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The federal government caused the problem first though. The federal reserve denied inflation was real for so long, signaling to everyone that it was safe to bu

by bsuvc 4y ago

The federal government caused the problem first though. The federal reserve denied inflation was real for so long, signaling to everyone that it was safe to buy US Treasuries, then suddenly and aggressively started raising rates. And wasn't it the federal government regulators who are responsible for ensuring that banks are not taking on excessive risk? Are they not to be trusted, and must every depositor perform a deep-dive due diligence on their bank and continuously do so in order to make sure their money is safe while deposited in a bank of all places? No, the Federal government is more like an arsonist who set fire to a building, then showed up to rescue the people inside, taking all the credit, and then shaming those who noticed the smoke and escaped on their own before they arrived.

mistrial9 4y ago
moronic one-sided grudge content aside - isn't "market valuation" by private capital on assets they have an interest in, also a snake in the grass here?
SketchySeaBeast 4y ago
It kind of feels like the argument here is "why didn't someone stop us from making mistakes"? If it's the case that the federal reserve sent deliberately misleading messages that no one could have doubted why isn't there a giant line of banks currently going under?
- deleted 4y ago
  [deleted]
kasey_junk 4y ago
It doesn’t take every depositor doing a deep dive, but if you hold half a billion dollars in cash at a bank, you bloody well better understand their balance sheet. I assure you that mainline company and governmental treasurers do this due diligence as a matter of course along with all the other counterparty risk mitigations that are SOP for well run companies. And if you are going to encourage (and sometimes insist) that your portfolio companies work with a bank, understanding concentration risk is the minimum professional standard you should be held to. Every other industry understands what fdic insurance is and is not. Competent CFO and corporate treasurers manage their counterparty risk as part of their job. It’s either immaturity, incompetence or entitlement that makes SV think this isn’t their problem.
selectodude 4y ago
>The federal government caused the problem first though. Nonsense. >The federal reserve denied inflation was real for so long, signaling to everyone that it was safe to buy US Treasuries, then suddenly and aggressively started raising rates. The Fed was issuing forward guidance in 2020 that it planned to aggressively raise rates. By 2021, my dog could have told you that this was going to happen. >And wasn't it the federal government regulators who are responsible for ensuring that banks are not taking on excessive risk? Are they not to be trusted, and must every depositor perform a deep-dive due diligence on their bank and continuously do so in order to make sure their money is safe while deposited in a bank of all places? SVB spent a lot of money on lobbying to keep themselves small enough (by raising the limits) to not have to get the full brunt of regulations. (https://theintercept.com/2023/03/11/silicon-valley-bank-used-former-mccarthy-staffers-to-weaken-regulations-lobby-fdic/ https://theintercept.com/2023/03/11/silicon-valley-bank-used...) >No, the Federal government is more like an arsonist who set fire to a building, then showed up to rescue the people inside, taking all the credit, and then shaming those who noticed the smoke and escaped on their own before they arrived. Makes sense that you don't know the difference between the Federal Government, the Federal Reserve, and the FDIC though.
- bsuvc 4y ago
  The Federal Reserve is basically part of the government, under the guise of independence. It's naive that you think otherwise. FDIC is not part of the government and I never said it was, but it does work closely with them. I'm not sure what your point is. As for your claim that the the "fed was issuing forward guidance in 2020", this says otherwise, from 2021 even: Federal Reserve calls inflation "transitory" as it keeps interest rates near zero https://www.cbsnews.com/news/interest-rates-inflation-federal-reserve-transitory/ https://www.cbsnews.com/news/interest-rates-inflation-federa...
  - orwin 4y ago
    And any bank would have hedged their bonds against interest rate hikes. Totally SVB's fault.
comte7092 4y ago
SVB ended up on the wrong side of a trade and somehow it’s the feds fault? They knew that there were risks in their strategy and went ahead with it, rather than hedging and forgoing profits. It’s not the feds job to make policy on the basis of how one bank is trading.
- bsuvc 4y ago
  Are you saying the deposit holders (customers of the bank) are to blame?
  - comte7092 4y ago
    Blame for what? The bank failing? SVB was financially mismanaged by its leadership. They then handled the communications around their poor financial position very poorly. This lead to the immediate cause of the banks collapse, a textbook bank run. So, technically yes? The depositors who pulled their money were the immediate cause of the failure if we’re being simplistic. They pulled out a quarter of the deposits in a couple of days, no bank is going to be able to withstand that.
cs702 4y ago
You're wrong, and it's easy to show why: SVB executives did NOT have to load up on high-duration bonds! They were under no obligation to do that. They CHOSE to do it because they wanted to increase interest income and earnings in the short run. They could have easily purchased a lower-duration mix of bonds. Instead, they gambled the bank on a bet that long-term rates would stay at historic lows. Once they made that bet, they could have easily hedged it every year, at a cost. Instead, they chose not to spend any money on hedging. The federal government did not cause SVB's failure. SVB executives caused it.
- bsuvc 4y ago
  I am not defending SVB executives. Don't you understand the difference between deposit holders (customers) and the executives and investors in the bank?
  - cs702 4y ago
    > I am not defending SVB executives. But you're blaming the federal government for something the executives did voluntarily! Please don't change the argument. I didn't say anything about depositors in my response. The federal government did not cause this. SVB executives did.
    - bsuvc 4y ago
      It's only fair, because I didn't say anything about executives in my original comment. Please don't make strawman arguments.
      - cs702 4y ago
        Don't be silly, please. There's no strawman here. You accused the federal government as causing something that SVB executives did voluntarily. It makes sense to point that it was they who caused their problems, not the government. Your arguments seem to be motivated by ideology, as opposed to facts and reasoning, so this will be my last comment on this sub-thread. Goodbye.
om42 4y ago
Outside of the Federal Reserve issue, isn't a core component here the 2018 bank deregulation laws that weakened the rules so they wouldn't apply to banks the size of SVB (less than $250B in assets)? Dodd-Frank was put in in place for a reason after 2008 and crawling it back in form of the 2018 bank deregulation laws was a glaring mistake.
kurthr 4y ago
Real banks hedge interest rates as required by regulation (and sanity). SVB lobbied Republicans to have regulation removed. SVB had hedges and let them expire while it had no risk officer. Theil apparently recommended cash at SVB after the failure of his funded Glorifi bank, but it's unclear why large sums (in excess of monthly needs) would be left by any company in any bank (if only because there's no interest). Were there other loans being made against deposits? https://www.wsj.com/livecoverage/stock-market-news-today-03-13-2023/card/silicon-valley-bank-dropped-a-hedge-against-rising-rates-in-2022-6MiD9ZLVY9CF8zbIM7ze https://www.wsj.com/livecoverage/stock-market-news-today-03-... https://theintercept.com/2023/03/11/silicon-valley-bank-used-former-mccarthy-staffers-to-weaken-regulations-lobby-fdic/ https://theintercept.com/2023/03/11/silicon-valley-bank-used... https://www.businessinsider.com/anti-woke-bank-backed-peter-thiel-folds-after-three-months-2022-11 https://www.businessinsider.com/anti-woke-bank-backed-peter-... It was actually the raising of 10y long term rates (which are not controlled by the Fed) which caused the value of SVBs MBS to fall. That in turn is mostly affected by inflation expectations.

by bsuvc 4y ago

mistrial9 4y ago

moronic one-sided grudge content aside - isn't "market valuation" by private capital on assets they have an interest in, also a snake in the grass here?

SketchySeaBeast 4y ago

It kind of feels like the argument here is "why didn't someone stop us from making mistakes"? If it's the case that the federal reserve sent deliberately misleading messages that no one could have doubted why isn't there a giant line of banks currently going under?

deleted 4y ago
[deleted]

kasey_junk 4y ago

It doesn’t take every depositor doing a deep dive, but if you hold half a billion dollars in cash at a bank, you bloody well better understand their balance sheet. I assure you that mainline company and governmental treasurers do this due diligence as a matter of course along with all the other counterparty risk mitigations that are SOP for well run companies. And if you are going to encourage (and sometimes insist) that your portfolio companies work with a bank, understanding concentration risk is the minimum professional standard you should be held to. Every other industry understands what fdic insurance is and is not. Competent CFO and corporate treasurers manage their counterparty risk as part of their job. It’s either immaturity, incompetence or entitlement that makes SV think this isn’t their problem.

selectodude 4y ago

>The federal government caused the problem first though. Nonsense. >The federal reserve denied inflation was real for so long, signaling to everyone that it was safe to buy US Treasuries, then suddenly and aggressively started raising rates. The Fed was issuing forward guidance in 2020 that it planned to aggressively raise rates. By 2021, my dog could have told you that this was going to happen. >And wasn't it the federal government regulators who are responsible for ensuring that banks are not taking on excessive risk? Are they not to be trusted, and must every depositor perform a deep-dive due diligence on their bank and continuously do so in order to make sure their money is safe while deposited in a bank of all places? SVB spent a lot of money on lobbying to keep themselves small enough (by raising the limits) to not have to get the full brunt of regulations. (https://theintercept.com/2023/03/11/silicon-valley-bank-used-former-mccarthy-staffers-to-weaken-regulations-lobby-fdic/ https://theintercept.com/2023/03/11/silicon-valley-bank-used...) >No, the Federal government is more like an arsonist who set fire to a building, then showed up to rescue the people inside, taking all the credit, and then shaming those who noticed the smoke and escaped on their own before they arrived. Makes sense that you don't know the difference between the Federal Government, the Federal Reserve, and the FDIC though.

bsuvc 4y ago
The Federal Reserve is basically part of the government, under the guise of independence. It's naive that you think otherwise. FDIC is not part of the government and I never said it was, but it does work closely with them. I'm not sure what your point is. As for your claim that the the "fed was issuing forward guidance in 2020", this says otherwise, from 2021 even: Federal Reserve calls inflation "transitory" as it keeps interest rates near zero https://www.cbsnews.com/news/interest-rates-inflation-federal-reserve-transitory/ https://www.cbsnews.com/news/interest-rates-inflation-federa...
- orwin 4y ago
  And any bank would have hedged their bonds against interest rate hikes. Totally SVB's fault.

comte7092 4y ago

SVB ended up on the wrong side of a trade and somehow it’s the feds fault? They knew that there were risks in their strategy and went ahead with it, rather than hedging and forgoing profits. It’s not the feds job to make policy on the basis of how one bank is trading.

bsuvc 4y ago
Are you saying the deposit holders (customers of the bank) are to blame?
- comte7092 4y ago
  Blame for what? The bank failing? SVB was financially mismanaged by its leadership. They then handled the communications around their poor financial position very poorly. This lead to the immediate cause of the banks collapse, a textbook bank run. So, technically yes? The depositors who pulled their money were the immediate cause of the failure if we’re being simplistic. They pulled out a quarter of the deposits in a couple of days, no bank is going to be able to withstand that.

cs702 4y ago

You're wrong, and it's easy to show why: SVB executives did NOT have to load up on high-duration bonds! They were under no obligation to do that. They CHOSE to do it because they wanted to increase interest income and earnings in the short run. They could have easily purchased a lower-duration mix of bonds. Instead, they gambled the bank on a bet that long-term rates would stay at historic lows. Once they made that bet, they could have easily hedged it every year, at a cost. Instead, they chose not to spend any money on hedging. The federal government did not cause SVB's failure. SVB executives caused it.

bsuvc 4y ago
I am not defending SVB executives. Don't you understand the difference between deposit holders (customers) and the executives and investors in the bank?
- cs702 4y ago
  > I am not defending SVB executives. But you're blaming the federal government for something the executives did voluntarily! Please don't change the argument. I didn't say anything about depositors in my response. The federal government did not cause this. SVB executives did.
  - bsuvc 4y ago
    It's only fair, because I didn't say anything about executives in my original comment. Please don't make strawman arguments.
    - cs702 4y ago
      Don't be silly, please. There's no strawman here. You accused the federal government as causing something that SVB executives did voluntarily. It makes sense to point that it was they who caused their problems, not the government. Your arguments seem to be motivated by ideology, as opposed to facts and reasoning, so this will be my last comment on this sub-thread. Goodbye.

om42 4y ago

Outside of the Federal Reserve issue, isn't a core component here the 2018 bank deregulation laws that weakened the rules so they wouldn't apply to banks the size of SVB (less than $250B in assets)? Dodd-Frank was put in in place for a reason after 2008 and crawling it back in form of the 2018 bank deregulation laws was a glaring mistake.

kurthr 4y ago

Real banks hedge interest rates as required by regulation (and sanity). SVB lobbied Republicans to have regulation removed. SVB had hedges and let them expire while it had no risk officer. Theil apparently recommended cash at SVB after the failure of his funded Glorifi bank, but it's unclear why large sums (in excess of monthly needs) would be left by any company in any bank (if only because there's no interest). Were there other loans being made against deposits? https://www.wsj.com/livecoverage/stock-market-news-today-03-13-2023/card/silicon-valley-bank-dropped-a-hedge-against-rising-rates-in-2022-6MiD9ZLVY9CF8zbIM7ze https://www.wsj.com/livecoverage/stock-market-news-today-03-... https://theintercept.com/2023/03/11/silicon-valley-bank-used-former-mccarthy-staffers-to-weaken-regulations-lobby-fdic/ https://theintercept.com/2023/03/11/silicon-valley-bank-used... https://www.businessinsider.com/anti-woke-bank-backed-peter-thiel-folds-after-three-months-2022-11 https://www.businessinsider.com/anti-woke-bank-backed-peter-... It was actually the raising of 10y long term rates (which are not controlled by the Fed) which caused the value of SVBs MBS to fall. That in turn is mostly affected by inflation expectations.