jimboston wrote:mookiemcgee wrote:jimboston wrote:Crypto Companies are banks now?
You can’t have it both ways.
Banks such as signature bank, with federal charters are banks.
It's seems like maybe you need to catch up on previous posts before we continue the conversation.
Let me ask you a question Jim, why did Silicon valley bank fail?
Did they make too bad loans that were defaulting?
Did they lose tons of money in crypto?
what was the root cause of their failure?
You are the one comparing Crypto Companies to Banks!
Why did SVB Fail…there’s no ONE Cause…
*They didn’t have enough liquidity.
*They were over-invested in limited assets and when they went to divest they took losses they couldn’t afford.
*They blindly invested in this limited asset without really considering the basic principal that when interest rates rise the value of this asset is absolutely going to drop… not a problem if you can sit on the asset for long term; a big problem if you need to sell.
*That made these investments with full knowledge that the Fed was going to be raising rates.
*They underestimated the cash flow needs of their customers.
*They had a limited customer base. When the industry that this base lives in started to experience turmoil these customers all jumped to access funds in a ‘herd mentality’ manner.
If you had to pick one cause the answer would be BAD MANAGEMENT.
If you had to pick a secondary cause you could blame the economy in general… but that’s dumb. It’s easy to run a business in a growing economy it’s much harder to maintain in a down market.
Yeah I mean i expected a stupider answer, but you basically have it right.
They made too many 'safe' investments that didn't pay enough (sub 2% treasuries), and now have depositors demanding 3-4%
They didn't make very many loans (which is generally the primary function of a bank)
they basically played it too safe. They also had no exposure to crypto (they held some treasuries as deposits from a 'crypto company' called Circle).
So why did Signature bank get closed Jim?
Did they break banking rules and have dealings with Shady partners?
Did they have too many loans default?
Did they have a brief bank run (as virtually all non-GSIB banks did) after the SVB collapse (depositors fled to GSIB banks because- wink wink nudge nudge they are fully insured by the gov't, too big to fail), and were shuttered within 48h of SVC collapse just as they had shored up their books for 'no apparent reason' outside feds wanted to send a mafioso type message aka you are guilty by association?