The Fed Is To Blame For The Collapse of Silicon Valley Bank | Chris Whalen
This is important, and what I've been saying about "safe" bonds.
This is tragic. There was nothing wrong with this bank. This Bank failed because they didn't fully understand the implications of the Fed's actions, especially quantitative tightening, and now you know, a good bank is gone. This shows you the downside of quantitative easing, destruction that the Fed's reckless and insensitive policies are causing.
Not sure SVB counts as a "good bank" if they were so ignorant about their bond valuations, but I get it, they were a decent business; this wasn't fraud (hopefully) or over-lending.
The FED should have known that when you concentrate all of the risk in the banking sector and the bond market into three points in terms of coupons on Securities and loans, and then you move the market 600 basis points in terms of interest rates, you're obviously going to have a problem. A first-year banking associate can figure this out without a calculator, but the FED Governors don't seem to understand these things, so we're paying the price for that.
I suspect they understand such things very well - very well indeed. A nice bank has now been bought on the cheap by one of the big boys. Job done... next!?
Whalen also mentions the real risk that I've been saying: under Basel rules, these gov bonds are rated as zero-risk. Most people seem not to grasp how laughable the mathematics of banking truly is.
The Fed is to blame twice: for the lax QE that built up all this low-interest paper, followed by this yanking up of rates thereby making that paper toxic. This is, of course, a way to make large chunks of debt disappear - but there are victims.
So, the Fed lays down some banana skins, waiting for a few people not paying enough attention to skid on one.
So, really both are to blame.
spoke too soon re fraud...
Shareholders file lawsuit against Silicon Valley Bank, alleging fraud: Report
yep
SVB’s UK arm issues 15M pounds in bonuses after symbolic bailout: Report
https://cointelegraph.com/news/svb-s-uk-arm-issues-15m-pounds-in-bonuses-after-symbolic-bailout-report
A golden handshake for execs, a golden shower for other shareholders.
We are delighted to be swallowed up by one of the global big banksters. We are comforted in knowing that nanny came to clean our mess - and that it was all OK by supper.
Those "impermanent losses" won't disappear, so it all depends on holding on, if one can. What does disappear is the share value! That's how big banksters eat the little neo-banksters. They get all the other assets on the cheap.
Remember the IMF prediction: fewer big banks and fewer national currencies.
Thanks for the info you are providing on this. I find it (almost) comprehensible, and very helpful.
Thanks! yeah, a lot of this is buried in very long, very tedious, documents that few ever bother reading, plus obfuscating the reality by using bankster jargon. Stripping it away to reveal the mathematics - money is maths - can reveal what is really going on.
Glad it's helping, but if anything confusing, just ask.
eg the con that gov bonds are risk-free is a great abuse of language - of course, any competent banker would know this, but I see even BoA could be about to fall as they have a huge amount of fixed-interest losses they are carrying.
bingo
banks are not prudent nor risk-averse, they are terrified, as they are all holding up a house of cards while walking a tightrope.
why?
Because it is the fastest way to make profits from the most unproductive industry in the world.
good analysis.
slippery when fed
I also start to wonder whether some VCs are just financial mercenaries looking around for targets. Peter Thiel was one of those demanding $42B on a Friday!
This is a genuine plus for cryptos - settlement times - but then again, imagine instant settlements leading to instant bankruptcy - ruin someone's weekend. lol
thiel of all people should know the limit on fdic deposit insurance
they say "taxpayers" will not pay
but "bank customers" will pay for this
and that's pretty much the same exact group