This is not the Fed’s fault.
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LMAO, how about no?
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GTFOH
Catastrophic potential.
Could easily lead to energy companies price gouging.
I think a combination of rate hikes and subsidies might have been best, but it also sounds like SVB’s goose was cooked even if the rates only jumped 2% to 3%. SVB was a shit show, this is not on the Fed.
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If people think there are going to be bank runs on Monday, where do they think that money is going to be moved to?
Why am I not seeing any of the people claiming to be worried about bank runs also pushing for greater bank regulations and changing the FDIC rules to be uncapped and force banks to insure all of their deposits?
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The Fed, Treasury, and FDIC will easily be able to work this out over the weekend with some sort of idea of maximum loss.
If so, all of the money under the maximum loss scenario will likely be made available early next week, perhaps even Monday.
If the Fed makes most of the money available early next week, will any payrolls not be met?
Color me skeptical.
It’s this. Any business that goes under because they had 70-80% of their cash held for 1-2 days, and 20-30% held longer… with maybe 10-15% being lost… was probably going out of business soon anyway.
And that may happen to some! Which is fine! Because we’re talking about non-profitable startups that were getting money thrown at them by venture capitalists in a zero interest environment. That money flow was going to dry up anyway, and the government does not have a responsibility to keep non-profitable businesses in business.
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It’d really kill our economy if this business went under! Better bail out the $6K a year tie-dye birthday party business!
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If only there was another way to curb inflation rather than raising the interest rates poor people pay on their mortgage.
Gtfo with letting Russia have Ukraine because letting energy rise to the appropriate prices would be catastrophic……. and instead make Americans poor by jacking up the prices on everything including their credit card bills, auto loans, student loans, mortgages, etc, etc? Sounds like a deep state conspiracy to hide the true cost of war to me.
Aren’t mortgage rates still incredibly low by historical standards?
BuT tHe CoMpAnIeS dIdNt KnOw ThEy WeRe TaKiNg A rIsK!
So if I’m understanding this correctly SVB made clients do ALL their banking with SVB, and if they wanted a loan from SVB they also had to do all their banking with SVB. Meanwhile SVB was giving out business loans secured against future earnings for companies that were losing money and had never been profitable.
There are going to be a lot of human interest stories about small startups here, but the fact of the matter is that SVB was taking ridiculous risks, and many/most of their business clients should have been able to figure that out.
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Banks with over 250b in assets would be where I would go.
Yes but homes are priced based on rates being half of what they were just a year ago . Fed has stated that they are attempting to crash home prices and are frustrated they have not been successful enough to date because nobody is selling unless they absolutely have to.
Seems pretty dumb and reckless to induce people to invest a huge chunk of their net worth in a home then turn around and try to crash the price a year later because Russia invaded Ukraine but what do I know?
Do you have a link to that?
Sorrry, I have no sympathy for people who are losing 10-15 percent of their funds over $250,000. Maybe they should try some personal responsibility?
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Below words from Jerome Powell himself good enough for ya?
“this difficult [housing] correction should put the housing market back into better balance”
That’s cool and all but companies/entities the vast majority of Americans work for have more than $250k in deposits in a bank. Them scrambling to get their money in the “right bank” this week should be fun!
I guess those with over $250k in SVB will just need to cut back on those avocado toasts, amirite?
I believe it was quoted upthread, but unpaid wages pierce the corporate veil, so I am not particularly worried about people gettting their paychecks.
Dude we already live in this world. Rates went up, as they inevitably will when they are close to zero. Long term treasuries went down in response, as did all other fixed income investments. This was entirely predictable. Managing this type of risk is part of the core business of banking. The Fed generally does a good job signaling moves in advance, banks knew rate increases were going to continue and what that would do the bond market. Rates going up in response to inflation isn’t some sort of world changing tipping point no one could have foreseen. It also is literally in Powell’s job description to raise rates in response to inflation, it’s not incompetence.
It was just bad risk management by a bank. We as a society have agreed that the FDIC should backstop 250k per account in this scenario, which is happening. Anything else is just typical libertarians asking for a handout after bitching for decades about paying into a system that might hand out something to others. It could be that some other small banks are at risk as well but there’s no indication of a systemic issue.
The thing that I think it unique about SVB that hasn’t been talked about is how many of their “separate” customer were linked through startup incubators and venture capitalists. So someone like Peter Thiel can start a bank run on his own just by telling all the startups he’s involved with the bank may not be safe and they need to pull their assets out. This is probably a risk SVB should have thought of, but didn’t and it is likely not a risk for most other banks. It is also something SVB’s other customers could have thought of.
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