Silicon Valley Techno-Utopianism

My understanding of the existence of Islamic finance is that it is designed to comply with sharia prohibitions on usury (ie. paying interest). It would be interesting to compare banking stability under such regimes with the interest-based model more common outside the Muslim world.

"labor theory of value" --karl marx

the thing is that the SVB investments weren’t even that usurious or anything, they were just chasing better rates on stable bond investments afaict?

obviously like any business they’re chasing more money on top of the overhead of keeping the store open but it wasn’t like they were loan sharking

The prohibition on usury under sharia means paying *any* interest.

Islamic law considers money as a measuring tool for value and not an asset in itself. Therefore, it requires that one should not be able to receive income from money alone. Interest is deemed riba, and such practice is proscribed under Islamic law. It is haram, which means prohibited, as it is considered usurious and exploitative.

https://www.investopedia.com/articles/07/islamic_investing.asp

various christian groups have at times banned earning interest too tho never as wildly as in the muslim world

this thread is starting to get creepy idk

just because money is made up doesn't mean we shouldn't be trying to make it more fair, not less fair

even though historically that hasn't been like a huge success

that's all i have to say on this topic i know nothing about and find eye glazingly boring, you're all welcome

on this: what, if anything, is preventing a perfectly liquid bank that has some low-interest t-bills worth 80$ on a face of $100 now borrowing against those through this program, and putting that back into higher yield t-bills and just pocketing the difference? https://t.co/zBy7ad2jZh

— sclv (@sclv) March 13, 2023

that specific question is answered in today's levine.

I love my readers, and yesterday one of them more or less immediately emailed to ask, about the Fed’s Bank Term Funding Program: “Can I get in on this? Specifically, can I buy a controlling interest in a bank, and then buy a bunch of long dated treasury instruments at $80, and exchange them for $100 immediately?” Great question! The answer is no. Here is the termsheet for the BTFP:

paywalled for me, but it's basically being large enough that someone would let you negotiate reasonable terms over a long period, right?

just funny numbers here, but stay with me:
- I buy bonds that mature in ten years and pay 4%
- The interest rate pops up to 7% on bonds at some later date
- I take out a loan using my bonds as collateral at a 5% interest rate to buy the new 7% bonds

I'm pushing back my maturity date and have a lot more contractual things in play, and I've now basically spent my money plus I have to make an interest payment on the loan. I've dug myself into a hole for ten years

(I'm never going to get terms that good and nobody's going to loan me a ton of cash because I'm an individual investor, and for me, the amount of money I'm going to make would change only a small amount)

Levine’s bottom line here makes the whole wrapup here sound basically obvious:

But in the modern world — of more pervasive financial markets and more sophisticated accounting and faster-moving information — the banks and their customers were unable to ignore those losses. So the Fed stepped in and said: Look, we are best positioned to ignore those losses, so we will. The service that the Fed is providing to the banking system here is ignoring that rates went up when it values banks’ bonds. That service is incredibly valuable. Historically banks’ retail depositors provided it, but now only the Fed can.

It sounds like SVB's main problem was concentrating their depositor-base in the hands of a particularly skittish and herd-like group - the inbred world of VCs and tech startups.

https://t.co/cQQrueYpj0 pic.twitter.com/zQXNFnQlz1

— Abe (@LikeAndBlock) March 12, 2023

lol

that dude attempting to "clarify" his point (it's about bias!) is a minor case of posting through it

both those systems are pretty fucked up in multiple ways

btw I had to stay late the day before thanksgiving at work one year because I managed a website that included an app that let farmers pay loans

IT'S ABOUT BIAS

yeah, everyone is pretty clear on being biased against tech venture dipshits

most people aren’t! a lot of the population is neutral, sees them as kind of quirky types who made it rich, or actually see that shit as aspirational

I have no idea what the breakdown is but it’s probably nearly even thirds among people I talk to daily irl

Those people aren’t on Twitter roasting this guy and his friends, though. They’re probably generally fine with bailing out Peloton For Aquarobics.

is that the new underwater basket weaving

idk exactly how popular silicon valley is but its def less popular than it used to be, the media coverage has gotten definitively more critical, and people are dicks to them on twitter

at one point long ago the main platforms for startup news were tech crunch and whats the other one which were basically just posting startup pr, then the companies that made it big and went public were greeted with fawning profiles in the mainstream business media, and that was pretty much how it went, these days all the big outlets cover tech much more seriously and theres tons of other writers out there making it their job to really know about this stuff, some parallels ro coverage of wall st pre and post 2008

anyway it makes them sad, oh well

there's the serious critical coverage, but there's also the fact that tech is synonymous with corruption and bias to anyone who watches fox news.

the 'keep Big Tech out of our Facebook' crowd

also the valley just hasnt had any real big hits in a long time wheres the new googles baby its all terrible shit like uber, and then titans like facebook are faltering too

and then theres the more general shift towards the sentiment that the economy as a whole is a scam

Biden’s rescue of ‘pro-Democrat’ SVB clients slammed: ‘They’re looking after their own’ https://t.co/8ywqYMs9W0 pic.twitter.com/XlgPlEaHcx

— New York Post (@nypost) March 13, 2023

theyre getting it from all sides

Incredible how much contempt Silicon Valley has garnered itself. Bad sign when even the top capitalist apologists can’t stand you. pic.twitter.com/qameFl085C

— sentient bloomberg terminal (@kayrosso1) March 13, 2023

the dem party looking after their own story is at least plausible i much prefer the pure ideology of "woke bank"

"They were one of the most woke banks" -- James Comer on SVB Bank pic.twitter.com/nGw6GvZTRs

— Aaron Rupar (@atrupar) March 12, 2023

Saw that headline today: "Was SVB too woke?" what the fuck are they talking about

They got a decade of goodwill from Prime two-day shipping, Google being a decent search engine, the iPod/iPhone, the first 18 months of Facebook when you reconnected with your childhood best friend... since then Amazon results became dozens of weird knockoff products, search got gamed, smartphones made your life worse and Facebook morphed into the boomer racism factory we all know and love. Only Bill Gates has managed a successful image rehab project.

he put the microchips in the vaccine tho

yeah he was just a bossy asshole in the 90s, now he's part if not leader of a sick perverted cabal

That's a word association I don't think you'll get very often.

"When I say bank, you say . . . "

"Woke?"

its a wild formulation, you can only tip your cap

bill gates is the largest farmer in america you know

thats how he grows the microchips

hes just describing banking

SVB committed one of the most elementary errors in banking: borrowing money in the short term and investing in the long term. When interest rates went up, the assets lost their value and put the institution in a problematic situation. https://t.co/HxsgqpZOuL

— Lawrence H. Summers (@LHSummers) March 14, 2023

Nice to have evidence that Larry Summers is dumber than any random person reading Matt Levine every day

he was the treasury secretary of the usa! what a world

more like larry winters

some interesting reactions from the vc ethnic minority

Alfred Rosenberg writing in the Völkischer Beobachter. pic.twitter.com/UwUl44ilEj

— Marc Andreessen (@pmarca) March 14, 2023

This sort of rhetoric is how you end up with things like the Rwandan genocide. https://t.co/6xjiwdG3uu

— Nate Fischer (@NateAFischer) March 14, 2023

tbf using 'euthanizing' is just giving them an opening

Wow, Andreessen has impressive knowledge of Nazi propaganda rags...

tbf using 'euthanizing' is just giving them an opening

― mookieproof, Monday, March 13, 2023 11:00 PM (seven minutes ago) bookmarkflaglink

causing them to share it... its a reference to keynes “the euthanasia of the rentier” fwiw, plausible deniability for some inflammatory clickbait lol, good article tho

This Is a Bear Market pic.twitter.com/Y5566sm5ap

— Chairman (@WSBChairman) March 13, 2023

Adam Tooze

SVB’s depositors were in no regular sense, depositors. They are badly run and ill-advised businesses that for obscure reasons parked huge cash balances in a highly vulnerable bank. As Matt Klein remarks in his brilliant post at Overshoot the real problem at SVB was that its depositor was base was so “low quality” i.e. extremely prone to run with influence exerted by a small group of VC advisors.

...

On the face of it SVB is not a bank big enough to do systemic damage. That was the prima facie reason for exempting it from the oversight that extends to really big banks. Finance per se will not explain the emergency intervention.

But as should have been obvious all along SVB matters very much indeed, because its depositors are very powerful, very rich and very influential people who own a narrative that makes them indispensable to one vision of America’s future. And that force was brought to bear on the Biden administration over the weekend in an extraordinarily overt exercise of “venture dominance”