March 10, 2023 - The Next Black Date in Economics?

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Doctor CamNC4Me
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Re: March 10, 2023 - The Next Black Date in Economics?

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Re: March 10, 2023 - The Next Black Date in Economics?

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honorentheos wrote:
Wed Mar 15, 2023 12:45 am
ajax18 wrote:
Tue Mar 14, 2023 11:37 pm


So the leftist elites at the banks didn't realize interest rates would be raised in response to inflation? Or did they just believe Eluzabeth Warren's propaganda that trillion dollar Covid stimulus packages and Build Back Better spending boondoggles wouldn't result in the highest rate of inflation since Jimmy Carter? Or did they just know all along that if their risky investments failed the government would take whatever they needed to bail them out from working peoples paychecks with the help of 87,000 newly armed and aggressive IRS agents?
Seriously, talking with you is worse than a Chatbot. At least a Chatbot tries to hide it's regurgitating words it doesn't comprehend. I'll say the same thing to you I said to Veritas earlier. This is not a partisan problem, it's a systemic one. Partisan gamesmanship is almost certainly going to hurt rather than help address the systemic issues involved.

If you happen to have a thought you self-generated feel free to share it. Otherwise we know where to find your taking points closer to their source made by people at least marginally able to comprehend the argument they are making.
I gave you three specific questions. Instead of taking offense, can you give me an answer from your perspective on what you would do to stop it or perhaps even what the party in power for the past three years should have done to have kept this from happening? How can this not be a political issue when the taxpayer is on the hook for this?
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by honorentheos »

ajax18 wrote:
Wed Mar 15, 2023 12:17 pm
honorentheos wrote:
Wed Mar 15, 2023 12:45 am

Seriously, talking with you is worse than a Chatbot. At least a Chatbot tries to hide it's regurgitating words it doesn't comprehend. I'll say the same thing to you I said to Veritas earlier. This is not a partisan problem, it's a systemic one. Partisan gamesmanship is almost certainly going to hurt rather than help address the systemic issues involved.

If you happen to have a thought you self-generated feel free to share it. Otherwise we know where to find your taking points closer to their source made by people at least marginally able to comprehend the argument they are making.
I gave you three specific questions. Instead of taking offense, can you give me an answer from your perspective on what you would do to stop it or perhaps even what the party in power for the past three years should have done to have kept this from happening? How can this not be a political issue when the taxpayer is on the hook for this?
The top leadership at SVB weren't "leftist elites". That is a Breitbart talking point. Most of them have roots in finance banking going back before the 2008 crash.

Their Chief Risk Officer stepped down in April 2022 and wasn't replaced until early this year. In that timeframe the Fed rate hikes flipped the value of the bonds they had most of their deposits in. It turned out to be fatal that no one at SVB was closely managing the climbing unrealized losses which is what a CRO would have been doing. You want to make that partisan? You are just making crap up if you do. It's not clear why this happened, why they didn't replace their CRO, if they were sleepily thinking their bonds were low risk so they didn't have someone correctly recognizing what was taking place. They had spent the last ten years effectively living in a world with zero interest rates so it's possible they'd forgot to watch that sector. We just don't know at this time.

Everything you asked aren't questions in the real sense. They were passive-aggressive assertions of BS right-wing talking points. You don't know crap and you don't understand what is going on. You're just a Brietbart Chatbot.
Last edited by honorentheos on Wed Mar 15, 2023 1:58 pm, edited 1 time in total.
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Re: March 10, 2023 - The Next Black Date in Economics?

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Hawkeye wrote:
Tue Mar 14, 2023 2:12 pm
Maybe SVB should have looked at peoples qualifications for management positions rather than try to meet a diversity quota?

Really? You’re going with, ‘Black people can’t do finance’ when you don’t even know who they hired, and when?

You should probably slow your roll a bit.
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Re: March 10, 2023 - The Next Black Date in Economics?

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Doctor Steuss wrote:
Mon Mar 13, 2023 9:52 pm
Res Ipsa wrote:
Mon Mar 13, 2023 8:14 pm


From increased fees on banks, which will be shifted to bank customers. Or, in other words, taxpayers.
It appears they might be able to cover it just by liquidating assets. SVB's assets are greater than their deposit commitments, according to this (or at least they were 3 months ago):
As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
https://www.fdic.gov/news/press-release ... 23016.html
That would be good. I'm not sure how all those low-interest bonds are valued. I think they're certainly worth quite a bit less today than they were on December 31.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Res Ipsa »

Hawkeye wrote:
Tue Mar 14, 2023 2:03 pm
Hell Just Froze Over
Waters: I Can’t Say Trump Rollbacks Caused SVB Collapse, It’s Too Early and They Were Invested in a Lot of Startups


On Monday’s broadcast of CBS’ “Red & Blue,” House Financial Services Committee Ranking Member Rep. Maxine Waters (D-CA) stated that she hasn’t come to any conclusions on whether regulatory rollbacks under the Trump administration caused the collapse of Silicon Valley Bank (SVB), there is work still to be done to see what steps need to be taken in response to the collapse, and noted that the bank was invested in a lot of startups.

Host Caitlin Huey-Burns asked, “Sen. Elizabeth Warren (D-MA) has attributed this to the rollback of regulations in 2018 under the Trump administration, do you agree with that?”

Waters answered, “Well, let me just say this: The rollback was troublesome for me and some of us who worked on Dodd-Frank reforms. However, we have to take a look at what is happening in our world today. For example, we have these startups. They are different in terms of seeking out support and loans. We have banks that don’t deal with them directly because they don’t understand some of this creativity. And it’s not easy for the startups to get loans, and what we saw was Silicon Valley Bank that was the go-to bank for these startups and they were able to support them. Many have become successful. They have created jobs. The bank was handling payroll. And we wanted to make sure that the people and the staffs that are in these startups get paid, and we’ve done that. And so, I think we’re going to look at all of this. And we’re going to make some decisions. I’m not at any conclusions now about what we will do, what we won’t do. But I am very much focused on and relieved that we’ve done an extraordinary job in a short period of time and that we will work to see if we have re-define risk, if we need to have more stress tests, and whether or not we need to make sure there’s not the kind of deregulation that would cause a collapse by a bank.”

https://www.breitbart.com/clips/2023/03 ... -startups/
Breaking news: Black woman Ajax continually mocks understands banking better than he does.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by honorentheos »

That gets to the other side of the issue where it's unlikely the rollbacks of Dodd-Frank would have impacted this particular episode, at least with SVB.

The SVB financials report the value of their assets based on the realized value at maturity (marked to maturity). A mortgage-backed security isn't going to show a loss at maturity because its making back its value by that time by definition.

The problem for SVB is that the +/- 2% yield bonds they had billions invested in were on their financial sheets as marked to maturity when their market value was much lower if they had to liquidate them in a pinch... Sometime back in February or so, Moody's followed the footnote in their financials, saw this, and called up the CEO to ask that they provide the value "marked to market", or what they would be worth right now if SVB had to sell them. Moody's told the CEO that they were going to have to lower their rating based on the real financial situation of the bank, and SVB made an attempt to fix it but way too late. They sold off bonds at a loss ($1.8 billion or so as I recall) and still have a gap to cover. So they attempted to offer new shares to generate some liquidity. But that backfired as the investors they approached realized the situation was bad plus many of them already had more than they now felt comfortable with sitting in deposits or shares with SVB. And that led to the momentum towards the bank run last week.

Dodd-Frank allows banks to report their assets marked to maturity. The stress test requirement occurs bi-annually so it should have occurred last year but it would likely have only pushed up the timeline to the end of 2022 rather than the beginning of 2023. Moody's tracking down the issue early this year is roughly approximate to how likely it would have been a regulator would have caught the severity of the issue and it would likely have been within the last few months, too.

What hit SVB happened in a matter of 7 months. They weren't a risky bank taking on risky investments. Their problems came from not paying attention to what they most likely assumed were safe investments that were low yield but secure...until the Fed rate hikes exploded the value of short term bonds and made it impossible for them to liquidate their overextended holdings.

I do think their execs are likely to face jail time. They sold shares worth millions at a time when it's pretty clear the issue had come to light and they were strategizing on how to fix it. The attempt to sell new stock? Not a problem. The selling of existing stock with inside track knowledge? That's insider trading and it's likely we'll find out more about what was really going on because there will be an investigation.

As to helping cover the deposits, I believe it will be most likely the Fed will cover the deposits from the $100 billion dollar emergency fund set up for addressing market stability and hold the bonds themselves. The losses will be mitigated through that, and hopefully fewer people will seek to withdraw their deposits with the understanding the money is available if they need it. Much is still to come, though.
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Re: March 10, 2023 - The Next Black Date in Economics?

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honorentheos wrote:
Wed Mar 15, 2023 2:25 pm
That gets to the other side of the issue where it's unlikely the rollbacks of Dodd-Frank would have impacted this particular episode, at least with SVB.

The SVB financials report the value of their assets based on the realized value at maturity (marked to maturity). A mortgage-backed security isn't going to show a loss at maturity because its making back its value by that time by definition.

The problem for SVB is that the +/- 2% yield bonds they had billions invested in were on their financial sheets as marked to maturity when their market value was much lower if they had to liquidate them in a pinch... Sometime back in February or so, Moody's followed the footnote in their financials, saw this, and called up the CEO to ask that they provide the value "marked to market", or what they would be worth right now if SVB had to sell them. Moody's told the CEO that they were going to have to lower their rating based on the real financial situation of the bank, and SVB made an attempt to fix it but way too late. They sold off bonds at a loss ($1.8 billion or so as I recall) and still have a gap to cover. So they attempted to offer new shares to generate some liquidity. But that backfired as the investors they approached realized the situation was bad plus many of them already had more than they now felt comfortable with sitting in deposits or shares with SVB. And that led to the momentum towards the bank run last week.

Dodd-Frank allows banks to report their assets marked to maturity. The stress test requirement occurs bi-annually so it should have occurred last year but it would likely have only pushed up the timeline to the end of 2022 rather than the beginning of 2023. Moody's tracking down the issue early this year is roughly approximate to how likely it would have been a regulator would have caught the severity of the issue and it would likely have been within the last few months, too.

What hit SVB happened in a matter of 7 months. They weren't a risky bank taking on risky investments. Their problems came from not paying attention to what they most likely assumed were safe investments that were low yield but secure...until the Fed rate hikes exploded the value of short term bonds and made it impossible for them to liquidate their overextended holdings.

I do think their execs are likely to face jail time. They sold shares worth millions at a time when it's pretty clear the issue had come to light and they were strategizing on how to fix it. The attempt to sell new stock? Not a problem. The selling of existing stock with inside track knowledge? That's insider trading and it's likely we'll find out more about what was really going on because there will be an investigation.

As to helping cover the deposits, I believe it will be most likely the Fed will cover the deposits from the $100 billion dollar emergency fund set up for addressing market stability and hold the bonds themselves. The losses will be mitigated through that, and hopefully fewer people will seek to withdraw their deposits with the understanding the money is available if they need it. Much is still to come, though.
Thanks for the additional information on how the bonds were valued in the financial statements. The insider trading investigation will be interesting.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by honorentheos »

Res Ipsa wrote:
Wed Mar 15, 2023 3:20 pm
Thanks for the additional information on how the bonds were valued in the financial statements. The insider trading investigation will be interesting.
For sure, and I'm hoping it pulls back the curtain as to why they left the CRO position unfilled as long as they did, plus what they were thinking in regards to their risk. It really seems odd that they didn't take measures to diversify and hedge their risk as interest rates climbed. The likely move to address the exposure then would have been to sell off some of the bonds early when the losses were negligible and move the money to other assets such as some of those short term higher yield bonds. Did they not do this because there was no CRO? Did they think the exposure was temporary and wanted to avoid the losses in the belief rates would stabilize or go down? We don't know. Having a CRO actively managing risk would have been the most obvious change that would have helped this situation play out differently.
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Re: March 10, 2023 - The Next Black Date in Economics?

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They weren't a risky bank taking on risky investments. Their problems came from not paying attention to what they most likely assumed were safe investments that were low yield but secure...until the Fed rate hikes exploded the value of short term bonds and made it impossible for them to liquidate their overextended holdings.
Who could have ever predicted that trillion dollars in "infrastructure," spending would have caused the federal reserve to raise interest rates?
The best part about this is waiting four years to see how all the crazy apocalyptic predictions made by the fear mongering idiots in Right Wing media turned out to be painfully wrong...Gasoline would hit $10/gallon. Hyperinflation would ensue.
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