SVB Bank Run: Fed Calling Emergency Meeting

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

IME, solid finance knowledge (especially risk management) has been increasingly marginalized within a lot of financial institutions. This predates the 2008 collapse, but has actually gained additional traction since then.


And Silicon Valley (the place) has been in total denial about zero interest rates role in their putative boom. A local bank getting caught out isn’t all that surprising.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

The mark to market applies even at the end of the duration. The value of that bond could be valued at 80 cents on the dollar and the taxpayers will pay the difference.

Um, Treasuries pay out their full face value at maturity.

+1000. Why do people who have no idea what they are talking about insist on posting drivel?

A few of you need to figure out how rates impacts value. Getting your nominal principal back in a decade or three ain’t what it used to be.

Average duration of SVB’s portfolio was around 5-6 years.

Tell me the % of the book that was long-dated. Averages can obscure bigly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

Treasuries do equal safety. The mistakes they made were duration and depositer risk. There is nothing they could have done to survive the run once it started. Looking back, it was probably a really bad idea to have 25% of their deposit base under the control of a single well known a-hole.

[Anonymous]

Do people have over $250,000 In the bank if they are not buying anything big at any given time? Do they invest and buy bonds at the time?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

Treasuries do equal safety. The mistakes they made were duration and depositer risk. There is nothing they could have done to survive the run once it started. Looking back, it was probably a really bad idea to have 25% of their deposit base under the control of a single well known a-hole.

Long-maturity assets belong more on insurance company and pension fund balance sheets. The bank should have been buying short t-bills and getting used to less spread.

The problem of concentration includes Thiel and friends, but is clearly much larger than them. We clearly didn’t get post-2008 finreg and, gasp, political economy right.

[Anonymous]

Anonymous wrote:Do people have over $250,000 In the bank if they are not buying anything big at any given time? Do they invest and buy bonds at the time?

Large entities need to make payments reliably. Banks perform both the role of facilitating payments AND financing asset purchases. The customers of SVB are almost always moderately large entities that largely just wanted payments processing and cash management. But since the bank holds lots of cash, the bank has to invest it in order to pay interest on deposits AND generate the bank’s income. They just invested the money unwisely, hence their losses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

I’m guessing PP wasn’t involved in finance the last time interest rates were rising quickly. This was to be expected and they did manage the cash tsunami poorly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

They didn’t hedge their 11-figure one-way interest rate risk. That’s their “unwise” investment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

They didn’t hedge their 11-figure one-way interest rate risk. That’s their “unwise” investment.

It’s a finance 101 thing…except ZIRP meant no one remembered it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

They didn’t hedge their 11-figure one-way interest rate risk. That’s their “unwise” investment.

It was only a 5% loss. No bank can survive a bank run like they experienced.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

They didn’t hedge their 11-figure one-way interest rate risk. That’s their “unwise” investment.

It was only a 5% loss. No bank can survive a bank run like they experienced.

The bank run was a product of their business model. It’s so, so far from almost any other bank.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The taxpayers will ultimately backstop these bad bonds owned by banks without proper hedging protocol

Uh, only if the fed turns around and tries to sell the bond on the open market. If they just hold it to duration (which they almost certainly will), then they haven't lost anything.

Exactly.

It is amazing the legnths the right is going to right now to cause misinformation and uncertainty in our financial markets.

It's like they want a crash to hurt Biden.

While there’s clearly right-wing noise (and a few folks yelling ‘fire’), fact is that they were going to be taking loses on long-dated assets regardless. HTM was never a viable path out of this, at least absent lower rates.

I still don’t understand SVB’s strategy. They had a robust corporate treasury….wtf were they thinking? Everyone knew the Fed was about to embark on a long journey of interest rate hikes and SVB decided to load up on long dated assets after 3x their deposits in 18 months. They didn’t even try to hedge their interest rate risk with derivatives.

It like they did all of this on purpose. I still can’t figure it out.

They got a massive influx of deposits in 2020 during ZIRP and thanks to ZIRP. They turned around and put those deposits into treasuries at one of the worst times possible. There are almost 4,500 FDIC insured banks; I'm be shocked if some of them didn't make terrible risk management decisions from time to time. This one likely would have flown under the radar if SVB was just a normal community bank, but once VC funds told their companies to pull out, it was over

The VC money tsunami acted like leverage: all decisions were genius in good times…and foolish in bad times. Given their role in being essentially treasury for the VC ecosystem makes me wonder if anyone at the bank understood they had super-easy fee income if they kept assets low-key.

It seems like they were being as conservative as the could, but risk management doesn't pay well and often gets ignored. I'd bet a lot of money that someone high up thought that treasuries = safety and they either ignored opposing views or those views just weren't aired

It's not clear that even a proactive risk assessment would have caught that long term US bonds would cause the bank to fail. Bonds are very low risk. And at the time they bought them, this would have looked to be among the most conservative options.

Im an R and listening to R news and the take is basically "well they were driven by ESG and focused too much on woke stuff." That may well be true, but the investments were in long term US bonds, not used as venture capital. I'm going to need to see a fuller case against these bankers. Some risk is acceptable-- it is part of life. I havent seen any case made yet that their investments were unwise.

I’m guessing PP wasn’t involved in finance the last time interest rates were rising quickly. This was to be expected and they did manage the cash tsunami poorly.

They bought these in 2020 when the market was tanking.

Ive never been involved in investment banking, so this may seem like a simple mistake to a pro. But no one is laying out the case that they should have foreseen hyperinflation. There may be a case, but no one is making it.