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Comment by xiaolingxiao | Hacker News Reader

Note this was published dec 2022.

So, classic bank run... except there were 6 people on the same chat channel controlling 10% of the bank's reserves. Once they notice, poof!

This is also why small, concentrated merchant banks like this are risky. Deposit base is too homogenous.

It was one of the 15 largest banks in the country.. if depositors lose money here, every bank in US better be ready Monday morning as every company moves all of their funds to one of the top 3.

Most banks the vast majority 60-70% of depositors are insured.

SVB was under 10% They were super concentrated in one industry, their depositors themselves were super concentrated with their deposits and they were poorly run.

They’ll be open in some capacity Monday but the idea that big rich uninsured depositors should be made whole because of vibes is silly. They have a $10Bish hole. TBD how this plays out.

Yet still small enough to not need to undergo stress tests after changes to Dodd frank in 2018.

That is irrational behaviour. Depositors should spread their cash across multiple banks. This is very basic risk management.

I’m just telling you what I’m seeing.. The “multiple banks” will be the few biggest ones, even if it’s 1/10th of their funds, nobody will accept the risk of a smaller bank.

Except that it's not quite so trivial to open an account at a new bank (especially if everyone decides to do it at the same time) and move US$15 billion dollars by the end of Monday.

I opened a new business account at Wells last fall, it took maybe a week to apply and get approval? In any case, many companies have multiple banking relationships already - if I were in their shoes I’d be moving all of the excess funds to the biggest bank available.

It’s not fair to the well managed small banks but honestly I don’t care at all about my bank, I just want to pay bills. I’d bank at the Federal Reserve if they offered an interest free checking account with unlimited bank insurance.

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