4 ms·

Those banks were all built on a fraudulent and irrational housing bubble. SVB just bought too many bad bonds and got stuck. I don't see the industry-wide effect

Those banks were all built on a fraudulent and irrational housing bubble. SVB just bought too many bad bonds and got stuck. I don't see the industry-wide effects from this.

cplusplusfellow 4y ago
The bonds aren’t bad. They are performing according to all reports I’m reading. They simply have a longer date to maturity then is comfortable for the depositors withdrawal cadences, and they have had to be sold / marked down in a period of rising interest rates.
- 1270018080 4y ago
  I mean bad by low returns and long date to maturity, as in a poor choice.
wefarrell 4y ago
They bought those bonds based on the assumption that money would flow in/out within a certain margin and that margin was exceeded. There will definitely be more cases to come where companies who are supposed to act conservatively took on more risk because they’re used to operating in an environment where it was profitable to do so.
postingawayonhn 4y ago
The next financial crisis likely won't play out the same as the last.
BearOso 4y ago
We're in a semi-fraudulent housing bubble now. Well, maybe not fraudulent, but unethical, and similar to what was going on in the '00s. Big banks are holding onto large, mostly unoccupied housing developments to create artificial scarcity and drive the prices up. Then they're selling with huge loans to buyers that are going to see value plummet and be unable to pay anything back.
- tylerrobinson 4y ago
  > Big banks are holding onto large, mostly unoccupied housing developments to create artificial scarcity and drive the prices up. I’m assuming you’re talking about the US. Do you have a source for this claim? There is a problem with vacant houses, but this is the first I’ve heard of the narrative of empty developments implying new houses. A discussion of vacant housing: https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/11/22/the-nations-vacant-homes-present-an-opportunity-and-a-problem https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
  - BearOso 4y ago
    I can only speak anecdotally and assume it's happening everywhere. I'm in the Midwest US. Banks themselves are building neighborhoods full of spec houses. Half of them go empty because they're overpriced. A bunch of developments have stopped before being completely finished, presumably because they can't put up for sale in that condition, but they still contribute to the bank's assets. I can't say I understand the whole economics of it, but it's obvious something sketchy is happening.

Those banks were all built on a fraudulent and irrational housing bubble. SVB just bought too many bad bonds and got stuck. I don't see the industry-wide effects from this.

cplusplusfellow 4y ago

The bonds aren’t bad. They are performing according to all reports I’m reading. They simply have a longer date to maturity then is comfortable for the depositors withdrawal cadences, and they have had to be sold / marked down in a period of rising interest rates.

1270018080 4y ago
I mean bad by low returns and long date to maturity, as in a poor choice.

wefarrell 4y ago

They bought those bonds based on the assumption that money would flow in/out within a certain margin and that margin was exceeded. There will definitely be more cases to come where companies who are supposed to act conservatively took on more risk because they’re used to operating in an environment where it was profitable to do so.

postingawayonhn 4y ago

The next financial crisis likely won't play out the same as the last.

BearOso 4y ago

We're in a semi-fraudulent housing bubble now. Well, maybe not fraudulent, but unethical, and similar to what was going on in the '00s. Big banks are holding onto large, mostly unoccupied housing developments to create artificial scarcity and drive the prices up. Then they're selling with huge loans to buyers that are going to see value plummet and be unable to pay anything back.

tylerrobinson 4y ago
> Big banks are holding onto large, mostly unoccupied housing developments to create artificial scarcity and drive the prices up. I’m assuming you’re talking about the US. Do you have a source for this claim? There is a problem with vacant houses, but this is the first I’ve heard of the narrative of empty developments implying new houses. A discussion of vacant housing: https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/11/22/the-nations-vacant-homes-present-an-opportunity-and-a-problem https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
- BearOso 4y ago
  I can only speak anecdotally and assume it's happening everywhere. I'm in the Midwest US. Banks themselves are building neighborhoods full of spec houses. Half of them go empty because they're overpriced. A bunch of developments have stopped before being completely finished, presumably because they can't put up for sale in that condition, but they still contribute to the bank's assets. I can't say I understand the whole economics of it, but it's obvious something sketchy is happening.