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Let's not forget that SVB was solvent at the time of its collapse. That may sound like a contradiction but it isn't. SVB had more assets than liabilities. On t

by jmyeet 4y ago

Let's not forget that SVB was solvent at the time of its collapse. That may sound like a contradiction but it isn't. SVB had more assets than liabilities. On the Friday 25% of deposits were withdrawn. There is literally no bank that could sustain that. I'm fine with the solution too: the FDIC seizes the banks and sells it for parts. Great. This isn't 2008. Interestingly the risks posed to these banks may be the one thing that calls off the Fed from further raising interest rates. Maybe then we can get to the actual good solution to inflation: taxation. Specifically of windfall corporate profits. But probably not.

shawabawa3 4y ago
I don't think we know yet if SVG was solvent until FDIC realises the sales on their assets. I don't think FDIC would have seized it if there was 0% chance it was insolvent In fact, i think it's clear creditors and shareholds are going to be wiped out, so that means they _were_ insolvent, even if their assets are able to cover their deposits (deposits are not their only liabilities) Also I hope you aren't using the definition of solvency that ignores the time value of money, because that's nonsense
- jmyeet 4y ago
  I mean solvent as having a positive book value based on the market value of their assets. The government requires banks to maintain various ratios. A certain percentage in liquid assets to cover withdrawls, etc. The big problem was in 1 day 25% of their deposits were withdrawn. Literally no bank can sustain that, from JP Morgan down to your local community bank. The Feds seized SVB because it fell out of compliance with its required ratios but it still had a positive book value for the assets it had.
Rapzid 4y ago
Seems like the system working well to me; government moved swiftly and is protecting depositors. Not sure if we need more regulations or we don't. It's a balancing act because we want a certain amount of risk taking along with security and public confidence. I am sure though that there seems to be a concerted effort through rhetoric to convince people a "bail out" is occuring and "rules are being broken"(re 250k deposit insurance) and this seems to be working it's magic.

by jmyeet 4y ago

shawabawa3 4y ago

I don't think we know yet if SVG was solvent until FDIC realises the sales on their assets. I don't think FDIC would have seized it if there was 0% chance it was insolvent In fact, i think it's clear creditors and shareholds are going to be wiped out, so that means they _were_ insolvent, even if their assets are able to cover their deposits (deposits are not their only liabilities) Also I hope you aren't using the definition of solvency that ignores the time value of money, because that's nonsense

jmyeet 4y ago
I mean solvent as having a positive book value based on the market value of their assets. The government requires banks to maintain various ratios. A certain percentage in liquid assets to cover withdrawls, etc. The big problem was in 1 day 25% of their deposits were withdrawn. Literally no bank can sustain that, from JP Morgan down to your local community bank. The Feds seized SVB because it fell out of compliance with its required ratios but it still had a positive book value for the assets it had.

Rapzid 4y ago

Seems like the system working well to me; government moved swiftly and is protecting depositors. Not sure if we need more regulations or we don't. It's a balancing act because we want a certain amount of risk taking along with security and public confidence. I am sure though that there seems to be a concerted effort through rhetoric to convince people a "bail out" is occuring and "rules are being broken"(re 250k deposit insurance) and this seems to be working it's magic.