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You fail to understand the actual reason for their insolvency. Their risk team chose to buy 10 year treasury bonds instead of 1 year treasury bonds. This is bec

You fail to understand the actual reason for their insolvency. Their risk team chose to buy 10 year treasury bonds instead of 1 year treasury bonds. This is because 10 year bonds offered a higher interest rate (more profit for SVB) but at a much much higher risk. The losses were then unrecognised, hoping the market would turn. Only when it was too late did SVB admit defeat. With their equity gone, they attempted a band aid with an equity raise but the market quite rightly recognised the bank’s shares were worthless. Anyone working in risk management will tell you SVB’s risk team and executive team should be in jail. Don’t blame SVB’s failure on a bank run. SVB caused their own failure with their own risk management policies and it’s insolvency was probably inevitable for months.

concordDance 4y ago
> Anyone working in risk management will tell you SVB’s risk team and executive team should be in jail. Jail seems extreme for an error in judgement that neither killed nor maimed anyone.
- nerdponx 4y ago
  It nearly killed billions of dollars in real value and required untold thousands of taxpayer-funded employees working through the weekend to unfuck the situation. If I drive recklessly, I am still guilty of reckless driving even though I didn't hit anyone or anything.
  - ihateyouall123 4y ago
    [flagged]
    - nerdponx 4y ago
      I see in your post history that you're a comedian, so I can only hope that this is meant to be funny, because the irony here is layered on so thickly.
    - concordDance 4y ago
      There is actually a money<->life tradeoff (because money can buy medical treatment), but that requires the value to be actually destroyed/created.
    - pnt12 4y ago
      This reminds me of that dumb meme: "you criticize society, and yet you participate in it... Interesting". In a capitalistic system, money is power, and messing with it has serious consequences. I'd rather be punched in the face than have all my savings drained, for example (as long as it's not Mike Tyson doing the punching).
- tracker1 4y ago
  They could be jailed for insider trading for selling all their stocks within the past few months. And the funds from those sales should absolutely, at least, be clawed back and then some for their responsibility for their decision making. I'd, for a change, like to see those responsible for massive business failures held to account personally and financially. The limitations on corporate liability are meant for investors, not executives or board members. And TBH, those accounts with over 100MM in deposit should probably lose the 10% or so under normal rules for this kind of thing, not be bailed out by the Fed, who will in turn likely need to be bailed out by taxpayers, or worse if this happens another couple times in the next couple years.
- watwut 4y ago
  People go to jail for all kinds of frauds and all kinds issues they cause to other people.
- deleted 4y ago
  [deleted]
- anigbrowl 4y ago
  Directly, nobody was injured. Proximately, we really have no idea. I am in favor of strict liability for a broader variety of negligent behavior. Losing one's career over bad judgment is of course a kind of deterrent, but realistically lots of people fuck up and then go on to have moderately profitable second careers by writing a book and giving talks with titles like 'Learning Hard Lessons'. If they're entrepreneurial they can become stars of the MBA circuit.
  - geysersam 4y ago
    Yes people make mistakes. That's legal and it should be. Especially in a business such as finance where the job literally is to estimate risk, someone will make the (in hindsight) wrong decision.
  - jalapenos 4y ago
    Strict liability for negligence would just mean sending business overseas where that rule isn't in play, and chilling it domestically. No one is interested in the deal "if you get it right, you make some money; if you get it wrong, we obliterate you". The move from caveat emptor to caveat venditor has coincided with everyone legally ringfencing things with corps & LLCs. People find ways back to a fair deal.
    - anigbrowl 4y ago
      If we have strict liability for truck drivers nobody will sign up to drive hazardous cargo.
- colinsane 4y ago
  that might (or might not) be arguable from a moral viewpoint, but it definitely isn’t arguable from the actual statistics. about half of the US state prison population is there for non-violent crimes. https://en.wikipedia.org/wiki/Incarceration_in_the_United_States#Violent_and_nonviolent_crime https://en.wikipedia.org/wiki/Incarceration_in_the_United_St...
  - concordDance 4y ago
    Those mostly wouldn't be errors in judgement but people who knew they were doing something wrong, like shoplifting.
    - colinsane 4y ago
      > like shoplifting or like being in possession of a gram of meth for personal use: something a person might legitimately believe isn’t “wrong”. the meth user didn’t get into jail for violating his own moral code: he’s there for an error in judgement, this error being that he didn’t understand how strongly the people around him would react to actions he thought were not that big of a deal. sibling comment does good by calling attention to driving: enough people text while drive that it can be considered normal behavior, that people who do this don’t actively think they’re doing wrong. but that doesn’t save them from culpability when they roll the dice poorly and hit a pedestrian. what’s the difference between “manslaughter” and “murder”: it’s intent. our justice system does consider intent, but it doesn’t require it.
nerdponx 4y ago
And to the original point about libertarians, this would only ever not happen in the face of regulation.
- tracker1 4y ago
  As a libertarian, I'm perfectly fine with letting a business fail, and holding the management and board to personally account/liability for their actions.
  - watwut 4y ago
    The actual "letting it fail" would be to pay up looses only for those insured. Those who did not insured would not be paid looses in "let it fail world".
    - tracker1 4y ago
      Exactly... they liquidate the bank's assets, payout the FDIC insured, and most of the depositors only lose about 10%... the shareholders would lose more... and the executives and board potentially lose everything to pay shareholders. That's how this is supposed to work under existing rules.
      - geysersam 4y ago
        Why didn't the fed decide that course of action in this case? Seems the difference is small. Shareholders still lost everything, depositors lost nothing instead of 10% but that's a minor difference. Guess one difference is how long it'll take before depositors can access their money. Now they'll get it immediately. If they were waiting for liquidation of the banks assets, that would probably take longer.
        kevingadd 4y ago
        Depositors would have lost up-to $X - 250000, not 10%. SVB is down ~10% but that doesn't mean everyone would have actually been made whole from the money.
beezle 4y ago
Your understanding of the HTM portfolio (and reasons for it) are clearly not complete and no, not anyone in risk management will say their risk team should be in jail (excepting the case of documents proving the failure to hedge was done specifically to increase executive compenstation/bonuses). Calling into question the lack of hedging or use of MBS is fair game and not something most other institutions would have done. For the record, "1 year treasury bonds" are 52 week Treasury Bills. They would not be buying off the run old debt.

concordDance 4y ago

> Anyone working in risk management will tell you SVB’s risk team and executive team should be in jail. Jail seems extreme for an error in judgement that neither killed nor maimed anyone.

nerdponx 4y ago
It nearly killed billions of dollars in real value and required untold thousands of taxpayer-funded employees working through the weekend to unfuck the situation. If I drive recklessly, I am still guilty of reckless driving even though I didn't hit anyone or anything.
- ihateyouall123 4y ago
  [flagged]
  - nerdponx 4y ago
    I see in your post history that you're a comedian, so I can only hope that this is meant to be funny, because the irony here is layered on so thickly.
  - concordDance 4y ago
    There is actually a money<->life tradeoff (because money can buy medical treatment), but that requires the value to be actually destroyed/created.
  - pnt12 4y ago
    This reminds me of that dumb meme: "you criticize society, and yet you participate in it... Interesting". In a capitalistic system, money is power, and messing with it has serious consequences. I'd rather be punched in the face than have all my savings drained, for example (as long as it's not Mike Tyson doing the punching).
tracker1 4y ago
They could be jailed for insider trading for selling all their stocks within the past few months. And the funds from those sales should absolutely, at least, be clawed back and then some for their responsibility for their decision making. I'd, for a change, like to see those responsible for massive business failures held to account personally and financially. The limitations on corporate liability are meant for investors, not executives or board members. And TBH, those accounts with over 100MM in deposit should probably lose the 10% or so under normal rules for this kind of thing, not be bailed out by the Fed, who will in turn likely need to be bailed out by taxpayers, or worse if this happens another couple times in the next couple years.
watwut 4y ago
People go to jail for all kinds of frauds and all kinds issues they cause to other people.
deleted 4y ago
[deleted]
anigbrowl 4y ago
Directly, nobody was injured. Proximately, we really have no idea. I am in favor of strict liability for a broader variety of negligent behavior. Losing one's career over bad judgment is of course a kind of deterrent, but realistically lots of people fuck up and then go on to have moderately profitable second careers by writing a book and giving talks with titles like 'Learning Hard Lessons'. If they're entrepreneurial they can become stars of the MBA circuit.
- geysersam 4y ago
  Yes people make mistakes. That's legal and it should be. Especially in a business such as finance where the job literally is to estimate risk, someone will make the (in hindsight) wrong decision.
- jalapenos 4y ago
  Strict liability for negligence would just mean sending business overseas where that rule isn't in play, and chilling it domestically. No one is interested in the deal "if you get it right, you make some money; if you get it wrong, we obliterate you". The move from caveat emptor to caveat venditor has coincided with everyone legally ringfencing things with corps & LLCs. People find ways back to a fair deal.
  - anigbrowl 4y ago
    If we have strict liability for truck drivers nobody will sign up to drive hazardous cargo.
colinsane 4y ago
that might (or might not) be arguable from a moral viewpoint, but it definitely isn’t arguable from the actual statistics. about half of the US state prison population is there for non-violent crimes. https://en.wikipedia.org/wiki/Incarceration_in_the_United_States#Violent_and_nonviolent_crime https://en.wikipedia.org/wiki/Incarceration_in_the_United_St...
- concordDance 4y ago
  Those mostly wouldn't be errors in judgement but people who knew they were doing something wrong, like shoplifting.
  - colinsane 4y ago
    > like shoplifting or like being in possession of a gram of meth for personal use: something a person might legitimately believe isn’t “wrong”. the meth user didn’t get into jail for violating his own moral code: he’s there for an error in judgement, this error being that he didn’t understand how strongly the people around him would react to actions he thought were not that big of a deal. sibling comment does good by calling attention to driving: enough people text while drive that it can be considered normal behavior, that people who do this don’t actively think they’re doing wrong. but that doesn’t save them from culpability when they roll the dice poorly and hit a pedestrian. what’s the difference between “manslaughter” and “murder”: it’s intent. our justice system does consider intent, but it doesn’t require it.

nerdponx 4y ago

And to the original point about libertarians, this would only ever not happen in the face of regulation.

tracker1 4y ago
As a libertarian, I'm perfectly fine with letting a business fail, and holding the management and board to personally account/liability for their actions.
- watwut 4y ago
  The actual "letting it fail" would be to pay up looses only for those insured. Those who did not insured would not be paid looses in "let it fail world".
  - tracker1 4y ago
    Exactly... they liquidate the bank's assets, payout the FDIC insured, and most of the depositors only lose about 10%... the shareholders would lose more... and the executives and board potentially lose everything to pay shareholders. That's how this is supposed to work under existing rules.
    - geysersam 4y ago
      Why didn't the fed decide that course of action in this case? Seems the difference is small. Shareholders still lost everything, depositors lost nothing instead of 10% but that's a minor difference. Guess one difference is how long it'll take before depositors can access their money. Now they'll get it immediately. If they were waiting for liquidation of the banks assets, that would probably take longer.
      - kevingadd 4y ago
        Depositors would have lost up-to $X - 250000, not 10%. SVB is down ~10% but that doesn't mean everyone would have actually been made whole from the money.

beezle 4y ago

Your understanding of the HTM portfolio (and reasons for it) are clearly not complete and no, not anyone in risk management will say their risk team should be in jail (excepting the case of documents proving the failure to hedge was done specifically to increase executive compenstation/bonuses). Calling into question the lack of hedging or use of MBS is fair game and not something most other institutions would have done. For the record, "1 year treasury bonds" are 52 week Treasury Bills. They would not be buying off the run old debt.