851–860 of 889 posts
SVB is our bank, I got in touch with a member of the senior team there and got the following message to share. (My own interpretation is I'm comfortable and I'm not planning to pursue it further at the moment): As you know, we are limited in what we can share until the transaction formally closes next week but in the meantime I’m attaching concise information on the strength of our business, based on our recent mid-q…
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Probably selling short
they aren't publicly traded
Trading Halted. They were down 66% on the day before halt
On 08-March-2023, they were trading at $267.90, by the end of the 9th, 106.08. By trading halt today, $39.49. Now, it's worthless. Imagine thinking you got a bargain at $106, or $39...
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The parent commenter is right, and the problem is the mark-to-market rule. This means that the value of the asset must be the current trading value, which goes down as the rates go up. The result is that bank reserves will go down substantially in nominal terms, sometimes faster than they can recoup the value of these investments.
That’s a regulatory rule which can be suspended not the underlying economic reality. “On April 9, 2009, FASB issued an official update to FAS 157[35] that eases the mark-to-market rules when the market is unsteady or inactive.” https://en.wikipedia.org/wiki/Mark-to-market_accounting We’re currently in some interesting times: “As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent…
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You’re confusing liquidity with solvency. For most banks, it is fine to assume a 20 year deposit window because deposits are fungible and for most of recent history deposit bases have gone up. SVB was wrong for not assuming that the 2021 deposit spike was (in hindsight obviously) a short term blip, but you can look at their loan book on page 19 of [0]. It's not immediately clear to me that there's some sort of system…
> For most banks, it is fine to assume a 20 year deposit window Let me try again. You're still thinking about liquidity -- assuming a 20 year deposit window seems okay to me. But the problem is solvency . It's not that the assets are illiquid -- it's that they insufficient . If you run a bank, assume a 20 year deposit window, and invest those deposits in safe assets that carry similar interest rate risk to the deposi…
You are confusing price today with the actual characteristics of the instrument.
A T-bill pays back it's face value always, it just trades below face when interest rates are higher than when it was purchased.
That is the definition of a liquidity problem. You'll get the face value back eventually (it is sufficient), but not if you sell today.
A liquid market is not the only characteristic of liquidity. There's a liquid market for anything at a low enough price...
>If depositors held their money at SVB for 20 years and SVB didn't have a bank run right now, SVB would still be in trouble: SVB would be paying more interest on those deposits than they would receive on their investments, and their portfolio would slowly go negative.
This is a true statement people are making that has nothing to do with what happened here. The point of a bank is interest rate arbitrage, so I agree SVB would have to do their job better over those 20 years, but this thing that happened over 3 months is a liquidity crisis. They weren't running out of money to pay interest on deposits, they were running out of money to give those deposits back and were veering into the problem discussed above - selling things below value to create liquidity.
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I don't believe the claim that non-fractional reserve banking would actually slow economic growth. Is real economic growth even determined by anything but technological development? Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.
Some loans go to businesses so they can buy a new widget-making machine, employ more operators, and profitably sell widgets. Economic growth in action! Other loans go to people who were going to buy a doodad after saving up for 12 months, who instead get the doodad immediately and pay for it for 14 months. That looks like economic growth, because in month 1 doodad sales have risen. But if the sale would have happened…
Did the loan actually increase economic growth? I think the only reasonable answer is: Yes, if the bank issuing the loan had a better idea than the market about the future profitability of the investment. However, that doesn't seem very likely to me.
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I don't believe the claim that non-fractional reserve banking would actually slow economic growth. Is real economic growth even determined by anything but technological development? Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.
>Is real economic growth even determined by anything but technological development? That is just the end result, the question is how do you get there? How do you organize an economy to reach that outcome in the most optimal way?
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No, you missed the point and that's not what I'm assuming. What you're stating is still not really actionable. Like what else specifically should he have said?
Again, the point is the only thing to say is theres no problem There’s no deeper point.
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It costs what, a transfer, a bit of explaining to the accountants, and a few days lost interest, to protect your company if SVB pulls through. If you risk it and SVB goes into receivership: you might fail to make payroll. You might not have money for the taxman. You might default on liabilities. These are not balanced risks. Any executive which does not pull their company's money to surefire safety is being negligent…
It's musical chairs once the panic sets in... that's why folks are trying to discourage panic. Another bank will likely swoop in, probably no need to panic
This didn't age well.
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>banks holding securities that they are required to hold by law Not an expert in this area but when distilling everything I understand about this topic, it seems like big banks (too big to fail?) collude with the federal reserve to rob smaller banks (of clients and value) using interest rate games and these "requirements" every x years. If anyone has an explanation as to why that's a wrong conclusion, please share.
That's a bit like saying having a door with a lock on your house is a conspiracy to get you to spend money with the door and lock industry. If you squint real hard that kinda sorta looks true, but it ignores the very real protection having a door with a lock on the front of your house actually gets you. Forcing banks to have X amount of reserves in a "safe" investment vehicle should protect them from exactly this kin…
>this case will be a case study for years to come, and will effect change in FDIC's requirements.
I'm only at the position where I see this conspiracy without squinting because I remember the last time this happened, responsible solvent small banks were, thanks to regulation, pushed under or taken over by the larger irresponsible banks.
I have a feeling the environment (requiring malinvestment followed by rapid rate raises) is set so that the next set of regulations will do the same and further kill smaller banks. It doesnt seem like a side effect but rather the intent of the chaos that a few large banks guide or are privy to (through lobbyists, fed insiders, etc...) before it occurs.
I urge you to withdraw your funds before they collapse. These are the same frauds that closed my account because they didn't like the business I was in. Enjoy bankruptcy you frauds.