Can’t Tell The Players Without A Program

Some have moved on, some deny they played any role (see above), and worse, some who fueled panic now take credit for saving us from total economic collapse. They deserve the microscope they are about to be put under, but for now, the mute button is all we have.

— Nicole Perlroth 🌻 (@nicoleperlroth) March 17, 2023

That’s the end of an interesting thread 🧵 which lines up with this comment left earlier.

The lesson here is the same old lesson. 1. diversify. The bank was not diversified. They did not have a loan portfolio earning them money. They just took money in. 2. Only invest money you can afford to lose. 

Seems these bankers are small, limited thinkers. They took the simple thought of: US Treasuries, safest place in the world and did not actually think through the mechanics of being a bank overall. Thus: We have a lot of cash, where should be put it to be safe. They did not think about the bank actually having to earn an income.

This just viscerally makes sense. Banks are ultimately fairly simple businesses. The idea (I read it somewhere on Twitter) that this was caused by the Fed (interest rates) struck me as remarkably stupid. A schoolchild whose parents listened to NPR would know interest rates were going up for the last year or so. A bunch of SV bankers couldn’t? Sounds like they were pretty stupid, though, because every time I read another reason why it’s not their fault, it makes them stupider than the previous excuse.

Which is why the explanation above makes sense. Occam’s Razor. Simpler is usually better. And it fits the “weak regulation” argument made by smart people (like Prof. Sen. Warren).

And that takes me back to the thread 🧵, which is interesting because it has some data to it.

Alethea Group: Associates of Peter Thiel [including David Sacks] were at least partially responsible for the initial online panic related to SVB: pic.twitter.com/5cNaVud8tB

— Nicole Perlroth (@nicoleperlroth) March 17, 2023

Crypto scammers jumped into the fray, mainly as a means of promoting themselves. pic.twitter.com/JOWeYglBDp

— Nicole Perlroth (@nicoleperlroth) March 17, 2023

Interestingly, Alethea also looked at Guo Wengui (who was recently arrested in a $1B fraud conspiracy). They assessed that Guo Wengui’s network did now sow initial panic but played a contributing role to larger concerns about the stability of the US banking system. pic.twitter.com/0kOhqI6M90

— Nicole Perlroth (@nicoleperlroth) March 17, 2023

Finally, a look at the short sellers and doomsday preppers, who did not cause SVB’s failure, but the cross-platform speed and volume of their posts capitalizing on SVB’s failure show the risk posed to other financial institutions, as they warned of impending global collapse. pic.twitter.com/CCBa2KfhcD

— Nicole Perlroth (@nicoleperlroth) March 17, 2023