SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
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Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#2I wish people would distinguish between "SVB does not deserve a bailout" as in "let it fail" vs as in "wipe out the shareholders and bond holders, but, sure, bail out the depositors"
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#3I wish people would distinguish between "SVB does not deserve a bailout" as in "let it fail" vs as in "wipe out the shareholders and bond holders, but, sure, bail out the depositors"
The situation is that the depositors will eventually get some money. And that should be good enough. If they were so stupid they put all of their money in single bank account they deserve to fail.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#4I wish people would distinguish between "SVB does not deserve a bailout" as in "let it fail" vs as in "wipe out the shareholders and bond holders, but, sure, bail out the depositors"
The situation is that the depositors will eventually get some money. And that should be good enough. If they were so stupid they put all of their money in single bank account they deserve to fail.
> The situation is that the depositors will eventually get some money. And that should be good enough.
No, it's not "good enough". Far too many companies can no longer make payroll as a result of this.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#5Why would they hedge? They would lose pretty much all of the return that they were getting by going long duration.
The problem is that their portfolio was too long duration, not a lack of hedging.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#6Earlier quoted context omitted.
The situation is that the depositors will eventually get some money. And that should be good enough. If they were so stupid they put all of their money in single bank account they deserve to fail.
> The situation is that the depositors will eventually get some money. And that should be good enough. No, it's not "good enough". Far too many companies can no longer make payroll as a result of this.
My expectations is they will liquidate all current holdings of SVB, and probably half their assets are down 20% because of interest rate pummeling of long dated bonds, so maybe everyone gets a check on Monday or Friday for 90% of their total assets at SVB. Payroll gets made, most companies will be fine, some runways are a wee bit shorter.
I think fast is better than perfect in this scenario.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#7Earlier quoted context omitted.
The situation is that the depositors will eventually get some money. And that should be good enough. If they were so stupid they put all of their money in single bank account they deserve to fail.
> The situation is that the depositors will eventually get some money. And that should be good enough. No, it's not "good enough". Far too many companies can no longer make payroll as a result of this.
No, it is good enough. They knew the rules going in. No rrason to change them after the fact because it now personally affects them. FDIC will write checks up to 250k, and return any/all recovered funds to depositors.
We can discuss changing that moving forward, but SVB is already done and dusted.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#8Why would they hedge? They would lose pretty much all of the return that they were getting by going long duration. The problem is that their portfolio was too long duration, not a lack of hedging.
Right, the problem was greed driving risk
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#9Earlier quoted context omitted.
The situation is that the depositors will eventually get some money. And that should be good enough. If they were so stupid they put all of their money in single bank account they deserve to fail.
> The situation is that the depositors will eventually get some money. And that should be good enough. No, it's not "good enough". Far too many companies can no longer make payroll as a result of this.
If you had a payroll to make this month and only had that much in cash on hand, you were already a marginal business and a gust of wind could have knocked you out. Your bank failing was that gust of wind. You’ll definitely get up to $250k back soon and probably more, and hopefully you can sort out the disruption and find a way to carry on.
If, on the other hand, you had a lot more cash on hand but parked it all as uninsured deposits in one bank, you should be screaming at whatever mentor told you that was a reasonable thing to do. Either your mentor was a hack with little financial experience or they were conniving against taxpayers and believed bailouts would magically come to their rescue and remediate well-known tail risk. Somebody done you wrong, kid. Take it up with them, not the rest of us.
Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all
#10Earlier quoted context omitted.
> The situation is that the depositors will eventually get some money. And that should be good enough. No, it's not "good enough". Far too many companies can no longer make payroll as a result of this.
My expectations is they will liquidate all current holdings of SVB, and probably half their assets are down 20% because of interest rate pummeling of long dated bonds, so maybe everyone gets a check on Monday or Friday for 90% of their total assets at SVB. Payroll gets made, most companies will be fine, some runways are a wee bit shorter. I think fast is better than perfect in this scenario.
Looks like that's happening: https://www.bloomberg.com/news/articles/2023-03-11/fdic-race...