Emperor Guillotine
The Almighty Ruler
So, the federal treasury is backing all of the money that vanished in this collapse that occurred in 48 hours flat? So, essentially we have another equivalent of the USA government stepping in to bail out banks?
Heads up for Reverb (Etsy) sellers; they're having issues sending payments out
- Thread starter HeHasTheJazzHands
- Start date
PiggySmallz
SS.org Regular
No the FDIC is stepping in to insure all uninsured deposits. The majority of deposits at this bank belonged to large corporations, Etsy/Reverb being one of them. The money didn't just disappear like a crypto rug pull lol. It was invested in longer dated maturities in Government backed treasuries. The problem is short term rates are higher than the rates they get on treasuries, creating a liquidity need. Bonds are sold and FDIC steps in to insure depositors so that business can continue as usual.
Emperor Guillotine
The Almighty Ruler
Got'cha. Understood. Perfect explanation. Thanks, dude.
wannabguitarist
Contributor
It's a lot more complicated than that, but SVB isn't getting "bailed out." The shareholders are getting hosed and management has been removed.
EDIT: Piggy beat me with that great explanation
I think this is a pretty solid summary of what happened with additional context.
jaxadam
SS.org Regular
cardinal
SS.org Regular
It bailed out depositors, essentially the people who just had bank accounts there. The idea is that we don't really want to force depositors to have to credit check the bank they use. Arguably the collapse was caused when the depositors did check SVB's credit and rushed to pull their money all at once. The bank management, shareholders, and bond holders are likely getting zeroed (other than the sales that happened right before the collapse, which is likely just poor timing but I'm sure they'll figure it out).
It's still not great. It is a "bailout" in the sense that the US insured more than they were supposed to, but the idea is to stop contagion. And moving forward there is going to need to be more heavy scrutiny of the banks because this still creates something of a moral hazard for the bank investors to invest in risky banks (sure, investors could lose their entire investment in any one bank, but they have levered upside to invest in multiple risky banks).
PiggySmallz
SS.org Regular
I think it's time for executives to be held personally liable for these kinds of issues. Especially the ones who are part of multiple failures. Why are they not held to the same standards as other financial services employees.
I'm fine with you earning $40 million if you want to put your own net worth and freedom on the line when you participate in greed amd stupidity. How does a guy who works for Arthur Anderson (the accounting firm that audited Enron), then get a job as head of Investment Banking at Lehman Brothers (bankrupt), and now is chief administrative officer at Silicon Valley Bank. Imagine every time you fail you get promoted? Unbelievable. I couldn't fall up the stairs like that with a handle of vodka in my liver and a rocket strapped to my ass.
I'm fine with you earning $40 million if you want to put your own net worth and freedom on the line when you participate in greed amd stupidity. How does a guy who works for Arthur Anderson (the accounting firm that audited Enron), then get a job as head of Investment Banking at Lehman Brothers (bankrupt), and now is chief administrative officer at Silicon Valley Bank. Imagine every time you fail you get promoted? Unbelievable. I couldn't fall up the stairs like that with a handle of vodka in my liver and a rocket strapped to my ass.
Emperor Guillotine
The Almighty Ruler
Which explains why Signature Bank was closed by regulators due to what was assessed as severely high, systematic risk immediately after SVB and Silvergate collapsed.
In the wake of this, Bank of America, Wells Fargo, Citi Bank, and J.P. Morgan (four names that are probably more familiar for folks) have all plummeted by a distressing amount of points, indicating that any of the four might bottom-out and collapse as well before the end of March. Looks like those four might face some scrutiny here soon, just as you stated that needs to be done, @cardinal. But we'll see if anything actually happens before they rebound.
PiggySmallz
SS.org Regular
Bigger banks will likely be fine to be honest. Schwab got hit harder than any of them completely unwarranted. That's likely the most conservative brokerage/bank out there.
The FDIC stepping in was to stop the bank run and prevent a liquidity crisis. Which begs the question. What is the federal reserve doing? If they raise rates again this will get worse. Jerome Powell is hellbent on being Paul Volker. The difference is the recession caused by Volker did not cause the financial system to collapse
The FDIC stepping in was to stop the bank run and prevent a liquidity crisis. Which begs the question. What is the federal reserve doing? If they raise rates again this will get worse. Jerome Powell is hellbent on being Paul Volker. The difference is the recession caused by Volker did not cause the financial system to collapse
penguin_316
SS.org Regular
For anyone confused by the agenda of our govt officials to say this isn’t a bailout….
It specifically is a bailout, as they are covering the underwater bonds held by these banks at let’s say $1 to $1 versus about 0.80 cents on the dollar.
Who do you think comes up with the difference in those trillions of treasuries they are now covering? We’ll, let me tell you they will have to expand the money supply once again. That is the hidden bailout. We will pay for it in the near future.
The only difference is this time they aren’t bailing out the creditors of the bank, only the depositors. It’s still a bailout we will pay for with increased inflation.
PiggySmallz
SS.org Regular
Nope, Jerome Powell said all of the money added to the system since 2020 wouldn't cause inflation. Then it was transitory. Now its out of control.
Question is which is more dangerous, total financial collapse or kicking the can a bit further by turning the printer back on?
penguin_316
SS.org Regular
When Volker raised rates we had like 60% debt to GDP. It is now over 130% debt to GDP. We are in a totally different situation…
Also, just food for thought. If this was a top tier bank rated just days ago, what kind of credit risk do you suppose smaller regional banks possess?
Also, just food for thought. If this was a top tier bank rated just days ago, what kind of credit risk do you suppose smaller regional banks possess?
tian
SS.org Regular
Well my payout actually hit my bank so that's cool.
penguin_316
SS.org Regular
What if I told you they don’t have any option but to continue to “print” money forever due to the current debt spiral we are in caused by the uncontrolled spending done over the last 50 years.
No inflation? Yea ok, a house cost $30k 50 years ago and now the national average is $500k. (May have tapered off some recently, but you get the drift).
No inflation? Yea ok, a house cost $30k 50 years ago and now the national average is $500k. (May have tapered off some recently, but you get the drift).
PiggySmallz
SS.org Regular
I'm agreeing with you. Sarcasm font not working today lol. They absolutely need to print forever. That's how ponzis work. Unfortunately that's what this has become since we could never reign in spending. The administration is proposing 6 trillion in spending next year....we bring in 4.7 trillion in revenues per year. Not sure how they expect to make that work without printing. That's why the fed is so determined to send rates to the moon, so they have more ammunition when the next one happens
penguin_316
SS.org Regular
Don’t be surprised if the next 10 years plays out identical to the previous financial crisis in 2008. Up only for stonks, up only for hard assets.
$100 pizzas lol
$100 pizzas lol
PiggySmallz
SS.org Regular
Think about this...
People were afraid of a bank run so they ran to banks to take out paper fiat currency that is $30 trillion in debt to buy the issuer of that paper's debt. Pretty sure someone in a textbook is going to wonder if we are inbred mouth breathers in 250 years
People were afraid of a bank run so they ran to banks to take out paper fiat currency that is $30 trillion in debt to buy the issuer of that paper's debt. Pretty sure someone in a textbook is going to wonder if we are inbred mouth breathers in 250 years
Albake21
Ibanez Nerd
Can anyone even use the site? The whole site is completely screwed on my end. No listings at all, no watchlist or anything. Random lines of HTML code, it's a mess.
HeHasTheJazzHands
SS.org Regular
Using the app atm and yeah it's boned
tian
SS.org Regular
Yep, seems to be broken right now. Listings are down so I don't know if that's a coincidence, Reverb, or some sort of back end service provided by another company.
