Reply to SVB Bank Run: Fed Calling Emergency Meeting

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]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.[/quote]

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[/quote]

To be fair, the bank ignored some very basic fundamentals of risk mgmt. It got $90B in deposits over 18 months….you don’t buy long dated MBS and USTs to offset those. They should’ve been investing in cash, 3 & 6 month TBills and terming those out. They also did not hedge their massive interest rate risk.

All of this was just plain stupid and greedy. [/quote]

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