SVB Bank?

[JohnRoberts]

Ok...but what does this have to do with "needing to sold and cleaned up but not with taxpayer money"? Coincidentally it's a screed I see plastered all over Fox News.

So small businesses are not taxpayers?

Why bail out silicon valley hedge funds by socializing their loss across all the small accounts? Let some vulture capital firms buy the failed bank assets and recover whatever asset value is left. Making small banks "too big to fail", creates moral hazard from no penalty for avoiding bad management.

Given a sizable chunk of small business accounts that were held at SVB (and child banks) that exceeded the $250K insurance limit, I'm sure if the FDIC hadn't stepped in to guarantee all deposits, the line would have been how Biden and the Fed let small businesses fail rather than act.

Um no,,, The government controlling more of the private sector is not always the answer. They would love to socialize the banking system and make it into a government managed utility. Imagine what they could do with access to all transaction data? It would be like living under the PRC.

JR

 

[ruffrecords]

As AnalogPackrat already shared today the contagion is spreading to EU banks (like Credit Suisse).

Credit Suisse has been floundering for months. This is perhaps the last straw.

Cheers

Ian

 

[JohnRoberts]

Credit Suisse has been floundering for months. This is perhaps the last straw.

Cheers

Ian

Indeed credit Suisse is not literally linked to this recent drama but any contraction of liquidity and credit (tide going out) will affect the weak sisters first. It is another symptom of too easy money, for too long.

Switzerland plans to bail out their $500B balance sheet but the GDP of Switzerland is only something like $800B so expect some turbulence.

JR

 

[living sounds]

 

[fazer]

I don’t buy that chart as correct. Under Volker, The consumer borrower rate was 15% and above in the 80s. Something is wrong with the analysis or my understanding of what it represents. Ah percentage change. So what. Look at the actual rate IMO

 

[JohnRoberts]

Lies, damn lies, and statistics.... Mark Twain/Benjamin Disraeli

JR

 

[cyrano]

Credit Suisse has been floundering for months. This is perhaps the last straw.

And the question is: "Who's next"?

My guess would be DB. Also has been cooking for a few years.

 

[JohnRoberts]

The next shoe to drop that everyone is watching is the next fed interest rate increase. The futures market was predicting a half a point increase, but since the recent banking drama, projections dropped to maybe a quarter point increase or maybe even zero.

Inflation is still too high, so this tide will have to keep going out (interest rate increases), to stop that.

JR

 

[Gold]

I read at the purple place that Reverb has been slow with payments because they are somehow tied up in the SVB failure. I sold something that arrived today. Reverb says I'll get my payout at the end of business today. Fingers crossed.

 

[JohnRoberts]

I read at the purple place that Reverb has been slow with payments because they are somehow tied up in the SVB failure. I sold something that arrived today. Reverb says I'll get my payout at the end of business today. Fingers crossed.

you're probably OK..
====
I think the new way to vet regional banks is to review insider sales made by the bank executives...

It appears some rats (bank executives) have been selling their bank stock holdings based on inside information.

JR

 

[living sounds]

I don’t buy that chart as correct. Under Volker, The consumer borrower rate was 15% and above in the 80s. Something is wrong with the analysis or my understanding of what it represents. Ah percentage change. So what. Look at the actual rate IMO

Lies, damn lies, and statistics.... Mark Twain/Benjamin Disraeli

JR

It's correct, not a lie. The historically very swift switch from no (or even negative) interest rates to moderately high ones has banks with suboptimal risk management (like SVB) struggling.

 

[fazer]

It's correct, not a lie. The historically very swift switch from no (or even negative) interest rates to moderately high ones has banks with suboptimal risk management (like SVB) struggling.

Ok due to bank investment bonds at such a low rate become upside down. The Feds have dragged their feet for 12 years on increasing rates. Stange time for boomers looking back at 70 plus years. People are living in a bubble of low interest and then WTF. SVB did not have a CRO for over a year to analyze the risk and make changes. Sad times. Boomers just have a different historical memory so rising interest rates are part of our culture.. None of us want to see 2008 again but things look dicy WTF again.

 

[JohnRoberts]

It's correct, not a lie. The historically very swift switch from no (or even negative) interest rates to moderately high ones has banks with suboptimal risk management (like SVB) struggling.

its a "statistic".

Those paying attention to the economy have seen the rising rate environment coming for some time. There is significant lag in the economy's reaction to interest rate increases which is why they only make small step adjustments over several months.

===

Reportedly SVB bank stopped hedging their bond duration risk at the end of last year. If SVB didn't even have a risk officer on the case, that kind of makes sense.

The news media arm wavers will work to make this seem like a bigger deal than it is, and government will offer to step in and save us as usual. Sadly in this day of electronic banking social medial could probably trigger a bank run.

Beware the man behind the curtain.

JR

 

[living sounds]

Actually it is a big deal. It is the chickens coming home to roost, maybe the end of kicking the can down the road, speaking in methaphors.

The underlying dynamic is that we are getting near the end point of the unsustainable long-term debt cycle. It restarted at the end of WW2, and now private and public debt is so high that there is no way to rectify the situation without a lot of pain.


It's math, not man. It's a system without sufficient negative feedback getting out of control. Much blame can be laid in the west on the neoliberal policies since the late 70s, of course. And human nature, I suppose.

 

[JohnRoberts]

Actually it is a big deal. It is the chickens coming home to roost, maybe the end of kicking the can down the road, speaking in methaphors.

The underlying dynamic is that we are getting near the end point of the unsustainable long-term debt cycle. It restarted at the end of WW2, and now private and public debt is so high that there is no way to rectify the situation without a lot of pain.


It's math, not man. It's a system without sufficient negative feedback getting out of control. Much blame can be laid in the west on the neoliberal policies since the late 70s, of course. And human nature, I suppose.

Not to feed the arm waving but I have been questioning how the central bankers would unwind the grossest liquidity distortions made in response to the 2007/2008 collapse (Helicopter Ben Bernanke). The world economies are still seeing ripples from this old and still ongoing extraordinary economic experiment. The tide appears to be going out.

I am not about to suggest running for the hills just yet. The central bankers have more tools now, including new ones that they created to help modulate economic activity. Coincidentally I just read a piece suggesting that so much money has been pulled out of common stocks, expecting a recession (within 12 months), that stocks are probably over sold right now. I am not a short term trader so ignoring that for now, but I am still long the markets.

JR