Forbes Magazine: How Trump’s Deregulation Sowed The Seeds For Silicon Valley Bank’s Demise

[Lesh]

Do you think 3% or 10% would be enough to keep SVB liquid when their depositors all
tried to withdraw their funds at the same time?

You want to prevent something that rarely if ever happens.

10% reserves protects almost all bank runs long enough to allow recovery

 

[Lesh]

So Feb 14, 2023, Forbes declares SVB one of the 20 safest banks in the whole country, but now they're blaming Trump when it collapses? Do people still subscribe to Forbes?

Forbes is a conservative entity

 

[FA_Q2]

Forbes is a conservative entity

What does that have to do with anything?

 

[Toddsterpatriot]

Deregulation was a cause of the 2007/8 crisis as well....

I thought mortgages had something to do with it as well.

 

[Lesh]

I thought mortgages had something to do with it as well.

How mortgages were created and bundled is the issue

 

[Toddsterpatriot]

You want to prevent something that rarely if ever happens.

10% reserves protects almost all bank runs long enough to allow recovery

You want to prevent something that rarely if ever happens.

I do?

10% reserves protects almost all bank runs long enough to allow recovery

Almost.

 

[Toddsterpatriot]

How mortgages were created and bundled is the issue

Crappy mortgages is the issue.

 

[Lesh]

Crappy mortgages is the issue.

Actually it’s the fact that crappy mortgages were bundled with good ones and the whole thing sold as AAA which was wrong.

And THEN the same people that did that were allowed to bet AGAINST those mortgages

 

[Lesh]

You want to prevent something that rarely if ever happens.

I do?

10% reserves protects almost all bank runs long enough to allow recovery

Almost.

Few things are perfect. This however came nowhere near 10%

 

[citygator]

They had to do it.

I don't like it any more than you do....but they had to stem the bleeding early.

Inflation caused this collapse. The banks Treasury Bonds were underwater. Read g5000 thread...it's a good one.

More Than $16 Trillion Of Underwater Bonds Are Out There

We are in a massive bond bubble, and it is beginning to pop. Silicon Valley Bank and Signature Bank are only the beginning. You can picture bond prices this way: The lower the interest rate a bond pays, the more expensive a bond is. The higher the interest rate it pays, the cheaper that bond...

www.usmessageboard.com

We always "have" to do it to protect wealthy investors. This place burns down at the mention of putting even a tiny morsel of effort into addressing the risks of being poor but addressing the risks to investors is always a "have to" priority.

Thanks for the recommendation I'll go read through that thread.

 

[Care4all]

I thought mortgages had something to do with it as well.

Yep. Mbsecurities....

in 2007 and 2008, we had a housing crisis and banking crisis, no?

 

[Mac1958]

So now I'm hearing that 90% of their MBS securities had maturities of 10 years or more.

If true, that's some pretty fucking stupid investing right there. Somebody was reaching, big time. Dumb, dumb, dumb.

 

[Missourian]

We always "have" to do it to protect wealthy investors. This place burns down at the mention of putting even a tiny morsel of effort into addressing the risks of being poor but addressing the risks to investors is always a "have to" priority.

Thanks for the recommendation I'll go read through that thread.

I believe they are only insuring depositors who, through no fault of their own happened to keep their money in a bank that failed.

My understanding is that the Fed ruled out bailing out investors.

How this will affect the "bank founders" money that they attempted to put before the bank failed...I do not know.

 

[Mac1958]

For fellow USMB finance geeks:

Their Balance Sheet is showing $91B in bond holdings, specifically marked "Held to Maturity" and not marked to market. Granted, it's an annual report.

So the liquidation value of those things will be, what, $75B, somewhere around there? They're mostly 10+ year maturities, so they've lost a ton. And who knows how liquid that market is right now, so it could be worse if they tried to sell. Total Equity is already below $0 after losses.

So the Balance Sheet doesn't give you an accurate representation of real value. You can't compute interest rate risk unless you dig into the maturities.

https://www.sec.gov/Archives/edgar/data/719739/000071973923000021/sivb-20221231.htm#ibb4dd73a1d3f4bff944b5d35fd2c5e2a_184

 

[candycorn]

Which bank regulations did he eliminate?

Banks didn’t have to keep so much money on hand, they didn’t have to report some transactions

 

[Toddsterpatriot]

Actually it’s the fact that crappy mortgages were bundled with good ones and the whole thing sold as AAA which was wrong.

And THEN the same people that did that were allowed to bet AGAINST those mortgages

If you write a crappy mortgage and hold it, you lose money.
If you write a crappy mortgage and sell it, the buyer loses money.
Either way, somebody loses money. Enough people lose enough money,
even good mortgages can end up going bad.

And THEN the same people that did that were allowed to bet AGAINST those mortgages

Who was their counterparty on those bets?

 

[Toddsterpatriot]

Yep. Mbsecurities....

in 2007 and 2008, we had a housing crisis and banking crisis, no?

MBS are just mortgages.

 

[Toddsterpatriot]

Banks didn’t have to keep so much money on hand, they didn’t have to report some transactions

How much "money on hand" would have saved them from a bank run?

 

[Lesh]

If you write a crappy mortgage and hold it, you lose money.
If you write a crappy mortgage and sell it, the buyer loses money.
Either way, somebody loses money. Enough people lose enough money,
even good mortgages can end up going bad.

And THEN the same people that did that were allowed to bet AGAINST those mortgages

Who was their counterparty on those bets?

Wtf are you babbling about?

 

[Lesh]

How much "money on hand" would have saved them from a bank run?

The standard is 3-10%. They didn’t come close