I don’t know how banks work

[Anonymous]

Not sure, but I suspect that the thread was started by, and the thread title written by, the officers and directors of SVB.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:SVB's directors took a gamble that the Federal Reserve would not raise interest rates [by investing depositors' money in low yielding, long-term US Government Treasury bonds.

When depositors wanted their money to invest elsewhere for a higher return or to use in their businesses, SVB had to sell these long-term government bond investments at a loss because interest rates had risen substantially--just as the federal reserve repeatedly told the world that it would do.

In short, the officers and directors of SVB put all of their eggs in one basket and this gamble did not pay off. And the entire world--except for SVB officers and directors--knew that such a gamble of placing a large bet on low yielding, long-term government treasuries was destined for failure.

They also had way too much depositer risk. Highly concentrated interconnected depositers withdrew tens of billions of dollars all at the same time. Any bank would fail if 1/3 of their deposits were pulled on a single day.

Wow ! You really do not understand. Just wow.

PP described exactly what happened to SVB. There was a small whiff of trouble, but nothing that is unusual. Unfortunately for SVB, they heavily relied on on VC funded tech start up. Once the VC funds started advising their companies to pull funds, it turned into a bank run

Good Lord.

We see things on a different level.

You and the previous poster to whom you refer are describing WHAT happened while I am sharing WHY it happened.

If you want to avoid the same result, the WHAT does NOT matter, the WHY does.

Simple example: Car crash. What happened = damage to car bumpers. Why it happened = brake failure. If you just know what happened, it is likely to happen again; but, if you know why something happened, the problem can be corrected so that the situation is far less likely to occur again.

And why it happened was because a small group of depositers with an outsized amount of cash exited at the same time. The size and coordination of the withdrawals is what caused the issue. Had the withdrawal amounts been either smaller or spread out then this would not have happened.

[Anonymous]

So is there a giant red FED button in the bank that you push when you realize you can’t cover your withdrawals? like the DSC button for on the boat when you call the coast guard and you realize your boat is sinking and all is lost?

But seriously how and when are the feds notified?, does svb reach out to them or are investors calling them or are they just checking Twitter feeds? Anyone know the procedure? I’d there a regulation person inside the bank saying sorry guys I gotta call the fin cops in on this now?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So this SVB situation is going over my head.

I follow @yourrich.bff on IG. She did a great job of explaining what happened to SVB, in a very simple, easy to understand way

https://www.instagram.com/p/CpqU7Mag4vS/

She almost gets it right.

She is just parroting the many articles available online to explain WHAT happened with a partial understanding and explanation of WHY it happened.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:SVB's directors took a gamble that the Federal Reserve would not raise interest rates [by investing depositors' money in low yielding, long-term US Government Treasury bonds.

When depositors wanted their money to invest elsewhere for a higher return or to use in their businesses, SVB had to sell these long-term government bond investments at a loss because interest rates had risen substantially--just as the federal reserve repeatedly told the world that it would do.

In short, the officers and directors of SVB put all of their eggs in one basket and this gamble did not pay off. And the entire world--except for SVB officers and directors--knew that such a gamble of placing a large bet on low yielding, long-term government treasuries was destined for failure.

They also had way too much depositer risk. Highly concentrated interconnected depositers withdrew tens of billions of dollars all at the same time. Any bank would fail if 1/3 of their deposits were pulled on a single day.

Wow ! You really do not understand. Just wow.

PP described exactly what happened to SVB. There was a small whiff of trouble, but nothing that is unusual. Unfortunately for SVB, they heavily relied on on VC funded tech start up. Once the VC funds started advising their companies to pull funds, it turned into a bank run

Good Lord.

We see things on a different level.

You and the previous poster to whom you refer are describing WHAT happened while I am sharing WHY it happened.

If you want to avoid the same result, the WHAT does NOT matter, the WHY does.

Simple example: Car crash. What happened = damage to car bumpers. Why it happened = brake failure. If you just know what happened, it is likely to happen again; but, if you know why something happened, the problem can be corrected so that the situation is far less likely to occur again.

And why it happened was because a small group of depositers with an outsized amount of cash exited at the same time. The size and coordination of the withdrawals is what caused the issue. Had the withdrawal amounts been either smaller or spread out then this would not have happened.

You partially understand.

The bank should have had adequate funds to handle these withdrawals, but it didn't because SVB GAMBLED on long-term bond investments that did not even come close to meeting the liquidity rights of its depositors.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So this SVB situation is going over my head.

I follow @yourrich.bff on IG. She did a great job of explaining what happened to SVB, in a very simple, easy to understand way

https://www.instagram.com/p/CpqU7Mag4vS/

She almost gets it right.

She is just parroting the many articles available online to explain WHAT happened with a partial understanding and explanation of WHY it happened.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

Your right because all those things are irrelevant. There is not a single bank out there that could survive the withdrawal of 1/3 of its deposits on the same day. No amount of risk management would be adequate in that scenario.

We also don't need to speculate on why the funds were withdrawn because they've been saying why. It wasn't to make payroll. It wasn't to get a higher interest rate somewhere else. It was because a VC group chat decided to do it because they were afraid that the bank would collapse if they did it. They convinced themselves of a risk and then chose to trigger it. They created a self-fulfilling prophecy.

Had the bank's depositors been more diverse in either size or industry then this would not have happened.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Take your money and give you very very small interest. Let others borrow your money from them and charge high interest and bank keeps that money. If everyone withdraws money at the same time, bank collapses. Exhibit 1 SVB

What made everybody decide to withdraw all at the same time in this case?

Two things.

1. Peter Theil a conservative out to destroy the US.
2. Republicans rolling back regulations.

Trump did this with Theil. This was always going to happen. Anyone paying attention to Theil could see it coming a mile long.

It is a distraction (a cruel one) by the Christian Nationalist party to distract from Trump's indictments/house republican lies/Jan 6th indictments of higher ups ie Rick Scott, Hawley Cruz, Brooks, MTG, Gosar, Gohmert, Members of Secret Service, & General Charles Flynn.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:SVB's directors took a gamble that the Federal Reserve would not raise interest rates [by investing depositors' money in low yielding, long-term US Government Treasury bonds.

When depositors wanted their money to invest elsewhere for a higher return or to use in their businesses, SVB had to sell these long-term government bond investments at a loss because interest rates had risen substantially--just as the federal reserve repeatedly told the world that it would do.

In short, the officers and directors of SVB put all of their eggs in one basket and this gamble did not pay off. And the entire world--except for SVB officers and directors--knew that such a gamble of placing a large bet on low yielding, long-term government treasuries was destined for failure.

They also had way too much depositer risk. Highly concentrated interconnected depositers withdrew tens of billions of dollars all at the same time. Any bank would fail if 1/3 of their deposits were pulled on a single day.

Wow ! You really do not understand. Just wow.

PP described exactly what happened to SVB. There was a small whiff of trouble, but nothing that is unusual. Unfortunately for SVB, they heavily relied on on VC funded tech start up. Once the VC funds started advising their companies to pull funds, it turned into a bank run

Good Lord.

We see things on a different level.

You and the previous poster to whom you refer are describing WHAT happened while I am sharing WHY it happened.

If you want to avoid the same result, the WHAT does NOT matter, the WHY does.

Simple example: Car crash. What happened = damage to car bumpers. Why it happened = brake failure. If you just know what happened, it is likely to happen again; but, if you know why something happened, the problem can be corrected so that the situation is far less likely to occur again.

And why it happened was because a small group of depositers with an outsized amount of cash exited at the same time. The size and coordination of the withdrawals is what caused the issue. Had the withdrawal amounts been either smaller or spread out then this would not have happened.

You partially understand.

The bank should have had adequate funds to handle these withdrawals, but it didn't because SVB GAMBLED on long-term bond investments that did not even come close to meeting the liquidity rights of its depositors.

No bank has enough funds to survive the sudden withdrawal of 1/3 of their deposits.

[Anonymous]

This ⬇️ My big question— Were depositors aware that their money was invested in long term, low interest treasuries? Liquidity in saving/checking is just that. They chose to dump well over the 250k FDIC insured into single accounts. It’s such a simplistic mistake and one has to wonder who was watching the fig tree.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

[Anonymous]

SVB invested heavily in govt bonds and failed so its a major problem and the fed is again messing things up. They should have raised rates earlier and slower, and now they raised them to late and to fast and too far.

Fed is full of idiots.

[Anonymous]

Anonymous wrote:This ⬇️ My big question— Were depositors aware that their money was invested in long term, low interest treasuries? Liquidity in saving/checking is just that. They chose to dump well over the 250k FDIC insured into single accounts. It’s such a simplistic mistake and one has to wonder who was watching the fig tree.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

You understand.

[Anonymous]

Anonymous wrote:SVB invested heavily in govt bonds and failed so its a major problem and the fed is again messing things up. They should have raised rates earlier and slower, and now they raised them to late and to fast and too far.

Fed is full of idiots.

The issue with respect to SVB is that it did not use a proper, common investment strategy such as laddering. Laddering bond investments means that one invests in bonds with different maturity dates (and with different maturity lengths).

Laddering bond investments minimizes investment risk and should facilitate liquidity.

SVB GAMBLED with its clients' deposits. IF interest rates declined, then the GAMBLE would have paid off. But, our banking system is not--and should not be--based on gambling and guessing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So this SVB situation is going over my head.

I follow @yourrich.bff on IG. She did a great job of explaining what happened to SVB, in a very simple, easy to understand way

https://www.instagram.com/p/CpqU7Mag4vS/

She almost gets it right.

She is just parroting the many articles available online to explain WHAT happened with a partial understanding and explanation of WHY it happened.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

But any bank would fail to meet simultaneous withdrawal of 1/3 of its depositors. Or did that happen after they announced the first shortfall?

[Anonymous]

Anonymous wrote:

Anonymous wrote:SVB invested heavily in govt bonds and failed so its a major problem and the fed is again messing things up. They should have raised rates earlier and slower, and now they raised them to late and to fast and too far.

Fed is full of idiots.

The issue with respect to SVB is that it did not use a proper, common investment strategy such as laddering. Laddering bond investments means that one invests in bonds with different maturity dates (and with different maturity lengths).

Laddering bond investments minimizes investment risk and should facilitate liquidity.

SVB GAMBLED with its clients' deposits. IF interest rates declined, then the GAMBLE would have paid off. But, our banking system is not--and should not be--based on gambling and guessing.

rates are going to be cut, the fed has failed to understand the market, they are causing massive losses and failures and inflation is not changing. they don't have a way to change inflation, this isn't the 70s its more complicated as its a geo polical issue w/ supply chain being choked off by russia and china.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So this SVB situation is going over my head.

I follow @yourrich.bff on IG. She did a great job of explaining what happened to SVB, in a very simple, easy to understand way

https://www.instagram.com/p/CpqU7Mag4vS/

She almost gets it right.

She is just parroting the many articles available online to explain WHAT happened with a partial understanding and explanation of WHY it happened.

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.

But any bank would fail to meet simultaneous withdrawal of 1/3 of its depositors. Or did that happen after they announced the first shortfall?

A VC newsletter started talking about the risk at the beginning of the week then the bank announced a share shale to raise capital in response then the VC's told their portfolio companies in a group chat to withdraw everything the next day.