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Matt Levine

FTX Is Still Looking for Money

Solvency vs. liquidity, Alameda loans, some podcast foreshadowing and some Jefferies shade.

Programming note: Money Stuff will be off tomorrow, back on Monday. I realize I say that a lot, but I’m saying it again.

The obvious question — here and always — is: Is it a liquidity problem, or a solvency problem? Classically, if you are a bank, and you have $100 of perfectly good mortgages outstanding, $20 of cash in your vaults and $100 of deposits, and all the depositors show up one day asking for their money back, you don’t have it. You have $20 of cash and they want $100. But you are good for it: You’ve got $100 of good mortgages, and when they get paid back you’ll have plenty of money for your depositors. You are just not good for it right this minute. You are solvent — you have $120 of assets (loans plus cash) and $100 of liabilities (deposits) — but illiquid. This is It’s a Wonderful Life.