Sometimes Karma's a bitch. SVB and mid-size banks spent $50 million to weaken Dodd-Frank SVB CEO Greg Becker lobbied the government to relax some Dodd-Frank provisions on regional lenders in 2015. Trump did in 2018. Silicon Valley Bank said it was too small to need regulation. Now it’s ‘too big to fail’ Probably not the complete cause but definitely a factor. https://www.cnn.com//business/2023/...nk-rollback-svb-collapse-zw-orig.cnn-business
Again, any bank worth its salt should understand and account for basic interest rate risk. They didn’t even hedge their massive bond buys apparently. I worked for a mortgage company many years ago, and we would sell bonds against our interest rate risk every month (we didn’t lock the rates but floated so there was constant risk to our pipeline). And that was only in the 10’s of millions a month. They had tens of billions and weren’t smart (or competent) enough to think of hedging or diversifying what they had to avoid this? That’s insane to me unless there is more to the story.
Well to be fair the other way, has they been regulated better it never would have gotten this far probably. Someone would have asked them last year what their plan was if rates went up with all those bonds on their book. And they did push for easing of requirements. Large systemic failure almost always have multiple causes, in this case it was a relaxed regulatory environment, rising rates, much higher then normal withdrawals to out more stress on, a lack of diversification in their portfolio, a large name like Thiel sounding the alarm in a tech savvy part of the world where many were probably online loving funds almost instantly etc. I just can’t get past the bank being as blind as they were to what they had. Like I said, maybe more comes out and it will make more sense.
I would say SVP mgt incompetence, but looking at the resumes its probably just greed. Hedging the l/t investments meant giving up some margin, so why do that.
I'd be pissed off too. Didn't read article but bondholders are supposed to get priority over equity investors.
You cited a lack of regulation. At the end of the day, a bank is like any other business and they should own their successes or failures. Their successes shouldn’t be dependent upon government regulation. In other words, Trump had nothing to do with this. This was a bank that made bad decisions with their investments.
Of course they shouldn’t, I’ve said that repeatedly. The point of regulation though is exactly what happened here. It’s to avoid bad actors potentially bringing down others with them. In this case it was the entire banking system potentially, along with anyone who used their payroll system (thousands of companies that might have had to fold up or lay people off), depositors, and even the tax payer potentially. If someone wants to be dumb with their own money and buy lottery tickets or cars or homes they can’t afford all day have at it. This is something way beyond that.
Bullshit. As long as the FDIC exists to bail out their failures, then they absolutely should be regulated.
Kind of an oh by the way, but behind the scenes banks are still pulling massive funds from that liquidity facility the fed set up. suggests things aren’t done and dusted even if they are better. Banks Are Still Drawing on the Fed for $164 Billion of Emergency Cash
https://www.cnbc.com/2023/04/28/fir...s-regional-bank-searches-for-rescue-deal.html First Republic finally succumbed it looks like.
market seems to think JPM got a good deal. up over 3% for the day and still climbing as the details get digested.