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> Explain to a peasant why he should have to share the risk you took with your money Well.. in this specific case I don't think tax payers (I assume this is wh

by boxed 4y ago

> Explain to a peasant why he should have to share the risk you took with your money Well.. in this specific case I don't think tax payers (I assume this is what you mean by "peasant") actually do share any of the risk/cost. The bank failed due to a liquidity problem. It actually has a pretty solid financial situation except for that! This isn't a "bail out" per se.

dragontamer 4y ago
> It actually has a pretty solid financial situation except for that! Then why couldn't they find a buyer in the auction today? If Silicon Valley Bank had positive equity, someone would have bought them out for an easy profit.
- xapata 4y ago
  Solid except for the time-value of money.
- camhart 4y ago
  Their bonds average 1.9% with a 10 year maturity. They pay out when they mature. But because rates are so much higher now, if they sold today they'd take a massive haircut. The bank made mistakes, and their startup assets are a big ? of unrealized losses. But they do have assets, just not liquid.
  - em500 4y ago
    But the reason why they'd take a massive haircut if sold today is that when they get the principal back in 10 years it will probably be worth a lot less. Their assets are completely liquid, they're just worth a lot less right now than what they're owed, and for good reason. That the assets might nominally cover the deposits in 10 years is besides the point, the depositors don't want to wait 10 years. Whoever pays to make depositors whole, be it FDIC, tax payers or other banks/bank customers, is transferring real value to the SVB depositors.
    - boxed 4y ago
      > That the assets might nominally cover the deposits in 10 years is besides the point, the depositors don't want to wait 10 years This would be a problem of liquidity though, which was my original statement.
      - xapata 4y ago
        Not just liquidity. A dollar 10 years from now is worth less than a dollar today. That means it's a solvency issue as well.
- rvnx 4y ago
  Isn't it what happened with the UK branch of SVB ?
tigershark 4y ago
No, it didn’t have a liquidity problem, it was insolvent. The value of all its assets marked to market are less than its liabilities.
- Lionga 4y ago
  Not if you let them do their shenanigans to let the assets be on the balance sheet on "face" value because they are in a "HTM" portfolio and not on the real market value. Many of the other banks are silently insolvent too, just the simple little account trick keeping them afloat. That's whats need to be changed, not a bail out of which more will follow
- boxed 4y ago
  Well... I guess. But the price of many of those assets were low because of the run right? So it's a self fulfilling prophecy. Banks that buy SVBs branches will be making money off that deal I think. Not short term obviously, but long term.

by boxed 4y ago

dragontamer 4y ago

> It actually has a pretty solid financial situation except for that! Then why couldn't they find a buyer in the auction today? If Silicon Valley Bank had positive equity, someone would have bought them out for an easy profit.

xapata 4y ago
Solid except for the time-value of money.
camhart 4y ago
Their bonds average 1.9% with a 10 year maturity. They pay out when they mature. But because rates are so much higher now, if they sold today they'd take a massive haircut. The bank made mistakes, and their startup assets are a big ? of unrealized losses. But they do have assets, just not liquid.
- em500 4y ago
  But the reason why they'd take a massive haircut if sold today is that when they get the principal back in 10 years it will probably be worth a lot less. Their assets are completely liquid, they're just worth a lot less right now than what they're owed, and for good reason. That the assets might nominally cover the deposits in 10 years is besides the point, the depositors don't want to wait 10 years. Whoever pays to make depositors whole, be it FDIC, tax payers or other banks/bank customers, is transferring real value to the SVB depositors.
  - boxed 4y ago
    > That the assets might nominally cover the deposits in 10 years is besides the point, the depositors don't want to wait 10 years This would be a problem of liquidity though, which was my original statement.
    - xapata 4y ago
      Not just liquidity. A dollar 10 years from now is worth less than a dollar today. That means it's a solvency issue as well.
rvnx 4y ago
Isn't it what happened with the UK branch of SVB ?

tigershark 4y ago

No, it didn’t have a liquidity problem, it was insolvent. The value of all its assets marked to market are less than its liabilities.

Lionga 4y ago
Not if you let them do their shenanigans to let the assets be on the balance sheet on "face" value because they are in a "HTM" portfolio and not on the real market value. Many of the other banks are silently insolvent too, just the simple little account trick keeping them afloat. That's whats need to be changed, not a bail out of which more will follow
boxed 4y ago
Well... I guess. But the price of many of those assets were low because of the run right? So it's a self fulfilling prophecy. Banks that buy SVBs branches will be making money off that deal I think. Not short term obviously, but long term.