SVB Bank.

[Over 29 years of fanhood]

The deliciousness of these two bank collapses;

 

SVB’s “high risk” liquid asset they had to sell at huge loses accelerating their demise through the run were US treasury bonds massively devalued due to this obscene inflation spiral we see money continue to be dumped into. 
 

And long time politician Barney Frank, author of major ‘preventive’ banking legislation sat on the board of the other. 
 

so it’s good the government is stepping in to help clean up the mess that more than likely than not is ultimately attributable to the government.  

[Precision]

Douglas Diamond gives a good summary of what went wrong.  

 

The economist who won the Nobel for his work on bank runs breaks down SVB’s collapse—and his fears over what’s next

 

 

[Irv]

14 hours ago, ChiGoose said:

The FDIC will sell the assets of the banks and use that to cover the depositors. 
 

If the sale does not cover the costs, the FDIC has a fund that all the partner banks pay into, which can be used to make depositors whole. 
 

If all of that fails to cover the costs (which doesn’t seem to be the case if the damage can be limited to the two banks), the FDIC has a $100 billion line of credit with the treasury. If it uses that, then taxpayers actually probably make money on the deal. 
 

Failing all of that, you would likely need an act of Congress to tap taxpayer funds.

How do you think the FDIC is funded?  The money gets picked off the money tree?  Honestly.  

14 hours ago, ALF said:

 

The other banks via FDIC

And who funds the FDIC?  Use your head for something other than a hat rack.  What a mess.  
 

 

Edited March 16, 2023 by Irv

[Joe Ferguson forever]

Looks like the bleeding has been stopped for now

https://finance.yahoo.com

[Tenhigh]

13 hours ago, redtail hawk said:

I like this one even better (when taken figuratively)

"Buy when there's blood in the streets, even if the blood is your own."

[Tenhigh]

Just now, redtail hawk said:

Looks like the bleeding has been stopped for now

https://finance.yahoo.com

First Republic bailed out by it's peers.   Search "Long Term Capital Management" for the last time this happened. 

 

[Joe Ferguson forever]

2 hours ago, Tenhigh said:

First Republic bailed out by it's peers.   Search "Long Term Capital Management" for the last time this happened. 

 

Thanks.  wasn't aware of this tale of woe.  More dumb f'ers

https://en.wikipedia.org/wiki/Long-Term_Capital_Management

[B-Man]

 

 

 

[Tenhigh]

2 hours ago, redtail hawk said:

Thanks.  wasn't aware of this tale of woe.  More dumb f'ers

https://en.wikipedia.org/wiki/Long-Term_Capital_Management

Did you notice who declined to participate? Some karma there I think...

Edited March 17, 2023 by Tenhigh

[ArtVandalay]

12 hours ago, Irv said:

How do you think the FDIC is funded?  The money gets picked off the money tree?  Honestly.  

And who funds the FDIC?  Use your head for something other than a hat rack.  What a mess.  
 

 

The FDIC is funded by the assessments charged to all member institutions, it is not funded by taxpayers.

Edited March 17, 2023 by ArtVandalay

[Buffarukus]

52 minutes ago, ArtVandalay said:

The FDIC is funded by the assessments charged to all member institutions, it is not funded by taxpayers.

 

everything is friend. where do you think those fees are generated?

[ArtVandalay]

On 3/14/2023 at 7:24 PM, ChiGoose said:

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. 

One major issue i take with this is the classification of the 2020 deposit increase as a tech boom. That's nonsense. It's the pandemic driven deposit surge that happened throughout the entire banking industry in which there was an influx over $4 trillion of deposits banking industry, by far the greatest growth the industry as seen. The stickiness of the deposits was a hot button industry issue for the following years and regulators wanted to see your assessment of surge deposits and your deposit studies and volatility assessments in relation to them. 

 

The remainder of the following items are a good synopsis but make no mistake, this was NOT caused by fed rate increases and rising interest rates, this was directly the result of poor interest rate risk management and horrendous liquidity risk management and liquidity strategy. The concentration risk assumed in their deposit portfolio is outrageous, the amount of volatility they carried mismatched with long term assets was wild. Entirely mismanaged and leadership either did not have appropriate oversight or did not have the qualifications for effective oversight. Their board either didn't receive appropriate risk reporting or didn't understand what they were looking at. 

 

People pointing at DEI are not idiots, they have a fair point because the company didn't have a Chief Risk Officer for just about all of last year, yet made heavy investments in DEI and the President was more focused in that area and board members had questionable qualifications/training. It's not saying DEI caused this but rather if the bank took their operational risk and financial risk functions as serious as they did their DEI this wouldn't have happened. It's more or less a criticism that company leadership was not appropriately focused which is a fair criticism IMO given the insane concentration risk in their deposit portfolio and grave mistakes in liquidity management. Its more or less a reasoning for why the lapses occurred 

 

Personally, i don't point the finger there but i understand it. 

[ArtVandalay]

16 minutes ago, Buffarukus said:

 

everything is friend. where do you think those fees are generated?

I understand eventually ***** flows downhill, but if you banked at a credit union that is NCUA rather than FDIC, then actually you wouldn't be paying anything to FDIC. Boom, checkmate.

[leh-nerd skin-erd]

23 minutes ago, ArtVandalay said:

I understand eventually ***** flows downhill, but if you banked at a credit union that is NCUA rather than FDIC, then actually you wouldn't be paying anything to FDIC. Boom, checkmate.

Pardon me, but you’re suggesting everyone “banks at a credit union that is NCAU rather than FDIC”?  Wouldn’t that be a very necessary piece of a boom/checkmate argument?    

 

31 minutes ago, ArtVandalay said:

One major issue i take with this is the classification of the 2020 deposit increase as a tech boom. That's nonsense. It's the pandemic driven deposit surge that happened throughout the entire banking industry in which there was an influx over $4 trillion of deposits banking industry, by far the greatest growth the industry as seen. The stickiness of the deposits was a hot button industry issue for the following years and regulators wanted to see your assessment of surge deposits and your deposit studies and volatility assessments in relation to them. 

 

The remainder of the following items are a good synopsis but make no mistake, this was NOT caused by fed rate increases and rising interest rates, this was directly the result of poor interest rate risk management and horrendous liquidity risk management and liquidity strategy. The concentration risk assumed in their deposit portfolio is outrageous, the amount of volatility they carried mismatched with long term assets was wild. Entirely mismanaged and leadership either did not have appropriate oversight or did not have the qualifications for effective oversight. Their board either didn't receive appropriate risk reporting or didn't understand what they were looking at. 

 

People pointing at DEI are not idiots, they have a fair point because the company didn't have a Chief Risk Officer for just about all of last year, yet made heavy investments in DEI and the President was more focused in that area and board members had questionable qualifications/training. It's not saying DEI caused this but rather if the bank took their operational risk and financial risk functions as serious as they did their DEI this wouldn't have happened. It's more or less a criticism that company leadership was not appropriately focused which is a fair criticism IMO given the insane concentration risk in their deposit portfolio and grave mistakes in liquidity management. Its more or less a reasoning for why the lapses occurred 

 

Personally, i don't point the finger there but i understand it. 

Yes to the text in bold.   It’s no different that a financial service organization failing and references to “lavish parties” and “executive bonuses”.  When the organization implodes, everything is in the table,  and each piece of the puzzle scrutinized as part of the overall problem. 

[ArtVandalay]

1 minute ago, leh-nerd skin-erd said:

Pardon me, but you’re suggesting everyone “banks at a credit union that is NCAU rather than FDIC”?  Wouldn’t that be a very necessary piece of a boom/checkmate argument?    

 

Yes to the text in bold.   It’s no different that a financial service organization failing and references to “lavish parties” and “executive bonuses”.  When the organization implodes, everything is in the table,  and each piece of the puzzle scrutinized as part of the overall problem. 

No that's not what I'm saying at all. What i said originally was the fact that the FDIC is not tax payer funded, it is funded through assessments on member institutions. The poster in response claimed it was the same thing since taxpayers are the customers the generate bank profits. What i am illustrating is a way that not all taxpayers are indirectly paying the FDIC and there is really a way you could chose not to participate in the FDIC system. If the poster is that concerned about his banking relationship funding FDIC he can easily bank at a Credit Union part of NCUA instead.

 

 

[Buffarukus]

44 minutes ago, ArtVandalay said:

I understand eventually ***** flows downhill, but if you banked at a credit union that is NCUA rather than FDIC, then actually you wouldn't be paying anything to FDIC. Boom, checkmate.

 

i was unaware i was playing chess. so just the fdic people are paying the price like me? good to know. eventually usually means immediate hikes....see inflation of entire country

 

boom rook takes queen check in 3 replys. your up

 

🤷‍♂️ 

[leh-nerd skin-erd]

4 minutes ago, ArtVandalay said:

No that's not what I'm saying at all. What i said originally was the fact that the FDIC is not tax payer funded, it is funded through assessments on member institutions. The poster in response claimed it was the same thing since taxpayers are the customers the generate bank profits. What i am illustrating is a way that not all taxpayers are indirectly paying the FDIC and there is really a way you could chose not to participate in the FDIC system. If the poster is that concerned about his banking relationship funding FDIC he can easily bank at a Credit Union part of NCUA instead.

 

 

I understood that, Mr. Vandalay.  Some taxpayers might not be impacted, that was the point.  I just didn’t see it as a boom/checkmate comment because a whole sh#t-ton of FDIC-lovin taxpayers would obviously participate.  

[ArtVandalay]

1 minute ago, leh-nerd skin-erd said:

I understood that, Mr. Vandalay.  Some taxpayers might not be impacted, that was the point.  I just didn’t see it as a boom/checkmate comment because a whole sh#t-ton of FDIC-lovin taxpayers would obviously participate.  

I get it. And it's bull#### that responsible institutions have to pick up the tab time and time again. 

[Joe Ferguson forever]

10 hours ago, Buffarukus said:

i was unaware i was playing chess

we're all playing chess, in almost every interaction. For the complex issues, it's 3D chess.  

[Buffarukus]

8 hours ago, redtail hawk said:

we're all playing chess, in almost every interaction. For the complex issues, it's 3D chess.  

 

dont tell me what im playing! maybe im playing texas holdem!!! 4d holdem!! 

 

bam boom royal flush on the reply! 😅

[SoCal Deek]

So here’s how SVB was explained to me by my financial adviser this morning: The bank experienced a significant and sudden request for withdrawals; but because they’d invested a large percentage of the banks assets in long term bonds, they were forced to cash out those bonds ahead of their maturity term, at a significant loss. The bank was way too heavily invested in this single asset type and regulators failed to either caution or actually stop them from investing with such limited diversity. 

Edited March 17, 2023 by SoCal Deek

[Joe Ferguson forever]

1 hour ago, Buffarukus said:

 

dont tell me what im playing! maybe im playing texas holdem!!! 4d holdem!! 

 

bam boom royal flush on the reply! 😅

Yeah, I actually don't play chess or at best I suck.  Know where the pieces can go.  Canasta and scrabble I'm pretty good.

Edited March 17, 2023 by redtail hawk

[ArtVandalay]

On 3/16/2023 at 10:37 PM, Buffarukus said:

 

i was unaware i was playing chess. so just the fdic people are paying the price like me? good to know. eventually usually means immediate hikes....see inflation of entire country

 

boom rook takes queen check in 3 replys. your up

 

🤷‍♂️

Actually rates dove in response to this so you saved money in response to this. 

 

It appears you have no understanding of the FDIC, which i don't fault you for but the way you reject information on it is weird. 

 

The FDIC receives no tax dollars. They receive no appropriations from government. They are funded by assessments to member institutions.

 

If you hold an account at a Member FDIC bank, you will receive the benefit of an insurance policy for your funds in the amount of $250k per depositor, per bank, per ownership category. With proper structure you can insure well over a million dollars. 

 

Additionally, the FDIC will regulate your bank and also enforce consumer protections, if they are the prudentialregulator depending on charter. If your have a complaint about your bank you can file that with the FDIC and they will investigate in your behalf if it is a regulatory issue. 

 

This is entirely funded as a non- interest expense to the bank. 

 

Now, as a customer of a bank yes the bank makes money, but the vast majority of this profit is through net interest margin, lending your deposits and making money off loans. 

 

It is very easy to maintain a banking relationship for a deposit account with no fees, in fact it's really the industry standard, as long as you don't do things like overdraft your account. The bank wants your deposits, they pay you interest then lend it out for more and the spread is profit. 

 

So when you say you are paying the FDIC i have no idea what you are referring to. What fees are you paying? Are you spending money you don't have and over drafting all the time? 

Edited March 18, 2023 by ArtVandalay

[Buffarukus]

4 hours ago, ArtVandalay said:

Actually rates dove in response to this so you saved money in reasons to this. 

 

It appears you have no understanding of the FDIC, which i don't fault you for but the way you reject information on it is weird. 

 

The FDIC receives no tax dollars. They receive no appropriations from government. They are funded by assessments to member institutions.

 

If you hold an account at a Member FDIC bank, you will receive the benefit of an insurance policy for your funds in the amount of $250k per depositor, per bank, per ownership category. With proper structure you can insure well over a million dollars. 

 

Additionally, the FDIC will regulate your bank and also enforce consumer protections, if they are the prudentialregulator depending on charter. If your have a complaint about your bank you can file that with the FDIC and they will investigate in your behalf if it is a regulatory issue. 

 

This is entirely funded as a non- interest expense to the bank. 

 

Now, as a customer of a bank yes the bank makes money, but the vast majority of this profit is through net interest margin, lending your deposits and making money off loans. 

 

It is very easy to maintain a banking relationship for a deposit account with no fees, in fact it's really the industry standard, as long as you don't do things like overdraft your account. The bank wants your deposits, they pay you interest then lend it out for more and the spread is your profit. 

 

So when you say you are paying the FDIC i have no idea what you are referring to. What fees are you paying? Are you spending money you don't have and over drafting all the time? 

 

while i appreciate you going into depth about the subject i was simply stating that saying "no cost to tax payer" "pay their fair share" ect ect. its all just a backdoor way of burdening regular folks. thats all. i may not overdraft all the time. it may just raise loans and mortgages .1%. it may get so spread out you dont even realize it. but it does come out of OUR pockets collectively. when you talk about possible billions/trillions banks will get creative as most companies for profit will.

 

if you look at this the way you are then who cares about any gov or corporate greed if it doesnt dramatically cost you personally. i dont overdraft but the person on a fixed income that repeatedly does may care that fee has gone up ect ect ect. it adds up in the end.

 

so i was basically pointing out verbage and joking with the boom pow bang checkmate comment. 😁

 

you seem knowledgeable and want to reasonably debate on topics so hopefully we can get into other topics we truly disagree on so we can test those chess skills. 👍🏻

Edited March 18, 2023 by Buffarukus

[Big Blitz]

Why woke ‘Frisco Fed chief missed Silicon Valley Bank’s warning signs

 

 

Wokeness has replaced competence and merit across the banking sector, and San Francisco Fed Chief Mary Daly is the poster child of this pernicious trend

 

A protege of Treasury Secretary Janet Yellen and short-list candidate for Federal Reserve vice chair, Daly was supposed to be supervising Silicon Valley Bank but apparently was too busy playing politics and pushing woke agendas to regulate rogue banks like SVB, the second-biggest bank failure on record.

 

Daly had other priorities, including climate change, George Floyd and Black Lives Matter, inequities between blacks and whites, LGBTQ+ rights and a host of other woke social-justice issues that had nothing to do with banking and finance.

 

Daly’s Fed bio gushes she’s committed to “understanding the economic and financial risks of climate change and inequities.” Never mind the more existential threat of banks in her jurisdiction amassing mortgage bonds with longer maturities that exposed investors to greater interest-rate risk.

 

In 2021, she said, “I am not thinking that we have unwanted inflation around the corner. I don’t think that’s a risk.”

 

https://nypost.com/2023/03/17/why-woke-frisco-fed-chief-missed-silicon-valley-banks-warning-signs/?utm_campaign=iphone_nyp&utm_source=pasteboard_app
 

 

 

The best and brightest. 
 

This country is done.  

[Over 29 years of fanhood]

On 3/17/2023 at 5:34 PM, SoCal Deek said:

So here’s how SVB was explained to me by my financial adviser this morning: The bank experienced a significant and sudden request for withdrawals; but because they’d invested a large percentage of the banks assets in long term bonds, they were forced to cash out those bonds ahead of their maturity term, at a significant loss. The bank was way too heavily invested in this single asset type and regulators failed to either caution or actually stop them from investing with such limited diversity. 

and that asset happened to be us treasuries. 

But now the plot thickens…

 

apparently the acting CRO was an ‘equity hire’ and incompetent or at the very least distracted celebrating “authenticity”..

 

and a bunch of AGs sent letter to Powell suggesting the local regulators were focusing on DEI and ESG over balance sheets, risk management and fiscal responsibility. 
 

Edited March 22, 2023 by Over 29 years of fanhood

[All_Pro_Bills]

On 3/17/2023 at 5:34 PM, SoCal Deek said:

So here’s how SVB was explained to me by my financial adviser this morning: The bank experienced a significant and sudden request for withdrawals; but because they’d invested a large percentage of the banks assets in long term bonds, they were forced to cash out those bonds ahead of their maturity term, at a significant loss. The bank was way too heavily invested in this single asset type and regulators failed to either caution or actually stop them from investing with such limited diversity. 

I heard Treasury Secretary Yellen speak during some Congressional testimony on backstopping banks depending on whether or not they posed any systemic risk.  The long and short of it all was that if in the opinion of Treasury that risk existed they'd move to support the bank, depositors, creditors in some way in order to contain any fallout.  What no representative asked was a question of mine that if in the opinion of Treasury any bank posed systemic risk then why are they allowed to exist in any form that posed such risks?  Along with what is wrong with the "system" where these events keep happening?     

Edited March 22, 2023 by All_Pro_Bills

[ChiGoose]

1 minute ago, All_Pro_Bills said:

I heard Treasury Secretary Yellen speak during some Congressional testimony on backstopping banks depending on whether or not they posed any systemic risk.  The long and short of it all was that if in the opinion of Treasury that risk existed they'd move to support the bank, depositors, creditors in some way in order to contain any fallout.  What no representative asked was a question of mine that if in the opinion of Treasury any bank posed systemic risk then why are they allowed to exist in any form that posed such risks?  Along with what is wrong with the "system" where these events keep happening?     

I think those are very good questions and you could probably find agreement across many Dems and Reps on it. 
 

Unfortunately, the solutions would likely require an act of Congress. So until that happens, Treasury and the Fed will have to keep putting out fires. 

[Tommy Callahan]

19 minutes ago, Over 29 years of fanhood said:

and a bunch of AGs sent letter to Powell suggesting the local regulators were focusing on DEI and ESG over balance sheets, risk management and fiscal responsibility.

from banks to fortune 500 companies. 

 

How does one tell investors that the numbers are down and dividends are going down, while cutting expenses and labor.. All the while just spending bank on DEI, ESG and expensive energy cause its "green"

 

IE, focusing on the DEI, ESG social spending (PR) vs balance sheets, risk management and fiscal responsibility. 

 

 

 

9 minutes ago, ChiGoose said:

I think those are very good questions and you could probably find agreement across many Dems and Reps on it. 
 

Unfortunately, the solutions would likely require an act of Congress. So until that happens, Treasury and the Fed will have to keep putting out fires. 

And congress is never going to actually fix the problem by instituting some Glass Steagall type separation of investment from traditional banking.

 

If they did anything, it would be like the last few fixes that made the problem worse.  creating more bubbles

 

 

 

 

 

[Over 29 years of fanhood]

23 minutes ago, All_Pro_Bills said:

I heard Treasury Secretary Yellen speak during some Congressional testimony on backstopping banks depending on whether or not they posed any systemic risk.  The long and short of it all was that if in the opinion of Treasury that risk existed they'd move to support the bank, depositors, creditors in some way in order to contain any fallout.  What no representative asked was a question of mine that if in the opinion of Treasury any bank posed systemic risk then why are they allowed to exist in any form that posed such risks?  Along with what is wrong with the "system" where these events keep happening?     

the cynical version is they pick the winners and losers. It’s the too big to fail argument but with subjectivity. 
 

 it’s still really hard to understand why they let Lehman Bros die while bailing out the others. 

[The Frankish Reich]

5 hours ago, All_Pro_Bills said:

I heard Treasury Secretary Yellen speak during some Congressional testimony on backstopping banks depending on whether or not they posed any systemic risk.  The long and short of it all was that if in the opinion of Treasury that risk existed they'd move to support the bank, depositors, creditors in some way in order to contain any fallout.  What no representative asked was a question of mine that if in the opinion of Treasury any bank posed systemic risk then why are they allowed to exist in any form that posed such risks?  Along with what is wrong with the "system" where these events keep happening?     

This is a good point. Perhaps we shouldn't allow banks to get so large as to pose a systemic risk to our economy?

This discussion should be happening. It isn't. Instead we're talking about the government intervening to protect depositors (and, in turn, the banks themselves) that weren't previously considered large enough to pose a systemic risk. 

[Joe Ferguson forever]

Big news:

https://finance.yahoo.com/news/the-federal-reserve-now-believes-its-work-is-nearly-done-morning-brief-093006092.html

[ALF]

What stopped inflation in the 80s?
In order to combat rising inflation, recently appointed chairman of the Federal Reserve, Paul Volcker, elected to increase the federal funds rate. Following the October 6, 1979 meeting of the Federal Open Market Committee, the federal funds rate increased gradually from 11.5% to an eventual peak of 17.6% in April 1980.

 

By the summer of 1980, inflation was near 14.5 percent, and unemployment was over 7.5 percent

[SoCal Deek]

7 minutes ago, ALF said:

What stopped inflation in the 80s?
In order to combat rising inflation, recently appointed chairman of the Federal Reserve, Paul Volcker, elected to increase the federal funds rate. Following the October 6, 1979 meeting of the Federal Open Market Committee, the federal funds rate increased gradually from 11.5% to an eventual peak of 17.6% in April 1980.

 

By the summer of 1980, inflation was near 14.5 percent, and unemployment was over 7.5 percent

So you’re saying THESE days are actually the good old days! Sweet.

[Tommy Callahan]

3 hours ago, redtail hawk said:

Big news:

https://finance.yahoo.com/news/the-federal-reserve-now-believes-its-work-is-nearly-done-morning-brief-093006092.html

Feds like eff the fixed income, poor and working class. Inflation be damned. we have the investor class to worry about. 

 

 

2 hours ago, ALF said:

What stopped inflation in the 80s?
In order to combat rising inflation, recently appointed chairman of the Federal Reserve, Paul Volcker, elected to increase the federal funds rate. Following the October 6, 1979 meeting of the Federal Open Market Committee, the federal funds rate increased gradually from 11.5% to an eventual peak of 17.6% in April 1980.

 

By the summer of 1980, inflation was near 14.5 percent, and unemployment was over 7.5 percent

Fixing the Carter Economic disaster.