ChiGoose
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Posts posted by ChiGoose
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22 minutes ago, Orlando Tim said:
Your last two posts seem to contradict each other some. Long term bonds are not safe for a bank, especially unless rates are expected to fall. To state they were considered safe is incorrect, they locked in the long term rate for a short term boost. I don't care if it was DEI or lack of a risk management director, the cost for the bailout needs to be substantial for the people who made this decision. If you allow them to keep their millions while bailing them out we are not even pretending that merit matters so long as you paid the politicians.
You are 100% absolutely correct. I meant to state that government bonds are generally safe but SVB’s investment strategy was not. Appreciate the catch. Not always easy to type all that out on mobile.
And yeah, the DEI stuff is completely irrelevant. It has absolutely nothing to do with this but I guess there’s a lot of gullible people out there.
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Financial reporters: SVB’s collapse was due to poor risk management in the face of raising rates.
The dumbest people in the world: SVB had DEI, therefore, it’s failure was due to DEI even though literally every bank does DEI and they didn’t have these problems.
Correlation isn’t causation, people.
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If anyone is interested in what actually happened with SVB, I’d recommend this episode of The Indicator.
The main points:
- SVB’s deposits shot up in 2020 during a boom in tech companies, which make up most of its customers.
- SVB put the deposits into treasury bonds which are generally safe bets.
- However, SVB had three vulnerabilities:1. The bonds had long maturities, so they cashed out way into the future. When interest rates went up, the value of the bonds went down. More than half of SVB’s investments were in these bonds (compared to 25% average of most banks). SVB also did not hedge to balance against the risks of interest rates going up
2. SVB’s business was concentrated in the tech sector, which is very sensitive to interest rates. With turmoil in the tech sector, they were getting fewer new deposits to offset the risk of devaluing bonds.
3. SVB had a disproportionate amount of large deposits. Only 10% of its deposits were covered by FDIC’s insurance compared to an average of 50% for other banks. This drove customer panic.
- Moody’s recently told SVB that it might downgrade its credit due to the risk of its bond value decreasing.
- SVB planned to avoid a downgrade by selling its bonds at a loss and then bringing in new investors. They sold the bonds but had trouble getting new investments.
- People could then see the trouble SVB was in and it’s depositors panicked and pulled $42 billion (20%) of the deposits.
So you have a bank that managed its risk poorly and collapsed due to the unique nature of its business combined with bad management.
Or you can be an idiot and claim this was wokeism or whatever.
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41 minutes ago, Unforgiven said:
Everything woke turns to *****.
(Citation needed) -
4 minutes ago, leh-nerd skin-erd said:
I don’t know what “unreasonable” means in this context? If it saved the banking system and prevented a run, yeah, it was for the greater good. That’s an argument made by more than a few experts in the field.
Either way, it’s reasonable to question who benefited and to what extent. As for investors and bond holders, I dunno, if we’re saving folk, why not save them all?
I think we’re probably mostly in agreement about the depositors. They did nothing wrong here and letting them fail can really risk harm to the economy. If the damage is limited to these two banks, the cost of making them whole should be covered by the sale of assets and the FDIC’s fund (if needed).
My concern about investors/shareholders is that covering their losses might encourage more risky behavior in the industry. If you make an investment, you run the risk of that investment going bad, I’m not sure it should be the government’s job to cover you.
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21 minutes ago, leh-nerd skin-erd said:
It’s interesting to me that there was no limit on the extent to which a depositor could be protected. $1m? $10m? $100m? Any way you slice it, you end back at the same spot.
I believe most of SVB’s depositors were small businesses. I don’t think it’s unreasonable to cover their deposits so long as we are not bailing out the investors, shareholders, or management. -
42 minutes ago, redtail hawk said:
Except "everyone else" doesn't include taxpayers. Off to the kids table with you. Let the adults discuss this rationally. From a New York Post article today:
“Had the [Federal Deposit Insurance Corporation], [the Treasury], and [the Federal Reserve] not intervened today, we would have had a 1930s bank run continuing first thing Monday causing enormous economic damage and hardship to millions,” Ackman tweeted.
“Our gov’t did the right thing.”
Certainly other masters of the universe disagree but Biden's actions were not crazy.
Also, the shareholders and investors are getting nothing. Only the depositors are getting anything.-
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57 minutes ago, Gene Frenkle said:
You are so brainwashed.
The adults are talking about complicated things now. I believe you may be more comfortable in the Desantis or Tucker threads. Maybe there's even a Hunter Biden laptop conversion you could contribute to.
Next to the Hamlin body double guy, he might be the most braindead poster on this site.-
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2 hours ago, Gene Frenkle said:
You guys are idiots with your BS Fox News crap. This happened because of greed, plain and simple.
All of the major banks have DEI programs. This is just the brain worms crowd reflexively blaming anything bad on anything that they don’t like, regardless if there’s any actual connection.
I used to work for one of the largest banks in the country. There were mandatory DEI trainings and voluntary DEI resource groups. One of the voluntary book clubs even read White Fragility.
Why didn’t the banks plummet then? Why is it suddenly, years and years after those types of programs were implemented that it’s a problem?
The answer is because the problems affecting SVB (being long on low yield government bonds in the face of rate hikes), Signature Bank (heavy investing in the crypto bubble), and smaller regional banks (bank run risks due to consumer concerns about SVB and Signature) have absolutely nothing to do with DEI.
It’s fine to criticize DEI programs, but people pretending they had anything to do with this are just bragging about their own ignorance.
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Just now, Nitro said:
Living outside of Buffalo, the opinion of Edmunds is that is a rising star. Still do not understand the heat he got from Bills fans.
Agreed. Grass is always greener, I suppose.
Outside of the Buffalo market, Edmunds is regarded as one of the top LBs in the game. I don’t know why he gets so much hate by fans.
My guess is that we’ve had some poor DT play during much of his career so he was constantly dealing with OL in the second level.
Not a coincidence then that once we get a great player like DaQuan Jones soaking up OL, Edmunds has his best year yet and secures the bag.
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7 minutes ago, All_Pro_Bills said:
I believe some of our "progressive" members here have already assigned blame to Trump on page one. Its only been 3 years.
I should talk. I was going to suggest it was Alan Greenspan for setting the precedent, followed by every successor to the former chairman, the Fed would backstop the industry with bailouts and accommodation when necessary while insuring that all risks of loss will be socialized and profits would still be kept private. So take risks and be as reckless as you want because you will never be hurt.
Yeah, in a short term crisis, you got to do what it takes to save the economy, even if it rewards the bad actors.
But then when things have stabilized, it’s crucial to put in place mechanisms to prevent future crises and/or create tools that allow for resolution without rewarding bad actors.
We’re generally good at the first part and bad at the second part. So we get (as you aptly described) privatized profits and socialized losses.
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Very conflicted about this.
On the one hand, I think Edmunds is very very good (and young) and combining him with Milano gives us one of the best LB tandems in the league.
On the other hand, there’s no way the Bills could afford him at that price. And it’s not reasonable for him to take a substantial home town discount. I’m not going to malign players for getting their bag.
I’m sad that he’s gone, but I’m happy for him. At least he’ll be on tv here in Chicago a lot.
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8 minutes ago, Chris farley said:
Welp. if its that simple, then that bank will just be the first of many?
We don’t know yet.
This is the start of a classic bank run panic. Depositors are concerned that their money won’t be available anymore so they are trying to withdraw it. It’s basically that famous scene from It’s A Wonderful Life.
Even smaller banks who don’t have underlying issues would be at risk if their customers wrongly believe there’s an issue and begin to withdraw all of their funds.
The FDIC and Treasury stepping in to guarantee all depositors at SVB and Signature Bank is meant to send a message to consumers that their money is safe no matter which bank it’s in.
The question is whether or not the public will believe this. The FDIC can cover the deposits for these banks with its own funds. If people stop withdrawing funds from their banks, we’ll probably be ok after a short but bumpy ride.
If people continue to withdraw their funds, it’ll put additional banks at risk to the point that we would need Congress to step in to provide a bigger backstop and fight the panic.
There’s a broader conversation to have about ways to prevent this and potential punishment for the risk managers at SVB, but ensuring depositor confidence is the #1 thing you have to do if you want to have a chance at preventing a broader collapse.
Thankfully, the government is not backstopping investors or management for these banks. Just depositors.
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Just now, OrangeBills said:
Short term yields have gone up faster than longer-term yields, because of Biden Admin’s decisions
which other bonds would you have them buy?
I am not a financial expert, so I’m not going to say what they *should* have done.
My point is that there is zero evidence that SVB’s collapse is due to “wokeism.” The current evidence points to them locking their money into long term bonds in the face of rising rates as the main driver of their issues.
Instead of people asking “why did this happen?” and trying to find the answer, a lot of people here seem to be asking “how can I find a way to blame people I don’t like regardless of the truth?”
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59 minutes ago, Chris farley said:
Thats the CNN headline. and has fact to it. but is just one part of it.
Any evidence that it was these investments that caused the collapse and not buying long term government bonds in the face of rising interest rates?
SVB invested in biotech, startups and tech. But for some reason, you’re not blaming those…
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30 minutes ago, Chris farley said:
Guessing the heads of all the rest of these banks and companies with silly spending on green carbon capture credits, Paris accord, social justice/inclusion high paid divisions might be seeing that writing on the wall.
Don’t know why they would since that had nothing to do with the current problems.
Over investing in long term government bonds in the face of rising interest rates as well as investing heavily in crypto isn’t social justice as far as I’m aware.
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1 minute ago, Gene Frenkle said:
And only guarantees deposits up to $250K per account.
With both SVB and Signature Bank, that covers less than 10% of all deposits.
That is correct, though their statement seems to say that they will cover all deposits for those two banks, not just covered deposits. -
Just a quick reminder that the FDIC does not receive taxpayer money. It is funded through premiums assessed on member institutions.
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2 minutes ago, redtail hawk said:
Seems very decisive and very likely to stop the bleeding. And rapid.
Not sure what NC finds funny? Kinda like he wanted a collapse. Guess it would make trying to start a revolution easier
I’m not sure if it will stop the bleeding, but it’s a necessary move if that’s your goal. -
Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC
“WASHINGTON, DC -- The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”-
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5 minutes ago, Gene Frenkle said:
@B-Man SVB failed because they made risky long-term bets at 0% interest rates and weren't prepared for the Fed to raise rates so quickly to combat inflation. Guess what...they're not the only one. This is Wall Street getting addicted to free money and thinking it would never end. Their risk is all interconnected too. This has been brewing since 2008.
I say eff em this time. Bail nobody out and let them fail like they should. The days of privatized gains and socialized losses need to end now.
You don’t understand. Something bad happened, so it has to be the fault of liberals somehow.-
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13 minutes ago, SCBills said:
Chansley’s mom and new defense team state they never had that video.
Again, do you believe, based on what we’ve now seen, that he deserves the sentence he received?
If they didn’t have access to it, it’s likely because they didn’t request it.
If it was intentionally withheld, then it’s likely a Brady violation and Chansley would be filing an appeal instead of releasing a statement that it doesn’t change anything.
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54 minutes ago, SCBills said:
That analogy makes zero sense given the unreleased, then released video exonerates what you said … and the unreleased, now released video of Chansley paints the opposite narrative.
What exactly do you want? Chansley to serve 4 years in prison?
I, and most who take issue with this charade, don’t believe Chansley should have zero punishment. What we take issue with is the excessiveness of that punishment.
Given the video that has come to light, it’s honestly shocking that people like you dig yourselves in deeper on that front.
You seem to insist on confusing “released to the public” with “released to the defense”Maybe don’t do that.
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Just now, SCBills said:
I said what I said.And you’re wrong.
Not that long ago, I was one of seemingly few people here who rejected the allegation that Paul Pelosi was having a gay affair with his attacker.
Now imagine if Pelosi had released a statement that he was, in fact, having an affair with DePape. And yet I still insisted that he wasn’t.
I’d look pretty dumb, wouldn’t I?
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SVB Bank.
in Politics, Polls, and Pundits
Posted
You were so close! So close to getting it and being right! But then you couldn’t help yourself but to veer off a cliff into being wrong. I can’t blame you, seems most of PPP is doing the same thing.
Inflation played a part in this only because the risk management at SVP somehow could not see the obvious: the Fed would continue raising rates through the end of 2022 and into 2023. This was staggeringly obvious to everyone except (apparently) the risk managers at SVB.
Basically every other bank is managing their risk portfolio to account for the inflation and the expected rate increases. If this was solely and only inflation’s fault, all of them would be failing too. But they’re not because this isn’t a story of inflation wrecking the banking industry, or wokeness, or ESG. It’s a story of a poorly run bank that was uniquely situated to fail.
Banks with good risk management didn’t have this problems. DEI or not. ESG or not. The large bank I used to work for that has a ton of DEI stuff is doing great. Because this has nothing to do with that.
If your theory was correct, that this was because of inflation, it would already be systemic and far more than two banks would have failed already. Isolate your variables before going off on a limb so you don’t come out looking like a fool.
But hey, if you really want to be wrong, I guess I can’t stop you.