Federal Reserve officials may have known Silicon Valley Bank was playing with fire. Bloomberg News reported (no paywall):
Just over a year before Silicon Valley Bank’s collapse threatened a generation of technology startups and their backers, the Federal Reserve Bank of San Francisco appointed a more senior team of examiners to assess the firm. They started calling out problem after problem. As the upgraded crew took over, it fired off a series of formal warnings to the bank’s leaders, pressing them to fix serious weaknesses in operations and technology, according to people with knowledge of the matter. Then late last year they flagged a critical problem: The bank needed to improve how it tracked interest-rate risks, one of the people said, an issue at the heart of its abrupt downfall this month. The Federal Reserve has promised to investigate how it supervised SVB Financial Group’s Silicon Valley Bank, now the second-biggest failure of a US lender in history. The relatively late discovery of so many flaws raises questions about whether the Fed was diligent in stepping up oversight as the firm was ballooning in size. Article
Here we go again. Regulators don't do their jobs and we get to bail out their mistakes. Ironically, it was the same low-interest exposure that created the S & L crisis many moons ago. The more things change......
Kingfish note: Notice something? Not one single member of our congressional delegation, not ONE, said a word about the bailouts this week. They sent out multiple press releases a day on the must mundane topics but bailing out a bunch of well-heeled investors or companies such as Roku merits nary a word from them. Not.a.word.
28 comments:
incompetency abounds-
I’m not sure why we are blaming the regulators. That’s stupid. They shouldn’t be involved in the first place. The key is that you have to let risky investments fail. Sure. It’ll be catastrophic for a period of time. But, as a society, we have forgotten there are winners and losers. Let the best man, woman, or non-binary win!
Doesn't help that they had 20% invested in Bitcoin. Not.Smart.
The fed probably did blow it, but the bank was never subject to stress tests for “systemically important” assetts because congress weakend the requirements for such tests. Indeed incompetence abounds. But we can make almost any bank fail with a sufficiently substantial run on it. Pull $40B cash out of Regions bank or Renesant in less than twenty four hours and see what happens. Neither bank is subject to stress tests.
Central Banks are the devil's work.
12:29, source?
Did anybody really think depositors in an FDIC insured bank would take a hit? After we paused student loan payments for three years and told landlords they could not evict tenants for non-payment all because of a bad cold that was going around?
The equity holders got wiped out. And that is good. But should the employees of companies that had money in the bank lose their paycheck? Hardly. Call it a bailout if you want, but the FDIC coverage rules are in place to keep unsophisticated consumers from rushing to the bank to pull money. The rules don't work so well for banks heavy in corporate deposits. Had all of those corporate accounts lost all their funds, you would see instant 1930.
The bank executives that sold their stock in the weeks before the collapse should have to give that money back or face federal charges IMO.
Something tells me that a future bailout was structured in when they started heading down the high risk road. The games are all rigged.
1:02 correct. They also paid $24mil in bonuses prior too. Also, SVB had another buyer and the board told them no.
Say something? The lobbyists serve both Establishment parties. Doesn't at least one of our richest GOP donors owe his wealth to Silicon Valley? He has a 300 foot yacht parked out in Cali.
Congressional staffers take calls from them, not us.
Even here we have GOP state legislators writing protectionist bills to hurt Musk and help our Largest auto dealer chain now owned by the leading and most politically active Dem donor. Fact.
FTX, SVB, et al....all planned demolitions on the road to CBDC. Doubt it not.
From what I have read, the FDIC chairman nixed the buyout.
BS. If Roku is dumb enough to park literally half a billion dollars in a bank, why should we bail it out for such stupidity?
Roku, and hundreds of other companies. If it was that simple Kingfish, none of these companies would have this exposure.
The FDIC should cover accounts up to $250k but not one cent more. You don’t see Allstate or State Farm giving away coverage beyond policy limits. Why should the government do it?
From what I read, they were flush with cash and bought the safest investment possible which is low interest gov bonds, and when the feds raised rates it somehow devalued their investment.
Sounds to me like they were trying to be as responsible as humanly possible
How many bank failures over the last 40 years have involved any depositor losing any amount of deposit? Going back to the Great Recession or even the S&L crisis of the 80s? None.
And now Kingfish wants customers of a business oriented bank to get shafted. And their employees.
How many bank failures over the last 40 years have involved any depositor losing any amount of deposit? Going back to the Great Recession or even the S&L crisis of the 80s? None.
Link?
9:11, seriously? You know of banks where anybody lost money during the Great Recession? Show me a single instance.
I had $750k in uninsured deposits in SVB, my payroll for the quarter, essentially.
I am not rich. I don’t own a home and have almost nothing in retirement. My company is my nest egg like almost all small businesses in the US.
Should everyone who works for me lose their job because some asshole bought long term bonds?
Investors should always lose in this situation, depositors should never. If that’s your attitude then you should expect most regional banks (Regions, Trustmark, Hancock) to all lose a significant amount of deposits as mass consolidation occurs to the big 4 banks. Two of which already operate in Ridgeland.
SVB didn’t have 20% of their deposits in crypto.
5:10, they should do it because the precedent was set a long time ago. Do you know where your employer's deposits are? Most businesses have more than $250,000 in the bank. The FDIC model is extinct, it was designed to keep little old ladies from panicking and starting a bank run. Not business deposits. There is a better way for the FDIC and banks to pool deposit risk but still allow equity holders to lose their investment. If you really think allowing businesses to lose all of their funds because they don't stay up all night spreading their deposits among 40 banks is a good idea, then get ready for 1930.
Before anyone writes an article on this, they need to do a timelime from 2008 that includes "de-regulations" and what the Feds can do and what hoops they have to jump to do it.
Who removed all the safeguards( aka "due diligence" and how did they do it?
8:10 you just laid out why people should run to their bank and get their money. If the FDIC is nothing but a sign in the window then this sort of thing will happen again and again until there is no hope for a bailout. I call BS on the notion that if businesses exceed the limits we should reinforce that practice with promises of bailouts. If this is what our banking system has become we should be looking at gold and silver.
We have no authority to demand insured deposits. If the participating institutions want to insure deposits, at their own risk and cost, let the market determine the amount insured.
What a few of you think 'they ought to do' is irrelevant.
No different from an employer offering 'no cost' life insurance on employees. Not required and shouldn't be. Nothing more than a recruiting and retention tool.
Don’t forget where the government gets it’s money to back it all up, or bail it out. It comes from taxpayers. You and me. So the idea that the government should bail out accounts because they had more than the insured limit is, in my view, playing fast and loose with our money.
The left are using the SVB debacle as a "wag the dog" distraction from the border crisis, fentanyl, Biden crime family corruption, blue city crime, Ukraine, etc. etc.
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