SVB Bank Run: Fed Calling Emergency Meeting

[Anonymous]

Anonymous wrote:

What is the mistake - bailouts or no bailouts?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So there are all of these libertarians etc calling on the Fed/FDIC to basically take over and secure the bank.

Keep in mind, this i only happening because Trump totally gutted regulations that would have prevented this from happening. So we are going to get a massive bailout for Silicon Valley Bank and yet people complain about a few thousand dollars in bailouts for student loans.

For one, the FDIC already took over the bank around 24 hours ago

Two, this is not caused by Trump gutting regulations. The cause was interest rate risk- recall people deposit money at banks and they turn around and lend money, in this case in the form of MBS and treasuries. The fed kept interest rates too low for too long and then they hiked rates precipitously, which caused huge losses for the bank on those securities that were purchased when interest rates were much lower

Disagree. Trump gutted Dodd-Frank that would have protected against this.

False. The regulations would not have helped in this case. The adverse interest rate risk scenario in the stress tests were not severe enough and SVB would easily have met the liquidity requirement.

So should the regs that aren't in place but if they were wouldn't be good enough to prevent this just be more strict?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So there are all of these libertarians etc calling on the Fed/FDIC to basically take over and secure the bank.

Keep in mind, this i only happening because Trump totally gutted regulations that would have prevented this from happening. So we are going to get a massive bailout for Silicon Valley Bank and yet people complain about a few thousand dollars in bailouts for student loans.

For one, the FDIC already took over the bank around 24 hours ago

Two, this is not caused by Trump gutting regulations. The cause was interest rate risk- recall people deposit money at banks and they turn around and lend money, in this case in the form of MBS and treasuries. The fed kept interest rates too low for too long and then they hiked rates precipitously, which caused huge losses for the bank on those securities that were purchased when interest rates were much lower

Disagree. Trump gutted Dodd-Frank that would have protected against this.

No way some "stress test" would have shown this kind of stress. There has to be many more banks out there in the same position. Who's next?

[Anonymous]

I have no understanding of banking, but when you see all the shares of stock sold by those in charge over the last month, something really, really smells.

[Anonymous]

Anonymous wrote:I have no understanding of banking, but when you see all the shares of stock sold by those in charge over the last month, something really, really smells.

Do you have a link to support that? I also saw that the CEO, CFO and the CMO all sold a lot of shares in the past few weeks, but I saw it on FB.

[Anonymous]

This bank has a lot of assets, very high ratio. It appears to have failed because of a run on the bank.
The asset ratio is so high, everyone should be able to get their money out eventually.
This bank funds silicon valley startups, so they should make those companies and the VCs that wanted these loans pay up.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So there are all of these libertarians etc calling on the Fed/FDIC to basically take over and secure the bank.

Keep in mind, this i only happening because Trump totally gutted regulations that would have prevented this from happening. So we are going to get a massive bailout for Silicon Valley Bank and yet people complain about a few thousand dollars in bailouts for student loans.

For one, the FDIC already took over the bank around 24 hours ago

Two, this is not caused by Trump gutting regulations. The cause was interest rate risk- recall people deposit money at banks and they turn around and lend money, in this case in the form of MBS and treasuries. The fed kept interest rates too low for too long and then they hiked rates precipitously, which caused huge losses for the bank on those securities that were purchased when interest rates were much lower

Disagree. Trump gutted Dodd-Frank that would have protected against this.

False. The regulations would not have helped in this case. The adverse interest rate risk scenario in the stress tests were not severe enough and SVB would easily have met the liquidity requirement.

So should the regs that aren't in place but if they were wouldn't be good enough to prevent this just be more strict?

Stress test scenarios depend on forecasting that can be off--it's not a question of strictness for that. Getting technical, the liquidity rule should not give as much credit as it does to hold to maturity government securities. SVB had something like 40% of its balance sheet in these, but they cannot be sold without forcing instant realization of mark to market losses on the entire HTM portfolio. This has been a concern of a few ever since the rule was made.

[Anonymous]

[Anonymous]

Jesus, they're predicting bank runs on Monday. What is this, 1929?

Hold on to your butts folks. This could get ugly quick. What company in their right mind who does business with smaller/regional banks would keep funds over $250k in them now that they're watching SVB fail? It is scary to think how this could spread and cause a nation wide bank run.

[Anonymous]

This had nothing to do with the bipartisan DFA changes made a few years ago. This was:

bad balance sheet management (plus regulatory preference for Treasuries when even sovereigns can cause issues in rapidly changing interest rate environments) THAT WAS DIRECTED BY THEIR REGULATOR WHO TOLD THEM TO SELL 21 BILLION.

bad investment banking - they should never have gone forward with the capital raise with Silvergates problems.

a concentrated business model. Their borrowers were also their depositors.

8/165 billion insured/uninsured deposits. Wtf. Talk about ready for runs.

Peter Theils big mouth.

[Anonymous]

Hello

[Anonymous]

Anonymous wrote:Jesus, they're predicting bank runs on Monday. What is this, 1929?

Hold on to your butts folks. This could get ugly quick. What company in their right mind who does business with smaller/regional banks would keep funds over $250k in them now that they're watching SVB fail? It is scary to think how this could spread and cause a nation wide bank run.

I hope so! Got some cash to deploy.

[Anonymous]

Oh.

[Anonymous]

Anonymous wrote:Jesus, they're predicting bank runs on Monday. What is this, 1929?

Hold on to your butts folks. This could get ugly quick. What company in their right mind who does business with smaller/regional banks would keep funds over $250k in them now that they're watching SVB fail? It is scary to think how this could spread and cause a nation wide bank run.

That’s why depositors need to be made whole. It’s fine if equity holders in SVB lose out. But if people don’t have faith in smaller banks, this could spiral out of control extremely quickly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Jesus, they're predicting bank runs on Monday. What is this, 1929?

Hold on to your butts folks. This could get ugly quick. What company in their right mind who does business with smaller/regional banks would keep funds over $250k in them now that they're watching SVB fail? It is scary to think how this could spread and cause a nation wide bank run.

That’s why depositors need to be made whole. It’s fine if equity holders in SVB lose out. But if people don’t have faith in smaller banks, this could spiral out of control extremely quickly.

No - they do not need to be 'made whole'. They were aware of FDIC when they opened their accounts (and were able to buy insurance for deposits that exceeded FDIC limits if they chose to do so.

If you think that depositors in any bank need to be 'made whole' if the bank collapses then we are into a completely different regulatory scenario.

If the feds are required to make depositors 'whole' if their bank collapses - then we really don't need private banks at all. Instead, the feds can just turn itself into a public-offering bank, accept all deposits and the associated liability.

Sorry but 'private banks accept the deposits + the profits, the feds pay back when that fails" isn't actually a thing.