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The collapse of SVB exposes the largest crack in the economy
- TooSmugToFail 4y agoSVB used an exemption from Basel III, which allowed it to run a riskier business, and eventually led to its implosion. Basel III was introduced to force banks to be more conservative, and thus more safe. Downside: this also means bank is going to be less profitable. European banks were forced to implement Basel III, while the US bankers managed to lobby a loophole for certain types of banks. And sure enough, SVB leveraged this loophole. For those interested, FT Alphaville describes this in ample detail: Silicon Valley Bank is a very American mess https://on.ft.com/3ywMURD https://on.ft.com/3ywMURD
- xwdv 4y agoThe exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
- rco8786 4y ago> The exemptees just need to be fucking careful with this advanced mode of operation. How many times will we get burned until we learned that banks will not be careful if they are given an opportunity to not be.
- illiarian 4y agoOr that any business will not be careful given the opportunity.
- deleted 4y ago[deleted]
- talideon 4y agoSo, you're essentially proposing a weaker, informal version of Basel III. In which case, why have such an exemption in the first place? What innovations does it lead to? Restrictions on banking typically exist for a _really_ good reason. After all, we saw what happened when retail and investment banking were allowed to mingle because it 'lead to [...] innovations'. If you're going to advocate for something beyond saying 'but look, innovation!', you need to be more explicit about what those innovations are, because European banking is plenty innovative within the constraints of Basel III.
- worik 4y agoYes. And the pace of innovation in US banking was very slow, essentially stalled, for a generation from the consumer's POV Here in Aotearoa we have ATMs on every street corner since the 1980s. All but the tiniest traders have had pos electronic transactions for nearly thirty years Other countries are even more advanced (our banks are all like yous now, consumers now viewed as pests) I want innovation in customer services, but what we get is innovations in financial engineering. May they all rot...
- layer8 4y ago> The exemptees just need to be fucking careful You mean “need to have sheer luck in their gambling”.
- bequanna 4y agoHead, we get bonuses Tails, taxpayers bail us out
- bequanna 4y agoPlease name one “banking innovation” the banking industry has implemented in the last decade which has benefitted consumers.
- morelisp 4y agoVCs and founders must believe SVB offers at least one, or why not go with a normal bank?
- gesticulator 4y agoThis has to do with a web of relationships and risk tolerance, not some product set…
- morelisp 4y agoWhatever you mean by "relationships" is in fact an "innovation" in the banking sense.
- saurik 4y agoAnd how did that work out for them? Are many of the people who were using SVB yesterday happy about their decision today? If they could go back in time and give up whatever that innovation was, and not be praying that they still have their money next week, are you saying most of them would be happy where they are? The problem here is that the system just isn't transparent enough: you put your money in a bank and I guess you just have to assume that they are really really smart or you lose your money... people make fun of crypto here constantly, but at least there everything is an open book. At the end of the day, the situation with SVB is actually worse than some scary DeFi protocol.
- nradov 4y agoThe system is sufficient transparent. SVB was a publicly traded company. Customers who cared about risk could just read the reports. In the end any bank can fail. https://ir.svb.com/financials/sec-filings/default.aspx https://ir.svb.com/financials/sec-filings/default.aspx The depositors will get their money back, with perhaps a small delay. Which is more than you can say for scams like cryptocurrency.
- MrMan 4y agononsense - what banking innovations do startups need? is there really any such thing as a startup? or are we just talking about small businesses some of which grow into larger still unprofitable businesses? hopefully this mythologizing stops
- chasd00 4y agoI was wondering the same. You put money in a bank so no one robs you and steals it. Money goes in and money comes out when you need it. What innovation is there?
- Forgeties79 4y ago“The exemption for dumping hazardous materials should still be allowed, as it led to great manufacturing innovations for startups. The exemptees just need to be f**ing careful with this advanced mode of operation.” This sounds tongue in cheek I know, but SVB’s situation has created real world consequences even for me, someone who has no money tied up with them. My go-to for bonded cellular networks (so i can run a livestream for my employer, a small tech start up) had to tell all of us who use them to pause payments immediately today as this unfolded and are not taking new rentals in the meantime. They’re literally not getting paid right now. This is not a holding pattern that can last long and is highly disruptive for them and, consequentially, me. A video content guy at a small start up on nearly the other side of the country.
- Jensson 4y ago> Downside: this also means bank is going to be less profitable. What are the downsides to society if banks are less profitable? They invested in T-Bills, I don't see how that investment served society in any way.
- PKop 4y agoLiterally funds the government lol
- phkahler 4y agoTaxes fund the government. Bonds are just a way to avoid managing a budget.
- PKop 4y agoOk so you're saying it's bad that they fund the government. But given the large budget deficit we have, the statement is true.
- arez 4y agogovernment doesn't need taxes to fund anything, it can just create money and sell bonds. Taxes are just for steering money flows
- nostromo 4y agoInflation would like a word.
- majewsky 4y agoSpeaking from my German perspective. Our (European) central bank printed central bank money like crazy the last 10 years, and apparently it was not a problem. Prices only shot up once there were supply shocks due to Covid and Putin. And sure enough, the supply shocks are slowly waning, and hence YoY inflation rates are also rapidly declining. Yet everyone keeps talking about how the money supply is causing inflation, even though there is no plausible direct connection [1] between the amount of money in some bank account somewhere and consumer prices. The bakery down the street does not look at federal reserve rates when figuring out their bread prices. [1] I'm guessing that someone will be able to explain this to me. But keep in mind that your explanation should cover how we could have over a decade of near-zero interest rates and the respective money supply inflation without seeing any significant consumer price inflation.
- talideon 4y agoYour username is both very ironic and apt in this particular case. Also, your analysis is spot on.
- nayuki 4y agoOn Reddit they call this phenomenon beetlejuicing. (Subreddit, Know Your Meme, Urban Dictionary)
- worik 4y ago> SVB used an exemption from Basel III, Really? That is interesting. Why? How? Who else?
- toomuchtodo 4y agohttps://archive.is/Fx1is https://archive.is/Fx1is
- white_dragon88 4y ago[dead]
- rr808 4y agoAre you sure that is the problem? I see lots of comment today they lost a lot of money on long dated treasuries. Which is "safest" asset.
- dragontamer 4y agoNo. My money market fund (VMFXX) is composed of Fed Repo notes with 13 _DAYS_ of maturity average (https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx#price https://investor.vanguard.com/investment-products/mutual-fun...) A bank holding customer deposits in lol 30 _Year_ or 10 _YEAR_ treasuries is anything but safe. That's called duration risk, and congrats, they just got burned by duration risk.
- rr808 4y agoSure, what I meant was Basel rules mark treasuries as level 1 capital. So Basel doesn't have much to do with it, as the OP suggested.
- wpietri 4y agoAre you sure? The article says, "short-term Treasury bills get 100-per-cent weightings", implying that longer term ones would get something else.
- twelve40 4y agoso it looks like the bank run was not the root cause but a consequence of this mess, and all these people moralizing about not panicking were essentially advising small companies to keep funding wild practices of one adventurous bank CEO out of their pocket - how could it have ended in anything else?
- cm2187 4y agoYes and no. LCR is basically requiring you to keep in cash and liquid assets the equivalent of a 30 day bank run. And it should work. A european bank had very large bank run last year and survived without even breaching its regulatory minimums. But that still leaves the bank in a weak position after the bank run, and you can't predict the exact magnitude of a run.
- aqme28 4y agoWhat is a "30 day" bank run? How is a bank run measured in time?
- Our_Benefactors 4y agoUndoubtedly it is a dry bureaucratic definition like “A 30 day period where on each day capital outflows were greater than inflows by a factor of 10”, of course in the definition failing to capture what an _actual_ bank run is.
- andreareina 4y agoSeems to just mean 30 days of average outflows, i.e. a bank should be ok for that long without any money coming in via new deposits, loan repayments, etc. Of course the issue is when you have larger-than-average withdrawals... https://www.investopedia.com/terms/l/liquidity-coverage-ratio.asp https://www.investopedia.com/terms/l/liquidity-coverage-rati...
- Scoundreller 4y agoProbably doesn’t help that this is very a niche bank. Lots of orgs running their payroll from this bank, but few retail account holders. At a typical community/regional bank, payday is just a bunch of bill entries: debit the corp account and credit the employees accounts. Meanwhile a business-focussed bank will just have huge debits every Friday without corresponding credits: those are happening at other banks. And with a small number of account holders, it doesn’t take many actors to cause an a bank run. Payday sealed the fate here.
- npunt 4y agoWhat other banks that startups use have an exemption to Basel III? Would love to understand broader risk to startup ecosystem.
- ta1243 4y agoWhy would a startup use a risky bank?
- Scoundreller 4y agoGiven how popular this bank was with startups/tech orgs, it suggests that they were otherwise unbankable by the usual players. I’m unsure what special services a startup needs from their bank that any other bank serving businesses couldn’t offer.
- JackFr 4y agoAgree. SVB was not small, but an order of magnitude smaller than the large money center banks (Citi, BofA, JPMChase). That being said, nearly every other bank of that size submitted Dodd Frank Stress Test results to the Fed in 2022. https://www.federalreserve.gov/publications/files/2022-dfast-results-20220623.pdf https://www.federalreserve.gov/publications/files/2022-dfast... Somehow SVB avoided this. I don’t see this as systemic at all. The FDIC will make depositors whole and the owners and managers did a bad job and they lose. The worst possible response would be a bailout of any sort beyond ordinary FDIC receivership.
- boppo1 4y ago97% of depositors exceeded the FDIC limit.
- phone8675309 4y agoThat stinks, and I feel for them. Let's hope people will learn a lesson from this - never keep all your eggs in one basket.
- fbdab103 4y agoAren't we talking about hundreds of millions/billions of dollars? At that scale, not a lot of baskets available.
- throwing_away 4y agoCould a tech company have split their accounts into separate $250k accounts? I'm not sure if the bank would offer that.
- x3n0ph3n3 4y agoNo, FDIC insurance applies to account owners, not accounts. Fun fact, if you're married, you can actually turn that into 3 * FDIC insurance limit. - Account 1: You - Account 2: Your spouse - Account 3: Jointly you and your spouse
- steve76 4y ago[dead]
- MrBuddyCasino 4y agoThis btw is Jay Ersapah, Head of Financial Risk at SVB. Apparently DEI & LGBTQ issues were more important than making sure their assets & obligations are balanced: https://twitter.com/the_real_fly/status/1634035956188688385 https://twitter.com/the_real_fly/status/1634035956188688385
- throwayyy479087 4y agoSVB UK has now been sold to HSBC for 1 pound.
- fidgewidge 4y agoAt SVB UK, which is isolated apparently. Not that it reduces the impact of the image ...
- throwayyy479087 4y agoSVB UK also failed this week.
- fidgewidge 4y agoIsolated ... or not. Damn this situation moves fast.
- djfobbz 4y agoWe are living in a REAL CLOWN WORLD!
- Longtermvalue1 4y agoIt’s reported that SVB paid executives bonuses to grab cash right before they were shit down. Each of these executives names should be published & exposed as the grifters they are.
- 1980phipsi 4y agoCome back when you have the entire risk mgmt org chart and show she is at the top. Then I would be interested.
- HyperSane 4y agoGlass-Steagall needs to be brought back. It was incredibly effective at preventing situations like this.
- fshbbdssbbgdd 4y agoGlass-Steagal separated commercial banks from investment banks. As far as I can tell, SVB was just a commercial bank and the way it went bust has nothing to do with conduct that would have been prohibited under Glass-Steagal.
- DeathArrow 4y agoWhat are other banks that exploited that loophole? Maybe it's time to short them for some easy money.
- m348e912 4y agohttps://twitter.com/DavidSacks/status/1634292056821764099 https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.
- tekla 4y agoThere is no evidence of this
- dragontamer 4y agoWhy? My money at VMFXX is almost entirely composed of safe Fed Repos with average maturity of 2-weeks. VUSXX is mostly Treasury Bills, again of maturity averaging like 2-weeks. My money at SWVXX is composed of AAA-rated bank notes, of similar 2-weeks-ish maturity average. The idea of a bank, like SIVB, being composed of largely 30-year mortgages and 10Y or 30Y Treasury Bonds is insane. The bank deserves to die after taking such high duration risks. There should be _NO_ bailout. I can barely believe a bank was so stupid to keep customer deposits backed by something so risky. ---------- We've been preparing our financial system for the last 15 years (since 2008) for the next financial storm. We've got "stress tests" to see that various banks have severed contamination between each other, at least in theory. Lets see how good our preparations have held up. No point giving up and bailing things out before we've even tested our new financial system regulations. We can afford to let some banks go under. Only if the contagion has a chance of spreading everywhere should we consider the last-ditch effort of a bailout.
- cplusplusfellow 4y agoI couldn’t give two shits about banks that go under. The businesses that concern me are the ones who lose deposits.
- JohnFen 4y agoThey won't lose deposits except insofar as they decided it was OK to exceed the 250k limit for FDIC insurance. And in deciding to do that, they were deciding to take a risk and got burned by it -- but it was a risk they willingly took on.
- nodesocket 4y ago> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.
- dougmwne 4y agoYes, another way to think about this is that if you bought an .80 t-bill today it would have the return on investment equivalent to a 1.00 bill bought last year. That’s because the new t-bill has a much higher interest rate. So in effect, as the fed raises interest rates, they are destroying the principle of every existing bond on the market. That’s a big problem for anyone owning bonds, especially if they are using them as collateral for leverage.
- JohnFen 4y ago> they are destroying the principle of every existing bond on the market What principle are they destroying? Bonds are not, and never were, immune to economic changes. They're just less volatile and react differently than stocks and, if you hold them to maturity, will pay what what they promised. It seems to me that the problem is that a whole bunch of people made investments assuming that there was effectively no risk in doing so. Like the good times would last forever or something.
- deleted 4y ago[deleted]
- candiodari 4y agoThese bonds are not held as investments, but as collateral for getting other things (like money to buy mortgages with). If your collateral gets worse ...
- JohnFen 4y agoEither way, they were treating them as if their value was guaranteed prior to maturity. That has never been a thing that these instruments guaranteed. They were gambling, because they failed to hedge that risk.
- Apocryphon 4y agoSo between the tech angle and the housing-related investment vehicles, are we remixing 2000 with 2008 now?
- cplusplusfellow 4y agoSelf inflicted wounds this time, though. There is nothing wrong with a bank purchasing 80bln of MBS with their depositors money. The issue becomes when the fed suddenly raises rates faster than any time in their history while still failing to fight inflation (which is a result of having a stronger economy).
- testfoobar 4y agoSVB failed to hedge their interest rate risk.
- teacpde 4y agoCurious what are the ways SVB could have hedged in this scenario?
- wskinner 4y agoBuy T-Bills or other short maturity assets instead of long maturity T-Bonds and mortgage-backed assets.
- snuxoll 4y agoNot investing such a large percentage of their capital in long-duration fixed income vehicles all at once. There's nothing wrong with going long on duration, it's a hedge against decreasing rates. The problem is when you go all-in on long duration investments and rates suddenly shoot up like they did, you now can't sell those assets without eating a massive loss. An appropriate hedge would have been doing what every retail bond trader does, build a ladder. If they had simply bought a wider variety of say 1/2/5/10 year securities then they could have let the longer-dated ones sit and sell the shorter duration ones (and they wouldn't have suffered such a huge loss of market value that spooked depositors and started the run in the first place).
- yalogin 4y agoAs someone that is not following this as closely as I would like, does the collapse of this bank have nothing to do with FTX and Crypto?
- morelisp 4y agoOnly indirectly; the tide is receding for the first time in many years, and it's exposing a variety of... issues.
- UncleOxidant 4y agonaked swimmers.
- tekla 4y agoFTX was simple fraud. This isn't really related and is more standard bank taking on wayy too much risk.
- thepasswordis 4y agoFTX was because they took customer deposits and gambled with them, lost the gamble, and therefore lost the money.
- mannerheim 4y agoYes, but it was also fraud because they weren't supposed to gamble with that money because they were an exchange, not a bank.
- fullsend 4y agoWhat is different here? FTX bought shitcoins. SVB bought MBS. They gambled rates wouldn’t change and customer’s wouldn’t withdraw.
- jandrese 4y agoOnly indirectly. They released a statement after the FTX collapse saying effectively "don't worry, no problem here", which caused a bank run that they couldn't manage and forced the collapse.
- marcopicentini 4y agoIn 2008 we learned “cartolarization”. In 2022-23: “Bond convexity”. This word is still not on headlines yet, so maybe more loses has to come.
- SideburnsOfDoom 4y ago> In 2008 we learned "cartolarization" Did we? So what the hell is it?
- astrange 4y agoItalian-English for securitization?
- notpeter 4y agoI think you got it. cartolarization ~= cartolari(zzazione) + (securiti)zation. https://it.wikipedia.org/wiki/Cartolarizzazione https://it.wikipedia.org/wiki/Cartolarizzazione
- rationalist 4y agoA misspelling of "collateralization"?
- rehitman 4y agoEveryone says SVB had bad investment and they deserv it etc. However, I am worried about this being the first of many similar financial instutation failing. After all, bonds are supposed to be safe on paper. Increasintg interest rate fast can break many people who are not able to adjust.
- jschveibinz 4y agoJust something to consider… A casual look at the regional bank index ETF will show that starting about two weeks ago, the price started to steadily decline and then a sudden drop with SVB. I’m not sure if this decline is well correlated with the total market index over the same period, but if not, it suggests that some people “saw this coming” a couple of weeks ago and the other shoe may still need to drop. Was it just good analysis? Was there some whispering going on? If so, I hope the SEC is watching.
- markus_zhang 4y agoThis kind of things usually have someone or some people pushing from behind. I'm sure there are some sharks around the corner. Of course you have to have blood to attract sharks but human sharks can easily buy social media and newspaper to exploit small wounds. This might be just the beginning of a large hunting campaign, let's wait and see.
- MrMan 4y agothis bank stuck out as troubled far before this event
- snewman 4y agoThese bonds were supposed to be "safe" in the sense that they would be repaid on schedule. And that's been fine, AFAIK there is no suggestion that they won't be repaid. The problem is that SVB, knowingly, took on "interest rate risk" by buying long-term bonds (average 6.2 years, I read) that lock in an interest rate. The money to purchase those bonds came from deposits, which can be withdrawn at any time. When everyone started withdrawing their money SVB had to sell the bonds, and they took a loss because interest rates have increased and the bonds they were selling were not longer worth as much.
- guhcampos 4y agoThis whole discussion around bonds makes me feel like I'm either too stupid or too smart, because it does not make sense to me that SVB would not have any sort of hedging around government bonds? I don't know much about US bonds, but Brazil issues 3 types of bonds: fixed rate, inflation-indexed floating rates and interest-indexed floating rates. It's common sense between investors you need to hold a mix of the 3 to hedge against macroeconomic changes, that way the term does not really matter that much: if inflation skyrockets, it's likely the government will increase interest rates to compensate, and so on. Is it that much different in the US or has SVB simply failed to choose the bonds they bought carefully?
- jfengel 4y agoThe US does have inflation-indexed bonds, but they're only available in small amounts ($10k/year). They're for consumers, not institutions. You can, however, buy bonds with varying maturity times. That's generally OK, since there's a liquid market in those bonds. They appear to have been caught flat footed by a sudden run.
- gruez 4y ago> The US does have inflation-indexed bonds, but they're only available in small amounts ($10k/year). They're for consumers, not institutions. You're thinking of I-bonds, but that's not the only inflation indexed bonds out there. There's also TIPS https://treasurydirect.gov/marketable-securities/tips/ https://treasurydirect.gov/marketable-securities/tips/
- bjornsing 4y agoI'm not aware of any useful hedge for long term US government bonds. There are inflation protected bonds (TIPS), but they wouldn't have worked as a hedge in this case [1]. 1. https://www.schwab.com/learn/story/treasury-inflation-protected-securities-faqs-about-tips https://www.schwab.com/learn/story/treasury-inflation-protec...
- inconceivable 4y ago
- 1vuio0pswjnm7 4y agoThe author myopically tries to extrapolate this incident to "the economy" and "other industries". SVB's customers panicked. But who are SVB's customers. For the most part, VC, PE and non-profitable "tech" startups. Not surprising they would panic. They produce nothing themselves, conduct surveillance, sell advertising services, pay employees from funding rounds and call this a "business model". This is not "the economy". This is a giant sucking leech attached to it. A parasitic fungus that has attacked the minds of an alarming number of susceptible people. But not everyone is a mindless zombie. Among other things, the parasite needs "zero" interest rate borrowing to survive. "The economy" is not synonymous with Silicon Valley nor the SV mind virus.
- soundsgoodtome 4y agoHey can we save this kind of comment for Reddit? Literally the majority the tech you use today was born from companies that were unprofitable and leveraged VC funds at some point. I don’t know about you, but I come to HN for discourse that I could not get on race-to-the-bottom social media sites.
- MrMan 4y agoHN is much worse than many sub-reddits. Look at the belligerent ignorance on display not just here, but that which is demonstrated by the VCs who seem to collectively lack a sufficient knowledge of finance and other things. The decline in quality is evident here, and it doesn't stack up well compared to places where people mostly know what they are talking about.
- tgv 4y agoWell, Intel, Apple and Microsoft, to name a few, have (nearly) always been profitable. But isn't VC supposed to invest in things that are likely to return a profit? There's some risk, which is offset against the ROI, but I don't see a good reason to invest in companies that run a loss.
- izacus 4y agoIt absolutely was not.
- PKop 4y agoIn the short term, it is interesting to see if this problem grows[0]...if Fed keeps rates at high levels for longer, there is going to be a gravitational pull into treasuries which will cause more banks to fail. It would be very prudent to not have more than the FDIC insured amount in especially smaller regional banks that may have made same errors as SIVB while avoiding Basel III regulations [1] [0] https://twitter.com/TOzgokmen/status/1634329176554520576 https://twitter.com/TOzgokmen/status/1634329176554520576 [1] https://archive.ph/Fx1is https://archive.ph/Fx1is
- esotericimpl 4y ago[dead]
- mullingitover 4y ago> In the 2008 crisis, a major lesson was that you can’t effectively reduce risk by bundling together lots of risky assets into one major asset. That was the first domino to fall, but that was survivable. The real problem was that the banking system had a suicide pact in the form of credit default swaps on each other that they couldn't cover. The MBS stuff was bad, but that wasn't what caused 2008. Now I'm just waiting to find out if some other bank is going to need to pay out credit default swaps for SVB in excess of their market cap...
- PaulHoule 4y agoInterest rates were going to go up at some point anyway.
- pasquinelli 4y agothis is a response to the title: the crack that just appeared must be the largest!
- rcme 4y agoI disagree with the overall learning from SVB’s collapse. Bonds are safe. The learning, to me, is that keeping interest rates at zero for too long distorts expectations in an unsafe way. What did SVB do wrong, exactly? They took in a lot of money, i.e. they ran a successful business. And they bought safe assets with that money. Who at the time would have disagreed with their strategy? The issue is that the Fed created expectations that interest rates had a reasonable chance of staying 0 for the next decade. This blame falls squarely with Powell. He lowered rates in 2019, well before the pandemic. Who can blame someone for seeing near-0 rates in 2019 and believing they would stay that way well into the 2020s? Also worth noting that SVB was not the only one to belief this. The market, in general, was supporting insanely high valuations whose only justification was near-0 rates well in to the future.
- phlakaton 4y agoSo I would say it's safe in one way (if you hold it to the end, you'll get your money back plus interest), unsafe in another (its value on the market before then is not guaranteed). I disagree that the Fed set an expectation for indeterminate 0% interest. I'm sure that's what sugar addicts in the market told themselves, but I think the Fed was clearly, if gingerly, trying to dig themselves out of a 0% hole, having started to raise rates again in 2015. As they should have been!
- caddemon 4y agoYou get back your money plus a garbage interest rate relative to what you could've gotten if your money were available now though. That is why it is cheaper, it's not like it's an irrational market dip due to a panic, where the time-value will eventually recover. Unless interest rates go back down very soon the time-value on this thing is definitely a loss. And yeah as a bank it's an extremely stupid move to put 40% of your money into an entirely unhedged bet that interest rates will not go up for 10 straight years. Maybe the Fed didn't handle things as well as they could, and similarly maybe VCs exacerbated the problem unnecessarily, but I don't see how the lion's share of the blame doesn't go to SVB here.
- 4y ago
- senorrib 4y agoIt only takes one bank to default, and an infinite amount of articles like this are instantly published. Urgh.
- weeksie 4y agoI dunno. Fucking duh, a government bond that pays you a fixed amount of interest is going to lose value when inflation is higher than the loan rate.
- chernevik 4y agoThere are LOTS of financial players looking for low credit risk long-term assets who can tolerate the associated interest rate risk. Pension funds and life insurance companies have highly predictable long-term cash outflows and often happily buy long-term bonds to match up inflows. They do not care that the market value of their holdings has been hammered by interest rate increases because the assets were selected to fund a future liquidity need. Just because the tech community is just now discovering interest rate risk and maturity matching problems doesn't mean any of this is new to the rest of us.
- DeathArrow 4y agoI thought Bear Stearns going under was exposing a crack. Same for New Century Financial Corp. declaring bancrupcy. Is this going to end with similar results as 2018 by affecting the whole financial system? If yes I hope there will be no bailouts using public money and the financial system will start to be properly regulated and supervised.