ChiGoose

COVID and the response to COVID changed the risk environment and increased inflation. Most financial institutions adjusted their risk portfolios to reflect this. SVB did not. You can go off on whatever rambling non-sequitur you want, but it’s just going to make you look foolish.

Making a lot of assumptions there, buddy. Maybe take a beat and go touch some grass. Or read what I actually wrote instead of what you seem to wish I wrote.

If you have a coherent thought or question, I’d be happy to address it. But it seems like you just want to ramble about anything and everything and try to connect dots that aren’t there. SVB failed because they had unbelievably incompetent risk managers. Signature Bank failed because they were heavily invested in the the Ponzi scheme that is crypto. If your theory was correct, we’d already have dozens and dozens of bank failures. But you’re wrong, so we haven’t. Inflation is a problem and it was exacerbated by the easy money policies of the current and previous administrations as a response to COVID. They would argue it was a necessary risk to prevent a broader collapse, but your mileage may vary. That does not excuse the poor strategies of the two failed banks.

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.

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.

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.

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.

(Citation needed)

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.

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.

Also, the shareholders and investors are getting nothing. Only the depositors are getting anything.

Next to the Hamlin body double guy, he might be the most braindead poster on this site.

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.

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.

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.

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.

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.

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?”

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…

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.

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.

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.”

You don’t understand. Something bad happened, so it has to be the fault of liberals somehow.