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The point is not what you’re assuming it to be. The point is that a bank run is a liquidity event (i.e. we still own more than what we owe, it’s just hard to t

• wbl 4y ago
  SVB has taken a major impairment due to rising rates already. They might not have to mark the remaining assets to market, but if they have to sell they will take losses, even if these are liquid. His statement didn't project confidence. My "we are adequately capitalized" shirt is raising questions answered by my shirt is the meme way of expressing it. The right move would be to find a recapitalization transaction and complete it, which they tried to do but issued the press release right after a crypto-focused bank went into receivership due to falling account levels. That did not help matters.
• nradov 4y ago
  No, you missed the point and that's not what I'm assuming. What you're stating is still not really actionable. Like what else specifically should he have said?
  • RC_ITR 4y ago
    Again, the point is the only thing to say is theres no problem There’s no deeper point.
    • nradov 4y ago
      No, that's not what a competent leader would say. You obviously don't understand how this stuff works in the banking industry.
      • RC_ITR 4y ago
        Im just explaining the quote that you asked for clarification on.
• amluto 4y ago
  > SVB has a fine balance sheet for now, they’re just running out of easy things to sell. Do they? If SVB is sitting on a pile of Treasury bonds that mature in 20 years, they can “hold to maturity” and get their principal plus some very low interest rate. But this is useless! In a fantasy world in which all their depositors leave and they keep those bonds for 20 years, they are indeed worth that amount in 20 years, which has a rather lower net present value today, and maybe their investors care and maybe they don’t. But this is, of course, a fantasy. Those bonds are collateral for deposits, SVB pays 4.5% APY on savings, and that 4.5% doesn’t materialize from the ether. In 20 years, 4.5% multiplies money by 2.4, those T-bonds will not multiply by 2.4, and SVB will slowly but surely end up in the hole. Unless they convince a very large fraction of their depositors to forego interest. It boggles my mind that banks are apparently permitted to do accounting on a hold-to-maturity basis. Holding a bond to maturity avoids paying a spread and maybe has some tax effects. And that’s it. Otherwise you might as well sell it and buy a new one with the same present value. (I am not an expert, and I’m going off HN comments for how these rules work. But if the banks really do get to say they plan to hold a fixed-income instrument to maturity and they can value it as something like face value, then I think the system is broken.)
  • femto113 4y ago
    HTM accounting isn't the problem, it's one tool among many and has its uses. SVB's mistake was buying long term paper just as the country was heading into a rising rate environment. This has already put them in a hole they probably can never dig themselves out of (selling stock is clearly not gonna work). I think the only non-disastrous path forward here is an acquisition by another bank big enough to just absorb that paper into its balance sheet. If SVB is smart they'll try to get this done while there's still some value left to sell--if they wait too long it'll turn into another WaMu.
    • panarky 4y ago
      Borrowing short and lending long has been the traditional function of banks for hundreds of years. They profit from the interest rate spread between what they pay on short-term liabilities (mainly deposits) and what they receive on long-term assets (usually business or housing loans). It's hilarious that banks serving crypto and startup ecosystems aren't failing because their crypto and startup loans went bad, they're failing because of the duration risk from holding long-term Treasurys on their balance sheet.