Wouldn’t this be baling out the rich?
What will Bernie and AOC say?
Link: https://www.foxbusiness.com/markets/billionaire-bill-ackman-svb-collapse-government-has-48-hours-fix-irreversible-mistake
There should be a limit but it should be perhaps $2.5M.
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too cautious, too conservative in technology business investing. They are supposed to be mainly in venture capital investment. Yes, that means risker. But that is what their customers want, high risk high return. But they use 65% of customers' deposit to buy debt securities (e.g.10-year treasures) and only 35% in high tech investment. That's not their customers expected. I think it's likely something wrong from technology industry side that made this bank so timid in venture capital investment.
interest bonds "to maturity"...as the attached article notes...that was a risky strategy...
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But underlying the failure was a demonstrable problem, one to keep an eye on for other banks: The company had invested its deposits in low-interest rate bonds that it held on its books on a long-term “hold-to-maturity” basis. That means that it did not have to mark-to-market those bonds until they were sold, leaving investors with a somewhat distorted view of its balance sheet. So long as a bank doesn’t need to sell “hold-to-maturity” assets to meet withdrawal requests, there is no problem. But if a bank has to sell at a loss, that’s when things get complicated.
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"Risk" can come from many directions...
Also, their clientele (many hedge funds with large stakes) is very astute, attentive and quick to act with 'internet speed'...they sensed a problem and withdrew funds "rapidly".
Link: https://deal.town/the-new-york-times/dealbook-why-did-silicon-valley-bank-collapse-P3W3QNLK9
previous post on risk, they invested too much in debt securities, too less in technology funding ( 65%0vs 35%). Their business model is supposed to be middleman between VC and tech business. They are not supposed to be heavily in bond market. No need to send me link. I don't see you add anything meaningful to my point. I know details. Actually I like this bank's business model on theory. But what they actually did is weird.
from the attached article...
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The third lesson we can draw from S.V.B.’s collapse is that bank regulation works. As soon as it was clear on Friday that S.V.B. was going under, the Federal Deposit Insurance Corporation did what it always does when a bank fails — it swooped in, took over and started trying to make the bank’s customers whole. As a result, S.V.B. customers who had $250,000 or less deposited in insured accounts will be able to access those funds quickly. With any luck, a big bank will subsume the old S.V.B. seamlessly, make its larger depositors whole, and there will be no domino effect — no taxpayer bailouts, no mass start-up failures, just a simple and orderly bank failure.
In recent years, a certain set of tech leaders disparaged regulators and government officials as slow, corrupt and a drag on innovation. (Some of these same leaders begged for government bailouts on Friday.)
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Link: https://www.nytimes.com/2023/03/11/technology/silicon-valley-bank-failure-lessons.html?searchResultPosition=5
Janet thinks otherwise.
Link: https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e
from your link...
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Sen. Mark Warner, D-Va., said in an interview with ABC News’ “This Week” that he was concerned that the bank’s collapse could prompt nervous people to transfer money from other regional banks to larger institutions.
“We don’t want further consolidation,” he said.
Warner suggested there would be a “moral hazard” in reimbursing depositors in excess of the $250,000 limit and said an acquisition would be the best next step.
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In some ways, bad luck, but also bad management.
I think the fears of a bank run are overblown.
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