Reply to SVB Bank Run: Fed Calling Emergency Meeting

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Jerome Powell was an absolute dove under Trump and did nothing but print free money all the live long day and the second Biden is in he’s raising rates like an addict at a slots machine. Biden should NEVER have kept him in place, he has an agenda to prop up Republicans and it’s working. [/quote]

No, not the second Biden is in. 
He actually waited too long.  
Inflation wasn't an issue under Trump.  It is a huge issue under Biden.  
#FACTS[/quote]

This event has nothing to do with politics. This bank for its size has an alarmingly narrow depositor base concentrated on starts ups and entities funded by VC’s. As the VC market has declined, along with proceeds from new issuances, SVB lost demand deposits to the tune of 40 percent. A lot of their money was tied up in long term bonds diminished in value due to the recent rise in interest rates. The bank was squeezed, and once word got out, the depositors, who tend to all know each other (again, a narrow deposit base) all rushed to the exits. The bank could have held liquid assets such as T-bills, but of course at a cost to their margins. Such is the price of safety.  In hindsight, the bank should have paid that price.

I note Fox News in some clumsy way tried to connect the fall of the bank to the bank’s emphasis on DEI programs. While the value of DEI programs can be questioned, DEI programs have nothing to do with this collapse.  It is due to poor treasury management. The bank does have a reputation of banking start up entities which would otherwise be unbanked- the reason Paul Krugman referred to them as Schmooze and Vibe - and it difficult to discern what impact their decisions over credit quality affected this mess. But the main peril here is having a depositor base focused on a single industry - and one which generates demand deposits from new issuances of start up cash as opposed to from operating funds.

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