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I thought the majority of SVB's cash was tied up in 10-year MBSs, not treasury bonds?

nonethewiser 4y ago
Pretty sure that is the case
fwlr 4y ago
The kind of mortgage-backed securities they held are still US Government securities! They are “mortgage-backed” more-or-less in the sense that the Government is willing to offer such-and-such amount of investment opportunity at so-and-so rate of return because they are holding a bunch of mortgages that they expect will be able to pay for it. They are different to Treasury bonds in important ways so it’s imprecise for me to refer to all of it as Treasury bonds, I agree. In practical terms, the reason SVB held MBSes was the same reason they held Treasury bonds (low risk because of Government guarantee), Treasury bonds and MBSes react to Federal Reserve rate increases in much the same way, and the ways that MBSes and Treasury bonds differ are largely walled off by the Government guarantee and thus immaterial to SVB (if the housing market does some wild stuff then MBSes might pay out differently to Treasury bonds, but this didn’t happen here).
- deleted 4y ago
  [deleted]
- MrMan 4y ago
  you are doing a pretty good job trying to explain away the officers of this bank running it into the ground. you havent even started to try to excuse their lending practices. what are you trying to accomplish? their CRO committed career-ending blunders and even with only short term securities on their books this bank could run into serious trouble simply by dint of their customer base all running into trouble at the same time, as is happening. why do you need to posture here man-splaining this shit incorrectly to people who dont know any better
  - fwlr 4y ago
    Because the officers of the bank are guilty of maybe 10% more garden variety bank greed than the average bank, while the real criminals here are the Silicon Valley CEOs who conspired to start a bank run and within 24 hours were demanding taxpayers fork over billions to clean up all their mess.
    - UncleEntity 4y ago
      > …while the real criminals here are the Silicon Valley CEOs who conspired to start a bank run… Yeah, way to victim blame. Only an irrational person would “take one for the team” and leave their assets in an obviously failing bank. I mean, if only so-and-so had kept their mouth shut nobody would have noticed that some cryptodudes and dudettes had blown a few measly billion of their customers’ funds.
      - fwlr 4y ago
        I mean, I’m much more concerned about the “immediately demanding taxpayers make them whole” bit.
  - anon84873628 4y ago
    I think fwlr is doing a good job bringing actual data & detail to the conversation. They don't seem to be attempting to excuse or exonerate the bank officers, indeed they do call this behavior "dirty laundry". But they are fairly questioning whether the regulation would have actually prevented this scenario. If there is a subtext intended, it seems to be that the Fed didn't adhere to its previous assertions about how fast interest rates would rise, which is something that would undermine the stress tests.
    - fwlr 4y ago
      > If there is a subtext intended, it seems to be that the Fed didn't adhere to its previous assertions about how fast interest rates would rise This is extremely perceptive! I do feel that way, and you know what? I didn’t fully realize that I did until you pointed it out. Yeah, two major activities of the Federal Reserve are “saying what it will do with interest rates in the next few years” and “changing interest rates”, it’s really bizarre that they can’t get these two to even remotely line up. I know they have to respond to fluctuating macroeconomic situations, but is that really enough to almost completely disconnect “their predictions of their actions” from “their actions”? It feels like a bit like a fig leaf, it kinda doesn’t pass a smell check.
lordnacho 4y ago
Dynamics of the trade will be the same though.

Pretty sure that is the case

fwlr 4y ago

The kind of mortgage-backed securities they held are still US Government securities! They are “mortgage-backed” more-or-less in the sense that the Government is willing to offer such-and-such amount of investment opportunity at so-and-so rate of return because they are holding a bunch of mortgages that they expect will be able to pay for it. They are different to Treasury bonds in important ways so it’s imprecise for me to refer to all of it as Treasury bonds, I agree. In practical terms, the reason SVB held MBSes was the same reason they held Treasury bonds (low risk because of Government guarantee), Treasury bonds and MBSes react to Federal Reserve rate increases in much the same way, and the ways that MBSes and Treasury bonds differ are largely walled off by the Government guarantee and thus immaterial to SVB (if the housing market does some wild stuff then MBSes might pay out differently to Treasury bonds, but this didn’t happen here).

deleted 4y ago
[deleted]
MrMan 4y ago
you are doing a pretty good job trying to explain away the officers of this bank running it into the ground. you havent even started to try to excuse their lending practices. what are you trying to accomplish? their CRO committed career-ending blunders and even with only short term securities on their books this bank could run into serious trouble simply by dint of their customer base all running into trouble at the same time, as is happening. why do you need to posture here man-splaining this shit incorrectly to people who dont know any better
- fwlr 4y ago
  Because the officers of the bank are guilty of maybe 10% more garden variety bank greed than the average bank, while the real criminals here are the Silicon Valley CEOs who conspired to start a bank run and within 24 hours were demanding taxpayers fork over billions to clean up all their mess.
  - UncleEntity 4y ago
    > …while the real criminals here are the Silicon Valley CEOs who conspired to start a bank run… Yeah, way to victim blame. Only an irrational person would “take one for the team” and leave their assets in an obviously failing bank. I mean, if only so-and-so had kept their mouth shut nobody would have noticed that some cryptodudes and dudettes had blown a few measly billion of their customers’ funds.
    - fwlr 4y ago
      I mean, I’m much more concerned about the “immediately demanding taxpayers make them whole” bit.
- anon84873628 4y ago
  I think fwlr is doing a good job bringing actual data & detail to the conversation. They don't seem to be attempting to excuse or exonerate the bank officers, indeed they do call this behavior "dirty laundry". But they are fairly questioning whether the regulation would have actually prevented this scenario. If there is a subtext intended, it seems to be that the Fed didn't adhere to its previous assertions about how fast interest rates would rise, which is something that would undermine the stress tests.
  - fwlr 4y ago
    > If there is a subtext intended, it seems to be that the Fed didn't adhere to its previous assertions about how fast interest rates would rise This is extremely perceptive! I do feel that way, and you know what? I didn’t fully realize that I did until you pointed it out. Yeah, two major activities of the Federal Reserve are “saying what it will do with interest rates in the next few years” and “changing interest rates”, it’s really bizarre that they can’t get these two to even remotely line up. I know they have to respond to fluctuating macroeconomic situations, but is that really enough to almost completely disconnect “their predictions of their actions” from “their actions”? It feels like a bit like a fig leaf, it kinda doesn’t pass a smell check.

lordnacho 4y ago

Dynamics of the trade will be the same though.