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! 😅