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>SVB put themselves in a somewhat bad situation by heavily concentrating the high levels of deposits in 2019-2021 in long-term treasury bonds (which would not h
by oarabbus_ 4y ago
>SVB put themselves in a somewhat bad situation by heavily concentrating the high levels of deposits in 2019-2021 in long-term treasury bonds (which would not have been permitted had not the previous administration not rolled back Dodd-Frank regulations, in no small part due to the lobbying of SVB's CEO).
And they put even more into 30-year mortgage backed securities. Bonds are normally purchased across a mix of maturities by banks. It's strange how everyone is absolving them for the mistake of holding almost no 1-2 year bonds and instead blaming VCs for pulling out.
To be explicitly clear: it's the responsibility of the bank to maintain their own liquidity (just like the borrower needs to do the same with their loan repayments), and putting $100B (33%+) of assets into 10-30Y securities was highly irresponsible and poor risk management.
- fisherjeff 4y agoAverage maturity was like 6y though, which means ~15% annual turnover. Not great (and certainly not nearly enough to redeem 20% in like a month) but far from locked up forever.
- getoffmycase 4y agoI keep screaming into the void that the real issue is the poor risk management of the bank, but nobody in the echo chambers wants to listen to anything other than VC conspiracy points
- toss1 4y agoAbsolutely! The root cause is in this headline: >>SVB CEO Greg Becker lobbied the government to relax some Dodd-Frank provisions on regional lenders in 2015. Trump did in 2018. [0] All to chase a couple extra basis points (1/100 of a percent) of yield to increase the bank's profits. Both Glass-Stengal from the 1930s and Dodd-Frank from 2010 segregated the investment (read market gambling) activities of banks from the deposit activities. After a period of no crashes, they always lobby to gut such laws to increase their profits (of course privatizing the profits, but socializing the risk, which will fall on society whether or not the taxpayers bail out anyone). Politicians who are fools comply with these requests because the voters will not notice right away. In this case, it wasn't until the next administration that we have the 2nd largest bank failure in history. Or when Clinton rolled back Glass-Stengal in 1999, it was nearly two full terms later before the banking system came to a new near-collapse crisis. So, yes, root cause vs proximal cause. [0] https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g...
- egberts1 4y agoFortune is washing the exclusionary rules for non-bank by saying the executive administration imposed this rule when it is actually the Board of the Federal Reserve that imposed the rule: "Finally, the Board has determined not to impose enhanced prudential standards on nonbank financial companies supervised by the Board through this final ($50B stress test) rule." https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-05699.htm https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-...
- gruez 4y ago>All to chase a couple extra basis points (1/100 of a percent) of yield to increase the bank's profits. Source? My understanding is that they fucked up by buying long dated bonds/MBS rather than short dated ones. Surely the difference between a 5 year treasury and a 1 year treasury would surely be bigger than 1 basis points?