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I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 https://twitter.com/alistairmbarr/status

by ezekg 4y ago

I’m surprised the author didn’t include a chart like this: https://twitter.com/alistairmbarr/status/1634275645235793920 https://twitter.com/alistairmbarr/status/1634275645235793920. It shows how bad the SVB situation really is. It’s been very quiet since 2008 and its aftermath. Until now.

bink 4y ago
Yeah, I don't know anyone saying "it's just SVB since 2000". They're saying SVB is the first major bank in a long time (and hopefully not a harbinger of things to come).
- latency-guy2 4y ago
  It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it.
  - Grimburger 4y ago
    What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
    - saveferris 4y ago
      Not the poster you asked. But, a lesson we continue to ignore is that there are other options to tame inflation besides raising interest rates. The problem is the option isn’t politically expedient so Congress just raises its hands in mock exasperation and says well, it’s the Fed’s mandate to manage inflation. Congress are cowards and won’t do what should be done - raise taxes. That is likely the fastest least painful long term solution to quickly climbing inflation I say likely solution because at this point economies are so complex I’m not certain there are solutions without any butterfly effect consequences
      - tines 4y ago
        I know nothing about economics. Can you help me understand how raising taxes helps deal with inflation? Is the idea that the federal government "deletes" some of the money it receives through taxes, like the opposite of printing more money which cheapens the existing supply?
        convolvatron 4y ago
        that would .. actually make sense. I can't imagine anyone who is winning in the status quo being anything but horrified at the thought. has any currency ever done this? isn't there a risk of a Japanese-style concurrent inflation and recession?
        frankfrankfrank 4y ago
        Yes, on the face of it. The issue with what appears to be the same old game is that those who absconded with the wealth pillaged through funny money, are not going to be the ones getting punished to “fix things”. This opens up a whole different set of cascading consequences because now on top of the moral hazard we had, we’ve gone well beyond that because the perpetrators have learned there are not only no consequences, but that you will be rewarded for your evils. Combined with other factors too numerous to really go into here, we are seeing the emergence of essentially an aristocracy in the USA and Europe, consisting of, as the earlier aristocracy, of the pillagers of their own people and the people of the rest of the world.
        AnimalMuppet 4y ago
        That is an interesting idea, but it won't happen, because Congress won't "delete" the money. Instead, they'll spend it.
        lifeisstillgood 4y ago
        You have stated Modern Monetary Theory precisely. Yes that is the new modern argument - government prints money, spends it on hospitals etc thus putting it in circulation and deletes it by taxation. One HN comment == ten years of economic debate. :-)
    - TheOtherHobbes 4y ago
      Inflation is caused by profiteering and opportunism aided by the occasional supply shock. Trying to control it solely with interest rates makes as much sense as trying to fly a beach ball to Mars.
      - frankfrankfrank 4y ago
        Those are simply common correlate effects. Inflation is really rather simple, it is inflation of the money supply, i.e., printing more Monopoly money for oneself, knockoff purses, using chemicals to create fake honey, it’s what counterfeiters do … whether it’s some North Koreans or the federal government … its fraud, criminal, illegal, immoral, evil, and a clear indicator of illegitimacy of this or any government that does what this fake government has done.
        imtringued 4y ago
        Except that view is divorced from reality. https://economicsfromthetopdown.com/2023/01/17/is-stagflation-the-norm/ https://economicsfromthetopdown.com/2023/01/17/is-stagflatio...
    - dragonwriter 4y ago
      > What lesson is that? That there maybe shouldn't be as many: > Basel exempted businesses’
    - raziel2701 4y ago
      In my opinion the Fed should be more decisive and data-dependent. In 2021 the Fed stubbornly stuck to an "inflation is transitory" narrative that meant they did not start raising rates all of 2021 when most people could see the excess and the mania of a bubble. Rates should have started to be raised since the summer of 2021, they could've done a slow and steady pace. Instead, once things got super hot inflation-wise, then they flip flop and start a very rapid pace of rate hikes, unsurprisingly something broke and here we are once more talking about bailouts, about more QE. We're frenetically going from rapid tightening of financial conditions, to potentially, rapid loosening of said conditions. The Fed is supposed to raise rates in two weeks, I'm not sure if they will change their mind given what just transpired this last week. I agree inflation must be tamed, I criticize the Fed's inability, or unwillingness, to start addressing it at least a year earlier. From my cynical perspective, keeping rates super low is a fucking party to the stock market and lots of powerful people want to keep the party going and they closed their ears to the inflation alarms. Now we're facing the possibility of another crisis (we'll see how things play out next week) and we know that the proposed solution will be to lower rates and accommodative policy that actually contributes to inflation. It's a shit show I'm tired of seeing repeat.
  - chimeracoder 4y ago
    > It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it. Don't bet on it. One of the big changes after the 2008 crisis was the passage of Dodd-Frank, which was then repealed in large part in 2018. Some of the repealed provisions in Dodd-Frank would likely have mitigated or even prevented this bank run, due to the capital and liquidity testing requirements.
- saalweachter 4y ago
  I'm actually curious if SVB failed because it had so many highly connected "big" customers. A panic moves a lot faster if each person is pulling 8+ figures from the bank, and you have a lot more incentive to panic if you have more than the 6 figures of FDIC insured balance in the bank. There's also a measurable difference in hearing crazy Jim down at the pub pulled his $400 out of the local credit union because he heard the fed was raising rates and hearing from the VC on your startup's board that three guys -- guys you know and think are cooler than you -- have pulled their next year of runway from SVB because they're worried for vague handwaving macroeconomics reasons that sound plausibly impressive to you.
Waterluvian 4y ago
I’m still not clear on if it’s even the same. My very weak understanding is that in 2008 a ton of assets turned out to be valueless junk mortgages that were all going to default. Is that true for SVB or are their assets just too locked in for now? What that graph doesn’t show is the percentage of the blue bars that are recoverable assets.
- pclmulqdq 4y ago
  I'm not sure if we know how much of the blue bar is recoverable. SVB is holding a lot of fixed-income vehicles that currently yield less than: * Depositing money in a fed account (available to banks) * Depositing money in a money market savings account * Every treasury instrument you can buy today When they go to sell those assets, they may take a much bigger haircut than the pricing models suggest given the supply and demand. The assets definitely won't be worthless, but they may not be worth very much.
  - Scoundreller 4y ago
    > Every treasury instrument you can buy today Treasuries don't even need to pay more than a savings account to be the rational choice as they aren't subject to local/state income taxes. That's a bigger than average advantage in California. Add to that no $250k limit either.
- pgwhalen 4y ago
  It turns out that there was very little defaulting in 2008, the problem was the fear of default which resulted in changing valuations that were not broadly expected. In this case, there is no doubt about the value of SVB’s assets: they’re lower than they were a year ago simply because they were heavily long duration and rates went up a lot. That’s bond pricing 101. That, in combination with a low diversity of depositors that starting withdrawing at once, set up the bank run that VCs created by emailing all their portfolio companies to run.
- bink 4y ago
  Not valueless, exactly. The mortgage backed securities were rated more highly than they should have been as the default rate was assumed to be much lower. When that became obvious the securities lost a lot of value and the banks found out they were over-leveraged. I'm not in finance (clearly), but it seems to me there are a lot of similarities with interest rates rising and forcing banks to re-value their investments in bonds and mortgage backed securities. The clear difference this time IMHO is that valuing bonds based on interest rate movements is much less opaque (even fully transparent) compared to valuing mortgage backed securities based on default rate predictions that are outright lies. We know, or should know, how many of these investments are held by large banks and what the rates and maturation dates are. The big question I have is the more traditional financial contagion. If companies that had millions in SVB lose that money there will be impacts for other banks as the companies and bank investors become more conservative or paranoid. If many of those companies go out of business that means fewer deposits and fewer investment opportunities.
rektide 4y ago
That shows money, which is interesting. I'd also like to see "Years of Banking Institutions Lost"... SVB is supposedly 40 years old... how old were banks that had failed in the past? That'd be an interesting other way to tally/view the magnitude of what happens, a kind of indicator of volatility. My thought is... if a whole bunch of banks open then shut down 3 years latter, it doesn't seem as notable as a bunch of more established banks going under.
- bumby 4y ago
  Why does that sort of “infant mortality” matter in finance if they play by the same rules? I’m not being argumentative, just trying to understand. In physical systems, that view would be used to apply additional stress testing early to reduce the overall risk exposure (e.g., test a pump for a certain run time to be assured it’s made it out of the early failure age and is more likely to last a lot longer). I’m not quite sure how this applies to contrived (non-physical) systems.
  - davrosthedalek 4y ago
    I can imagine two effects why a younger bank might experience higher risk: 1) a young bank is more likely to experience a high-growth phase, which produces operational challenges 2) a young bank might be founded to serve a new business niche, and experience with the challenges of that niche might be less prevalent in the banking sector. Like airplane regulations, rules are written in blood.
arcticbull 4y ago
That chart would probably be more useful if expressed as the shortfall between assets and deposits. It's not really a huge issue if a bank with $1T in assets has a $1M shortfall but the regulators will sure a shit still close it down.
- lazide 4y ago
  No bank with $1T in assets will ever have a shortfall of only $1m - it’s too easy to shuffle things around to move the problem forward another day or whatever. A bank the size of SVB has a whole team that does that - it’s just a necessary part of operating at that scale. Blowups like SVB happen when an entire team of financial experts have tried everything - and have nothing left they can do. Then it blows up big, because all their other moves ‘come due’ at once.
- mike_d 4y ago
  Almost all failed banks (including SVB) in recent history held more assets than deposits. Liquidity is the issue. Imagine you take your $10 million fortune and convert it all into gold bars and hide it under you bed. Then you order a pizza. When the pizza guy shows up, even though you are "rich," you are also in that moment broke and can't pay for the pizza. Not only will the pizza guy not take gold, you can't find someone to convert your gold into cash before the pizza guy gives up and leaves.
  - tshaddox 4y ago
    There’s still a big difference between being 10 cents short on your pizza bill and being $10 short.
  - beebmam 4y ago
    Except instead of just leaving, the pizza guy sues you and the state takes your gold bars under your bed and sells it to pay the pizza guy. Not saying this is a bad or good thing.
    - Scoundreller 4y ago
gnfargbl 4y ago
I'll ask the obvious question, because I have no clue about this stuff. The early failures in 2008 seem to have been followed by a cascade of smaller failures. Is that going to happen again?
- eqmvii 4y ago
  It might. Have to see what else breaks and/or gets bailed out on Monday.
  - resource0x 4y ago
    I'm very curious about the bailout criterion. They can't set the rules individually for each "problematic" bank. Whatever formulation they come up with, will be immediately abused by creative financial engineering, so the problem will soon re-emerge in a different, totally unexpected shape.
    - humanizersequel 4y ago
      >They can't set the rules individually for each "problematic" bank. Can't they?
      - resource0x 4y ago
        In principle, they can do whatever they want, but they already know SVB is not the only problematic bank - there's a whole pipeline of them; inventing individual bailout protocol for each would look ridiculous. My bet is that Fed's PhDs are desperately looking for a formula as we speak. That won't be easy. :-)
    - dragonwriter 4y ago
      > They can’t set the rules individually for each “problematic” bank. Most past bailouts have been sui generis actions with rules adopted for individual or small numbers of institutions currently in trouble, not forward-reaching “rights” that future actors could exploit. So I don’t see why you characterize this as impossible here; if there is any bailout beyond regular FDIC process, the most likely case would be a unique specific plan for this institution that creates no general rule that anyone else could force the government to use in the future.
mjlawson 4y ago
Also note that the prior large spikes were due in large part to multiple banks failing as well [1]. It's also notable in that this is the second largest bank to fail in the data I've been able to track since 2008 [2]. [1] https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ [2] https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E2%80%93present) https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
jvanderbot 4y ago
Wait so svb made up that whole spike? A chart with number of banks would hardly show a blip this year?
- ezekg 4y ago
  Yes. SVB was the first bank failure since 2020.
  - raziel2701 4y ago
    Wasn't silvergate the first failure just days before SVB?
    - Scoundreller 4y ago
      Yes and No. Depends how you track "failure" and from which Point of View: > Silvergate Capital Corp.'s voluntary liquidation process is being supervised by the state of California, and the company has not entered the Federal Deposit Insurance Corp.'s receivership program at this point, a spokesperson for the California Department of Financial Protection and Innovation confirmed. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/silvergate-pursuing-voluntary-liquidation-in-california-without-fdic-74692281 https://www.spglobal.com/marketintelligence/en/news-insights... Other banks in the past have "failed", but not from FDIC point-of-view, instead merged into others through a shotgun marriage facilitated by the feds, e.g. Bear Stearns and National City Bank[0] (formerly a top10 US bank until late 2008) [0]https://news.ycombinator.com/item?id=35113816 https://news.ycombinator.com/item?id=35113816
Scoundreller 4y ago
There are other banks that didn't make the official list, but effectively should have. National City Bank was the US' 7th largest banks. It didn't "fail", but the US Treasury gave another bank, PNC, $5.7b in a capital injection to buy it in late 2008. https://abcnews.go.com/Business/story?id=6107696&page=1 https://abcnews.go.com/Business/story?id=6107696&page=1 https://www.cleveland.com/business/2008/10/national_city_moves_up_to_7th.html https://www.cleveland.com/business/2008/10/national_city_mov...

by ezekg 4y ago

bink 4y ago

Yeah, I don't know anyone saying "it's just SVB since 2000". They're saying SVB is the first major bank in a long time (and hopefully not a harbinger of things to come).

latency-guy2 4y ago
It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it.
- Grimburger 4y ago
  What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
  - saveferris 4y ago
    Not the poster you asked. But, a lesson we continue to ignore is that there are other options to tame inflation besides raising interest rates. The problem is the option isn’t politically expedient so Congress just raises its hands in mock exasperation and says well, it’s the Fed’s mandate to manage inflation. Congress are cowards and won’t do what should be done - raise taxes. That is likely the fastest least painful long term solution to quickly climbing inflation I say likely solution because at this point economies are so complex I’m not certain there are solutions without any butterfly effect consequences
    - tines 4y ago
      I know nothing about economics. Can you help me understand how raising taxes helps deal with inflation? Is the idea that the federal government "deletes" some of the money it receives through taxes, like the opposite of printing more money which cheapens the existing supply?
      - convolvatron 4y ago
        that would .. actually make sense. I can't imagine anyone who is winning in the status quo being anything but horrified at the thought. has any currency ever done this? isn't there a risk of a Japanese-style concurrent inflation and recession?
      - frankfrankfrank 4y ago
        Yes, on the face of it. The issue with what appears to be the same old game is that those who absconded with the wealth pillaged through funny money, are not going to be the ones getting punished to “fix things”. This opens up a whole different set of cascading consequences because now on top of the moral hazard we had, we’ve gone well beyond that because the perpetrators have learned there are not only no consequences, but that you will be rewarded for your evils. Combined with other factors too numerous to really go into here, we are seeing the emergence of essentially an aristocracy in the USA and Europe, consisting of, as the earlier aristocracy, of the pillagers of their own people and the people of the rest of the world.
      - AnimalMuppet 4y ago
        That is an interesting idea, but it won't happen, because Congress won't "delete" the money. Instead, they'll spend it.
      - lifeisstillgood 4y ago
        You have stated Modern Monetary Theory precisely. Yes that is the new modern argument - government prints money, spends it on hospitals etc thus putting it in circulation and deletes it by taxation. One HN comment == ten years of economic debate. :-)
  - TheOtherHobbes 4y ago
    Inflation is caused by profiteering and opportunism aided by the occasional supply shock. Trying to control it solely with interest rates makes as much sense as trying to fly a beach ball to Mars.
    - frankfrankfrank 4y ago
      Those are simply common correlate effects. Inflation is really rather simple, it is inflation of the money supply, i.e., printing more Monopoly money for oneself, knockoff purses, using chemicals to create fake honey, it’s what counterfeiters do … whether it’s some North Koreans or the federal government … its fraud, criminal, illegal, immoral, evil, and a clear indicator of illegitimacy of this or any government that does what this fake government has done.
      - imtringued 4y ago
        Except that view is divorced from reality. https://economicsfromthetopdown.com/2023/01/17/is-stagflation-the-norm/ https://economicsfromthetopdown.com/2023/01/17/is-stagflatio...
  - dragonwriter 4y ago
    > What lesson is that? That there maybe shouldn't be as many: > Basel exempted businesses’
  - raziel2701 4y ago
    In my opinion the Fed should be more decisive and data-dependent. In 2021 the Fed stubbornly stuck to an "inflation is transitory" narrative that meant they did not start raising rates all of 2021 when most people could see the excess and the mania of a bubble. Rates should have started to be raised since the summer of 2021, they could've done a slow and steady pace. Instead, once things got super hot inflation-wise, then they flip flop and start a very rapid pace of rate hikes, unsurprisingly something broke and here we are once more talking about bailouts, about more QE. We're frenetically going from rapid tightening of financial conditions, to potentially, rapid loosening of said conditions. The Fed is supposed to raise rates in two weeks, I'm not sure if they will change their mind given what just transpired this last week. I agree inflation must be tamed, I criticize the Fed's inability, or unwillingness, to start addressing it at least a year earlier. From my cynical perspective, keeping rates super low is a fucking party to the stock market and lots of powerful people want to keep the party going and they closed their ears to the inflation alarms. Now we're facing the possibility of another crisis (we'll see how things play out next week) and we know that the proposed solution will be to lower rates and accommodative policy that actually contributes to inflation. It's a shit show I'm tired of seeing repeat.
- chimeracoder 4y ago
  > It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it. Don't bet on it. One of the big changes after the 2008 crisis was the passage of Dodd-Frank, which was then repealed in large part in 2018. Some of the repealed provisions in Dodd-Frank would likely have mitigated or even prevented this bank run, due to the capital and liquidity testing requirements.
saalweachter 4y ago
I'm actually curious if SVB failed because it had so many highly connected "big" customers. A panic moves a lot faster if each person is pulling 8+ figures from the bank, and you have a lot more incentive to panic if you have more than the 6 figures of FDIC insured balance in the bank. There's also a measurable difference in hearing crazy Jim down at the pub pulled his $400 out of the local credit union because he heard the fed was raising rates and hearing from the VC on your startup's board that three guys -- guys you know and think are cooler than you -- have pulled their next year of runway from SVB because they're worried for vague handwaving macroeconomics reasons that sound plausibly impressive to you.

Waterluvian 4y ago

I’m still not clear on if it’s even the same. My very weak understanding is that in 2008 a ton of assets turned out to be valueless junk mortgages that were all going to default. Is that true for SVB or are their assets just too locked in for now? What that graph doesn’t show is the percentage of the blue bars that are recoverable assets.

pclmulqdq 4y ago
I'm not sure if we know how much of the blue bar is recoverable. SVB is holding a lot of fixed-income vehicles that currently yield less than: * Depositing money in a fed account (available to banks) * Depositing money in a money market savings account * Every treasury instrument you can buy today When they go to sell those assets, they may take a much bigger haircut than the pricing models suggest given the supply and demand. The assets definitely won't be worthless, but they may not be worth very much.
- Scoundreller 4y ago
  > Every treasury instrument you can buy today Treasuries don't even need to pay more than a savings account to be the rational choice as they aren't subject to local/state income taxes. That's a bigger than average advantage in California. Add to that no $250k limit either.
pgwhalen 4y ago
It turns out that there was very little defaulting in 2008, the problem was the fear of default which resulted in changing valuations that were not broadly expected. In this case, there is no doubt about the value of SVB’s assets: they’re lower than they were a year ago simply because they were heavily long duration and rates went up a lot. That’s bond pricing 101. That, in combination with a low diversity of depositors that starting withdrawing at once, set up the bank run that VCs created by emailing all their portfolio companies to run.
bink 4y ago
Not valueless, exactly. The mortgage backed securities were rated more highly than they should have been as the default rate was assumed to be much lower. When that became obvious the securities lost a lot of value and the banks found out they were over-leveraged. I'm not in finance (clearly), but it seems to me there are a lot of similarities with interest rates rising and forcing banks to re-value their investments in bonds and mortgage backed securities. The clear difference this time IMHO is that valuing bonds based on interest rate movements is much less opaque (even fully transparent) compared to valuing mortgage backed securities based on default rate predictions that are outright lies. We know, or should know, how many of these investments are held by large banks and what the rates and maturation dates are. The big question I have is the more traditional financial contagion. If companies that had millions in SVB lose that money there will be impacts for other banks as the companies and bank investors become more conservative or paranoid. If many of those companies go out of business that means fewer deposits and fewer investment opportunities.

rektide 4y ago

That shows money, which is interesting. I'd also like to see "Years of Banking Institutions Lost"... SVB is supposedly 40 years old... how old were banks that had failed in the past? That'd be an interesting other way to tally/view the magnitude of what happens, a kind of indicator of volatility. My thought is... if a whole bunch of banks open then shut down 3 years latter, it doesn't seem as notable as a bunch of more established banks going under.

bumby 4y ago
Why does that sort of “infant mortality” matter in finance if they play by the same rules? I’m not being argumentative, just trying to understand. In physical systems, that view would be used to apply additional stress testing early to reduce the overall risk exposure (e.g., test a pump for a certain run time to be assured it’s made it out of the early failure age and is more likely to last a lot longer). I’m not quite sure how this applies to contrived (non-physical) systems.
- davrosthedalek 4y ago
  I can imagine two effects why a younger bank might experience higher risk: 1) a young bank is more likely to experience a high-growth phase, which produces operational challenges 2) a young bank might be founded to serve a new business niche, and experience with the challenges of that niche might be less prevalent in the banking sector. Like airplane regulations, rules are written in blood.

arcticbull 4y ago

That chart would probably be more useful if expressed as the shortfall between assets and deposits. It's not really a huge issue if a bank with $1T in assets has a $1M shortfall but the regulators will sure a shit still close it down.

lazide 4y ago
No bank with $1T in assets will ever have a shortfall of only $1m - it’s too easy to shuffle things around to move the problem forward another day or whatever. A bank the size of SVB has a whole team that does that - it’s just a necessary part of operating at that scale. Blowups like SVB happen when an entire team of financial experts have tried everything - and have nothing left they can do. Then it blows up big, because all their other moves ‘come due’ at once.
mike_d 4y ago
Almost all failed banks (including SVB) in recent history held more assets than deposits. Liquidity is the issue. Imagine you take your $10 million fortune and convert it all into gold bars and hide it under you bed. Then you order a pizza. When the pizza guy shows up, even though you are "rich," you are also in that moment broke and can't pay for the pizza. Not only will the pizza guy not take gold, you can't find someone to convert your gold into cash before the pizza guy gives up and leaves.
- tshaddox 4y ago
  There’s still a big difference between being 10 cents short on your pizza bill and being $10 short.
- beebmam 4y ago
  Except instead of just leaving, the pizza guy sues you and the state takes your gold bars under your bed and sells it to pay the pizza guy. Not saying this is a bad or good thing.
  - Scoundreller 4y ago

gnfargbl 4y ago

I'll ask the obvious question, because I have no clue about this stuff. The early failures in 2008 seem to have been followed by a cascade of smaller failures. Is that going to happen again?

eqmvii 4y ago
It might. Have to see what else breaks and/or gets bailed out on Monday.
- resource0x 4y ago
  I'm very curious about the bailout criterion. They can't set the rules individually for each "problematic" bank. Whatever formulation they come up with, will be immediately abused by creative financial engineering, so the problem will soon re-emerge in a different, totally unexpected shape.
  - humanizersequel 4y ago
    >They can't set the rules individually for each "problematic" bank. Can't they?
    - resource0x 4y ago
      In principle, they can do whatever they want, but they already know SVB is not the only problematic bank - there's a whole pipeline of them; inventing individual bailout protocol for each would look ridiculous. My bet is that Fed's PhDs are desperately looking for a formula as we speak. That won't be easy. :-)
  - dragonwriter 4y ago
    > They can’t set the rules individually for each “problematic” bank. Most past bailouts have been sui generis actions with rules adopted for individual or small numbers of institutions currently in trouble, not forward-reaching “rights” that future actors could exploit. So I don’t see why you characterize this as impossible here; if there is any bailout beyond regular FDIC process, the most likely case would be a unique specific plan for this institution that creates no general rule that anyone else could force the government to use in the future.

mjlawson 4y ago

Also note that the prior large spikes were due in large part to multiple banks failing as well [1]. It's also notable in that this is the second largest bank to fail in the data I've been able to track since 2008 [2]. [1] https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ [2] https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E2%80%93present) https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...

jvanderbot 4y ago

Wait so svb made up that whole spike? A chart with number of banks would hardly show a blip this year?

ezekg 4y ago
Yes. SVB was the first bank failure since 2020.
- raziel2701 4y ago
  Wasn't silvergate the first failure just days before SVB?
  - Scoundreller 4y ago
    Yes and No. Depends how you track "failure" and from which Point of View: > Silvergate Capital Corp.'s voluntary liquidation process is being supervised by the state of California, and the company has not entered the Federal Deposit Insurance Corp.'s receivership program at this point, a spokesperson for the California Department of Financial Protection and Innovation confirmed. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/silvergate-pursuing-voluntary-liquidation-in-california-without-fdic-74692281 https://www.spglobal.com/marketintelligence/en/news-insights... Other banks in the past have "failed", but not from FDIC point-of-view, instead merged into others through a shotgun marriage facilitated by the feds, e.g. Bear Stearns and National City Bank[0] (formerly a top10 US bank until late 2008) [0]https://news.ycombinator.com/item?id=35113816 https://news.ycombinator.com/item?id=35113816

Scoundreller 4y ago

There are other banks that didn't make the official list, but effectively should have. National City Bank was the US' 7th largest banks. It didn't "fail", but the US Treasury gave another bank, PNC, $5.7b in a capital injection to buy it in late 2008. https://abcnews.go.com/Business/story?id=6107696&page=1 https://abcnews.go.com/Business/story?id=6107696&page=1 https://www.cleveland.com/business/2008/10/national_city_moves_up_to_7th.html https://www.cleveland.com/business/2008/10/national_city_mov...