I think bdcravens is suggesting not that the law itself was intentionally a half-measure, but that the state apparatus is slow-walking the reform measures in a sort of malicious compliance with the law, in order that the governmental machinery of prohibition and its constituents (employees and vendors) are perceived as continued necessities.
That is very, very much in line with observed behaviors here in Washington state. We had a very strange marijuana legalization process, because it was almost precisely contemporaneous with another popular initiative that dismantled the state-owned liquor regulatory apparatus (it used to be state-franchised liquor stores were the only liquor retailers; Costco and the grocery interests funded a repeal of that and voters were generally quite in favor). The liquor regulator was basically renamed from "Liquor Control Board" to "Licensing of Cannabis Board" (or such) and the machinery was kept around. Extremely odd -- but probably greased the skids for the state to actually adopt the liberalized marijuana policy (instead of slow-rolling it and exaggerating its harms) because it was a new budget and jobs program for the to-be-canned employees.
Presently in Seattle, we have a very similar thing going on with the implementation of mental health and homeless service response for 911 calls for things like high guy in the street or passed out guy in doorway. The politicians are meeting their promise of standing up a small team to go to those calls, but, the police union is insisting that an armed officer go with the mental health responder every time. This malicious compliance protects existing budgets and jobs, and makes the new program destined to fail, because by definition it will always be less economical (due to duplicative efforts).
Short form: never underestimate the bureaucratic/union self-preservation instinct.
Folks seeking a more neutral description of the situation may desire to click into the 4-part data-driven report that is the original source of the claims, which is linked in the article but also below:
54% of SVB’s loan book was loans “to” VCs and PEs, but they weren’t loans based upon the funds’ portfolio holdings. They were Capital Call lines, based on the power of the VC to demand that its LPs make good on capital commitments.
(Yes, the fund portfolio holdings were pledged as additional collateral here but that’s secondary. The only thing that could make the CCLOC outstandings get marked down is if the well-heeled institutions and individuals who’ve committed to VC funds stop making their capital calls.)
Even SVB is not crazy enough to lever up against VC portfolio marks.
It's not nearly that simple, though. You are ignoring capital requirements. For things like Treasuries, you don't need any capital % against it. ($100 in deposit -> $100 in Treasuries, if you borrow at 1 and lend at 4 you made a 3% spread on $100). But for risky things that might yield much more, you might need to reserve far more, meaning you need to fund part of it with equity. ($100 in deposit but with a 50% capital requirement means you can -> buy $100 of high-yield stuff, but you need to use $50 of your equity to do so)
There's other epicycles to this too. For example, a bank can just "buy" deposits through a correspondent bank (a bank-for-banks). So the direct connection between your kind of borrowing and kind of lending, particularly when its consumer / credit card stuff, can be tenuous. In SVB's case, though, all of the stuff happened in a tight echo chamber ecosystem -- SVB got deposits from tech cos, who got money from VCs, who were working off of capital call LOCs from SVB. So your observation is germane.
Yeah, I oversimplified it to a large degree because getting to deep into the nightmare that lies beneath the banking system can make ones head explode. It's accurate enough for a layperson, if nothing else.
See also, thermohaline circulation. A major factor in the global climate is the flow of water pulled north along the Atlantic's surface due to the sinking of denser, saltier water.
Not going to be an issue with your average desalination plant, but certainly proves the point that water masses can behave differently in big, non-trivial ways due to their salinity.
There is a large set of infrequently encountered (for most) but often highly important and/or time-sensitive things that having a traditional bank you can walk into makes much easier.
Consider: medallion signature guarantee, initiating an arbitrarily large sized wire to an arbitrary recipient, cashing a physical check where the payee and indorsement doesn't match automatic remote-deposit scrutiny, cashing a particularly large cashier's check, getting cash above an ATM withdrawal limit (even from another bank or in another country, in some cases), working around a stated policy, etc.
Online-only, mobile-only, and neo-banks basically say "eh" to these corner-case services. But a branch manager, even if they may not personally recognize you, will have surprising leeway and willingness to solve problems if they look at the CRM and see you're a longtime customer in good standing with some modicum of deposit / activity over time. Not so for a rando.
It's been very worth my while to forego a couple % in interest income for the annual "need an institution to help me fix this today" tax.
(But yeah, keep the corpus in something that will pay you.)
I completely agree about the features of brick and mortar banks. My complaint specifically is about letting the large chain banks dominate your view. For example, BoA seemingly has the gall to charge a monthly fee on a savings account.
I'm lucky to have a competitive market for local banks that hasn't (yet) been completely borgified, and I do keep an account / safe deposit box [0] at one and use them for many of the things you mentioned. If you don't have any independent banks around, there is the common advice to look for credit unions instead.
I actually do keep an account at BoA too. It's the only link to another account that would be a huge hassle change out. Their ATM network is nice, the automated cash deposit feature on their ATMs is one of the easier ways to get available funds into the banking system on short notice, and I can stand keeping the $2k minimum balance for now. But still, they've got to be kept on a short leash.
[0] It's an inexpensive place to store external hard drives for rotating backups.
Effectively, yes. It's a subsidy to individuals of moderate means, particularly those who have spent decades maxing out their holdings.
If you think that's regressive and absurd, wait until you hear about the mortgage interest deduction, 1031 exchanges, depletion allowances, accelerated depreciation, ....
That is very, very much in line with observed behaviors here in Washington state. We had a very strange marijuana legalization process, because it was almost precisely contemporaneous with another popular initiative that dismantled the state-owned liquor regulatory apparatus (it used to be state-franchised liquor stores were the only liquor retailers; Costco and the grocery interests funded a repeal of that and voters were generally quite in favor). The liquor regulator was basically renamed from "Liquor Control Board" to "Licensing of Cannabis Board" (or such) and the machinery was kept around. Extremely odd -- but probably greased the skids for the state to actually adopt the liberalized marijuana policy (instead of slow-rolling it and exaggerating its harms) because it was a new budget and jobs program for the to-be-canned employees.
Presently in Seattle, we have a very similar thing going on with the implementation of mental health and homeless service response for 911 calls for things like high guy in the street or passed out guy in doorway. The politicians are meeting their promise of standing up a small team to go to those calls, but, the police union is insisting that an armed officer go with the mental health responder every time. This malicious compliance protects existing budgets and jobs, and makes the new program destined to fail, because by definition it will always be less economical (due to duplicative efforts).
Short form: never underestimate the bureaucratic/union self-preservation instinct.