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The issue is that banks are holding lots of long term treasury bonds with low yields that are worth less than they bought them for. If I wanted to sell you some
by rogerkirkness 4y ago
The issue is that banks are holding lots of long term treasury bonds with low yields that are worth less than they bought them for. If I wanted to sell you something that locked your money in for 10 years and yielded you 2% in 2023 you'd say not unless I get a sweet discount against the interest I could earn, right? Well banks bought like trillions of dollars worth of aforementioned treasuries.
- guywithabowtie 4y agoLike I said, charles schwab is mostly a broker. They do not have tons of deposits with them.
- sowbug 4y agoAre you asking us or telling us? Schwab is the eighth largest bank in the US.
- guywithabowtie 4y agoI may be wrong ! The news source was incorrect in that case.
- rabidonrails 4y agoFrom Schwab's press release: "More than 80% of our total bank deposits fall within the FDIC insurance limits, among the five highest ratios of the top 100 banks in the United States."
- PeterisP 4y agoThey do have some 366 billion of deposits according to https://finance.yahoo.com/quote/SCHW/balance-sheet/ https://finance.yahoo.com/quote/SCHW/balance-sheet/ , twice as much as SVB had.
- guywithabowtie 4y agoI accept that I am definitely wrong in that case. Apologies, and yes, this can be eye opener.
- nscalf 4y agoYou’re missing a big part of this, banks with good risk management hedged these positions. SVB did not, they also did not have a chief risk officer.
- lumost 4y agoHow many banks are in the same boat? How many banks are dependent on these other banks not to be in this boat? There have been discussions for the last decade that finance institutions have been looking the other way on smaller firm practices as it lets them make more money. If the risks taken are greater than 10 years long, then everyone has gotten paid out by the time there is a problem.
- nscalf 4y agoI think the biggest concern with SVB was about the contagion risk because we didn’t know to what extent they were the counter party for other banks risk management. If you hedged your low interest bonds via options with SVB holding the other end of that, your options are toast. Now you own all that risk.
- avelis 4y agoNo chief risk officer?!?!?! Damn! Kind of like the movie Margin Call. Can't see the risk if you fire the entire department and promote a shill that goes along with it all.
- nscalf 4y agoAbsolutely nuts. It’s apparently been 8 months with no CRO.