Silicon Valley Bank collapse

Last week, two major banks collapsed: Silicon Valley Bank (SVB) and Signature. These were the second and third largest bank collapses in US history—the largest being Washington Mutual in 2008. Since I seem to be writing about finance this month, I wanted to try my hand at explaining why, for the reader who doesn’t know anything about finance.

Short answer: SVB placed a big bet long-term US treasury bonds and mortgage-backed securities. However, the prices of these assets went down. Companies with money in SVB were worried about it, so they started withdrawing a lot of money, requiring SVB to sell its assets at a loss until it was wiped out. Bank collapses tend to spread via a process called “contagion”, and Signature appears to be the first victim.

Really long answer: Okay, let’s walk through these concepts one by one.

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What do you think of finance?

Dear readers, what do you think of the finance industry?

Ideally, I would keep this short and give up the floor to commenters. But I’ll start by saying I work in the finance industry. I am not a finance expert, I’m just a data scientist. I am ambivalent about the moral value of the industry.

I know from hanging out in leftist spaces that a lot of people feel much more strongly about the finance industry. Strongly negative. I’m curious to hear more.

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Why doesn’t EA divest from crypto?

After Sam Bankman-Fried (SBF) was arrested for massive fraud in November, there has been a reckoning in the EA movement to which SBF belonged. I’ve linked to several critics discussing how SBF’s actions could have been attributed to EA philosophy and practices, and even offered my own humble commentary.

Of course, it’s very easy to get distracted by philosophical arguments, and miss what’s staring in our face. The much more obvious takeaway from the whole affair is: EA was overinvested in cryptocurrency. Cryptocurrency is evil, why were they invested in it at all?

Yes, fraud can come from any sector, and no, not every person involved in crypto is fraudulent to the same degree as SBF. No, SBF is not “proof” of the depravity of crypto. What SBF proves, is that EA has been supportive of, and dependent on crypto. EA insiders must have already known, and maybe some readers already knew, but I didn’t know! I didn’t know EA had so much crypto in it! Why is that? And why don’t they stop?

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A few things in defense of EA

I’m fairly well off these days. Between having a frugal upbringing, and being a tech worker married to another tech worker with no kids or debt, I think life has obviously been unfair in my favor. I want to give some of it away. For these reasons, I think a lot about the effective altruism (EA) movement, albeit as an outsider.

Most of the stuff I say about EA is fairly critical (and there’s more to come!), but I try to be measured in my criticism, because I don’t think it’s all bad. Compared to a lot of stuff PZ Myers says, I’m practically a supporter. In this article, I offer a begrudging and measured defense.

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