do you need peace in the world lol

     See, as a Greek, I think I got the secret to peace in the Middle East. HUMMUS! 

    Yes, it's all about Hummus. 

    Who doesn't love hummus? Arabs love hummus, Israelis love hummus, Persians do hummus, Greeks, Turks, Egyptians, everyone agrees on hummus! I wonder, how much hummus was at the various negotiations? I bet not enough! HUMMUS! Love it in Lebanon, savor it in Syria, indulge in Israel, joy in Jordan all for the HUMMUS! 

    I am telling ya, it's all about the HUMMUS!


     I thought all this times the secret ingredient is baklava ;-)

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Leland S.:

    This was identified 2 years ago by some bloggers on Seeking Alpha.

    I think you mean three months ago... December 19, 2022 to be exact.

  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    It's hard to fathom that an idea like only keeping 250k in each bank would be seriously considered. Real estate investments are often done with syndicators, who pool together money from many investors. It just doesn't make sense for them to have 20 separate bank accounts - it's too much work and makes the investment process even more complicated than it already is! Growing up in Cupertino (Silicon Valley), I always held Silicon Valley Bank in high regard as a good institution catering to the high-tech industry. Perhaps what they needed at the time was some real estate loans tied to prime on their books. That way, they could provide a service that catered to their customers while also allowing them to keep more funds available at any given time. Real estate investments are often long-term, so having more funds readily available makes sense for any business.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Jay Thomas:

    It's hard to fathom that an idea like only keeping 250k in each bank would be seriously considered. Real estate investments are often done with syndicators, who pool together money from many investors. It just doesn't make sense for them to have 20 separate bank accounts - it's too much work and makes the investment process even more complicated than it already is! Growing up in Cupertino (Silicon Valley), I always held Silicon Valley Bank in high regard as a good institution catering to the high-tech industry. Perhaps what they needed at the time was some real estate loans tied to prime on their books. That way, they could provide a service that catered to their customers while also allowing them to keep more funds available at any given time. Real estate investments are often long-term, so having more funds readily available makes sense for any business.


    Well there is no doubt mortgages would have helped their books. That’s been an on-going discussion because it’s consistent income stream. ultimately their approach to treasuries and not backing off on some of them was the other end of it. 

    Finally end of day if something like what Thiel caused - happens to any bank - they pretty much could all fold right away. BEcause it wasn’t just the PE firms yanking but all their companies they invested in. IT’s hard to survive when the bank run is a huge amount of companies yanking their money out all in one day.

     

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Michael Wooldridge:

    Well there is no doubt mortgages would have helped their books. That’s been an on-going discussion because it’s consistent income stream. ultimately their approach to treasuries and not backing off on some of them was the other end of it.
     


    They received about $100B in deposits in 24 months -- there was absolutely no way they could have deployed even a fraction of that money into mortgages (or even venture debt) that quickly.

    That's why they went with bonds.  No idea why they went with long-term bonds, though.  That remains a mystery...

  • Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    3y
    Quote from @Jay Thomas:

    It's hard to fathom that an idea like only keeping 250k in each bank would be seriously considered. Real estate investments are often done with syndicators, who pool together money from many investors. It just doesn't make sense for them to have 20 separate bank accounts - it's too much work and makes the investment process even more complicated than it already is! Growing up in Cupertino (Silicon Valley), I always held Silicon Valley Bank in high regard as a good institution catering to the high-tech industry. Perhaps what they needed at the time was some real estate loans tied to prime on their books. That way, they could provide a service that catered to their customers while also allowing them to keep more funds available at any given time. Real estate investments are often long-term, so having more funds readily available makes sense for any business.

    Having 20 different bank accounts has never been a serious suggestion by anyone who knows even a tiny bit about treasury operations and is basically a strawman. ICS Accounts have existed for decades. 

    @J Scott their WAM as of 31 Dec 22 in their HTM book was something like 6.2yrs with $3b/month coming from interest and roll off. Hindsight being 20/20 yes, they should have held t-bills, but they didn't have a portfolio stacked with bonds. Being an honest broker the portfolio was medium term at best. 

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