Reply to SVB Bank Run: Fed Calling Emergency Meeting

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We should have done with Iceland did in '08.  Let the banks fail, bail out the consumers, and prosecute the bankers.[/quote]

This is a lot easier in a country with less than 400,000 people.  [/quote]

+1 Also, most of the country is uninhabited, and it has restrictive immigration policies.[/quote]

And has a robust fishing industry [/quote]

Plus cheap thermal energy.[/quote]

The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value.

It’s a similar situation as SVB - it was a liquidity issue that led to bank run. [/quote]

It’s *somewhat* similar, especially in that Icelandic banks were also laughably badly managed and very much the product of too-rapid, low-interest rate fueled growth. But SVB, more like Anglo-Irish, created conditions for a bank run by being overly dependent on just a few players for deposits, even if they could pretend that their portfolio companies were OPM and not just more than a handful of people’s wealth in an additional account.[/quote]

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