Starfish BCB - Loans and Deposits - page 3.

bigbox

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Quote from: JoelKatz on November 06, 2012, 08:39:58 PM

The FDIC is specifically insurance and specifically assumes the risk of bank failures.

Patrick specifically insured his deposits and specifically assumed the risk of loan failures.

Quote from: JoelKatz on November 06, 2012, 08:39:58 PM

In addition, there was no mistake on the part of the people whose funds the FDIC insured. So it would not have been equitable for the FDIC to split the losses with those it insures.

If the FDIC were named Patrick, you would probably say the depositors made the assumption that the banks loans weren't correlated, and thus should share in the losses. You would probably say that regardless of whether the depositors actually made that assumption.

Quote from: JoelKatz on November 06, 2012, 08:39:58 PM

It's possible he had different loans with different terms and some weren't predicated on the shared belief that he had limited Pirate exposure. You'd have to look on a case by case basis and decide in each case how to equitably divide the losses.)

Agreed. My deposit wasn't predicated on shared beliefs of what he would do with his loans, it was predicated on the shared belief that he guaranteed his deposits. He didn't specify exactly what he was going to do with the deposits, or who he was going to loan money to, so we couldn't have had shared beliefs on correlation which is irrelevant anyway. If he spent the money on hookers and blow, I would still expect him to honor the shared belief that he guaranteed his deposits.

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Quote from: bigbox on November 06, 2012, 07:55:44 PM

Quote from: JoelKatz on October 25, 2012, 09:37:26 PM

By the way, this was the same type of missed risk that resulted in the mortgage collapse. People who thought they were "diversified" didn't realize that a significant fraction of their assets were vulnerable to a drastic drop in the housing market because they were all ultimately tied to residential mortgages.

I'm glad you think it's the same. There have been hundreds of bank failures since 2008 in the USA due to correlated loans that went bad (mortgages). The FDIC guaranteed bank deposits. This guarantee was honored, regardless of whether the bad loans were correlated or not. Patrick also guaranteed his deposits.

http://www.fdic.gov/bank/individual/failed/banklist.html

The FDIC is specifically insurance and specifically assumes the risk of bank failures. In addition, there was no mistake on the part of the people whose funds the FDIC insured. So it would not have been equitable for the FDIC to split the losses with those it insures. (Also, even if equitable, it would have been politically infeasible. Any loss of confidence in the FDIC would defeat the point of the FDIC.)

Yes, Patrick guaranteed his deposits. But as he made quite clear, that guarantee was predicated on his belief that there was no significant correlated risk. (The transcript in the scammer accusation thread makes this clear.) So against someone who didn't make that same mistake, it would be enforceable. But against someone who did, it isn't. If Patrick is responsible for losses caused directly by this mistaken belief, so are others who have that same mistaken belief and it causes the same type of loss. (Unless the agreement was otherwise. It's possible he had different loans with different terms and some weren't predicated on the shared belief that he had limited Pirate exposure. You'd have to look on a case by case basis and decide in each case how to equitably divide the losses.)

bigbox

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Quote from: JoelKatz on October 25, 2012, 09:37:26 PM

By the way, this was the same type of missed risk that resulted in the mortgage collapse. People who thought they were "diversified" didn't realize that a significant fraction of their assets were vulnerable to a drastic drop in the housing market because they were all ultimately tied to residential mortgages.

I'm glad you think it's the same. There have been hundreds of bank failures since 2008 in the USA due to correlated loans that went bad (mortgages). The FDIC guaranteed bank deposits. This guarantee was honored, regardless of whether the bad loans were correlated or not. Patrick also guaranteed his deposits.

http://www.fdic.gov/bank/individual/failed/banklist.html

dooglus

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Quote from: Shadow383 on November 04, 2012, 09:16:32 PM

So roughly what percentage has now been paid back?

In my case, 43.37% of the initial investment, so far.

Shadow383

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So roughly what percentage has now been paid back?

PatrickHarnett

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Quote from: CharlieContent on November 04, 2012, 12:20:41 AM

Patrick someone is calling you out as a scammer in the accusation forum.

https://bitcointalksearch.org/topic/scammer-tag-patrickharnett-121915

Yes, I've seen that. I have no intention of fanning the flames over there. I find it interesting that one of the replies commending the accusation is someone I've never dealt with. I did also note that there is a claim that the coins haven't moved, which shows someone doesn't know how to view the block chain. That account is being paid back on the same basis as everyone else.

Note to BorderBits: Try harder, that's neither an effective troll or humour. Micon was better.

BorderBits

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Quote from: CharlieContent on November 04, 2012, 12:20:41 AM

Patrick someone is calling you out as a scammer in the accusation forum.

https://bitcointalksearch.org/topic/scammer-tag-patrickharnett-121915

I've been informed that Patrick has considered the charges against him and has since downgraded his investment program to AAA- Within five days, if Patrick continues to fail to respond to the accusations, he will recalculate his rating to be AAA+

CharlieContent

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Patrick someone is calling you out as a scammer in the accusation forum.

https://bitcointalksearch.org/topic/scammer-tag-patrickharnett-121915

Trance104

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So... Morale of the story: Life's tough, money's tough, Bitcoin's tough. Cool

I suppose trust is tough too.

JoelKatz

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Quote from: Chang Hum on October 28, 2012, 05:11:32 AM

What is the correlated risk you are talking about is it GLSBE?

GLBSE is one unforeseen correlated risk. Another is that a large number of borrowers were actually borrowing to invest in Pirate and thus many loans would go bad if Pirate went bad. This was especially disastrous because many people assumed they could use these kinds of loan portfolios specifically to diversify themselves against Pirate exposure. Hashking was a similar issue -- people specifically expected to use him to diversify to protect against Pirate exposure but actually only got themselves more Pirate exposure. It's possible that GLBSE's collapse is actually tied to the PPT collapse. So it may all tie back to unforeseen Pirate exposure.

Quote

If so why would people borrow money at a 2% compounding interest rate to invest in flakey unregulated businesses on there when most of them yielded less than that and how is that the depositors fault?

It's the depositors' fault because they refused to appreciate this risk even while folks like me were screaming in their faces that they were idiots to invest with Patrick because of these kinds of risks. And it's Patrick's fault because he continued to take deposits and make loans even while folks like me were screaming in his face that his business model made no sense. There is equal fault on both sides, I think.

coinft

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Quote from: memvola on October 28, 2012, 05:24:19 AM

Quote from: JoelKatz on October 27, 2012, 03:22:50 AM

Quote from: bigbox on October 27, 2012, 01:32:53 AM

I understood Patrick's guarantee to mean that my funds were guaranteed regardless of whether any or all loans went bad, correlated or uncorrelated. Any other kind of guarantee isn't a guarantee, it's pointless.

I don't believe you. If you have any evidence to suggest that you understood that there was a real risk that the loans were correlated, and that this risk was allocated to Patrick, please present it. All the evidence I have suggests that people either never considered that risk or rejected it as implausible. If you have any evidence that might change my mind, I'd be glad to take a look at it.

Yeah, it would be hard to prove what people in general perceived at some point in the past, though I'm not sure the burden is on the lender to prove their historical beliefs. FWIW, I certainly thought most loans would be correllated, regardless of "pirate exposure". That kind of high interest loans couldn't likely have diverse destinations. I admit that I considered there was a high-risk of this sort of thing happening but assumed the borrowers were prepared to pay out of their pockets. I certainly thought they should, even if they wouldn't.

+1

At some point in time about every non-PPT asset issuer (including Patrick) has been accused of investing in pirate secretly, or having much higher indirect exposure than expected. The dependence on pirate has been discussed on this board repeatedly. The possible correlation of a lot of investments is a logical conclusion, which is hard to assume has not happened in the minds of at least some investors.

memvola

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Quote from: JoelKatz on October 27, 2012, 03:22:50 AM

Quote from: bigbox on October 27, 2012, 01:32:53 AM

I understood Patrick's guarantee to mean that my funds were guaranteed regardless of whether any or all loans went bad, correlated or uncorrelated. Any other kind of guarantee isn't a guarantee, it's pointless.

I don't believe you. If you have any evidence to suggest that you understood that there was a real risk that the loans were correlated, and that this risk was allocated to Patrick, please present it. All the evidence I have suggests that people either never considered that risk or rejected it as implausible. If you have any evidence that might change my mind, I'd be glad to take a look at it.

Yeah, it would be hard to prove what people in general perceived at some point in the past, though I'm not sure the burden is on the lender to prove their historical beliefs. FWIW, I certainly thought most loans would be correllated, regardless of "pirate exposure". That kind of high interest loans couldn't likely have diverse destinations. I admit that I considered there was a high-risk of this sort of thing happening but assumed the borrowers were prepared to pay out of their pockets. I certainly thought they should, even if they wouldn't.

Chang Hum

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Quote from: JoelKatz on October 27, 2012, 10:27:00 PM

Quote from: Bjork on October 27, 2012, 09:22:33 PM

I don't believe Patrick ever explicitly stated that these funds were vulnerable to any risks from the depositors perspective. In most countries any ambiguities in contracts favor the person who did not write the contract, I.E. depositors. He would have needed to explicitly state that these funds were vulnerable and he did not.

I'm not arguing that there's an ambiguity in the contract. I'm arguing that there's a common mistake underlying the contract.

The analogy would be two people who both believe that a ship sank in a particular place who contract to have one party recover the ship for a fixed fee. If it turns out that they were both incorrect and the ship was actually someplace else that is either more expensive or less expensive to recover, the disadvantaged party could not be equitably required to comply with the terms of the contract. The exception, of course, would be if the contract explicitly assigned this risk to one party or the other. The failure to assign this risk doesn't make the contract ambiguous, it just doesn't address this possibility because neither party to the contract considered it likely.

In this case, the common mistake was the belief that the loans were not subject to significant correlated risk. The contract doesn't appear to assign this risk to either party. It's not that it's ambiguous about who bears this risk, it simply didn't include assigning that risk inside its scope because neither party considered that risk likely.

What is the correlated risk you are talking about is it GLSBE? If so why would people borrow money at a 2% compounding interest rate to invest in flakey unregulated businesses on there when most of them yielded less than that and how is that the depositors fault?

JoelKatz

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Quote from: Bjork on October 27, 2012, 09:22:33 PM

I don't believe Patrick ever explicitly stated that these funds were vulnerable to any risks from the depositors perspective. In most countries any ambiguities in contracts favor the person who did not write the contract, I.E. depositors. He would have needed to explicitly state that these funds were vulnerable and he did not.

I'm not arguing that there's an ambiguity in the contract. I'm arguing that there's a common mistake underlying the contract.

The analogy would be two people who both believe that a ship sank in a particular place who contract to have one party recover the ship for a fixed fee. If it turns out that they were both incorrect and the ship was actually someplace else that is either more expensive or less expensive to recover, the disadvantaged party could not be equitably required to comply with the terms of the contract. The exception, of course, would be if the contract explicitly assigned this risk to one party or the other. The failure to assign this risk doesn't make the contract ambiguous, it just doesn't address this possibility because neither party to the contract considered it likely.

In this case, the common mistake was the belief that the loans were not subject to significant correlated risk. The contract doesn't appear to assign this risk to either party. It's not that it's ambiguous about who bears this risk, it simply didn't include assigning that risk inside its scope because neither party considered that risk likely.

Bjork

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Quote from: JoelKatz on October 27, 2012, 03:22:50 AM

Quote from: bigbox on October 27, 2012, 01:32:53 AM

I understood Patrick's guarantee to mean that my funds were guaranteed regardless of whether any or all loans went bad, correlated or uncorrelated. Any other kind of guarantee isn't a guarantee, it's pointless.

I don't believe you. If you have any evidence to suggest that you understood that there was a real risk that the loans were correlated, and that this risk was allocated to Patrick, please present it. All the evidence I have suggests that people either never considered that risk or rejected it as implausible. If you have any evidence that might change my mind, I'd be glad to take a look at it.

I don't believe Patrick ever explicitly stated that these funds were vulnerable to any risks from the depositors perspective. In most countries any ambiguities in contracts favor the person who did not write the contract, I.E. depositors. He would have needed to explicitly state that these funds were vulnerable and he did not.

JoelKatz

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Quote from: bigbox on October 27, 2012, 01:32:53 AM

I understood Patrick's guarantee to mean that my funds were guaranteed regardless of whether any or all loans went bad, correlated or uncorrelated. Any other kind of guarantee isn't a guarantee, it's pointless.

I don't believe you. If you have any evidence to suggest that you understood that there was a real risk that the loans were correlated, and that this risk was allocated to Patrick, please present it. All the evidence I have suggests that people either never considered that risk or rejected it as implausible. If you have any evidence that might change my mind, I'd be glad to take a look at it.

bigbox

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Quote from: JoelKatz on October 25, 2012, 09:37:26 PM

I think you're misunderstanding my argument.

I understand your argument. I'm saying you're wrong. I understood Patrick's guarantee to mean that my funds were guaranteed regardless of whether any or all loans went bad, correlated or uncorrelated. Any other kind of guarantee isn't a guarantee, it's pointless.

PatrickHarnett

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Quote from: JoelKatz on October 25, 2012, 09:37:26 PM

By the way, this was the same type of missed risk that resulted in the mortgage collapse. People who thought they were "diversified" didn't realize that a significant fraction of their assets were vulnerable to a drastic drop in the housing market because they were all ultimately tied to residential mortgages. It always seems obvious in hindsight.

That was also helped by the closely interrelated nature of the businesses - cascading collapse. It remains a significant risk in the world economy currently.

As you note, something similar happened in bitcoin, but rather than simply having a bunch of people lying about what they were doing with coins and loans, there were also those that were simply dishonest, and the diversification into other assets saw a fair share of failures (uncorrelated) and then chronic illiquidity (correlated events). What has become obvious - in hindsight - is that the average level of honesty just isn't high enough. That's without the scams, thefts, hacks and other crap that goes on.

JoelKatz

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Quote from: bigbox on October 25, 2012, 03:50:01 PM

Quote from: JoelKatz on October 25, 2012, 06:34:25 AM

I don't agree that that's an obvious risk.

A big reason I deposited with Patrick is because he is assuming the risk of loans going bad. If I knew that his guaranteed deposits really meant "guaranteed unless loans go bad", then I never would have deposited with Patrick. If I wanted to assume the risk of loss (and thus potentially higher profit), I could have made loans to other people myself.

I think you're misunderstanding my argument. It isn't about the foreseeable risk that loans would go bad. I agree that Patrick assumed that risk.

Quote

You're saying I couldn't have foreseen the possibility of Patrick's loans going bad, and thus Patrick shouldn't have to pay me back. That's false. I did expect there was a possibility Patrick's loans could go bad. That's the whole point of depositing with Patrick: he guarantees his deposits against that scenario.

I agree. I'm talking about the risk that the loans were correlated, that is, that a common event would make a significant number of the loans go bad at the same time. If you have some evidence that you and other depositors considered that specific risk or that this risk was allocated to Patrick, I'd like to see it. All the evidence I've seen suggests that both Patrick and his depositors (at least those who spoke on the issue) either denied that this risk existed or never considered it.

By the way, this was the same type of missed risk that resulted in the mortgage collapse. People who thought they were "diversified" didn't realize that a significant fraction of their assets were vulnerable to a drastic drop in the housing market because they were all ultimately tied to residential mortgages. It always seems obvious in hindsight.

PatrickHarnett

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Quote from: AndyRossy on October 25, 2012, 05:19:49 PM

Quote from: PatrickHarnett on October 25, 2012, 05:06:01 PM

There are still a few good people making their regular scheduled payments, but they remain the minority in BTCland

such as who? Tongue

x

Yes, you're happily in that list.

Topic: Starfish BCB - Loans and Deposits - page 3. (Read 60461 times)