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Banks to Super Apps?
Your Daily Eko
🧠 Insights You Won’t Forget
Today's insights are inspired by a recent episode of Odd Lots about US Banks trying to be Super Apps
SVB’s Collapse Stemmed from Liability Misjudgment, Not Asset Toxicity
Regulators and markets focused heavily on bank assets post-2008, but SVB’s downfall was due to its liability structure, over 90% uninsured, concentrated deposits that turned “overnight” during panic. This blind spot shows risk modeling often ignores how fast “sticky” deposits can flee.
The FDIC’s ‘Least Cost’ Mandate Doesn’t Prevent Bailouts
The legal requirement to resolve failed banks at “least cost” often incentivizes bailing out uninsured deposits because when a bank is 90% uninsured, covering only insured depositors doesn’t significantly reduce costs, creating systemic moral hazard.
Unseen Consolidation Risk: Flight to ‘Too Big to Fail’ Banks
SVB’s failure triggered massive capital flows from regional to mega banks, reinforcing the perception that only big banks are safe. This leads to market concentration, unfair cost-of-capital advantages, and fewer lending sources for small businesses.
Buy Now, Pay Later (BNPL) = Blind Spot in Credit System
BNPL is surging, growing 10x during COVID, but isn’t tracked on credit reports, making it invisible to lenders and regulators. Consumers are unknowingly over-leveraging, and systemic risk is mounting unmeasured.
Stablecoins = Shadow Banking, Not Just Crypto
Chopra reframes stablecoins as tokenized bank or money market deposits. Their expansion could disintermediate traditional credit channels, shifting liquidity to entities that don’t lend to the real economy (e.g. farms, small businesses).
Fintech and Big Tech Aim to Monetize Payments via Surveillance
Payment apps aspire to replicate China’s WeChat/Alipay model, monetizing SKU-level data for targeted pricing. Chopra warns this turns payments into surveillance tools, posing systemic and privacy risks.
BTFP Bailout Mechanism Raised Eyebrows
The Fed’s Bank Term Funding Program let banks post underwater treasuries at face value for liquidity. It was created to avoid stigma of the discount window,but enabled interest rate arbitrage and moral hazard, as some banks gamed it.
Stablecoins Could Undermine Democratic Financial Control
If issued by tech giants (like Meta’s Libra), stablecoins could lead to a corporate-controlled currency layer, threatening both economic sovereignty and free expression, especially as firms could discriminate on transaction types.
The Regulatory Response to Innovation is Hampered by Complexity and Arbitrage
Chopra argues for bright-line rules instead of convoluted policies that invite regulatory arbitrage. With tokenized stocks and offshore digital markets proliferating, the U.S. must prioritize simplicity and legal clarity.
Banking and Commerce Are Blurring in Ways That Risk Democracy
The historical separation of banking and commerce is eroding. If commerce giants control payments or stablecoins, they could enforce payment censorship, similar to content moderation, threatening both economic freedom and democratic norms.
Recall from last week
Whiteboard Investing as a Competitive Edge
The firm’s unique value creation often comes from co-creating bespoke structures with CEOs via “whiteboard sessions.” Whether Spotify’s convertible or Real Madrid’s stadium JV, the structure is never off-the-shelf.
Investor-First Architecture: The TAO Model
Sixth Street built TAO, a $30B+ balance sheet-like vehicle, to backstop and co-invest with smaller, strategy-matched funds. This allows them to write billion-dollar checks while keeping core fund sizes aligned with actual opportunity, not just fundraising ambition.
💡 Eko Worth Remembering
“Stablecoins are not about crypto. They are about creating a new type of banking and payments charter.”
⚡ Active Recall – Test Yourself
Question: Why did SVB’s asset portfolio of safe U.S. Treasuries still result in a catastrophic bank run, and what does this reveal about the current regulatory blind spots in bank risk modeling?
🛤️ Off the Record
Lets explore Rohit’s comment above. I want to slightly disagree here. Stablecoins are about crypto, in fact stables showcase how useful crytpo can be. The new typ eof banking and payments does not stop with just stablecoins. They are just a POC. What follows is what’s interesting.
Finance onchain, otherwise known as Decentralized Finance (DeFi). Yes, this already exists and has billions of total value locked (TVL). The next step is bringing traditional equities (your stocks and bonds) onchain. Companies like Ostium.io, are doing just this allowing users to trade basically anything onchain.
If you want to learn more about DeFi I recommend either chatting with your GPT of choice or reading below:
Happy to answer any questions as well, so feel free to reply!
Eko’s Top Pods
Reply with an episode suggestion. If added, you’ll get a shoutout from Eko!
Answer:
SVB’s collapse was triggered not by asset toxicity but by the structure of its liabilities- specifically, its over-reliance on large, uninsured, concentrated deposits. When confidence evaporated, these deposits fled quickly, and the bank couldn’t liquidate its long-duration assets without huge losses. This reveals a key blind spot: regulators have focused too much on asset quality post-2008, but liability dynamics, especially deposit fragility and concentration, are equally vital to systemic stability.
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