281–290 of 311 posts
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I noticed that he conflated the safety of a T-note* with the asset price. US Treasuries are AAA-rated super safe guaranteed returns because they're not expected to default or miss a coupon payment, and they'll be redeemed for the full value when they mature. That doesn't mean they don't have market prices that fluctuate. *T-bills are up to 52 weeks maturity.
Heh I was wondering if someone else would spot that too. Who said finance people aren't fun at parties?
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This btw is Jay Ersapah, Head of Financial Risk at SVB. Apparently DEI & LGBTQ issues were more important than making sure their assets & obligations are balanced: https://twitter.com/the_real_fly/status/1634035956188688385
At SVB UK, which is isolated apparently. Not that it reduces the impact of the image ...
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Are these really innovations, or just convoluted workarounds for problems that other countries have actually solved? I don't think anyone under 40 in Europe has ever written a check, for example, because wires are far more convenient there.
System-wide Innovation is a lot easier when one’s country has a handful of banks. USA has ~4500 banks, 12x the #2 country, Russia. https://www.helgilibrary.com/charts/what-country-has-the-mos...
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Let us hope that the bank did not "bet" and instead had a decision making process.
I mean objectively the bank bet that interest rates wouldn't go up, they took a massive unhedged position in exactly that. I hope the bank thought it was betting, because if they didn't realize they were betting on interest rates staying low then that is a shocking level of incompetence. They probably thought it was a safe bet, but it was a bet nonetheless with obvious risk if they were wrong.
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Honest answer? I don't know. But when my business was in a similar position (not from VCs and only about 25% of that amount), my business partner, attorney, and accountant sure did, so I know it can be done. IIRC, it was a fairly complex mix of different things. There certainly wasn't a single place that held all of the money. I know that this sort of problem isn't new, and I know that there are a variety of ways to…
In jest, this comment reminds be of that article about "The Gods On Hacker News" [1]. A random user just typed "when I had about $25mn in my business account..." like that's nothing, lol. 1- https://www.riknieu.com/the-gods-on-hackernews/
I disagree with the overall learning from SVB’s collapse. Bonds are safe. The learning, to me, is that keeping interest rates at zero for too long distorts expectations in an unsafe way. What did SVB do wrong, exactly? They took in a lot of money, i.e. they ran a successful business. And they bought safe assets with that money. Who at the time would have disagreed with their strategy? The issue is that the Fed create…
I think you're suggesting that somehow SVB a large and sophisticated bank could not contemplate that the fed would raise interest rates. Not to mention despite the size of their bet, they could have unwound this position for the last couple years since their initial bet. >And they bought safe assets with that money. The point is that you can't buy 100B of bonds and say "oh bonds are safe". When you buy low yield bond…
1. Covid stimulus vastly increased the amount of cash at the bank.
2. Artificially low interest rates plus the cash infusion caused inflation.
3. While inflation was beginning, the Fed somehow got it in its head that inflation was “transitory” and rate hikes weren’t needed.
4. The Fed waited too long to raise rates, so they needed to spike rates as quickly as possible once they changed their opinion on inflation.
Basically the government gave banks hundreds of billions of dollars to lend via stimulus spending, and then made those loans worthless by spiking interest rates less than a year later. Whose fault is that really?
SVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leve…
This btw is Jay Ersapah, Head of Financial Risk at SVB. Apparently DEI & LGBTQ issues were more important than making sure their assets & obligations are balanced: https://twitter.com/the_real_fly/status/1634035956188688385