Silicon Valley Bank

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 gave an honest relatively balanced response, and that is what you put back? I didn’t blame trump.

 

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.

 

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

 

Aaaaaaaand on queue….

 

https://www.cnbc.com/2023/04/28/fir...s-regional-bank-searches-for-rescue-deal.html

First Republic finally succumbed it looks like.

 

Feds seize First Republic Bank, then sell it to JPMorgan -