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[Deleted User 863]

I get that... but are we willing to risk a massive depression?

It feels like it is inevitable. So many aspects of our financial system and economy are not built on sound foundations. Smoke and mirrors. Another bail out doesn't fix that. And possibly makes it even worse in the long run.

[Sparko]

Trump ended Dodd Frank like the idiot he is. And stood down the pandemic task force. And tried to ruin NATO. A one man armageddon.

[RainbowsandUnicorns]

Back to SVB for a moment. Good thing the market isn't getting hammered. Yet.
Will be interesting to see what if anything happens to other "financial institutions".

[Mjl]

Back to SVB for a moment. Good thing the market isn't getting hammered. Yet.
Will be interesting to see what if anything happens to other "financial institutions".

It isn't getting hammered because the depositors were "bailed out".

[Shirley]

Back to SVB for a moment. Good thing the market isn't getting hammered. Yet.
Will be interesting to see what if anything happens to other "financial institutions".

It isn't getting hammered because the depositors were "bailed out".

But thankfully, not the investors in the bank.

[Mjl]

Back to SVB for a moment. Good thing the market isn't getting hammered. Yet.
Will be interesting to see what if anything happens to other "financial institutions".

It isn't getting hammered because the depositors were "bailed out".

But thankfully, not the investors in the bank.

Yep. I really like what was done here, given the alternatives.

[Deleted User 863]

The prolonged low rate environment has caused poorly run banks to make risky loans.

[Mjl]

How are banks not considered Ponzi schemes?

I don't know that I have a better answer, but it does seem to fit the definition.

[Deleted User 863]

How are banks not considered Ponzi schemes?

I don't know that I have a better answer, but it does seem to fit the definition.

Haha...they don't mislead. They tell you exactly what they'll do with your money when you open an account.

[Shirley]

"

[jfish26]

The prolonged low rate environment has caused poorly run banks to make risky loans.

Maybe, maybe not. But this particular situation has nothing to do with SVB having made risky loans.

[RainbowsandUnicorns]

Back to SVB for a moment. Good thing the market isn't getting hammered. Yet.
Will be interesting to see what if anything happens to other "financial institutions".

It isn't getting hammered because the depositors were "bailed out".

Market didn't get hammered. Other "financial institutions" did.

[Deleted User 863]

The prolonged low rate environment has caused poorly run banks to make risky loans.

Maybe, maybe not. But this particular situation has nothing to do with SVB having made risky loans.

Why did they collapse?

[jfish26]

The prolonged low rate environment has caused poorly run banks to make risky loans.

Maybe, maybe not. But this particular situation has nothing to do with SVB having made risky loans.

Why did they collapse?

Because their investments (treasuries) were underwater.

[DCHawk1]

"

Dodd-who?

https://www.wsj.com/articles/barney-fra ... d-e5c8819c

Former Rep. Barney Frank co-sponsored the law that tightened banking regulations after the financial crisis, but since leaving office he has been working the other side of the street—as a board member of Signature Bank, which regulators shut down Sunday.

[DCHawk1]

Maybe, maybe not. But this particular situation has nothing to do with SVB having made risky loans.

Why did they collapse?

Because their investments (treasuries) were underwater.

That's not even close to the entire story.

They also got greedy, taking on excess duration risk. They had a ton of spread risk w/a ton of mortgage-backed securities. They were overinvested in venture debt. They didn't hedge their interest risk. And because they kept their treasuries and mortgage-backed securities in held-to-maturity accounts, they weren't marked to market, effectively hiding all of the risk.

This was major risk management failure and a minor regulatory failure.

[jfish26]

Why did they collapse?

Because their investments (treasuries) were underwater.

That's not even close to the entire story.

They also got greedy, taking on excess duration risk. They had a ton of spread risk w/a ton of mortgage-backed securities. They were overinvested in venture debt. They didn't hedge their interest risk. And because they kept their treasuries and mortgage-backed securities in held-to-maturity accounts, they weren't marked to market, effectively hiding all of the risk.

This was major risk management failure and a minor regulatory failure.

I agree of course. But the point is - this is not remotely the same fact pattern as the 2007-08 crisis.

[DCHawk1]

Because their investments (treasuries) were underwater.

That's not even close to the entire story.

They also got greedy, taking on excess duration risk. They had a ton of spread risk w/a ton of mortgage-backed securities. They were overinvested in venture debt. They didn't hedge their interest risk. And because they kept their treasuries and mortgage-backed securities in held-to-maturity accounts, they weren't marked to market, effectively hiding all of the risk.

This was major risk management failure and a minor regulatory failure.

I agree of course. But the point is - this is not remotely the same fact pattern as the 2007-08 crisis.

Fair enough.

[Shirley]

Why did they collapse?

Because their investments (treasuries) were underwater.

That's not even close to the entire story.

They also got greedy, taking on excess duration risk. They had a ton of spread risk w/a ton of mortgage-backed securities. They were overinvested in venture debt. They didn't hedge their interest risk. And because they kept their treasuries and mortgage-backed securities in held-to-maturity accounts, they weren't marked to market, effectively hiding all of the risk.

This was major risk management failure and a minor regulatory failure.

You took the words out of my mouth, duration risk, no interest rate hedges, i.e., no risk management.

"...If you look at page 66 of SIVB's FY 2022 10-K, you can see the composition of its "Held-to-Maturity" (HTM) Securities portfolio.

Remarkably, $86 billion of the portfolio was invested in long duration securities, mostly Agency issued mortgage backed securities. Per the 10-K, the weighted average yield of these securities was 1.63%!!!

...the estimated weighted average duration of SIVB's investment securities portfolio was 5.7 years.

So, last week, on March 8, 2023, when SIVB disclosed that the company sold $21 billion of its Available-for-Sale Securities, and crystallized $1.8 billion in losses, which triggered a need to raise equity capital to replenish its tangible equity capital ratios, this triggered a run on the bank...

[Sparko]

The Fed takes a big part of the blame with their hammering interest rates when inflation had a lot to do with profit taking and supply chain stress