Biden economy, 16th largest bank fails [Archive]

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mack7.62

03-10-23, 20:36

This bank is supposed to have 160 billion + of uninsured deposits.

https://apnews.com/article/svb-fed-bonds-rates-banks-inflation-a24b28b3caeede91c76cd120aa9b7966

NEW YORK (AP) — Regulators rushed Friday to seize the assets of one of Silicon Valley’s top banks, marking the largest failure of a U.S. financial institution since the height of the financial crisis almost 15 years ago.

Silicon Valley Bank, the nation’s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.

hotbiggun42

03-10-23, 20:48

Not too big to fail.

mack7.62

03-10-23, 21:32

Oh you can bet they are going to ask for a Fed bail out ala 2008.

SteyrAUG

03-10-23, 22:11

Oh you can bet they are going to ask for a Fed bail out ala 2008.

The "bail out" never actually stopped.

mack7.62

03-10-23, 22:40

You know this is supposed to be a big time money manager but she doesn't appear to know how FDIC works, everyone is insured up to $250,000 it's just the amount over that that is at risk. Still only 2.7% are fully covered.

Genevieve Roch-Decter, CFA
@GRDecter
·
9h
·
Only 2.7% of Silicon Valley Bank deposits are less than $250,000.

Meaning, 97.3% aren't FDIC insured.

Ouch.

Coal Dragger

03-10-23, 23:34

This isn’t good. Maybe we get lucky and no more dominoes fall.

We probably won’t be that lucky.

HKGuns

03-11-23, 08:51

The bailout plans have already started. They're going to put this on YOUR back to bail out the assholes in Silicon Valley who hate you. Once again, TC is over the target.

https://youtu.be/cl-ZawiAghE

This is very long, but when Bannon shows up it gets even more interesting.

https://www.youtube.com/live/nwoXou5zWiE?feature=share

Averageman

03-11-23, 09:08

ChattanoogaPhil

03-11-23, 09:10

“Only 2.7% of Silicon Valley Bank deposits are less than $250,000.

Meaning, 97.3% aren't FDIC insured.”

——-

FDIC is per person (depositor). For example… a married couple joint account would be FDIC insured up to $500k. Can’t assume any account over $250k isn’t insured.

On the other hand, just because an account is under $250k doesn’t necessarily mean it’s fully insured. If a married couple had three accounts in a bank, each under $250k but the total was over $500k, anything over $500k would not be FDIC insured.

HKGuns

03-11-23, 09:15

Jim Cramer is praising the Banks Stock and saying Buy Buy Buy, just a month before the banks failure.

I'm not sure how Jim Cramer became an expert, but he's often wrong, too often for my money.

Anyone taking investment advice from that idiot deserves to be poor. He's been discredited well before this one. In fact, I wouldn't be a bit surprised if he was paid to push their stock.

C-grunt

03-11-23, 09:48

My best friend's tech company uses that bank. He had a bad day yesterday as he is currently getting his payroll together to pay his employees next week.

Bluto

03-11-23, 09:54

Jim Cramer is praising the Banks Stock and saying Buy Buy Buy, just a month before the banks failure.

https://www.youtube.com/watch?v=vw9IZ7_8XCw
I'm not sure how Jim Cramer became an expert, but he's often wrong, too often for my money.

I day trade for a living. Just do the opposite of what Cramer says and you’ll be rich.

All jokes aside he had an investor on his show the other day that sold TSLA in December at all time lows for a huge loss stating they are a dead fish in the EV market and then just rebought it over 200 stating they are the most competitive EV company in the world and they call this schmo an expert investor that you should follow. Talking head clowns.

utahjeepr

03-11-23, 10:36

I day trade for a living. Just do the opposite of what Cramer says and you’ll be rich.

All jokes aside he had an investor on his show the other day that sold TSLA in December at all time lows for a huge loss stating they are a dead fish in the EV market and then just rebought it over 200 stating they are the most competitive EV company in the world and they call this schmo an expert investor that you should follow. Talking head clowns.

It makes sense if you consider these guys to be like carnival barkers for the big brokerage firms.

"Tesla's in the toilet, they are crap, sell now before you lose it all!"
-big boys buy TSLA cheap-
"TSLA is a bargain even at this price, buy now it's only going up!"
-big boys cash out, big profits-

I can't say that this is actually what happens. Just wild, cynical speculation on my part. Still...

Averageman

03-11-23, 11:00

It makes sense if you consider these guys to be like carnival barkers for the big brokerage firms.

"Tesla's in the toilet, they are crap, sell now before you lose it all!"
-big boys buy TSLA cheap-
"TSLA is a bargain even at this price, buy now it's only going up!"
-big boys cash out, big profits-

I can't say that this is actually what happens. Just wild, cynical speculation on my part. Still...

I had a nice 401K, but I knew realisticlly that I certainly wasn't a "Power Investor".
About 15 years in to it, I had come to the conclusion that the service you recieve is based on the level of your investment.
So, it appeared to me that the more money you had in it, the better deals you'll get with your money.
It only makes sense.

utahjeepr

03-11-23, 11:25

I had a nice 401K, but I knew realisticlly that I certainly wasn't a "Power Investor".
About 15 years in to it, I had come to the conclusion that the service you recieve is based on the level of your investment.
So, it appeared to me that the more money you had in it, the better deals you'll get with your money.
It only makes sense.

Yeah, I ain't a "power investor" either. That's why I pay a guy that is. I'm a moron on investment strategies. My guy even literally laughs at me sometimes. But he takes good care of my money. :)

lowprone

03-11-23, 13:16

Easy come, easy go !

jesuvuah

03-11-23, 13:45

Que on the new cbdc system to save us all.

Nothing to see here.

Soli Deo Gloria

ddbtoth

03-11-23, 14:02

This isn’t good. Maybe we get lucky and no more dominoes fall.

We probably won’t be that lucky.

I guess I’m lucky none of my accounts are over 250k?

Coal Dragger

03-11-23, 14:21

Were you banking with this institution?

If not I wouldn’t worry about it too much.

Silicon Valley Bank specialized in lending to tech startups, which have been going under and generally getting their dicks kicked in. Now the bank has gone tits up for a variety of reasons, that really boil down to making bad loans to risky borrowers. Their other woes stem from their business model.

The same can be said for the bank that went tits up that did lending for all the crypto currency ponzi sheme bullshit. Make a bunch of bad loans to shady grifters er I mean cryptocurrency companies, and you’re going to have problems.

I’m not particularly worried about my bank accounts with my local credit union in comparison.

kerplode

03-11-23, 19:37

I'm not sure how Jim Cramer became an expert, but he's often wrong, too often for my money.

I think one could make a tidy living just doing the opposite of whatever that jackass recommends.

SteyrAUG

03-11-23, 22:24

I guess I’m lucky none of my accounts are over 250k?

This is why all of my accounts are in the gun safe and typically appreciating at a better rate than any 401k.

HMM

03-12-23, 06:27

https://www.whitecoatinvestor.com/jim-cramer-inverse-etf/

He's a clown, I love this idea!

TMS951

03-12-23, 07:22

This is why all of my accounts are in the gun safe and typically appreciating at a better rate than any 401k.

Yikes, that’s cool until you wake up one morning and you can’t legally sell those guns anymore. I’d consider your gun collection a much higher risk investment than money in a bank.

Harpoon

03-12-23, 07:55

https://pbs.twimg.com/media/Fq94ohqWwAMWW8n?format=jpg&name=small

HKGuns

03-12-23, 09:58

We’re you banking with this institution?

If not I wouldn’t worry about it too much.

Silicon Valley Bank specialized in lending to tech startups, which have been going under and generally getting their dicks kicked in. Now the bank has gone tits up for a variety of reasons, that really boil down to making bad loans to risky borrowers. Their other woes stem from their business model.

The same can be said for the bank that went tits up that did lending for all the crypto currency ponzi sheme bullshit. Make a bunch of bad loans to shady grifters er I mean cryptocurrency companies, and you’re going to have problems.

I’m not particularly worried about my bank accounts with my local credit union in comparison.

Yep, part of my job was to review these start-ups and make a call on their product viability. Most of the interesting stuff was coming out of Israel, not Silicon Valley. I'd say roughly 5% of the Israel stuff was interesting, so that tells you the viability of the SV startups. People are stupid, they go out to Kalifornia, get a nice dinner at a vinyard then listen to the bullshit as it flows profusely. They don't know anything, so they buy the sales pitch hook, line and sinker.

Its unurprising to me they went belly up. It was hard to get the idiots in Kalifornia to get any work done prior to the ScamDemic. Good luck getting anything out of them now.

prepare

03-12-23, 11:33

One step closer to a CBDC.

tn1911

03-12-23, 14:29

This bank was heavily exposed to treasuries and bonds it snapped up when interest rates were near zero...

kerplode

03-12-23, 15:03

Yeah, interest rate risk on long bonds is a bitch...

It'll be interesting to see what happens on Monday morning.

Averageman

03-12-23, 15:31

Monday will be telling.
Canary in a Coal mine kind of way.
They've had an entire weekend to fix this, but Monday morning more domino's begin falling. Hang On.

HKGuns

03-12-23, 16:20

You honestly think the moron's in charge did anything over the weekend except refine the bailout talking points and arrange for their Commie Governor to fly in and beg?

chuckman

03-12-23, 16:35

There's a reason it's that bank, or just there. No, not every bank, not a predictor of the rest of the banks.

Averageman

03-12-23, 16:38

You honestly think the moron's in charge did anything over the weekend except refine the bailout talking points and arrange for their Commie Governor to fly in and beg?

Well, I was kind of hoping a small group of whiz kids would be working to ensure this didn't create a domino effect, but.... Wishful thinking I'm sure.
My Son is finishing up his MBA so I had to set through a complete download of Sam Bankman Freid a minute ago.
The way he explained it these guys in crypto currencies were gutting each other like fishmongers. I guess some banks might have had some fringe investments caught up in all of that.

tn1911

03-12-23, 16:57

Apparently First Republic and Bancorp might be in trouble.... Fed and FDIC are openly discussing backstops and creation of a fund that would allow regulators to protect more deposits at banks that run into trouble...

Sounds like things behind the scenes might not be peachy.

Cracks are appearing in the global financial system as the decade-long era of cheap money ends

https://finance.yahoo.com/news/analysis-silicon-valley-banks-fall-051419388.html

donlapalma

03-12-23, 16:59

SVB is (was) my company's primary banking institution. Friday was not a good day and the next several weeks will suck hard as well. Wish me luck.

HKGuns

03-12-23, 17:18

Well, I was kind of hoping a small group of whiz kids would be working to ensure this didn't create a domino effect, but.... Wishful thinking I'm sure.
My Son is finishing up his MBA so I had to set through a complete download of Sam Bankman Freid a minute ago.
The way he explained it these guys in crypto currencies were gutting each other like fishmongers. I guess some banks might have had some fringe investments caught up in all of that.

My current understanding is they got bit by low interest bearing government securities in the midst of rising interest rates. But they were too busy making DEI hires and videos to manage their bank. There are a lot of very large US companies in the same boat.

You know, like we are going all electric vehicles and nobody stops to think, hey, we take a loss on every one of these we sell.

The entire green mess will be the next crash of 2008. You read it here first. Government encourages you to make bad loans = Government subsidized, unsustainable bad business decisions.

There are ZERO Wizkids in DC right now, which only makes this situation worse.

tn1911

03-12-23, 17:23

Regulators just announced backstops for the depositors minutes before futures trading opening

Averageman

03-12-23, 17:30

Yeah Monday will be very interesting.
Edit to add;
Pretty understandable but easy to understand explaination of how this might work out.
https://www.msn.com/en-us/money/markets/big-short-michael-burry-warns-of-another-major-bank-collapse/ar-AA18wQF5?ocid=msedgntp&cvid=1af29e30fb214431c2ae9a94fd2e16ae&ei=23

tn1911

03-12-23, 17:55

Regulators close New York’s Signature Bank, citing systemic risk

https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

Signature is one of the main banks to the cryptocurrency industry.

Artos

03-12-23, 17:59

https://finance.yahoo.com/news/us-government-guarantees-all-silicon-valley-bank-deposits-money-available-monday-223546372.html

U.S. government guarantees all Silicon Valley Bank deposits, money available Monday

sigh...

kerplode

03-12-23, 20:39

DG23

03-12-23, 21:00

Glad our economy is doing so good! :)

Averageman

03-13-23, 11:45

A bit biased, but an explanation.

https://www.youtube.com/watch?v=ezqrqNjS8eI

Averageman

03-13-23, 11:47

A very ugly bit of trivia;

https://www.youtube.com/watch?v=1EPzoXxNITA
They sold out before the collapse. Bonus's issued hours before they went dark.
Lets not bail them out.

FromMyColdDeadHand

03-13-23, 11:59

No bail- for them facing fraud charges among other things. We will continue to have these moral hazard problems until some finance guys start calculating the net present value of their anal virginity after going to prison.

It is that simple. Take away their cash and put them in prison. The first one will make their trophy wives make sure that they are staying legal and he second will re-enforce the point. Until these people lose it all and do prison time, we will do this every decade or so.

1987 Savings and loans
1997 LTC
2008 GFC
2020s - "Free money"- low interest rates (the cost of money) and then just handing out money.

Coal Dragger

03-13-23, 14:30

I support no bailouts and no insuring accounts beyond FDIC limits. Stupid people who make stupid choices should suffer the consequences of those choices.

Tax payers shouldn’t be on the hook for this.

glocktogo

03-13-23, 15:47

Well, I was kind of hoping a small group of whiz kids would be working to ensure this didn't create a domino effect, but.... Wishful thinking I'm sure.
My Son is finishing up his MBA so I had to set through a complete download of Sam Bankman Freid a minute ago.
The way he explained it these guys in crypto currencies were gutting each other like fishmongers. I guess some banks might have had some fringe investments caught up in all of that.

Those whiz kids will make a lot more money setting up the next ponzi scheme than they would fixing this one.

I support no bailouts and no insuring accounts beyond FDIC limits. Stupid people who make stupid choices should suffer the consequences of those choices.

Tax payers shouldn’t be on the hook for this.

But butt... Too Big To Fail!!!™ :rolleyes:

ddbtoth

03-13-23, 15:53

Jellybean

03-13-23, 16:20

https://pbs.twimg.com/media/Fq94ohqWwAMWW8n?format=jpg&name=small

I'd have been more impressed if she showed up with a Safariland, or other non-sucky holster, but hey... it's a start. :laugh:

Anyway...
All the 'failures' or recessions or whatever [I]they want to call it... it's all just part of the show. Part of the ponzi scheme. Part of the control-grab.
God help us if there was a real collapse it would be a true black swan these muppets would never see coming.
Everything outside of that is a temporary hiccup, or engineered for their gain.

tn1911

03-13-23, 17:45

The Fed’s near-zero interest rate experiment was destined to have unintended consequences. Backstopping SVB’s collapse is just the first one

https://finance.yahoo.com/news/fed-near-zero-interest-rate-040100459.html

It was inevitable that the Fed’s decade-long experiment with near-zero interest rates would have serious unintended consequences. Count this as one of the first of those—a historic reframing of depression-era deposit insurance. We’ll let politicians and regulators argue over whether to call it a bailout, but it is a big change.

Averageman

03-13-23, 18:04

So, not just one, but two banks?

https://www.youtube.com/watch?v=pAAvNbiLEFM

Gabriel556

03-13-23, 18:08

The body count is two right now. I suspect there will be a few more by the time this settles.

HKGuns

03-13-23, 18:38

The body count is two right now. I suspect there will be a few more by the time this settles.

Not following this one……

utahjeepr

03-13-23, 18:52

The bond situation is gonna play hell on a lot of banks, even if they don't fail they are gonna be in a weaker position to lend. Of course at least part of that is by design. It's what happens when you aggressively raise interest rates. The Fed had to have seen this as a risk.

I like how they are placing some of the blame on depositors that took their money out. Saying the "run on the bank" was instrumental in the failure. Look for the new "protections" to further limit your ability to get your own money out of a bad bank.

tn1911

03-13-23, 19:22

It's what happens when you aggressively raise interest rates. The Fed had to have seen this as a risk.

Sure the Fed saw it, the question is how or why the banks didn't see it.

Averageman

03-13-23, 19:25

The body count is two right now. I suspect there will be a few more by the time this settles.

It would appear to be three...

https://www.youtube.com/watch?v=oHjDCC6Vigc
Just not as much attention to the first one.
Edit to Add;
This is a very good video that has a lot of good coverage on the issue.

vicious_cb

03-13-23, 19:49

Need anymore proof we live in a Banana Republic? "But but guys, the US has never been stronger! US decline is just a delusion!" :rolleyes:

https://i.redd.it/bnwae7yyamna1.jpg

utahjeepr

03-13-23, 20:49

Sure the Fed saw it, the question is how or why the banks didn't see it.

I'm sure the banks did. Unfortunately there was really nothing they could do about it. It's complicated. They bought a ton of them during Covid and the early recovery because there were limited options for them to park cash with any kind of return. And of course the government puts pressure on banks to buy bonds. It's not required per se, but... Bonds are not the easiest asset to sell in inflationary periods. Especially low interest bonds. Even if I were interested in buying bonds, why would I buy existing bonds from the bank instead of new, higher yield bonds? So it's not like they can get out of them without losing money. I'm not feeling a lot of empathy for big banks here, just saying it can't totally be laid at their feet.

Political actions have economic consequences, and many of our "financial crises" have government fingerprints all over them.

Gabriel556

03-13-23, 22:03

Not following this one……

I meant two banks were closed by regulators this weekend and given the situation, I suspect there will be more in the next few months. Actually a third was closed last Wednesday which is rare, this most always happens on a Friday. The weird thing with Silvergate was that it’s not on the FDIC list, and I’m not sure if that’s because they dealt predominately in crypto or not.

HKGuns

03-14-23, 00:40

I meant two banks were closed by regulators this weekend and given the situation, I suspect there will be more in the next few months. Actually a third was closed last Wednesday which is rare, this most always happens on a Friday. The weird thing with Silvergate was that it’s not on the FDIC list, and I’m not sure if that’s because they dealt predominately in crypto or not.

Got it, thanks for clarifying. I thought you may be referring to people held accountable which I’d heard nothing about.

Coal Dragger

03-14-23, 03:43

People being held accountable?

LOL. Now that is funny.

FromMyColdDeadHand

03-14-23, 08:28

glocktogo

03-14-23, 08:49

utahjeepr

03-14-23, 09:14

So to help pass ‘stress tests’ banks loaded up on Treasuries since they are ‘risk less’- but only to default, not to risk of rising interest rates. So when these treasuries held by banks, because the govt pressed them to hold them (it also held down bond rates), started to decrease in value because the govt caused inflation- the banks started to fail.

And most banks are financed and structured this way. So as inflation causes rises in bond rates, more banks will have problems. AND if they hold back on raising interest rates, that will cause inflation to go higher, which will cause more pressure on bonds to go higher- which will cause more banks into a crisis.

Pretty accurate, at least from my understanding. I mean one of the things government could do is to limit the issuance of bonds by reducing spending. This would also help to tame inflationary pressure on the economy. I'll wait til you stop laughing before I continue. I said "could", but of course they won't.

The banks do carry a fair bit of the blame themselves. They know the game and they know their balance sheets better than anyone else. OK, so that cash they parked in bonds is earning very little money. Yes it's locked up for now. That would tend to encourage you to be more prudent with your remaining assets right? I mean you still need ROI to keep investors happy but you have to be very sensitive to risk because you have less flexibility. One would not expect the bank to have their primary risk management officer and their staff spending most of their time on diversity, alphabet soup outreach, and other "woke" shit as was the case at SVB. In fact the most senior risk manager at the bank was a diversity hire with questionable qualifications.

So yes, the banks are facing some challenges due to current economic conditions. That does not absolve them from behaving responsibly. Most banks most certainly have. There will be some that have played a little loose. If they fail well, "just deserts" and all that.

Averageman

03-14-23, 17:10

So yes, the banks are facing some challenges due to current economic conditions. That does not absolve them from behaving responsibly. Most banks most certainly have. There will be some that have played a little loose. If they fail well, "just deserts" and all that.

My understanding is this Bank Manager took it on his own to "Go it Alone". I was told he could have simply asked for a loan from a bigger Bank to hold him over. If he didn't do his due diligence, but on his way out bailed his on butt out with some major sales of stock,...
I dunno, but I have a feeling someone needs to look long and hard and work alongside the Fed to make sure this doesn't happen again.

Or they're trying to break the system.

Gabriel556

03-14-23, 18:52

The DOJ is looking into the events preceding SVB’s closure by FDIC and SEC regulators. Say what you will about alphabet agencies, but they will likely find fire if they smell smoke. It happened to the CEO of my company AFTER the board ousted him in 2012. They went after him personally as well as acting as an agent of the company claiming he intentionally downplayed financial risks.

Averageman

03-15-23, 08:04

https://redstate.com/kiradavis/2023/03/14/silicon-valley-bank-spent-74-million-on-black-lives-matter-and-social-justice-causes-n716419

Silicon Valley Bank’s collapse is almost entirely self-imposed, but they’re getting an almost-bailout anyway. President Biden has said the taxpayers will bear the brunt of guaranteeing all SVB deposits. The Federal Deposit Insurance Corp. (FDIC) already insures deposits up to $250,000, a pittance compared to the collapse of this billion-dollar bank.

Many in the financial punditry class believe the move is necessary to prevent a chain reaction that could take down other big investment banks. There is plenty to be debated about the merits of that action, but it certainly does make it harder to accept that Americans are being forced to bail out millionaires when SVB has been grossly irresponsible with their own funds.

As it turns out, SVB was a massive donor to Black Lives Matter and other social justice causes, to the tune of nearly $74 million dollars. $73,450,000 to be more exact.

The figure comes from an extensive report dropped by the Claremont Institute on Tuesday. The report details $82 billion dollars in social justice/BLM investments by major American companies. SVB stands out as one of the larger donors, next to big donors like Apple ($100 million) and Comcast ($165 million). While at the top of the donation pool, those contributors do pale in comparison to donors like Blackrock ($810 million) and Citigroup ($1.1 billion). However, the group did pledge on their website to provide in total up to $11 billion dollars by 2026 for Diversity, Equity and Inclusion (DEI) programs and racial justice causes.

Go Woke, Go Broke.
Edit to add....
https://thefederalist.com/2023/03/14/dont-blame-depositors-for-bank-failure-blame-biden-and-svb-management/
If you want to understand the context for the crisis, look at the Federal Deposit Insurance Corporation chair’s March 6 testimony — a week before Silicon Valley Bank’s collapse — where he explains that banks were sitting on $620 billion of unrealized losses from long-dated bonds. This provided the tinder for the crisis.
The match was lit when SVB announced on Wednesday, March 9, that it had effectively sold all of its avail*able-for-sale se*cu*ri*ties and needed to raise fresh cap*i*tal because of large unrealized losses from its mortgage bond portfolio.
On Thursday morning, the financial press widely reported SVB’s need for new capital, and short sellers were all over the stock. The CEO’s disastrous “don’t panic” call later that morning only heightened fears and undermined confidence in the bank.
The idea that one needed “non-public information” to understand that SVB was at risk is drivel being peddled by populist demagogues. Any depositor who could read The Wall Street Journal or watch the stock ticker could understand there was no upside in waiting to see what would happen next.
By Friday, the run on other banks had begun. This became abundantly clear when regulators placed Signature Bank in receivership, announced a backstop facility for First Republic, and temporarily halted trading of regional bank stocks on Monday. Even trading of Schwab was halted.
Once the run on the bank started, decisive action by the Fed was imperative. This meant protecting deposits (uninsured are 50 percent) and backstopping regional banks. No matter how distasteful you may find those things to be, preventing a greater economic calamity was necessary.
But back to SVB: Its collapse was first and foremost a result of its own poor risk management and communications. It should have hedged its interest rate risk. And it should have raised the necessary capital months ago through an offering that didn’t spook the street.
SVB doesn’t deserve a bailout and isn’t getting one. SVB’s stockholders, bondholders, and stock options are getting wiped out. The executives will spend years in litigation and may have stock sales clawed back. Anyone who thinks there’s a “moral hazard” isn’t paying attention.

FromMyColdDeadHand

03-15-23, 08:49

Averageman

03-15-23, 09:12

We’ll see on the moral hazard. They said the same thing at the start of the GFC and then when it was clear that if they let the banks go down, they would drag down others, POOF, they had to walk it back. Hopefully this is just a couple of banks- but the underlying issue- assets in govt bonds and rising interest rates making these decline in value. You can’t really hedge it now that everyone knows that rates are headed higher. Though that might be a way for the govt to bail them out with out ‘bailing them out’. The govt could buy back the bonds at face rather than current value, erasing the losses and claiming that they are just buying back bonds.

I'm not sure how you decide to raise intrest rates and not see this coming?
Why didin't the mediate the risk when they decided to raise rates? Someone surely had to see this coming, why not take action before this happened?

This is like going Duck Hunting in a John Boat and you decide to shoot a hole in the bottom of the boat, then you complain when your feet get wet.
You just can't print money "Willy Nilly" and not expect this to come back on you.
There was a limit to that monkey business and we far surpassed it's limits. What the American People didn't want to hear is 'Yes there is a virus out there, but you need to suck it up, get off the couch and go back to work.
I remember seeing my Dad walk to work in a blizzard, it was snowing so hard that it took him an hour to walk 2 miles to work, thigh deep snow, no school, no public transportation, utilities were sketchy, but my Dad worked for the Telephone Company and he went to work because folks needed their phones.
What happened to Men who did stuff like that?

FromMyColdDeadHand

03-15-23, 11:52

Also as interest rates go up, aren’t all the bonds and bond funds held by near retirees and retired people going to go down in value also?

Averageman

03-15-23, 12:05

Also as interest rates go up, aren’t all the bonds and bond funds held by near retirees and retired people going to go down in value also?

Absolutely.

utahjeepr

03-15-23, 13:18

Also as interest rates go up, aren’t all the bonds and bond funds held by near retirees and retired people going to go down in value also?

The answer is "kind of". If you look at a bond as you would a commodity then yes. The market price of a bond, say a 10 year T-Bond, is always dropping. Why? A $1k Bond is worth $1K at maturity but it pays interest payments every six months at the rate determined when it was purchased. So the fewer payments that are left the less it is worth in total. The bond market price for that individual bond reflects that.

Assuming they are purchasing individual bonds most folks saving for, or in, retirement don't really care about the market price of the bond. They don't intend to sell it. They care more about the safety of their principal investment. They have planned for the income stream of interest payments. Either to be used as income or to be reinvested. When the bond matures they will purchase another with the principal. Now this could change if they have some dramatic event that requires them to liquidate bonds for liquid capital.

The same holds true for the individual bonds in a bond fund. There that mix is constantly rolling individual bonds of diverse types, much as a mutual fund does with stock. Now the individual may be bought and sold on the market as a part of the fund management, but the goal is to manage the income stream of the fund. For the investor the reliable income and the security of the principal is the goal. Again, a need for quick cash to cover an unforseen expense could force the investor to sell.

In the case of SVB and other banks the bond price is important if they are forced to liquidate the bonds early to address cash flow requirements. The idea is to balance the risk of other loans and investments with the security of bonds. The need to liquidate those securities is what causes the problem.

Averageman

03-15-23, 19:16

I just heard that the fifth Bank has fallen.

DG23

03-15-23, 19:46

I just heard that the fifth Bank has fallen.

Guessing you are talking about the fifth Russian bank that has fallen thanks to our sanctions?

:)

Gabriel556

03-15-23, 19:49

Any idea which one? Was it closed by regulators or shuttered by themselves? It should be on this list if it was failed by the FDIC.

Averageman

03-15-23, 20:00

Any idea which one? Was it closed by regulators or shuttered by themselves? It should be on this list if it was failed by the FDIC.

Out of San Fransico, they have the FDIC and Regulators onhand now, dissecting the remains.

Averageman

03-16-23, 09:20

https://www.youtube.com/watch?v=GI4-_vh4UMw
Bank crisis spreads to Europe, Credit Suisse on the verge of collapse and the Dow is down 250 points.
Spicy times.

prepare

03-16-23, 16:12

The US will default within a couple years and be in a major war within 5 years or less.

FromMyColdDeadHand

03-16-23, 17:48

The US will default within a couple years and be in a major war within 5 years or less.

I wonder if Putin is starting to realize that while he started the Ukrainian thing because of domestic politics, and the Biden might have an even bigger problem domestically and will be more than happy to make things spicy and direct in Eastern Europe.

DG23

03-16-23, 23:37

The US will default within a couple years and be in a major war within 5 years or less.

China has continued to slash its holdings of US treasury securities amid the growing threat of economic sanctions from Washington, according to data released by the US Treasury on Wednesday. The figures show that Beijing's holdings slid to $859.4 billion in January from $867.1 billion in December.

The decline in January was more than double the $3.1 billion cut the month before, though less than the $7.8 billion reduction in November.

China is the second largest foreign holder of US government debt but has reduced its holdings for six consecutive months, with the figure dropping below the symbolic $1 trillion mark in April 2022.

https://ticdata.treasury.gov/Publish/mfh.txt

China has already trimmed its holdings by 34.1% over the past ten years, including a 16.6% cut in 2022 based on US data

They own all that debt of ours and what do we do?

:)

Averageman

03-17-23, 07:30

https://www.youtube.com/watch?v=g0inUP6W20I
Janet Yellen took a beating yesterday.
If they were trying to break it, it would look just like this.

pinzgauer

03-17-23, 10:36

In the case of SVB and other banks the bond price is important if they are forced to liquidate the bonds early to address cash flow requirements.

This is exactly the problem that triggered SVB.

If you buy a bond your principal is protected if you hold it to maturity. And it pays the interest the bond said it was going to pay.

It's only worth less if you're trying to sell a bond pre-maturity that has already paid a bunch of interest, and low interest at that when the buyers can purchase a bond that will pay triple that interest or more. So it sells at a significant discount to make up for that interest gap.

gsd2053

03-17-23, 11:11

Yeyea, da dults ur bizac in da hizous!

Averageman

03-17-23, 15:02

https://www.youtube.com/watch?v=G5FquTQtTHE
Pretty telling message.
SVB could have asked for help.
Bailing out everyone only leads to more of this.

utahjeepr

03-17-23, 16:23

Yeyea, da dults ur bizac in da hizous!

Um, earth languages only please.