9 ms·

How Silicon Valley Bank Avoided Oversight

116 points by marban 4y ago

neonate 4y ago
https://archive.ph/ert4b https://archive.ph/ert4b
jmclnx 4y ago
I could not get into either articles, but.. One can hope at the very least all the execs bonuses for the past 2 years need to be refunded to help pay for what the FDIC needs to pay out. Why ? Yes, they said the Taxpayer will not pay, but that is a kind of lie of omission. The Fees Banks Pay the FDIC will be raising, that was stated. But where do these fees come from ? You know who, we will pay higher fees on our Bank accounts and higher interest rates on Loans and probably Credit Cards. None of the journalist asked or brought up that point. So yes, the Taxpayer will pay for so they would not loose the amounts over 250,000. Again, no risk for the well-to-do but "main street" pays.
- lisasays 4y ago
  In their big announcement, the Fed did say that ultimately all costs will be recovered from the bank's remaining assets (and will not fall on the taxpayer). The government is still providing liquidity and coercive muscle -- so it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise.
  - readthenotes1 4y ago
    and the govt made a profit from TARP. I don't want the US government to be driven by a profit motive any more than it already is...
    - sfblah 4y ago
      Just jumping in to point out that to make the profit from TARP, the government had to distort the economy in ways that won’t be fully understood for maybe 30 more years.
      - lisasays 4y ago
        Yeah, I don't get this "It didn't cost the taxpayers a cent, so really it's all good, man, and not really a bailout" line that some people keep putting out, at all.
    - boh 4y ago
      They are not profiting in the SVB bailout. The available SVB assets aren't increasing in value unless interest rates go back to zero.
      - larkost 4y ago
        The assets do not have to increase in value, the face value on them is enough (if what I am reading is right), but that is if you hold the bonds until maturity. SVB's problem was that suddenly they could not wait for maturity their depositors were asking for their money right now. Since most of the money is in treasury bonds, the government can either wait until then, or maybe nullify the bonds that are now in their hands, since it is now the government owing the government money (there is probably some complexity there, but I don't know my way though it). In the mean time the depositors' money needs to come out of the FDIC, and that is probably going to increase costs for banks (and thus their consumers), until things can be worked out.
    - TuringNYC 4y ago
      >> and the govt made a profit from TARP. TARP had three players: TARP Fund: via The US Government (fiscal), POMO/QEx: via The Fed (monetary), and The Banks (those bailed out) TARP "made a profit" by the Fed printing money and buying assets at way above market value from the banks. It didnt cost anything because we just printed the money, but there was a cost...inflation. We just spread the cost secretly to everyone. Real impacts of printing money: Houses jumping in value by 40 or 50%, meanwhile: https://www.costar.com/article/266860380/most-us-households-cant-afford-a-median-priced-home https://www.costar.com/article/266860380/most-us-households-... Most US Households Can't Afford a Median-Priced Home https://www.nahb.org/blog/2022/03/36-million-households-cant-afford-a-150000-home/ https://www.nahb.org/blog/2022/03/36-million-households-cant... "36 Million Households Can’t Afford a $150,000 Home"
    - qwerpy 4y ago
      > govt made a profit from TARP That's like selling your used car for a "profit" during the recent supply chain issues caused by the pandemic. Sure, you might have gotten more dollars from the sale than you did when you purchased it. But those dollars are worth a lot less now, and you would not be able to repurchase an equivalent car with those dollars. The TARP profit line is how they deflect some of the outrage from yet another bank bailout. "See, it didn't cost you, the taxpayer, anything!".
  - boh 4y ago
    The Fed is saying it will be funded by the banks remaining assets and the "banking system" which assumes higher FDIC premiums, which the banks will likely transfer to customer as additional fees. The taxpayer is definitely paying for it (just with extra steps).
    - mulmen 4y ago
      By that definition literally everything is taxpayer funded and thus taxpayer funded is a meaningless term.
    - op00to 4y ago
      Not higher fees. The FDIC will use a special assessment like they did in 2009. This special assessment was 5 basis points last time. 5 cents on $100. Hardly a major expense to pass on. Banks are highly competitive and those that do pass on the assessment will lose customers to those who eat the 5 basis points.
  - kmonsen 4y ago
    It's not a bailout because the stockholders were wiped out. I guess you can say that customers were bailed out, but the bank was not.
  - dasil003 4y ago
    What happened to the executives, board, and shareholders? I honestly don't know as I haven't followed that closely, but to me those are the most important three questions, and in that order, because that determines the level of moral hazard. I'm less concerned over semantic arguments of what technically constitutes a bailout. Personally a stable banking system is important to me, as is accountability for risky investment strategies. I have a hard time seeing the situation is black and white enough to jump to a conclusion on exactly what the delta is between what happened and what should have happened.
    - FireBeyond 4y ago
      I believe the entire executive is without a job. Likewise with board. Shareholders will be able to get what they can that is left over after depositors are made whole, but that seems like it will be effectively zero. As for consequences beyond that? Unsure. Hopefully the CEO (now on his second failed bank) doesn't "fail upwards". I mean it's one thing to have a poorly performing bank on your resume... it's another to have two banks forcibly closed by the FDIC.
    - vkou 4y ago
      The executives have been fired, the board has been fired, the shareholders have been zeroed out. The shareholders are currently suing the board and the executives for running the bank into the ground. Ten years from now, once all the long-term investments settle, if there's any money left over, the shareholders might be entitled to two turnips and cup of coffee from Uncle Sam. As far as 'The guilty getting their just deserts', this is a rare example of the world mostly working in a just way.
      - AvocadoPanic 4y ago
        Really? There are jurisdictions where executives responsible for this sort of failure would be shot and have their assets confiscated. Neither is likely in this instance.
        op00to 4y ago
  - gumby 4y ago
    > it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise. How do you define a bailout? The shareholders and bondholders of the bank lose everything. The customers (depositees) get their money back. You consider that a bailout?
    - lisasays 4y ago
      How do you define a bailout? Per what sources like Investopedia, Wikipedia, and all the major English dictionaries say. None of which limit the term to protections for investors.
  - shadowgovt 4y ago
    It's a bailout of the creditors. The bank itself is evaporating.
- fswd 4y ago
  What upsets me the most is that the execs gave themselves bonuses in to their personal FDIC insured accounts, essentially writing a bad check for free bailout money, after the bank went negative.
  - rybosworld 4y ago
    Source?
    - op00to 4y ago
      SVB had a bonus schedule like every other company, and paid out those bonuses to all eligible employees. The payments were for work done in 2022. There is literally nothing to see here. https://www.cnbctv18.com/market/silicon-valley-bank-employees-bonuses-just-hours-before-government-takeover-report-16145921.htm https://www.cnbctv18.com/market/silicon-valley-bank-employee...
- mjmahone17 4y ago
  Do different banks pay different amounts into FDIC insurance based on how risky the FDIC considers them? If so then it’s really the FDIC adjusting their risk model to treat most mid-size banks as likely to cause systemic failures if they fail, and requiring the riskiest banks to cover the cost for that updated model based on how likely the FDIC believes they are to fail. I don’t know that pricing insurance based on the actual cost of the potential external harm can really be considered a tax increase.
  - op00to 4y ago
    Yes. Banks are evaluated for their risk and pay assessments based on their risk scores and total deposits (give or take). The riskiest banks pay the most.
realworldperson 4y ago
[dead]
duped 4y ago
A family member noted to me yesterday (after being frustrated by the coverage and reading the regulatory requirements from the Fed) some stuff that is being poorly articulated by these articles. Even under Dodd-Frank and prior to the Trump deregulation, SVB was in trouble and acting badly - and regulators probably wouldn't have caught it, nor would SVB have broken the law. They had to do stress tests this year anyway. But that wouldn't have caught onto the fact that they parked deposits from (now forgiven) PPP loans into treasury bonds in a hold-to-maturity account (thus hiding the asset risk on paper, something that isn't illegal but is suspicious that they did to a degree beyond anyone else apparently), and it wouldn't get over the fact that the Fed's own guidelines for computing asset risk told them to only take into account a 1% rise in the Fed's interest rate (it actually rose 3%!). Point being, deregulation (real or advocated for) didn't cause SVB to fail. It would have failed anyway. The actual data they base things on is bad, and the bank was nigh criminally mismanaged.
- DrThunder 4y ago
  Frank was on the board of Signature Bank, that should tell you a lot about how useless Dodd-Frank was. The Biden admin had 2 years of total congressional control to overturn Trump's rollback of these supposedly amazing regulatory requirements. Government encouragement of risky behavior due to bailouts is the problem, not deregulation.
  - delecti 4y ago
    > total congressional control It most certainly did not have that.
    - DrThunder 4y ago
      Dems had the Senate and House. Stop with the gaslighting. If you want to let them pull the wool over your eyes over and over and blame the guy that's been out of office for 3 years for their failures, I guess you kinda deserve what you get.
      - 4y ago
DrThunder 4y ago
"Oversight", is not the issue. The issue is our government has incentivized risky behavior by bailing these fools out. If you're bank management and you know big daddy government will save you no matter what... well then, why would you not continue to engage in this risky behavior? I love how the white house is trying to paint this as an issue with lack of oversight and the need for MORE regulation when that's not even the issue.
- deleted 4y ago
  [deleted]
- frankbreetz 4y ago
  I mean you loose all your investors' money and your job. As the CEO of a bank you probably get paid a lot in equity and that would be gone. If they were really reckless they could go to jail. Hopefully they look into the exec stock sales over the past few months. If money in a checking account is not safe, and I can't spend cash over 10k without a ton of paperwork, where can I keep cash that is safe?
  - DrThunder 4y ago
    Oh how terrible. Must be awful losing your job while raking in millions off the stock you sold beforehand and then getting re-hired at the next massive bank that does the same thing. These people rarely go to jail, and if they do it's a minimum sentence in low security white-collar "jail". The politicians will do everything they can to keep their donors donating. The fact they ARE and continue engaging in this behavior right now proves you're just wrong about any possible "risk" they perceive.
  - notch898a 4y ago
    Revolving treasury bills
- HFguy 4y ago
  How would this explain...that vast majority of banks were not doing what you say they were incentivized to do? Maybe they weren't?
FireBeyond 4y ago
A good comment on all this... If a bank is complaining about the overhead, effort, cost, complexity of adhering to risk management protocols... they're really actually saying "if it wasn't for pesky government, we'd be more than happy to take more risks with -your- money."
- yieldcrv 4y ago
  there are plenty of pointless poorly thought out protocols that have nothing to do with speculation of customer deposits but do increase operating costs unnecessarily
  - mostlysimilar 4y ago
    In a perfect world regulation would be right-sized and not needlessly waste resources, but failing that I'll take "the billionaires make slightly less money but are less likely to crash the economy" over the inverse.
    - Red_Leaves_Flyy 4y ago
      When billionaires get too greedy it’s typically average people who beat the brunt of their responsibility. This is a regressive state of affairs. Banks serving everyday people should not be allowed to make risky bets or engage in transactions that can cause contagion. If that pisses some billionaires off, well thats just the icing on the cake.
  - czzr 4y ago
    Could you name one? (Just to help us understand a real example)
    - yieldcrv 4y ago
      The current implementation and purpose of currency transaction reports. These are random documents sent to the government when some transactions over a certain dollar amount are done, ostensibly to help prevent money laundering, in practice just waste everyone’s time. The Government Accountability Office has reported on this for 30 years. GAO reports are full of other examples too.
bombcar 4y ago
Shouldn't journalists be writing these types of stories before the bank collapses? What happened to investigative journalism?
- Maursault 4y ago
  > What happened to investigative journalism? Infotainment consumers happened.
- deleted 4y ago
  [deleted]
- hudsonjr 4y ago
  This guy had it in his newsletter in February: https://twitter.com/ByrneHobart/status/1628779894183272452 https://twitter.com/ByrneHobart/status/1628779894183272452
1vuio0pswjnm7 4y ago
"Some observers fear that the decision to disregard the $250,000 cap on insured deposits could generate irresistible pressure to insure deposits fully regardless of the amount. This would undermine the purpose of the cap, which was to give large depositors an incentive to monitor the conduct of their banks and subject the system to market discipline. A total guarantee, many argue, is an invitation to irresponsibility. This may be right." SVB was happy to conceal their precarious position until they were required to recognise and disclose losses when they sold some of their bonds. Is there any reason we should promote personal responsibility on the part of depositors. The author's children are VC. What appears to be an easy question suddenly become challenging.
- pickovven 4y ago
  SVB is actually an inverse example of that hypotheses. The biggest depositors added pressure on the bank to be more risky.
  - Red_Leaves_Flyy 4y ago
    Which proves the need for regulation.
    - cmurf 4y ago
      Or that the depositors should have lost money, with the ensuing ripple effects: unpaid workers, state fines for violating wage payment laws, bankruptcies, lawsuits, unpaid vendors and contractors and all their downstreams, etc. i.e. carnage, a big bloody nose, but not an extinction level event. Maybe the depositors deserved a bloody nose. But do their employees, vendors, and contractors?
      - Red_Leaves_Flyy 4y ago
        In my outspoken opinion you’re onto something. Regular FDIC insurance should kick in. Every aaccount gets their 250k, and rest will take years to figure out with lawyers scrambling to stake claims of the carcass. Enhanced unemployment for the non executive level employees of companies effected by the failure. Highly compensated employees that don’t budget might suffer, good. Executives, investors, etc should all take a bath from this. They should be made whole on the backend if they didn’t have insurance and well managed risk. There should also be a lot of high profile and HNWI people thrown in prison for their gross negligence. Hopefully the regulators can secure the evidence they need for convictions without their investigations getting compromised by any manner of the typical shenanigans.
toraway1234 4y ago
[dead]
jongjong 4y ago
The failure of SVB may be evidence that even the most well-connected, most tech-savvy bankers do not understand the monetary system. It appears that they naively believed that if they converted $1 of today-money into $1 worth of today-bonds that those bonds would always be worth at least $1 nominally since bonds yield interest and the $1 principal is returned to the bond-holder once it reaches maturity... It seems that they couldn't imagine how a bond which costs $1 and yields $1 + interest could be worth less than $1? It appears that they failed to understand that $1 in today-money is not necessarily worth the same as $1 in tomorrow-money (or especially 10-years-in-the-future-money). If you look at history over the past 50 years or so, tomorrow-money has always and predictably been worth less than today-money. So it's a gross oversight. I didn't study economics, finance or business and I'm basically a dumb pleb scraping by the bottom rung of society, yet even I knew that. That's why I often get caught up in conspiracy theories. It's hard for me to believe that these wealthy, highly educated people don't know this stuff. I tend to think that a lot of such things are malicious and intentional because I believe that the elites are intelligent. But then I think, why would these people risk going to jail over a scheme when they are already well off regardless? Are they compromised individuals being extorted for over a decade straight with the intention to basically run the company into the ground (for the benefit of third parties) and then be the fall guy? Hmmm seems very far fetched...
- MrMan 4y ago
  by tech savvy do you mean javascript?
  - jongjong 4y ago
    I mean understanding of tech systems.
- fires10 4y ago
  I am often of the opinion many technical people can't bring abstract ideas across domains. I have seen people recognize things in context and ignore the same idea in another one. They loose sight of the details when looking to high up or looking at reports instead of building the reports themselves.
jbaber 4y ago
I asked this too late on the last SVB thread: I have a naive question. When I was a little kid and the FDIC only insured the first $100,000, I thought, "If I were rich, I'd have to have multiple bank accounts." Do big companies not do this with their liquid assets as a matter of course? Are there just not enough banks? Or would per-account fees unknown to me as a little guy eat into savings? I get that big companies directly hold a bunch of bonds, too. But if they use a bank so they can actually write checks, why not many banks?
- strgcmc 4y ago
  This is actually a niche industry, that provides "deposit solutions". A family member used to work at this one for example, who just put a PR release based on the recent news cycle: https://www.reichandtang.com/2023/03/12/statement-on-protecting-deposits-2/ https://www.reichandtang.com/2023/03/12/statement-on-protect... They provide up to $50 million worth of combined coverage, by splitting across dozens of partner banks into $250k chunks. Yes there are fees associated with purchasing such a service, but I'm not really sure why it's not more popular or more commonly adopted as SOP for small to medium enterprises to do this. Maybe there is a convenience or liquidity factor that I'm missing, or maybe people really didn't think the cost was worth it (but I'd guess many are probably reevaluating now, just how safe or unlikely they think a bank failure really is)?
egberts1 4y ago
FTFA: “Among other measures, Dodd-Frank imposed new reporting requirements on banks, toughened standards for capital adequacy, and restrained banks’ ability to use deposits for speculative investment. Banks with assets above $50 billion were deemed “systemically important” and subjected to especially strict scrutiny.” Hold your horse. Back up a bit to 2014, to where this snippet appeared when SVB was a nonbank at the time: "Finally, the Board has determined not to impose enhanced prudential standards on nonbank financial companies supervised by the Board through this final ($50B stress test) rule.l https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-05699.htm https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-...

116 points by marban 4y ago

https://archive.ph/ert4b https://archive.ph/ert4b

I could not get into either articles, but.. One can hope at the very least all the execs bonuses for the past 2 years need to be refunded to help pay for what the FDIC needs to pay out. Why ? Yes, they said the Taxpayer will not pay, but that is a kind of lie of omission. The Fees Banks Pay the FDIC will be raising, that was stated. But where do these fees come from ? You know who, we will pay higher fees on our Bank accounts and higher interest rates on Loans and probably Credit Cards. None of the journalist asked or brought up that point. So yes, the Taxpayer will pay for so they would not loose the amounts over 250,000. Again, no risk for the well-to-do but "main street" pays.

lisasays 4y ago
In their big announcement, the Fed did say that ultimately all costs will be recovered from the bank's remaining assets (and will not fall on the taxpayer). The government is still providing liquidity and coercive muscle -- so it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise.
- readthenotes1 4y ago
  and the govt made a profit from TARP. I don't want the US government to be driven by a profit motive any more than it already is...
  - sfblah 4y ago
    Just jumping in to point out that to make the profit from TARP, the government had to distort the economy in ways that won’t be fully understood for maybe 30 more years.
    - lisasays 4y ago
      Yeah, I don't get this "It didn't cost the taxpayers a cent, so really it's all good, man, and not really a bailout" line that some people keep putting out, at all.
  - boh 4y ago
    They are not profiting in the SVB bailout. The available SVB assets aren't increasing in value unless interest rates go back to zero.
    - larkost 4y ago
      The assets do not have to increase in value, the face value on them is enough (if what I am reading is right), but that is if you hold the bonds until maturity. SVB's problem was that suddenly they could not wait for maturity their depositors were asking for their money right now. Since most of the money is in treasury bonds, the government can either wait until then, or maybe nullify the bonds that are now in their hands, since it is now the government owing the government money (there is probably some complexity there, but I don't know my way though it). In the mean time the depositors' money needs to come out of the FDIC, and that is probably going to increase costs for banks (and thus their consumers), until things can be worked out.
  - TuringNYC 4y ago
    >> and the govt made a profit from TARP. TARP had three players: TARP Fund: via The US Government (fiscal), POMO/QEx: via The Fed (monetary), and The Banks (those bailed out) TARP "made a profit" by the Fed printing money and buying assets at way above market value from the banks. It didnt cost anything because we just printed the money, but there was a cost...inflation. We just spread the cost secretly to everyone. Real impacts of printing money: Houses jumping in value by 40 or 50%, meanwhile: https://www.costar.com/article/266860380/most-us-households-cant-afford-a-median-priced-home https://www.costar.com/article/266860380/most-us-households-... Most US Households Can't Afford a Median-Priced Home https://www.nahb.org/blog/2022/03/36-million-households-cant-afford-a-150000-home/ https://www.nahb.org/blog/2022/03/36-million-households-cant... "36 Million Households Can’t Afford a $150,000 Home"
  - qwerpy 4y ago
    > govt made a profit from TARP That's like selling your used car for a "profit" during the recent supply chain issues caused by the pandemic. Sure, you might have gotten more dollars from the sale than you did when you purchased it. But those dollars are worth a lot less now, and you would not be able to repurchase an equivalent car with those dollars. The TARP profit line is how they deflect some of the outrage from yet another bank bailout. "See, it didn't cost you, the taxpayer, anything!".
- boh 4y ago
  The Fed is saying it will be funded by the banks remaining assets and the "banking system" which assumes higher FDIC premiums, which the banks will likely transfer to customer as additional fees. The taxpayer is definitely paying for it (just with extra steps).
  - mulmen 4y ago
    By that definition literally everything is taxpayer funded and thus taxpayer funded is a meaningless term.
  - op00to 4y ago
    Not higher fees. The FDIC will use a special assessment like they did in 2009. This special assessment was 5 basis points last time. 5 cents on $100. Hardly a major expense to pass on. Banks are highly competitive and those that do pass on the assessment will lose customers to those who eat the 5 basis points.
- kmonsen 4y ago
  It's not a bailout because the stockholders were wiped out. I guess you can say that customers were bailed out, but the bank was not.
- dasil003 4y ago
  What happened to the executives, board, and shareholders? I honestly don't know as I haven't followed that closely, but to me those are the most important three questions, and in that order, because that determines the level of moral hazard. I'm less concerned over semantic arguments of what technically constitutes a bailout. Personally a stable banking system is important to me, as is accountability for risky investment strategies. I have a hard time seeing the situation is black and white enough to jump to a conclusion on exactly what the delta is between what happened and what should have happened.
  - FireBeyond 4y ago
    I believe the entire executive is without a job. Likewise with board. Shareholders will be able to get what they can that is left over after depositors are made whole, but that seems like it will be effectively zero. As for consequences beyond that? Unsure. Hopefully the CEO (now on his second failed bank) doesn't "fail upwards". I mean it's one thing to have a poorly performing bank on your resume... it's another to have two banks forcibly closed by the FDIC.
  - vkou 4y ago
    The executives have been fired, the board has been fired, the shareholders have been zeroed out. The shareholders are currently suing the board and the executives for running the bank into the ground. Ten years from now, once all the long-term investments settle, if there's any money left over, the shareholders might be entitled to two turnips and cup of coffee from Uncle Sam. As far as 'The guilty getting their just deserts', this is a rare example of the world mostly working in a just way.
    - AvocadoPanic 4y ago
      Really? There are jurisdictions where executives responsible for this sort of failure would be shot and have their assets confiscated. Neither is likely in this instance.
      - op00to 4y ago
- gumby 4y ago
  > it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise. How do you define a bailout? The shareholders and bondholders of the bank lose everything. The customers (depositees) get their money back. You consider that a bailout?
  - lisasays 4y ago
    How do you define a bailout? Per what sources like Investopedia, Wikipedia, and all the major English dictionaries say. None of which limit the term to protections for investors.
- shadowgovt 4y ago
  It's a bailout of the creditors. The bank itself is evaporating.
fswd 4y ago
What upsets me the most is that the execs gave themselves bonuses in to their personal FDIC insured accounts, essentially writing a bad check for free bailout money, after the bank went negative.
- rybosworld 4y ago
  Source?
  - op00to 4y ago
    SVB had a bonus schedule like every other company, and paid out those bonuses to all eligible employees. The payments were for work done in 2022. There is literally nothing to see here. https://www.cnbctv18.com/market/silicon-valley-bank-employees-bonuses-just-hours-before-government-takeover-report-16145921.htm https://www.cnbctv18.com/market/silicon-valley-bank-employee...
mjmahone17 4y ago
Do different banks pay different amounts into FDIC insurance based on how risky the FDIC considers them? If so then it’s really the FDIC adjusting their risk model to treat most mid-size banks as likely to cause systemic failures if they fail, and requiring the riskiest banks to cover the cost for that updated model based on how likely the FDIC believes they are to fail. I don’t know that pricing insurance based on the actual cost of the potential external harm can really be considered a tax increase.
- op00to 4y ago
  Yes. Banks are evaluated for their risk and pay assessments based on their risk scores and total deposits (give or take). The riskiest banks pay the most.

realworldperson 4y ago

[dead]

duped 4y ago

A family member noted to me yesterday (after being frustrated by the coverage and reading the regulatory requirements from the Fed) some stuff that is being poorly articulated by these articles. Even under Dodd-Frank and prior to the Trump deregulation, SVB was in trouble and acting badly - and regulators probably wouldn't have caught it, nor would SVB have broken the law. They had to do stress tests this year anyway. But that wouldn't have caught onto the fact that they parked deposits from (now forgiven) PPP loans into treasury bonds in a hold-to-maturity account (thus hiding the asset risk on paper, something that isn't illegal but is suspicious that they did to a degree beyond anyone else apparently), and it wouldn't get over the fact that the Fed's own guidelines for computing asset risk told them to only take into account a 1% rise in the Fed's interest rate (it actually rose 3%!). Point being, deregulation (real or advocated for) didn't cause SVB to fail. It would have failed anyway. The actual data they base things on is bad, and the bank was nigh criminally mismanaged.

DrThunder 4y ago
Frank was on the board of Signature Bank, that should tell you a lot about how useless Dodd-Frank was. The Biden admin had 2 years of total congressional control to overturn Trump's rollback of these supposedly amazing regulatory requirements. Government encouragement of risky behavior due to bailouts is the problem, not deregulation.
- delecti 4y ago
  > total congressional control It most certainly did not have that.
  - DrThunder 4y ago
    Dems had the Senate and House. Stop with the gaslighting. If you want to let them pull the wool over your eyes over and over and blame the guy that's been out of office for 3 years for their failures, I guess you kinda deserve what you get.
    - 4y ago

DrThunder 4y ago

"Oversight", is not the issue. The issue is our government has incentivized risky behavior by bailing these fools out. If you're bank management and you know big daddy government will save you no matter what... well then, why would you not continue to engage in this risky behavior? I love how the white house is trying to paint this as an issue with lack of oversight and the need for MORE regulation when that's not even the issue.

deleted 4y ago
[deleted]
frankbreetz 4y ago
I mean you loose all your investors' money and your job. As the CEO of a bank you probably get paid a lot in equity and that would be gone. If they were really reckless they could go to jail. Hopefully they look into the exec stock sales over the past few months. If money in a checking account is not safe, and I can't spend cash over 10k without a ton of paperwork, where can I keep cash that is safe?
- DrThunder 4y ago
  Oh how terrible. Must be awful losing your job while raking in millions off the stock you sold beforehand and then getting re-hired at the next massive bank that does the same thing. These people rarely go to jail, and if they do it's a minimum sentence in low security white-collar "jail". The politicians will do everything they can to keep their donors donating. The fact they ARE and continue engaging in this behavior right now proves you're just wrong about any possible "risk" they perceive.
- notch898a 4y ago
  Revolving treasury bills
HFguy 4y ago
How would this explain...that vast majority of banks were not doing what you say they were incentivized to do? Maybe they weren't?

FireBeyond 4y ago

A good comment on all this... If a bank is complaining about the overhead, effort, cost, complexity of adhering to risk management protocols... they're really actually saying "if it wasn't for pesky government, we'd be more than happy to take more risks with -your- money."

yieldcrv 4y ago
there are plenty of pointless poorly thought out protocols that have nothing to do with speculation of customer deposits but do increase operating costs unnecessarily
- mostlysimilar 4y ago
  In a perfect world regulation would be right-sized and not needlessly waste resources, but failing that I'll take "the billionaires make slightly less money but are less likely to crash the economy" over the inverse.
  - Red_Leaves_Flyy 4y ago
    When billionaires get too greedy it’s typically average people who beat the brunt of their responsibility. This is a regressive state of affairs. Banks serving everyday people should not be allowed to make risky bets or engage in transactions that can cause contagion. If that pisses some billionaires off, well thats just the icing on the cake.
- czzr 4y ago
  Could you name one? (Just to help us understand a real example)
  - yieldcrv 4y ago
    The current implementation and purpose of currency transaction reports. These are random documents sent to the government when some transactions over a certain dollar amount are done, ostensibly to help prevent money laundering, in practice just waste everyone’s time. The Government Accountability Office has reported on this for 30 years. GAO reports are full of other examples too.

bombcar 4y ago

Shouldn't journalists be writing these types of stories before the bank collapses? What happened to investigative journalism?

Maursault 4y ago
> What happened to investigative journalism? Infotainment consumers happened.
deleted 4y ago
[deleted]
hudsonjr 4y ago
This guy had it in his newsletter in February: https://twitter.com/ByrneHobart/status/1628779894183272452 https://twitter.com/ByrneHobart/status/1628779894183272452

1vuio0pswjnm7 4y ago

"Some observers fear that the decision to disregard the $250,000 cap on insured deposits could generate irresistible pressure to insure deposits fully regardless of the amount. This would undermine the purpose of the cap, which was to give large depositors an incentive to monitor the conduct of their banks and subject the system to market discipline. A total guarantee, many argue, is an invitation to irresponsibility. This may be right." SVB was happy to conceal their precarious position until they were required to recognise and disclose losses when they sold some of their bonds. Is there any reason we should promote personal responsibility on the part of depositors. The author's children are VC. What appears to be an easy question suddenly become challenging.

pickovven 4y ago
SVB is actually an inverse example of that hypotheses. The biggest depositors added pressure on the bank to be more risky.
- Red_Leaves_Flyy 4y ago
  Which proves the need for regulation.
  - cmurf 4y ago
    Or that the depositors should have lost money, with the ensuing ripple effects: unpaid workers, state fines for violating wage payment laws, bankruptcies, lawsuits, unpaid vendors and contractors and all their downstreams, etc. i.e. carnage, a big bloody nose, but not an extinction level event. Maybe the depositors deserved a bloody nose. But do their employees, vendors, and contractors?
    - Red_Leaves_Flyy 4y ago
      In my outspoken opinion you’re onto something. Regular FDIC insurance should kick in. Every aaccount gets their 250k, and rest will take years to figure out with lawyers scrambling to stake claims of the carcass. Enhanced unemployment for the non executive level employees of companies effected by the failure. Highly compensated employees that don’t budget might suffer, good. Executives, investors, etc should all take a bath from this. They should be made whole on the backend if they didn’t have insurance and well managed risk. There should also be a lot of high profile and HNWI people thrown in prison for their gross negligence. Hopefully the regulators can secure the evidence they need for convictions without their investigations getting compromised by any manner of the typical shenanigans.

toraway1234 4y ago

[dead]

jongjong 4y ago

The failure of SVB may be evidence that even the most well-connected, most tech-savvy bankers do not understand the monetary system. It appears that they naively believed that if they converted $1 of today-money into $1 worth of today-bonds that those bonds would always be worth at least $1 nominally since bonds yield interest and the $1 principal is returned to the bond-holder once it reaches maturity... It seems that they couldn't imagine how a bond which costs $1 and yields $1 + interest could be worth less than $1? It appears that they failed to understand that $1 in today-money is not necessarily worth the same as $1 in tomorrow-money (or especially 10-years-in-the-future-money). If you look at history over the past 50 years or so, tomorrow-money has always and predictably been worth less than today-money. So it's a gross oversight. I didn't study economics, finance or business and I'm basically a dumb pleb scraping by the bottom rung of society, yet even I knew that. That's why I often get caught up in conspiracy theories. It's hard for me to believe that these wealthy, highly educated people don't know this stuff. I tend to think that a lot of such things are malicious and intentional because I believe that the elites are intelligent. But then I think, why would these people risk going to jail over a scheme when they are already well off regardless? Are they compromised individuals being extorted for over a decade straight with the intention to basically run the company into the ground (for the benefit of third parties) and then be the fall guy? Hmmm seems very far fetched...

MrMan 4y ago
by tech savvy do you mean javascript?
- jongjong 4y ago
  I mean understanding of tech systems.
fires10 4y ago
I am often of the opinion many technical people can't bring abstract ideas across domains. I have seen people recognize things in context and ignore the same idea in another one. They loose sight of the details when looking to high up or looking at reports instead of building the reports themselves.

jbaber 4y ago

I asked this too late on the last SVB thread: I have a naive question. When I was a little kid and the FDIC only insured the first $100,000, I thought, "If I were rich, I'd have to have multiple bank accounts." Do big companies not do this with their liquid assets as a matter of course? Are there just not enough banks? Or would per-account fees unknown to me as a little guy eat into savings? I get that big companies directly hold a bunch of bonds, too. But if they use a bank so they can actually write checks, why not many banks?

strgcmc 4y ago
This is actually a niche industry, that provides "deposit solutions". A family member used to work at this one for example, who just put a PR release based on the recent news cycle: https://www.reichandtang.com/2023/03/12/statement-on-protecting-deposits-2/ https://www.reichandtang.com/2023/03/12/statement-on-protect... They provide up to $50 million worth of combined coverage, by splitting across dozens of partner banks into $250k chunks. Yes there are fees associated with purchasing such a service, but I'm not really sure why it's not more popular or more commonly adopted as SOP for small to medium enterprises to do this. Maybe there is a convenience or liquidity factor that I'm missing, or maybe people really didn't think the cost was worth it (but I'd guess many are probably reevaluating now, just how safe or unlikely they think a bank failure really is)?

egberts1 4y ago

FTFA: “Among other measures, Dodd-Frank imposed new reporting requirements on banks, toughened standards for capital adequacy, and restrained banks’ ability to use deposits for speculative investment. Banks with assets above $50 billion were deemed “systemically important” and subjected to especially strict scrutiny.” Hold your horse. Back up a bit to 2014, to where this snippet appeared when SVB was a nonbank at the time: "Finally, the Board has determined not to impose enhanced prudential standards on nonbank financial companies supervised by the Board through this final ($50B stress test) rule.l https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-05699.htm https://www.govinfo.gov/content/pkg/FR-2014-03-27/html/2014-...