Is the stock market going to tank?
Quote:
Originally Posted by
JaytaeMoney
I'm curious about the timing specifics with SVB.
When were the $25b in bonds sold leading to the $2b loss (rough numbers)? Recently like in Q1 2023? If so the earliest the market would have found out about that would have been when they filed their quarterly report unless a loss that large triggered some sort of reporting requirement.
So assuming I'm correct and that would have showed up in quarterly earnings, everyone found out about this because they were trying to raise additional capital and disclosed it in the offering?
If so that seems like a horrible, horrible sequence of events. Regardless, should have gotten the equity raise closed first and liquidated the bonds afterwards. Stock probably still takes a shit but at least you've already got the capital in to offset the losses on the bond sale and maybe that way you avoid the VC panic and therefore the bank run. Hindsight 20/20 obviously.
The thing is, selling bonds “at a loss” sounds terrible, but it’s not half as momentous or even interesting as that…. They’re all ultimately just expressions of yield over some period of time, and tuning up a troublesome net interest margin is a proactive move that probably made all kinds of sense over the next few years.
Lots of FIs are stuck with long and shitty investment portfolios because yield was nowhere to be found but deposits were flush. Hundreds of millions of dollars in your checking account earning next to nothing doesn’t scream responsible balance sheet management, so you park it somewhere, anywhere, to earn something.
$80B at 1.56% is 1.5% higher than overnight at the time, or $1.2B per year in additional earnings. It looked ok at the time. Nobody was excited about it I’m sure, but what else do you do? Pulling a quarter of that out for a $2B loss basically wipes out most of your upside from that move, but gives you a chance to grab some meaningful yields and on net over time makes sense.
Anyways, another win for subjective mass hysteria.
Is the stock market going to tank?
Quote:
Originally Posted by
Kevo
No cost to taxpayers except additional inflation. Nothing to see here. Everything is fine.
How so? FDIC is ultimately backed by the taxpayer but funded like any other kind of insurance…. With insurance premiums paid by member banks. If there is an additional assessment to member banks I expect it’ll be minor. You might see additional bank fees, higher loan rates, lower deposit rates… and I guess that works it’s way into inflation eventually, but… I don’t see the inflation arrow as being particularly compelling. Ultimate FDIC losses should actually be pretty minimal over time. Probably a lot less than if this was allowed to keep spinning through the system.
