site banner
naraburns  nihil supernum  1yr ago (text post)   34332 thread views

Culture War Roundup for the week of March 13, 2023

This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.

Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.

We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:

  • Shaming.

  • Attempting to 'build consensus' or enforce ideological conformity.

  • Making sweeping generalizations to vilify a group you dislike.

  • Recruiting for a cause.

  • Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.

In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:

  • Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.

  • Be as precise and charitable as you can. Don't paraphrase unflatteringly.

  • Don't imply that someone said something they did not say, even if you think it follows from what they said.

  • Write like everyone is reading and you want them to be included in the discussion.

On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.

15
Top Bottom Old Controversial Comments
Jump in the discussion.

No email address required.

I'm going to use this text, posted in last week's thread, as a jumping off point to make a little effortpost on a boring area that's actually kind of important, and where I know a little bit: treasury management!

If the FDIC or other banking entity does not cover deposits, any business that depends on SVB and has a

$125K bimonthly payroll will have to do furloughs or layoffs. That's basically any business above ~15-20 people.

... From a survey of my VC and startup friends, it seems reasonable to assume that 25% of that are extremely dependent on SVB (e.g. payroll, no cash sitting elsewhere, and incoming customer payments aren't going to cover anything).

This will only happen if your CFO is incompetent and doesn't do treasury management.

Treasury management - the most basic practice of any corporate finance department - is the practice of managing corporate cash in order to earn interest on what isn't being used , ensure that whatever cash is needed by the business is available, and also minimize tail risks like your bank going belly up.

Step 1 is observing that you can get 4.5% on 4 week treasuries. These are, regardless of amount, backed by full faith and credit of US Gov.

Now suppose you are a business with $500k of biweekly expenses ($500k due on Mar 15, $500k due on Mar 31). You have $20M in venture capital remaining which gives you about 1 year 8 months of runway.

All of that - minus $500k or so needed for short term investments - goes into 4-8 week treasuries which you reinvest whenever they mature. This earns 4.5% or about $900k/year in essentially free money. Money sitting in government bonds with duration < 90 days is called cash equivalent by corporate finance people.

Your not incompetent CFO just extended your runway to 1 year 9 months.

Step 2: ensure that the maturity dates of these cash equivalents line up to your payroll dates. $500k cash is due on Mar 15 for payroll/etc. Fortunately, $500k worth of your 4 week treasuries got turned into cash on Mar 9 (typically the maturity date is thurs).

Another $500k cash is due on Mar 31. You have another $500k worth of 4 week treasuries maturing into your bank account on Mar 30 (a thurs) or maybe Mar 23 (also a thurs) if you really want to be safe.

Step 3: line up a short term credit facility.

Some expenses are less predictable. Part of the job of CFO is to project these expenses, come up with upper bounds, and inform the CEO what it will cost if these bounds are exceeded. Then the CFO goes to a few banks and lines up credit facilities - a $2-3M line of short term credit backed by cash equivalents from step 2.

Step 4: have a few bank accounts including one at a "too big to fail".

That's treasury management, obviously oversimplified.

Now suppose your CFO actually did his job. It's Mar 13 and SVB just imploded. You had $500k sitting in SVB for Mar 15 payroll and that's locked up. Here's what you do:

Mar 11: Quickly call up your credit facility and tell them to wire $500k to your payroll provider on Mon. Call your payroll provider and tell them to confirm with the bank that this is happening to avoid any snafus.

Mar 13-14: As soon as SVB allows it, wire the $250k FDIC insured money to your credit facility. Also redirect treasury maturity payments to said account, and take another $250-270k of cash equivalent and don't reinvest them.

Mar 16 or Mar 23 (a thursday when your maturity payment gets deposited): get $270k worth of 4 week treasury maturity payments from the US govt. Wire this money back to your credit facility.

Net result is that you make payroll with no interruption. You just lost $250k to SVB's errors and paid your credit facility $20k in interest. The end.

There are services that help automate treasury management for smaller companies now, like Vesto.

Until last year T-Bills were paying ~nothing, and it had been that way since 2008, an eternity in the startup world. There was no direct financial incentive to do anything more complicated than park your money in a checking account. Sure, ideally everyone should have been actively managing things to hedge against bank failure, but startups have a zillion things to worry about. SVB's pitch was basically that they were experts on startup finance and would relieve you of having to worry about this yourself. The social proof of these claims was impeccable.

So, yes, many startups screwed up. It turns out that safeguarding $20M isn't entirely trivial. But it's a very predictable sort of screwup. There wasn't really anyone within their world telling them this, it wasn't part of the culture, nobody knew anyone who had been burned by it.

And, well, maybe it should be trivial to safeguard $20M? "You have to actively manage your money or there's a small chance it might disappear" is actually a pretty undesirable property for a banking system to have. The fact that it's true in the first place is a consequence of an interlocking set of government policies — the Fed doesn't allow "narrow banks" (banks that just hold your money in their Fed master accounts rather than doing anything complicated with it) and offers no central bank digital currency (so the only way to hold cash that's a direct liability of the government is to hold actual physical bills). Meanwhile the FDIC only guarantees coverage of up to $250K, a trivial amount by the standards of a business.

The net result of these policies is that the government is effectively saying "If you want to hold dollars in a practical liquid form you have to hold them in a commercial bank. We require that bank to engage in activities that carry some level of risk. We'll try to regulate that bank to make sure it doesn't blow up, but if we fail, that's your problem."

"WTF?" is a reasonable response to this state of affairs. If these companies had had the option to put their money into a narrow bank or hold it as a direct liability of the government, but had nonetheless chosen to trust it to a private bank because they were chasing higher returns, I'd have zero sympathy for them. But our system declines to make those safer options available.

They could have put their money in larger more diversified bank subject to more regulations including liquidity stress tests that SVB successfully lobbied to be exempted from. The VC world and their startups weren't seeking maximum safety and unfairly barred from seeking it. They sought out a smaller bank with less regulatory oversight that specialized in their industry presumably because that offered benefits.

Greg Mankiw says that the stress tests probably wouldn't have caught this, although I imagine that they'll be modified to cover this scenario in the future.

Would those stress tests actually detect any issues, or would SVB have been fine either way, with or without the changes they lobbied for? Has anyone actually checked that, or is this just an empty pro-government regulation talking point?

I am not an expert on how the Dodd Frank Act Stress Test is conducted and I don't know whether it would have caught this. Forbes says that "will we get fucked if the fed raises rates" is a basic scenario they should have been testing for and that they were exempt from disclosing whether they had enough high quality liquid assets to cover 30 days of distressed cash flow. I don't know whether the standard definition of distressed cash flow includes this sort of bank run. I suspect someone who is an expert on all this will do a big analysis in the next week or so.

I'm suggesting that the VC & startups were not maximally risk averse in their banking selection. Even if you think regulation adds no security, "hey let's put all our money in a bank specializing in one industry" seems obviously more risky than "let's deposit in a massive diversified bank like BoA. The idea that because The Narrow Bank was shut down they had no safer option than SVB doesn't make much sense to me.

https://www.google.com/amp/s/www.forbes.com/sites/mayrarodriguezvalladares/2023/03/11/warning-signals-about-silicon-valley-bank-were-all-around-us/amp/

The burden of proof is on people calling for regulation and complaining about SVB lobbying to actually show that the stress tests they were allegedly exempt of would actually have prevented the situation. Otherwise, this is just pure partisanship without any substance: if you claim the problem here is lack of regulation and stress test, you better show that what you propose is more than empty quasi-religious ritual to appease the regulation gods, and that it would actually causally achieve substantial outcome.

+1

Elizabeth Warren sent up her offering the regulations Gods in this morning's NYT.

Which also means she had her staff write the op-ed over the weekend. What a great boss.

Since when have banks been banned from owning Tbills? They can 100% hold safe cash like instruments that can be liquidated quickly.

The phrase "Narrow Bank" is the name of an actual bank that the Fed shut down because it did not lend out money and just held 100% safe reserves.

https://archive.is/TqCJX

The issue there is more that the Fed pays interest on excess reserves and that bank was just trying to abuse that system. The fact they could abuse it shows how much of an abomination the whole reserves system has become; but, I don't think an actual 100% reserves bank that just held required reserves at the Fed and kept the rest in T-bills or money in its own vaults would get in trouble.

No, the explicit reasoning of the fed in blocking TNB is that it would discourage people from putting money into institutions that lend.

To be explicit, the Fed Reverse's refusal (and later notice of rulemaking) was about The Narrow Bank (and other) being able to access the interest on excess reserve rate accounts (possibly only at full rate? I can't find the final rule, if there ever was one). The Narrow Bank was chartered in Connecticut and still has a cert good til August of 2023, though I think their specific business model is focused very heavily on those rates and thus they haven't opened for accounts yet.

((I expect groups like the Narrow Bank and Custodia are probably more about the philosophical point, anyway.))

That is not at all my interpretation of the Fed's statement. I read it as more in line with my interpretation. They explicitly state many times in their statement that the issue is over what institutions should receive interest on reserves. If The Narrow Bank did not receive interest on reserves the Fed wouldn't care IMO. The article in the archive link above also explicitly makes note that The Narrow Bank was trying to do arbitrage on the Fed's policy of paying interest on reserves. I think you are just mistaken.

Nah it really must be more ideological, or something else like that. To the extent any journalist or economist was speculating that the Fed wants to avoid paying interest on excess reserves, they would be flatly incorrect. Central bank reserves are a closed system, so to the extent that a narrow bank is attracting them, that's just a flow from other banks where they were beforehand. The central bank is paying the same interest out either way. Other non-depository institutions (who aren't eligible for IOR) using reverse-repos to get (nearly) the base interest rate is just a workaround to help smooth out the system (ineligible because of congressional rules; the central bank would almost certainly prefer to pay it out in as simple a fashion as possible).

And the central bank is not trying to avoid paying out interest -- it's a policy choice in the first place to pay IOR (that's the whole rate maintenance regime now: instead of using open-market-operations to maintain a positive interest rate, they simply flood the system with excess reserves and pay interest on them directly, which is way simpler). It sounds like the Fed had been narrowing the gap between ceiling and floor rates anyway, because they never were using that lower rate to try to really save money or whatever.

How do you allow a narrow bank without collapsing the entire banking system? Once you can put your cash in a place that has no risks aside from actual fraud and sovereign default, why would you put it anywhere else? And if you won't put it anywhere else, how do private loans get made? This is made worse by the fact that a narrow bank today would pay more than savings, but even if a narrow bank paid zero, the fact that the risk was literally as close to zero as possible would likely result in most commercial bank deposits vanishing, and then who would make loans?

Once you can put your cash in a place that has no risks aside from actual fraud and sovereign default, why would you put it anywhere else?

In ye olden times also known as "the late 80s", it was common (at least in Northern Europe) for bank accounts to pay actual interest, particularly for fixed term deposits. This would be that same thing expect instead of a fixed term, the depositer would be taking some minor risk in exhange for return on their deposit. Fully guaranteed accounts might in turn pay no or even a small negative interest (eg. you have to pay an annual fee for the bank to safeguard your money).

Commercial banks could offer higher interest rates on deposits, lend out their own capital, or issue bonds. If this didn't provide sufficient funding for whatever amount of lending the government wanted to see, the government itself could loan money to banks to re-lend.

Really though, the easiest patch to the system would just be for FDIC insurance to (officially) cover unlimited balances, or at least scale high enough that only the largest organizations had to worry about it. It makes no sense to require millions of entities (if you include individuals of moderate net worth) to constantly juggle funds to guard against a very small chance of a catastrophic outcome that most of them aren't well positioned to evaluate the probability of. That's exactly the sort of risk insurance is for.

If the concern is that this will create moral hazard because banks that take more risks will be able to pay higher interest rates and fully-insured depositors will have no reason to avoid them, the solution is just for regulators to limit depository institutions to only taking on risks the government is comfortable insuring against. Individuals should be allowed to take on risk to chase returns, but there's no compelling reason to offer this sort of exposure through deposit accounts in particular. Doing so runs contrary to the way most people mentally model them or wish to use them.

This results in a fully socialized lending system with the government making all the decisions. Which is likely where we're headed ANYWAY, I'll grant, but it seems like a bad end.

Why not require banks to buy insurance instead of government regulation? Get market pricing on risks instead of government fiat?

Insurance is a key if not the main function of the US government and many other governments. They can print money. There’s no insurance company big enough to insure. SVB. Maybe a consortium could also insure a little. But the insurance industry is not bigger than the banking industry. They couldn’t insure a bank issue that is systematic with multiple failing. You would move the stystematic risks for bank failure to banks failure causing insurance failure. AIG had a quant insurance unit that insured some financial risks and surprise surprise they sold it too cheap and blew up.

Why not require banks to buy insurance instead of government regulation?

Forcing banks to buy insurance still is government regulation.

Yes it is. I should’ve made it clear. One is command and control (ie you must do XYZ). Think old school environmental regulation. The second is more like a carbon tax. It regulates via pricing arguably allowing a more accurate risk.

Who are you going to buy global financial collapse insurance from? What counterparty can be relied on to pay out in such a scenario?

Who are you going to buy global financial collapse insurance from? What counterparty can be relied on to pay out in such a scenario?

You gotta have physical. Physical gold, yes. But also physical land you can reach, physical guns, and a physical body of followers you can trust.

In the case of global financial collapse the dollar is probably worthless so who cares?

Once you can put your cash in a place that has no risks aside from actual fraud and sovereign default, why would you put it anywhere else?

Even a small yield on things like private loans would be worth it for larger sums. I'm sure that there's a certain subset of business that would take 0% yield for 0% risk, but I don't think that's everyone.

I'd imagine the banks that make money off your deposits would actually have to give you a cut of the pie as enticement. And really, why shouldn't they?

In theory. But in practice the federal government bails out “risky banks” so question is whether there is much juice to be squeezed.

Wouldn't banks just increase their interest rate to attract depositors? It's self correcting: some people would choose the least risky option, their money would no longer be available for risky investments, and so the remaining people with less risk aversion would get greater returns.

I think risk aversion is strong enough that the banks would not be able to increase their interest rates sufficiently while still loaning money profitably. That is, fractional reserve banking (and thus the whole financial system) is based on fooling people into taking more risk than they'd like.

Not sure about details but I logged in to work this morning and saw an announcement from our hopefully-not-incompetent CFO that this was basically what we are doing. Yay, I keep getting paid until the world financial system collapses. (which may be tomorrow, alas)

Thanks for the writeup, I at least found this interesting. Don't get much exposure to finance.

All of that - minus $500k or so needed for short term investments - goes into 4-8 week treasuries which you reinvest whenever they mature. This earns 4.5% or about $900k/year in essentially free money. Money sitting in government bonds with duration < 90 days is called cash equivalent by corporate finance people.

Is this a function of the current ahistorically (at least in my lifetime...) high interest rates? Were people still buying 4 week T-bills even when interest rates were shit, or in 'normal times' are there better short-term investments?

People were buying a mix of 4 week t-bills and other short term debt in order to put their money to work. It was not always paying 4.5% interest though, a while back it was maybe 0.1-0.2% + protection against tail risks of your bank shutting down.

It was hard for me to wrap my head around this, until I got it into my noggin that all the alarm about start-ups really is about start-ups. This was the start-up bank. So you had someone who decided that "Internet of Things for your parrot" was a great idea, they pitched it, some VC threw money at them, they put that into SVB and relied on it for everything. They weren't generating any profit yet, so any customer payments or subscriptions were in effect meaningless. They were running the business on cash injections from their backers. And when SVB went "poof!" all the money is now frozen there, there isn't any money coming in otherwise, so they literally can't pay wages etc. and may have to go bust.

And the problem from SVB's side seems to be: loads of money coming in as deposits. Can't lend this out and make money off it (because this is a start-up bank, nobody is in a position to borrow money, they're living off their fairy godmothers) so they bought some kind of bonds? (unclear on this because I'm ignorant) which, because of interest rate hikes, now became unprofitable. Somebody got panicky, started drawing money out, and that started a bank run, and here we are. More or less, this is how I understand it, could be totally wrong.

Pretty much you hit the major points. Of course the whole point of being a niche bank is that you can charge higher service fees. And being a niche bank means that you can't hedge the risk completely of all your customers going down at once - so you really need high liquidity investment portfolio.

Yeah, seems like SVB's core competency was supposed to be "we do your treasury management for you for a fraction of the cost of a CFO" (they were paying treasury like rates on corporate money market accounts). Unfortunately, they were incompetent (they had long dated treasuries/agencies and no hedges).

Money market accounts != treasury management.

However, robo-treasury management (taking 10bps off the top and automating some projections) might well be a useful niche and I should investigate if it exists.

Something like that exists. Raymond James gives you $50 million fdic. They do this by taking your account and putting it in 200 banks.

So I’m starting to just assume there’s zero reason for regional banks to exists. They don’t have proprietary advantages like the big banks. GS with complexity/cap markets, C with scale ability to do transactions anywhere etc.

I don’t see any reason for a person to keep deposits in no edge regional banks. They pay you barely anything. Seems like on the lending side they don’t have any market advantage to generate enough yield. Business models seem dependent on 0% deposits which no one should own.

Depending on deposits just seems like a bad business model to me going forward. And 0% deposits allowing you to make bad financial decisions.

So I’m starting to just assume there’s zero reason for regional banks to exists.

This whole affair has actually convinced me of the exact opposite - there's no reason for gigantic banks which can cause the entire economy and unrelated businesses to go under/suffer when placed under stress. There shouldn't be any banks which are systemically important and require bailouts in order to prevent the collapse of the entire economy. Beyond the incredible fragility induced by having corrupt financial institutions with broken incentives (note the people actually profiting off these issues and selling stock in SVB before the news broke), the sheer concentration of wealth and power that occurs in those banks gives them far more influence over the levers of national power than is healthy for society.

So then why have GSIBs losts. They have higher capital ratios. They’ve lost every regulatory fight for a decade. The shit SVB did would never be allowed at the mega banks.

Being that SVB was deemed systematic and got a full bailout it’s obvious banks like them were benefiting from easier regulations while still being systematic.

I guess the solution is the regionals are treated like the GSIBs. So they need to raise their tier one capital about 50-80% right now to fit the same standards as the GSIBs. And we just drop the asset cap down to 10 billion for regulatory reasons since these guys are claiming their depositors need protected.

GSIB

Could you please explain this acronym?

Global systematically-important bank.

“Too big to fail” (without bringing down everything else too)

I'm sorry but could you please reword your comment? I have no idea how to parse the sentence "So then why have GSIBs losts." and the grammar errors elsewhere leave me unwilling to talk in depth on a technical subject.

@sliders1234 appears to be arguing: if GSIBs are so powerful, we should expect them to have less regulation. Mid-sized banks like SVB are dodging regulations which (hopefully!) apply to full-size ones, but are still getting the benefits of bailouts. If we are giving them the benefits they should also be paying the costs.

I don’t know what the bit about “asset cap” means.

$250 billion in assets was trigger for tighter regs.

As a small business owner I couldn't imagine trying to deal with a bank like Citi or BoA. The general rule of thumb is that you want a bank big enough to offer the kind of products you need but no bigger. I use a regional (though I could probably use a small local) and if I have a problem I can call the girl who handles my account from the number in my Rolodex and usually get an in-person meeting scheduled for the same day. IF I'm dealing with some huge national I'm stuck calling a customer service line where I spend half the afternoon on hold and the other half trying to explain my problem to someone who has limited power to solve it and whose evaluations are based on how quickly they can get me to hang up.

Judging by how we prioritized fixing post-cutover bugs at the bank I worked for, the best bank is the one where your CFO can call their CEO at 6am (time zones!) and start the conversation with "What the flying fuck?"

Yeah, I'm only exposed to the small business's accountant's side of dealing with the banks when there's tech issues, but there's absolutely practical day-to-day benefits of smaller banks.

Regional banks do have proprietary advantage - domain specific knowledge of regional industry and real estate as well as local relationships. JPM or BofA need to have fairly uniform underwriting rules and these rules will not necessarily allow them to service some particular industry with weird cash flow patterns (such as startups). Rapidly scaling SAAS is a very good example of this.

Another great service SVB provided is a degree of self dealing/moral hazard - founders can get a mortgage backed by illiquid equity if they do corporate banking with SVB. This sort of self dealing is a problem for startups, but it is not really a problem and is a useful feature for family offices.

But how is that translating into good risks adjusted returns? They bought treasuries for size.

And the other business seems like a we give you good terms on loans so you deposit them with us. And then invest ??? For returns others can’t get. That all works if you can (1) get higher returns from relationships (2) have some real business diversification so your not overly exposed to one risks. Neither of these things seem true.

But the larger issue a deposit based bank which regionals seem to be heavily dependent on can’t function in this new world. Deposits move too fast. The whole business model seemed based on cheap loans (no edge here) to get deposits (no value anymore).

The market seems to agree with you

your CFO

My impression from reading Hacker News comments this past weekend is that even having a CFO is an unfair expectation to levy against a fledgling startup.

Tech world is really coming off as a bunch of little over paid children right now.

A brand new company consisting of 10 tech workers lacks a mature corporate structure and a full C suite. I don't know what else we expect.

Acting like adults. We are talking about Stanford types probably one older mba.

But also referring to all the VC crying on twitter.

The tech world is millions of people in the US alone and not entirely in silicone Valley.

Because a massive bank lied to them and because incompetent federal regulators didn’t catch it?

Should they just have already assumed the government was made up mostly of completely useless rent seeking tyrants? Keep in mind a lot of them are pretty young and may not have figured that out yet.

Judging by the response to SBF, there are lots of pundits who would likely bite that bullet.

The issue here isn't the government. It's running a business with $millions in cash but not having a person familiar with basic corporate finance to help them manage it, as well as not spending a bit of time on investopedia to learn it themselves.

Banks fail. The government has rules in place as to what happens when they do, they require banks to disclose these rules (e.g. FDIC insured up to $250k) and these rules are enforced. Is it your belief that SVB stopped disclosing FDIC insurance limits? SVB is only minimally a story of government being useless/corrupt - at least, it wasn't a story about govt corruption until Yellen/Biden decided to take money from workers and give it (indirectly) to wealthy venture capitalists.

I mean really, is a safe full of one pay-period worth of physical cash too much to ask? Is this how financially illiterate we have become?

These motherfuckers need to eat shit. CFOs won’t get it until they see Roku employees setting up GoFundMe’s for lunch money.

There was a woman at my grandmother’s retirement home who’d worked in a Saudi hospital in the 80s or 90s. She oversaw their payroll switch from carrying in a literal sack of money to the exotic technology of checks. People weren’t used to working with them, but they were a way more efficient solution than handing out cash.

In this scenario is HQ going to mail me an envelope stuffed with cash or do I have to fly to San Francisco and pick it up?

Money orders only, sorry.

George Bailey will be waiting for you in the Bay Area asking if you can hold out a bit

I mean really, is a safe full of one pay-period worth of physical cash too much to ask?

Yes.

it wasn't a story about govt corruption until Yellen/Biden decided to take money from workers and give it (indirectly) to wealthy venture capitalists.

The money to make depositors (who are mostly employers, not VCs) whole is coming from a fund paid into by banks, not taxpayers.

That’s basically the same thing as taxpayers. People who didn’t invest in shit bank have to pay for shit bank.

And the correlation between pays a lot in taxes and has a lot of deposits is likely quite high.

My mistake on whether the funds will be taken from workers or people who deposit money in banks that engage in prudent risk management.

But I guess going forward, there's no point bothering to put your deposits into the reliable banks.

The money to make depositors (who are mostly employers, not VCs)

Who owns these depositors, and has been furiously lobbying the government to protect their asset over the weekend?

The bank didn't lie to them, they published their 10-K (with a full balance sheet on page 95) that clearly showed unrealized losses on their HFM portfolio of $15 billion that nearly exceeded their owners equity of $16.295 billion showing they were nearly insolvent using market prices on Dec 31, or if they were ever forced to sell. Maybe my expectations are too high but if I had more than a million dollars in uninsured assets in a bank I'd be arsed to read through their annual report and be able to do arithmetic.

Should they just have already assumed the government was made up mostly of completely useless rent seeking tyrants? Keep in mind a lot of them are pretty young and may not have figured that out yet.

I'd argue being young is even more reason for them to know. My wife's boomer parents are still living on in the shadow of their upbringing, where they assume the institutions (at least the ones run by Democrats) are unquestionably good, honorable, trustworthy and competent. The continuous rolling systemic weaknesses and disasters of the last 20 years have done absolutely zero to disabuse them of that notion. Where as, I've seen numerous polls that show young people who've grown up knowing nothing but the the absolute clusterfuck of the last 20 years have record low levels of trust in institutions.

All that said, I found this data point which makes me question a lot of that, and maybe come around to your side.

https://www.statista.com/statistics/1078192/trust-government-generation-us/

Some of the data points are funny. Like in 2009 after Obama won the presidency, Millennials had a 43% trust in government. That doesn't last. Biden being elected in 2020 results in a fairly large bump in trust for every generation except Millennials. Weirdly enough the data skips straight from Oct 2015 to April 2017, so we don't get a snapshot of the post Trump trust score.

So I donno, looking over the data, it may be hard to tease apart age cohort from political party in power, with younger cohorts generally trusting D's more, and older cohorts seeming to trust R's more. With the seemingly notable exception of Biden. In fact, when I really look at Millennials on the last 20 years of the graph, they do seem abnormally trusting. Once again, with the giant glaring exception of Biden winning office. What's up with that?

Things started notably unraveling under fairly recently and Biden took the blame.

I’m late GenX, and I took “government” class in high school. I’ve heard Boomers talk about “civics” class, but my cohort and younger talk about “social studies” classes. Not a comprehensive answer, just an anecdote which might be a piece of the puzzle.

Millennial here (or at least definitely somewhere between GenX and Zoomer), we indeed had Social Studies (mostly history, maybe also literature) when I was in public school. When I transferred to a charter school, I had more specific history classes. Didn't exactly have civics.

Back in my day we had “social studies” in elementary/middle and “government” in high school. The former was state and national history. Looks like the current requirements have a “social studies” category including history, government, geography and sometimes economics.

I think it’s a catchall term, not a shibboleth.

I'm kind of wondering what value add VC's provide if not giving founders advice on basic skills like this.

The value add is having lots of money and picking which projects they go to. I'm sure the good VCs also provide lots of useful advice but their main economic role is money man.

What is this place?

This website is a place for people who want to move past shady thinking and test their ideas in a court of people who don't all share the same biases. Our goal is to optimize for light, not heat; this is a group effort, and all commentators are asked to do their part.

The weekly Culture War threads host the most controversial topics and are the most visible aspect of The Motte. However, many other topics are appropriate here. We encourage people to post anything related to science, politics, or philosophy; if in doubt, post!

Check out The Vault for an archive of old quality posts. You are encouraged to crosspost these elsewhere.


Why are you called The Motte?

A motte is a stone keep on a raised earthwork common in early medieval fortifications. More pertinently, it's an element in a rhetorical move called a "Motte-and-Bailey", originally identified by philosopher Nicholas Shackel. It describes the tendency in discourse for people to move from a controversial but high value claim to a defensible but less exciting one upon any resistance to the former. He likens this to the medieval fortification, where a desirable land (the bailey) is abandoned when in danger for the more easily defended motte. In Shackel's words, "The Motte represents the defensible but undesired propositions to which one retreats when hard pressed."

On The Motte, always attempt to remain inside your defensible territory, even if you are not being pressed.


New post guidelines

If you're posting something that isn't related to the culture war, we encourage you to post a thread for it. A submission statement is highly appreciated, but isn't necessary for text posts or links to largely-text posts such as blogs or news articles; if we're unsure of the value of your post, we might remove it until you add a submission statement. A submission statement is required for non-text sources (videos, podcasts, images).

Culture war posts go in the culture war thread; all links must either include a submission statement or significant commentary. Bare links without those will be removed.

If in doubt, please post it!


Rules


Recommended Posts And Communities

Recommended Realtime Chats