71–80 of 311 posts
As someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?
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…
Earlier quoted context omitted.
The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argume…
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?
its not just government bailout versus nothing. private equity could have come together and tried to shore of the bank in its capital raise, but nobody (not enough) wanted to be first. their own collective risk aversion is their demise. And on the greed front, people totally plan to buy the carcass and firesold assets.
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…
Are you sure that is the problem? I see lots of comment today they lost a lot of money on long dated treasuries. Which is "safest" asset.
My money market fund (VMFXX) is composed of Fed Repo notes with 13 _DAYS_ of maturity average (https://investor.vanguard.com/investment-products/mutual-fun...)
A bank holding customer deposits in lol 30 _Year_ or 10 _YEAR_ treasuries is anything but safe. That's called duration risk, and congrats, they just got burned by duration risk.
Earlier quoted context omitted.
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?
It means that the bank was gambling, lost, and wants to externalize those losses onto the rest of us who weren't gambling.
An alternative is to bankrupt the partners, cancel the shares, then take action for depositors
That is what did not happen in 2008
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Self inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).
SVB failed to hedge their interest rate risk.
Earlier quoted context omitted.
> they are destroying the principle of every existing bond on the market What principle are they destroying? Bonds are not, and never were, immune to economic changes. They're just less volatile and react differently than stocks and, if you hold them to maturity, will pay what what they promised. It seems to me that the problem is that a whole bunch of people made investments assuming that there was effectively no ri…
These bonds are not held as investments, but as collateral for getting other things (like money to buy mortgages with). If your collateral gets worse ...
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…
The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
In 2022-23: “Bond convexity”.
This word is still not on headlines yet, so maybe more loses has to come.