4 ms·
It wasn't risky as long as prime rate stayed super low. But that rate has been creeping up for months now. SVB was too small to qualify for risk assessment un
by JJMcJ 4y ago
It wasn't risky as long as prime rate stayed super low.
But that rate has been creeping up for months now.
SVB was too small to qualify for risk assessment under the revised banking rules. So they could get away with money in volatile securities that were very interest rate sensitive.
That said, SVB seemed very solid until Thursday morning.
- Cthulhu_ 4y agoWould it have been better if the rate increases were further apart and there were strong declarations of intent?
- chiefalchemist 4y agoTo clarify, SVB's problems are the result of The Fed's change in direction. It just takes a while to see the affects of those decisions.
- salawat 4y agoSVB's problems were the result of glutting on long maturation bonds instead of bills.
- chiefalchemist 4y agoAs it was explained to me, the Fed increasing interest rates impacted the value of the bonds held by SVB. As that value contracted SVBs was eventually in trouble.
- tome 4y ago> It wasn't risky as long as prime rate stayed super low. That sounds a bit like "it's not risky to driver a motor vehicle as long as you don't get into an accident".
- JJMcJ 4y agoThat's true. The real risk was in imagining that the interest rates would stay super-low forever.
- salawat 4y agoOnly because people weren't asking the right questions. It's like driving into a parking structure and seeing exposed rebar. It might still be standing now; but if you're smart, you need to find somewhere else to park.