4 ms·

> On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature f

by kgwgk 4y ago

> On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. Imagine another bank BVS of similar size that didn’t quite have the money. It has lost part of it in monkey NFTs or whatever. They have a loss similar to the mark-to-market loss of SVB. Can they buy the same bonds that SVB has to patch the hole in their balance sheet? Can they then say “we have the money, we just don’t have it liquid right now because it's in bonds that won't mature for a while ”? If not, why not? Both banks would have the same assets.

unmole 4y ago
> If not, why not? Both banks would have the same assets. Unlike NFTs or whatever, the bonds held to maturity will pay out the full amount.
- kgwgk 4y ago
  The second bank has just bought - because it has enough money to do so selling its NFT or whatever - the same bonds that SVB has. There is no difference at all between the assets of liabilities and the two banks in this example. I don’t mean just that the amounts are the same: every asset is identical. Can both use the “I have the money but just not right now” excuse or not?
  - unmole 4y ago
    > every asset is identical. You lost me there. > Can both use the “I have the money but just not right now” excuse or not? No.
    - kgwgk 4y ago
      Bank 1 starts with $1000 in t-bills and $1000 in t-bonds (face value $1000) The bonds lose 20% (for simplicity the t-bills gain 0%) Bank 1 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) According to some people Bank 1 can say “I have $2000 it’s just that I don’t have them right now” Bank 2 starts with $1800 in t-bills and $200 in NFTs In the same period the NFTs lose 100% Bank 2 still has $1800 in t-bills, sells $800 and buys $800 of those t-bonds which are trading at a 20% discount to par Bank 2 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) Bank 1 and Bank 2 are in the same exact situation Bank 1 can say “I have $2000 it’s just that I don’t have them right now” but Bank 2 cannot do the same?
- dtech 4y ago
  Say the 1% 10y $100 bond is now worth $80 and there are now 5% bonds available. Say the monkey NFT is down from $100 to $80. The monkey NFT could be sold and 5% bonds could be bought, which will also pay out >$100 eventually.
unyttigfjelltol 4y ago
> Can they buy the same bonds that SVB has to patch the hole in their balance sheet? Unfortunately, in related news, the answer is 'yes', from the new BTFP.[1] I wouldn't say this is wrong but it does seem like the kind of bazooka-brandishing that makes financial-folk panic still more. [1] https://twitter.com/BenEisen/status/1635061019629289472 https://twitter.com/BenEisen/status/1635061019629289472
- kgwgk 4y ago
  I don’t thing those loans would be very useful for the bank that buys discounted debt in that example. Being able to borrow with “bad” collateral is nice but the main selling-point is not needing to recognize losses. If you don’t have unrealized loses to hide it doesn’t help much.

by kgwgk 4y ago

unmole 4y ago

> If not, why not? Both banks would have the same assets. Unlike NFTs or whatever, the bonds held to maturity will pay out the full amount.

kgwgk 4y ago
The second bank has just bought - because it has enough money to do so selling its NFT or whatever - the same bonds that SVB has. There is no difference at all between the assets of liabilities and the two banks in this example. I don’t mean just that the amounts are the same: every asset is identical. Can both use the “I have the money but just not right now” excuse or not?
- unmole 4y ago
  > every asset is identical. You lost me there. > Can both use the “I have the money but just not right now” excuse or not? No.
  - kgwgk 4y ago
    Bank 1 starts with $1000 in t-bills and $1000 in t-bonds (face value $1000) The bonds lose 20% (for simplicity the t-bills gain 0%) Bank 1 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) According to some people Bank 1 can say “I have $2000 it’s just that I don’t have them right now” Bank 2 starts with $1800 in t-bills and $200 in NFTs In the same period the NFTs lose 100% Bank 2 still has $1800 in t-bills, sells $800 and buys $800 of those t-bonds which are trading at a 20% discount to par Bank 2 ends with $1000 in t-bills and $800 in t-bonds (face value $1000) Bank 1 and Bank 2 are in the same exact situation Bank 1 can say “I have $2000 it’s just that I don’t have them right now” but Bank 2 cannot do the same?
dtech 4y ago
Say the 1% 10y $100 bond is now worth $80 and there are now 5% bonds available. Say the monkey NFT is down from $100 to $80. The monkey NFT could be sold and 5% bonds could be bought, which will also pay out >$100 eventually.

unyttigfjelltol 4y ago

> Can they buy the same bonds that SVB has to patch the hole in their balance sheet? Unfortunately, in related news, the answer is 'yes', from the new BTFP.[1] I wouldn't say this is wrong but it does seem like the kind of bazooka-brandishing that makes financial-folk panic still more. [1] https://twitter.com/BenEisen/status/1635061019629289472 https://twitter.com/BenEisen/status/1635061019629289472

kgwgk 4y ago
I don’t thing those loans would be very useful for the bank that buys discounted debt in that example. Being able to borrow with “bad” collateral is nice but the main selling-point is not needing to recognize losses. If you don’t have unrealized loses to hide it doesn’t help much.