301–310 of 311 posts
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Or you could hold short-term t-bills for any extra money over the FDIC insurance limit. Then you are good unless the US Gov goes bankrupt, which is a non-zero risk but much lower and different.
Yes, I don’t understand what systemic forces are making this not the standard practice.
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
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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…
I think you’re simplifying things too much. The issue wasn’t that SVB couldn’t foresee higher interest rates. There were a number of other issues, almost all caused by the Fed and the federal government: 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…
Becoming insolvent because the rates reached ~5% when history has had far greater rates is in fact an issue for SVB. https://tradingeconomics.com/united-states/interest-rate
The federal reserve has dual mandates for both full employment and to have stable inflation. These mandates are in many ways opposed to each other. Putting the blame on the fed in hindsight is always easy, but unlike an institution with such a mandate SVB failed at one of the most fundamental parts of being a bank.
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LOL. In Australia, an inter-bank ACH transfer was typically complete within the hour, worst case. Usually within minutes. Without fees. In 2002.
And how good was your internet?
... now the transoceanic cable, on the other hand, that was... anemic, we'll say.
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I don’t understand the disgust I’m reading for VCs and startups. Bailing out the bank doesn’t mean we let the bank CEO get richer off this transaction (like we did in 2008). It means the startup companies making payroll are going to survive and continue building the future of technology and healthcare. What am I missing?
I don’t think people are disgusted at “startups” in general, but David Sacks deserves any scorn that comes his way after his shameless and pathetic Musk sycophancy through the whole Twitter deal. This guy who has spent years (decades?) constantly whining about how government regulations are excessive and federal agency should be curtailed and government should stop protecting various groups from harm etc. is now sudd…
This whole discussion around bonds makes me feel like I'm either too stupid or too smart, because it does not make sense to me that SVB would not have any sort of hedging around government bonds? I don't know much about US bonds, but Brazil issues 3 types of bonds: fixed rate, inflation-indexed floating rates and interest-indexed floating rates. It's common sense between investors you need to hold a mix of the 3 to h…
In the short term, it is interesting to see if this problem grows[0]...if Fed keeps rates at high levels for longer, there is going to be a gravitational pull into treasuries which will cause more banks to fail. It would be very prudent to not have more than the FDIC insured amount in especially smaller regional banks that may have made same errors as SIVB while avoiding Basel III regulations [1] [0] https://twitter.…
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> The exemptees just need to be fucking careful with this advanced mode of operation. How many times will we get burned until we learned that banks will not be careful if they are given an opportunity to not be.
Or that any business will not be careful given the opportunity.
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In Russia money transfers are mostly instant. What stops american banks from using new software and new payment protocols?
There are instant transfers (Zelle, wire transfers, debit cards). There aren't instant transfers with all the same properties as ACH, but later this year there will be.
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