Silicon Valley Bank

You referring to Market Cap or deposits?

 

Tiny D will be blaming Fauci’s COVID lockdowns by the end of the week.

 

Former RNC Chair Michael Steele implying that DeSantis is being racist.

 

Which he is…

 

They were exposed to high interest rate risk. It will be interesting to see what the regulators reported over the last year or so.

 

Sorry $629B

US banks sitting on unrealized losses of $620 billion | CNN Business

But SVB isn’t the only institution with that issue. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, [COLOR=var(--theme-paragraph__link-color)]according to the FDIC[/COLOR].

 

But this is where I don't understand high finance. It is not like the institutions "lost money". I understand that against inflation, the interest rate is so low that the value of their dollar is diminished, but you only lose the principal if you sell a bond. Not every bank in the US needs to sell Treasury Bonds tomorrow to raise liquidity and distribute it to all account holders, so it is not like the system becomes insolvent over night. It is a big scary number, but is it really that abnormal??

 

They invested short term funds into long term investments. Very I sound banking practice and the interest rate spread out them at risk. My concern is with how many other banks are in a similar situation. The fed has been very aggressive taking is from historic lows interest rates back to a more historically normal environment. Financial institutions may be in trouble because if this rapid change.

 

OK, and I think I understand all of that, and remember some similar things from reading about the fall of Bear Stearns and the implosion of Enron. However, am I still right in my thinking that were it not for the bank run, driven by a couple of very, very calculated people, that SVB would still have been fine?

 

We never learn

 

Another reason he won’t sniff the presidency. This bank has loans all over the country and employee’s dependent on credit lines for their pay. And this is the kind of idiocy they get from DeSantis. Seems it is all he knows.

 

That number sounds bad, but in reality most anybody (corporate or individual) that bought long term bonds in the past couple of years has a paper loss due to rising interest rates. Most all IRAs/401k's/etc investing in L/T bonds have lost value.

From the little I've read tho, IMO there is no excuse for a bank to be in their desperate position. Banks have plenty of ways to mitigate interest rate risk exposure that the average investor does not. For some reason their chief risk officer resigned last April and they only recently replaced her. Maybe there was an interim risk review process, but on the face of it, the lack of a replacement sounds like financial malpractice.

 

Biden and Co just sealed their fate. About the dumbest move I've seen by any WH admin when it comes to economics. They just set a precedent by guaranteeing all $300+B deposits including all those not insured. The next bank or banks to fail will sue the WH if they don't also reciprocate and we don't have enough trees to print all the money Biden will guarantee if this becomes a contagion. Put it this way, there's $20T, yes with a T, in total depositor accounts if you include uninsured accounts. These 2 banks fell apart because of a run and all we need is slightly less than 1% of total bank runs to create a full panic.

 

Does not really seem like that dumb of an idea. The only entity that can temporarily eat the loss in value of the T-bonds is the US Government and/or the Federal Reserve Bank. Much the same way that they did in 2009. Since most of these transfers will actually be loans, just like in 2009 and beyond, in the end, the fed gains interest payments on the loans, do they not??

US regulators say SVB customers will be made whole as second bank fails | CNN Business

 

I figured this is what would happen. If the administration did what was needed to save the economy, take care of the depositors and beneficiaries of those depositors, such as employees, and save startups some of which can be of great future benefits, Republicans would complain and start the narrative of it being a bail out, blah blah blah. Of course if they didn’t do that, and let the situation expand and the whole house of cards crumble, they’d blame Biden for that too.

Ultimately, what is the upside of depositors taking a haircut? What does that accomplish? Are we saying that depositors were making risky decisions by having operating liquidity in banks and we want to punish that? What exactly is the moral hazard that we are trying to minimize?

 

“We” being mostly the GOP