Silicon Valley Bank is largest failure since 2008 crisis, billions stranded

BBSA said:
So according to you they only had cash equivalents on their balance sheet and no loans to individuals and businesses?
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The lengthy Wikipedia article provides some details (in a mostly fact-free thread). They did have some loans as part of their portfolio, but this collapse was not the same as the sub-prime lending crisis in 2007/8. It seems the bank was not actually a systemic risk, but did have a lot of high profile depositors. See:
en.m.wikipedia.org

Collapse of Silicon Valley Bank - Wikipedia

en.m.wikipedia.org en.m.wikipedia.org
 
rietrot said:
No. Not according to me. I did mention my source, which also correspond with all the other sources and information I have seen this far and what I know of US banking law, It is a public company, you can go and read their financials for yourself if you wish aswell as the US banking law.

And then you presented it in a way that is a strawman.
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They have lots of loans outstanding, so they did not have a 1-1 reserve ratio.

Think before you post nonsense....
 
rietrot said:
Just not true or really relevant in this case.If it was non of this would have happened.

There's regulation in place that requires banks to balance their balance sheet in this stupid way. They need to hold assets like treasuries for all the deposits. That is holding a reserve "seen as a cash equivalent" basically. It is not even fractional, they have a 1-1 reserve.

The Boyle youtube guy covers the details if anyone is actually interested.
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Correct. What some don't realize that the bank did not go bust because of bad loans, misinvestments etc. It went down because the value of assets in its books (treasuries) decreased because of high interest rates (yields go up, value of bonds goes down).
As a result the (unrealized) value of assets was in essence lower than the liabilities (customers deposits).
People started pulling money out and the rest is history.
 
BBSA said:
They have lots of loans outstanding, so they did not have a 1-1 reserve ratio.

Think before you post nonsense....
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Deposits aren't their only source of equity.

They have/had 1-1 reserves for deposits. And basically went bust because they need to legally maintain that ratio.

*I would say a bond they intend to hold to maturity is not a cash equivalent because of the intended illiquidity, but it can quickly become a cash equivalent if you just decide to take the loss and sell it. This is a over regulation failure that requires banks to do this creative accounting.
 
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BBSA said:
They have lots of loans outstanding, so they did not have a 1-1 reserve ratio.

Think before you post nonsense....
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To be fair he said assets to deposits.

Also, outstanding loan to the bank is an asset, the value of which is the underlying IOU. It can be traded, sold etc.
 
Gordon_R said:
this collapse was not the same as the sub-prime lending crisis in 2007/8
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still connected, svb's strategy of investing deposits into long term bonds would only ever work in a low interest rate environment

the low interest rate environment was created by and has persisted since the 2008 crises
 
Unhappy438 said:
Why stop there? Go back further and see the 08 collapse and that banking bail out.
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I hate all of them.
Give me a constitutional amendment to:
1) Require the federal government to maintain a neutral balance and only go into deficit during times of war.
2) Require the federal reserve to keep the money supply proportional to the population.
 
Gordon_R said:
The lengthy Wikipedia article provides some details (in a mostly fact-free thread). They did have some loans as part of their portfolio, but this collapse was not the same as the sub-prime lending crisis in 2007/8. It seems the bank was not actually a systemic risk, but did have a lot of high profile depositors. Democrat party funders. See:
en.m.wikipedia.org

Collapse of Silicon Valley Bank - Wikipedia

en.m.wikipedia.org en.m.wikipedia.org
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FTFY.

They obviously were not a systemic risk.
 
saturnz said:
Those treasuries dropping in price?
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In the open market.

The contract that forms part of the treasury still guarantees the value of the note will be repaid. Except the problem is that with inflation, the value of the thing in the future is going to be less.
 
Paulsie said:
Correct. What some don't realize that the bank did not go bust because of bad loans, misinvestments etc. It went down because the value of assets in its books (treasuries) decreased because of high interest rates (yields go up, value of bonds goes down).
As a result the (unrealized) value of assets was in essence lower than the liabilities (customers deposits).
People started pulling money out and the rest is history.
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Yeah its a mismatch in timing - you can't have 100% of your liabilities in demand deposits and your assets all in 5 year gov bonds. The bonds will fluctuate in value with the interest rate until held to maturity. In a way it is a sort of misinvestment (on a liquidity basis) in the end
 
Fractional reserve banking in itself is not a problem, the regulation after 2008 that requires banks to hold more reserves fixed the wrong problem (like most government regulations do)

If you don't have enough real reserves cash flow can be the real problem, and it still is because there's still liquidity issues from time to time in US banking.

Bad loans can be a real problem if the bank hands out bad loans, which can result in losses and cash flow issues again. Reserve ratios are not to blame for bad loans.

Lots of people that follow alt-finacial news (which I approve of) like to just blame fractional reserve banking for everything
 
Tim_vb said:
Libertarians calling for gov protection - exhibit 1 of countless

View attachment 1492395
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in what way is David Sacks a "libertarian"? citation needed, taking a position once upon a time in a single instance that may have the appearance of a libertarian outlook does not make someone "libertarian" ... jeez

also, cherry picking tweets isn't exactly an honest reflection of his position, here is the truth:
https://twitter.com/x/status/1635747517752283137

TL;DR: the government is part of the problem, hence in his mind they should be part of the solution

in my mind they should GTFO and let everything burn and never get involved ever again ... but we all know that will never happen
 
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