SVB failing... Here's our chance

Discussion in 'BS Forum' started by Br4d, Mar 10, 2023.

  1. Br4d

    Br4d 2018 Weeb Ewbank Award

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    This is what the Fed wanted. A niche bank serving a sector of the economy that is over-capitalized and under-productive has gone belly up. Many VC-funded ventures that are not profitable and likely not to be profitable, essentially backed by years of free money that the VC's were trying to turn into profits, will now go under.

    A sizeable number of affluent employees in that unicorn herd will now hit the job market driving wages at the top down. Consumer spending will go down as a result of all the flashy web startups going out of business and inflation will finally start to really settle.

    VC's will also be much more cautious moving forward in an era where capital actually has a cost attached to accessing it.

    It's a win-win.

    Now if we can just focus in on all the freeloaders in the top 1% previously paying no taxes and living off of that free float we might actually get back to being a facts based economy instead of whatever this was the last 13 years or so.
     
  2. HomeoftheJets

    HomeoftheJets Well-Known Member

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    These guys seem to be trying to create a panic in the hopes that by making it worse, the government will step in and bail them out. The government should step in but instead launch some criminal investigations.
     
  3. Br4d

    Br4d 2018 Weeb Ewbank Award

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    The government definitely should not step in.

    However launching investigations of who might profit from inducing bank runs would be worthwhile.

    None of this would be happening without the legislation in 2018 that reduced the need for stress checking from all banks with deposits of $50B+ to only those with deposits of $250B+. The banks under pressure right now fall squarely in the area that got reduced oversight under that bill.

    SVB didn't even have a risk management officer for most of the last year. That's how you get sudden surprises like the one that happened to them a week ago.
     
  4. HomeoftheJets

    HomeoftheJets Well-Known Member

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    There's one situation in which the government should step in: if letting uninsured SVB depositors take a haircut results in runs on other, less shady regional banks. (Which the doomsayers of course know, which is why they're trying to create panic, but let's leave that aside for now.) That said, if the government has to use a single taxpayer dollar to back uninsured depositors, they need to confiscate all the assets of SVB, send its equity and bonds to zero, and launch criminal investigations into the bank's executives. Make it clear that if you require a bailout, there will be severe, even vindicative punishment in order to ensure it doesn't happen again.
     
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  5. Jonathan_Vilma

    Jonathan_Vilma Well-Known Member

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    That’s pretty whack. The government can’t consistently need to protect everyone from fucking things up for themselves.

    The bank was run by a bunch of retards who likely engaged in fraudulent criminal activity and took way too many risks than they could back. Failing businesses dying out because of bad business practices is a result of capitalism. Let it run its course.

    I also don’t want to see any honest innocent business owners crash and burn because of this but this bank backed more than 50% of tech startups. Why in the world didn’t they go to a bank for adults?
     
  6. Br4d

    Br4d 2018 Weeb Ewbank Award

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    I think the government needs to protect society from retards who can do great damage if nobody is watching them. I totally agree that everybody should have the freedom to fail on their own but when their failures will impact all of us I think they need to be watched through that process.

    There are obvious reforms to come out of this debacle.

    1. Re-enable the required stress checks for banks with $50B+ in assets. This will require them all to have sturdy risk management processes in place because the government is going to come sniffing around fairly often and if they are flying by the seat of their pants they will fail those stress tests.

    2. Add regulations prohibiting fund providers from prohibiting the companies they are funding from accessing other sources of capital. One of the big reasons that SVB became the main banker for the VC market is that many VC's forced the companies they invested in to use only SVB as their banker. Over time this concentrated strategy made SVB a hugely over-extended resource that went from about $60B in assets in 2017 to over $225B in 2023. The rapid and massive influx of deposits over a several year period forced SVB to go to government bonds as a primary asset instead of growing naturally with a diversified portfolio. This was all because the VC's steered business towards SVB consistently and the regulators were not able to regulate effectively due to SVB not meeting the newly defined oversight guidelines from 2018 onwards.

    Really we should look into the entire timing of the steering vs oversight changes from 2017 to 2023. SVB's lack of oversight suspiciously follows their growth over that period. In 2017 SVB met the criteria for the stress tests and related processes and in 2018 they dropped out of the stress test criteria and then they grew rapidly towards the lower limits.

    3. Make sure that low interest loans from the Fed are not used speculatively. Abolish the overnight float and everything that stems from it. The government should not be handing the 1% more free money. Ever.
     
  7. Acad23

    Acad23 Well-Known Member

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    Fri, March 10, 2023
    Signature Bank SBNY announced its updated financial performance as of Mar 8, 2023, underlining a strong financial position and limited digital-asset-related deposit balances amid crypto headwinds.

    Management noted, “We want to make it clear again that Signature Bank is a well-diversified, full-service commercial bank with more than two decades of history and solid performance serving middle market businesses.

    SUN, MAR 12 2023
    Regulators close New York’s Signature Bank, citing systemic risk

     
  8. Br4d

    Br4d 2018 Weeb Ewbank Award

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    They're apparently going to do a partial bailout of SVB on Monday. All deposits made whole.

    If they go further than that we should all buy crates of canned beans because things are going to hell in a handbasket this summer when nobody believes the Fed's anti-inflation measures are real and the GOP Nutz Caucus forces a default on the government debt.
     
  9. SOXXX2

    SOXXX2 Well-Known Member

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    LMAO QE is back folks. Just call it something else.

    Bailouts for all the impending failures. Inflation is here to stay.
     
  10. IDFjet

    IDFjet Well-Known Member

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    I detest everyone involved in the decision making but I don't think it qualifies as a bail-out. Only the depositers are getting made whole--if they don't do this then we may as well start burying money in mason jars again so to speak.
     
  11. joe

    joe Well-Known Member

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    Go Swiss, you can't miss.
     
  12. SOXXX2

    SOXXX2 Well-Known Member

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    I believe this sets a precedent as more shit breaks. Fed will come to the rescue. Goldman Sachs said they dont think their will be a rate hike next meeting now.

    This decade will probably be like the 70s, inflation will persist. If FED starts cutting rates, inflation will be back immediately.
     
  13. Acad23

    Acad23 Well-Known Member

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  14. Acad23

    Acad23 Well-Known Member

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  15. Br4d

    Br4d 2018 Weeb Ewbank Award

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    As near as I can tell the big difference between what the Fed is doing now and what it did during TARP is it is leaving investors and shareholders fully exposed.

    If the FDIC is going to cover all deposits then they will also have to raise the rates they charge banks for FDIC coverage. My guess is that is the next shoe to fall in this sequence although we may not hear about it anytime soon. This would make banks even less attractive to investors and so maybe some of the casino aspects would get shut down in the process.
     
  16. HomeoftheJets

    HomeoftheJets Well-Known Member

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    Well the moral of the story is when you put your money in a bank, be more careful about making sound financial decisions. You don't want to do something dumb like put your money in a non-fraudulent bank offering lower rates because of some misbegotten fear you could lose your deposits if the bank goes bust. Finance 101 really.

    (Seriously, the cat's out of the bag now. Unless the government punishes the SVB folks harshly or passes strict laws banning this sort of behavior--which of course they won't do--every bank is going to start fucking around with people's deposits going forward.)
     
  17. Br4d

    Br4d 2018 Weeb Ewbank Award

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    All the government has to do is lower the stress test threshold back to $50B and 99% of the potential mischief goes away. That's the scenario where the Fed does an active check of the banks balance sheet every 6 months and problems like the ones that accumulated at smaller regional banks get pushed out of existence as that happens.

    The SVB collapse has many principal actors and you can't stop at the board and officers. The big VC's were just as responsible at the start, during and at the end. And they *are* getting bailed out because they're not losing the companies they backed.
     
  18. Jonathan_Vilma

    Jonathan_Vilma Well-Known Member

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    That’s exactly why they shouldn’t get bailed out. Sucks for the people that went to venture capitalists for money and all, but this is just going to be a governmental bail out of a bunch of rich assholes who invested in businesses and could probably cover their million dollar investments.

    The list of companies affected is not all small businesses either. Companies like Etsy and such have more than enough money to cover any losses.

    On another note, companies and federal agencies for that matter should maybe focus on their task at hand and stop dumping money into climate change initiatives and diversity and inclusion programs.
     
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  19. Br4d

    Br4d 2018 Weeb Ewbank Award

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    So this is another apolitical thing. One party wants the diversity and other spending and the other one wants to keep filthy government hands off of private companies decision-making.

    They're both part of the problem.
     
  20. HomeoftheJets

    HomeoftheJets Well-Known Member

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    And you know as well as I do that this will never happen, and in six months, Silicon Valley execs will be gloating about how they got one over on everyone else.
     

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