Miscellaneous And Off Topic Subjects

[Dr. Strangelove]

And haven't even really brought up the fact that the CEO Greg Becker also sat on the Board of Directors for the San Francisco Fed Reserve. How could he NOT know rising rates were coming? I'd be real friggin curious if he routinely spoke out against raising those rates.

[Dr. Strangelove]

[iam416]

And haven't even really brought up the fact that the CEO Greg Becker also sat on the Board of Directors for the San Francisco Fed Reserve. How could he NOT know rising rates were coming? I'd be real friggin curious if he routinely spoke out against raising those rates.

Yeah, it’s pretty disgusting that these guys aren’t accountable.

[Whitley]

So the rich guys get bailed out again? Gee. Why am I not surprised.

[Hannibal]

The lesson learned in 2008 was that if you take all kinds of risks and abuse OPM, you get bailed out by the Federal government. Why should SVB's people believe that 2023 would be different?

[Jeff Buchanan]

Remember when COVID related lockdowns began you couldn't find toilet paper anywhere on store shelves? I witnessed people rolling carts out of stores loaded with it. WTF. That's what happening to banks. Panic withdrawals. Classic "bank run." It's irrational. That irrationality spills over into markets which are roiled but haven't collapsed.

The Fed's reassurances on Sunday, along with yesterday's announcements by the Biden administration side step the issue of how SVB, and other banks, managed to load up on low interest government bonds that they couldn't sell at face to cover routine banking transactions and withdrawals. That started this shit-storm. The government stepping in to state all deposits will be covered appears to be a bailout with SVB and other bank executives that took risks to reap profits when bond interest rates were low seem to be unaccountable.

Like the toilet paper run, seeing the bigger picture makes the steps government is taking are both reasonable and rational (IMO). At this point, the situation means that concerns about moral hazard, and concerns about who the current regulatory system is protecting, are front and center - a good thing (IMO)

[Mike]

It sounds like many of the depositors were reckless themselves. If you have a company with $100M in cash and assets, it shouldn't all be at one bank for this exact reason. According to a discussion I listened to this morning, it sounds like SVB wasn't that bad of a bank. The main issue was that they catered to one specific clientele, tech companies, that all share a herd mentality. 93% of depositors had accounts exceeding the $250,000 FDIC insured cap and they tried to pull out $41B in one day. Apparently, SVB still has a lot of solid assets that can be used to make depositors whole but I don't like the idea of the government going over the $250,000 cap. Companies that put a ton of cash into SVB and either didn't insure those deposits or spread their money around to other banks should have to learn a hard lesson.

[iam416]

My economics is bad, but catering to one specific type of customer isn't risk diversification. It's a deliberate choice with known risks, both by the bank and depositers, that turns out to be no risk at all because all of us who pay taxes will cover that risk -- that vast, vast majority of whom don't have $250K+ deposits any fucking where.

[Mike]

Yeah, ain't it great?

[klondike]

Wow. Another bail out and another Joe taxpayer is stuck with the bill. They were also giving themselves big bonuses in the middle of this.

[Dr. Strangelove]

It sounds like many of the depositors were reckless themselves. If you have a company with $100M in cash and assets, it shouldn't all be at one bank for this exact reason. According to a discussion I listened to this morning, it sounds like SVB wasn't that bad of a bank. The main issue was that they catered to one specific clientele, tech companies, that all share a herd mentality. 93% of depositors had accounts exceeding the $250,000 FDIC insured cap and they tried to pull out $41B in one day. Apparently, SVB still has a lot of solid assets that can be used to make depositors whole but I don't like the idea of the government going over the $250,000 cap. Companies that put a ton of cash into SVB and either didn't insure those deposits or spread their money around to other banks should have to learn a hard lesson.

I mentioned yesterday that I heard an interview with a guy on CNBC who claims that while it was easier for startups to get a loan from SVB than Wall Street Banks, they imposed a condition that you had to leave ALL your money with them for a certain length of time. Can't confirm that but it partly explains why some companies didn't spread their risk.

These VC and Tech guys all pretty much know each other and when word got around that Peter Thiel had pulled all his money, the gossip quickly spread.

This apparently was triggered by Moody's threatening to downgrade the bank's credit. SVB Execs followed advice from Goldman Sachs to sell their long-term bonds, even at a loss, to raise cash and preserve their rating. But that turned out to spook their customers.

Silicon Valley Bank's demise began with a downgrade threat (cnbc.com)

[Dr. Strangelove]

There needs to be an investigation of whether company execs, particular this Becker guy, ignored internal alarms that the bank wasn't properly hedged against rising interest rates.

After that there also needs to be an investigation into the San Francisco Fed and possibly a housecleaning out there. Did they leave SVB alone because Becker was on the board? Did they just trust that he'd operate it responsibly?

[Mike]

I mentioned yesterday that I heard an interview with a guy on CNBC who claims that while it was easier for startups to get a loan from SVB than Wall Street Banks, they imposed a condition that you had to leave ALL your money with them for a certain length of time. Can't confirm that but it partly explains why some companies didn't spread their risk.

These VC and Tech guys all pretty much know each other and when word got around that Peter Thiel had pulled all his money, the gossip quickly spread.

This apparently was triggered by Moody's threatening to downgrade the bank's credit. SVB Execs followed advice from Goldman Sachs to sell their long-term bonds, even at a loss, to raise cash and preserve their rating. But that turned out to spook their customers.

Silicon Valley Bank's demise began with a downgrade threat (cnbc.com)

Oh, that's right. Forgot about that.

Sounds like there's enough blame to spread around, just wish the accountability would be as well. This is a perfect opportunity to make people suffer the consequences of their actions without collapsing the whole economy as would have been the case in 2008.

[Dr. Strangelove]

Honest Joe telling an obviously true story about how he’s been for gay marriage ever since 1961 when he saw two well dressed men making out in front of his high school.

[Mike]

LOL @ well-dressed.