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Counter-point: SVB's funds were in treasury bonds. Their losses were entirely paper losses caused by the Fed's decision to aggressively raise interest rates.

Counter-point: SVB's funds were in treasury bonds. Their losses were entirely paper losses caused by the Fed's decision to aggressively raise interest rates. The government caused this, so it's not unreasonable to expect that the government pay for the damaged caused. This was a completely predictable outcome of aggressive rate hikes - banks buy a whole lot of t-bonds. T-Bonds can lose money on paper. If someone buys a 1% 2-year T-Bond for $100 (expecting $102 in two years), and the next year, rates go to 3%, the book value of that bond (what it can be sold on the open market for) is now $99 because of how bond values are determined.

bugglebeetle 3y ago
That’s entirely absurd. This is essentially saying there should be a special, perpetual class of government-backed securities with a guaranteed return in excess of all other market performance or conditions. If this was true, everyone would just invest in the special government stocks where you get 10% ROI forever and almost nothing in anything else. At that point, you’d have insane inflation or be better off with a state-run command economy.
- mywittyname 3y ago
  It's not absurd at all when you consider that T-Bonds are the foundation of our banking system. Plus, there's no fundamental reason we price bonds the way we do. The risk of this exact scenario playing out across the banking sector is likely the reason why the Fed took so long to raise rates (and the drastic, reversal of course when they tried in 2018).
  - mlyle 3y ago
    > Plus, there's no fundamental reason we price bonds the way we do. Discounted cash flow analysis / net present value is the one thing that we have in finance that's really a fundamental/intrinsic thing.
mlyle 3y ago
> The government caused this, so it's not unreasonable to expect that the government pay for the damaged caused. No. You don't just get to get the government to subsidize all your duration risk. You need to properly run a bank. You can buy shorter duration bonds in order to mitigate the risk from interest rate changes.

bugglebeetle 3y ago

That’s entirely absurd. This is essentially saying there should be a special, perpetual class of government-backed securities with a guaranteed return in excess of all other market performance or conditions. If this was true, everyone would just invest in the special government stocks where you get 10% ROI forever and almost nothing in anything else. At that point, you’d have insane inflation or be better off with a state-run command economy.

mywittyname 3y ago
It's not absurd at all when you consider that T-Bonds are the foundation of our banking system. Plus, there's no fundamental reason we price bonds the way we do. The risk of this exact scenario playing out across the banking sector is likely the reason why the Fed took so long to raise rates (and the drastic, reversal of course when they tried in 2018).
- mlyle 3y ago
  > Plus, there's no fundamental reason we price bonds the way we do. Discounted cash flow analysis / net present value is the one thing that we have in finance that's really a fundamental/intrinsic thing.

mlyle 3y ago

> The government caused this, so it's not unreasonable to expect that the government pay for the damaged caused. No. You don't just get to get the government to subsidize all your duration risk. You need to properly run a bank. You can buy shorter duration bonds in order to mitigate the risk from interest rate changes.