But I am reasonably certain what was “marked to market” was not just government securities.
Picture the scenario below an dtell me if you see anything out of place:
Start-up guy says “No bank will lend me money for my start-up. I’ll go to a Venture Capitalist, they fund risky unprofitable stuff like this”
Venture Capitalist says “I’m not gonna use my own money for this, and no normal bank in their right mind will lend me money to fund this risky unprofitable start-up. I’ll go to Silicon Valley Bank. They fund stuff like this.”
SBV lends money to the risky scheme that no other bank would touch.
When SBV goes belly up, analysts declare “SBV went belly because of bad buys of government bonds. Lending money to risky schemes that no other bank would touch had nothing to do with it.”
The inflation and rising interest rates attacked both the risk portfolio and the reserve portfolio. At the very time that these financial institutions need the safety net of their reserve portfolios the rate increases are erasing the liquidation value of those reserves. The insiders know the true condition of both portfolios inside their institution. I opine that all the rest of the major houses are in the same situation. Collapsing risk portfolios and collapsing reserve portfolio values.
But my point is we here analyst after pundit after talking head saying in effect “SVB invested in loans that were far to risky for mainstream banks.” (The value of those loans went down hard in 2022.)
But when any reporter or pundit asks how SVB failed the analysis we here a weak, lazy-man’s refrain “They invested in government securities, the value of which went down in 2022 because J Powell raised rates.”
I’m not alleging bias, or conspiracy, or cover-up, just lazy reportage.
On SVBs part, they saw trouble coming they knew trouble was coming. They failed to disclose, but instead the insiders sold. Meanwhile Cframer, Goldman Sachs, Raymond James and 18 other analysts failed todo their DD and recommended the stock. (Like the analyst wo didn’t even know what the company did.)
The rating agencies don’t deserve their public reputations. The same thing was true during the mortgage backed securities debacle. Rating agencies saying everything is fine until suddenly it isn’t.
Yes the ratings agencies are “overly optimistic.” They were too kind to SVB, too kind to the practice of giving bank-rate loans to uncollateralized start-ups
So too are
The Wall St analysts
The pundits discussing the banks demise on CNBC, Bloomberg, Marketwatch etc…
Bloomberg discloses President and CEO of collapsed Silicon Valley Bank Greg Becker (the guy who sold %3.6m in SVB stock just before the collapse) was a Class A director at the San Francisco Federal Reserve (One of the 36 guys who runs the Fed. One of three who ran it for the San Francisco Area)
"etsy quit sending out payments at 7:30 p.m. last night.
“9,000 employees at the bank alone. Other companies that were announcing layoffs can’t even do that because they now can’t offer severance because it’s gone…”
Actually, neither liberals nor conservatives have any political responsibility to accept, nor is there any valid blame to dish out to either political side.
The fault belongs to Silicon Valley Bank, not politics.
Would have made no difference in this rather unique case. This bank had a very peculiar set of investors and investments that left it particularly vulnerable to a situation such as developed.
The system worked as designed. The bank has been seized, insured depositors have been protected. It will be a severe inconvenience for some businesses that foolishly but all their proverbial eggs in one basket.
But in the end, the banking cartel will survive this particular episode easily.
