9 ms·
SVB was particularly poorly run
- pazimzadeh 4y ago> A secular upward swing in interest rates what does secular mean here?
- geodel 4y agoIt just means going in one direction all along, not like going down and up over a period of time.
- deleted 4y ago[deleted]
- notahacker 4y agoThat the increase in interest rates was a separate economic development unrelated from anything SVB did or proposed to do (i.e. it was the Fed putting base interest rates up to reduce inflation, not commercial lenders reacting to SVB's position) This is similar to the use of "secular trend" in many other economics contexts to represent the overall long term trend
- seizethecheese 4y agoIt should be noted that the original use here is actually wrong. The recent increase in interest rates isn’t really secular. The long run downward trend in rates is a secular trend.
- yamtaddle 4y agoInvestopedia: "In finance, secular is a descriptive word used to refer to market activities that occur over the long term." This appears to derive from sense 6 of the adjectival form from dicationary.com: "going on from age to age; continuing through long ages."
- mrbombastic 4y agoThe pope didn’t demand it
- ummonk 4y agoLong term trends that aren't part of a fixed seasonal or cyclic pattern.
- deleted 4y ago[deleted]
- draw_down 4y ago(This is down so I can’t read it) It has been amusing to watch the initial rampage about “Silicon Valley tech libertarians” turn into… confused silence, now that we don’t have anyone to yell at about all these other banks failing. I did see a video of a senator yelling at Powell that he’s a big meanie destroying people’s jobs, so maybe it will be him.
- debacle 4y agoPowell is trying to save the economy and I don't think most people realize what they're in for if he fails. Give us a credit crunch.
- kamikaz1k 4y agohttps://web.archive.org/web/20230320171036/https://fedguy.com/hidden-to-market/ https://web.archive.org/web/20230320171036/https://fedguy.co...
- shmatt 4y agoThey literally brag about giving loans backed by non-liquid "lottery ticket" startup ISOs, which statistically are worth $0 95% of the time. And thats not even what caused the bank run. But now that the bank run happened, this is why no other bank wants to buy them https://svb.com/startup-insights/venture-debt/how-does-venture-debt-work https://svb.com/startup-insights/venture-debt/how-does-ventu...
- MrMan 4y agoyes its the inverted power law thing - the same dynamics that make 1/n approach work in a VC equity portfolio seems like poison in a debt portfolio - only one company out of n survives? fine if that company pops on the equity side, that pays for all the other losers. but on the debt side, it seems like a bad idea lol.
- fdgsdfogijq 4y agoWhat people arent saying: VCs received cheap loans and financial services from SVB if they got their portfolio companies to bank with SVB. There were in some sense backdoor deals, which resulted in these odd loans and bad portfolios. It was all built on an assumption of cheap capital. People are not discussing how incestuous SVB was with VCs, and many will get off the hook for unethical financial behavior. I dont think calling SVB poorly run is accurate, it was run for profits. The decision making is opaque at this point, and my guess is if the curtain is pulled back, it was run exactly as intended. If you watch the most recent episode of the AllIn podcast, they hint at this being the case. Clearly they know there was bad behavior, but dont discuss it at length. This is just another case of wealthy people gambling, with the common man absorbing the losses.
- erredois 4y agoIt was badly run, the main job a bank have is to manage it's risk. They did a bad job at managing risk.
- Arnt 4y agoThe bank died from a bank run. How much capital outflow per day, per week, per month should a bank's management plan to handle, do you think?
- MrMan 4y ago[dead]
- frozenport 4y agoSounds like legitimate business model, and not surprising for a place called "Silicon Valley" Bank? If SVB can't offer better deals for VCs then nobody can?
- luckylion 4y agoBut it came with strings attached: you put all your companies' money here, far beyond FDIC insurance levels, and don't go anywhere else, and for that we'll get you a nice rate on this unrelated private deal. Sounds pretty close to an investment where the investor shouldn't be made whole.
- t344344 4y agoI though it was "very ethical" bank, it even got award last year!
- omegaworks 4y agoI wish author would have also included Signature Bank on his charts, so we'd have another example of a failed regional bank rather than just comparing against functional regional banks.
- nostrademons 4y agoSignature Bank wasn't insolvent, it was seized by the FDIC to send a message to crypto. https://apnews.com/article/signature-bank-fdic-barney-frank-silicon-valley-6ad86262d9945675a42d735b66ace4f2 https://apnews.com/article/signature-bank-fdic-barney-frank-...
- lima 4y agoI think it's fair to call that a conspiracy theory.
- nostrademons 4y agoAn AP News article citing a congressman who authored the Dodd-Frank bill is a conspiracy theory? Exactly what is credible these days?
- deleted 4y ago[deleted]
- vitehozonage 4y agoThe reforms after the previous financial crisis are literally named after the person making this "conspiracy theory", right?
- lima 4y agoMichael Yeadon - former chief scientist at Pfizer - is now an anti-vaccine activist[1]. Similar story with Robert W. Malone[2]. Former accomplishments or positions are not a good appeal to authority. [1]: https://en.wikipedia.org/wiki/Michael_Yeadon https://en.wikipedia.org/wiki/Michael_Yeadon [2]: https://en.wikipedia.org/wiki/Robert_W._Malone https://en.wikipedia.org/wiki/Robert_W._Malone
- NickC25 4y agoSite isn't working. That said, it seems the core of the issue was that SVB wasn't properly hedged against interest rate hikes. My question is: why not? I understand that they were without a Chief Risk Officer for the last 10-11 months, but that's not really a problem if you think about it on a more macro-scale - as we've had a near-zero-interest-rate environment for a lot longer than that, so wouldn't the most basic plan of action when rates first hit that low for some officer of the bank to say "gee, these rates are dangerously low...and one day before these 10-year bonds fully mature, rates will probably go up, so shouldn't we take the obvious step to ensure we don't get absolutely fucked if rates go higher again?". I mean, these are bankers we're talking about...their whole job is to identify and manage risks. EDIT: I am aware there are financial instruments and vehicles that banks' trading desks can't trade, so buying specific ETFs or stocks as a hedge is off the table - but that begs the question - why not go and buy some shorter-dated vehicles such as Treasury Notes that mature a lot faster and are much more liquid?
- readthenotes1 4y agohedging reduces profits if the hedge isn't needed
- filoleg 4y agoWell yeah, but that's kind of like doctors saying that malpractice insurance reduces their profits in cases where it ends up not being needed. Having a hedge and not needing it is kind of a good problem to have, assuming they didn't overleverage on that hedge. But if the hedge is overleveraged, I am not sure if it can be called a hedge anymore. Because that would make the position it was supposed to offset the hedge position instead.
- aeternum 4y agoJust as a doctor needs to buy the right amount of malpractice insurance, the banks need to size the hedge properly. SVB did have other investments and some hedge. One of the core issues is that the Fed raised rates faster than any time in history and starting from some of the lowest interest rates in history. That's very difficult to predict and hedge against.
- lordnacho 4y agoThe problem with valuing things at something other that mark-to-market is you can get an illusion of stability. This is especially the case with bonds: so long as the issuer is paying, the buyer pretends all is fine, regardless of how close to default the issuer came. Now this isn't a situation where the government backed bonds held by SVB would default, but the principle is the same: you wouldn't get the same money for them today, so why pretend that your bank is well capitalized when it isnt? This is part of why bonds and credits cause problems that you don't find with equities. It's the normal thing to value an equity book as the market price, so if you have losses you have to do something about it. Somehow that isn't universal in credit markets (partly to do with illiquidity, sure, but some of these instruments aren't illiquid), so when there are swings you sometimes get everything being fine, other times gigantic losses that become too big to do anything about. This whole thing with having a Hold-To-Maturity book is a problem. The image in everybody's mind should be Wiley E Coyote running off a cliff. He doesn't fall until he looks down and finds nothing under. Of course it would be interesting to hear another perspective. I'm basically just saying "why isn't this bank just run like a hedge fund" because that's what I'm used to.
- qotgalaxy 4y ago[dead]
- flanked-evergl 4y agoWhat was their ESG score? --- https://www.forbes.com/sites/shivaramrajgopal/2023/03/15/svb-is-one-more-example-of-a-governance-crisis-that-seems-to-be-only-foretold-by-short-sellers-despite-plenty-of-red-flags-hiding-in-plain-sight/?sh=b46a8a31f63d https://www.forbes.com/sites/shivaramrajgopal/2023/03/15/svb... > As pointed out in the Bloomberg piece, SVB was rated highly as a pro ESG stock by the ESG rating agencies. MSCI rated SVB an “A” stock in terms of ESG. Blackrock appears to own SVB under its Article 8 funds (“green” as per the EU labeling regime).
- pclmulqdq 4y agoAt some point, the fed is going to have to take some accountability for the fact that hiking rates by 4% in one year (from literally 0%) was going to have some unintended consequences. People at SVB and other banks likely only modeled for rate hikes of 25 bps, which would have meant a limit on the interest rate delta of 2%/year. Everyone knew the fed was going to hike, but I doubt most of them modeled for the tail risk of the fed hiking that fast.
- Loughla 4y agoI don't understand what you're saying or understand the logic of blaming a third party for the failure of the first party.
- pclmulqdq 4y agoI'm simply looking for a root cause. What I'm saying is that one bank failure is their fault, but 3 bank failures within a week probably has some other root cause. In this case, that root cause is probably the one big fundamental change in the macroeconomic environment over the last year. By the way, I don't envy the Fed's position, but they did put themselves there with 10 years of free money that they abruptly ended.
- holmes25 4y agoIf Holmes started a bank, she would not have gotten a prison time.
- pcstl 4y agoApparently the site got deathhugged. Does anyone have an archive link?
- akritrime 4y agoWhile it's most probably true, I think putting all the blame on the greedy VCs seems to be ignoring an elephant in the room. When SVB made those investments in treasury bonds, everyone were busy pretending that inflation was 'transitory', from lowest to highest. The few voices warning about were considered to be overtly cautious. SVB's fall, while most probably just exposed existing faults in it's management, is also partly due to volatile policies. Ignoring that just makes it more likely we will see the same things happen again and again.
- preommr 4y ago> volatile policies Polite way of saying 'straight up lies by the Fed'
- JumpCrisscross 4y agoAbout what did the Fed lie?