
Originally Posted by
Mustonen
I dare say this was almost 100% psychological, or at least due to some basic misunderstanding. No? There seems to be a false equivalency afoot between depositor and investor. They aren’t really the same thing….
I might agree with that, except how? SVB was well capitalized and their balance sheet was extremely conservative. The FDIC put their seal of approval at every location and on every page of their website that discussed deposits. Risky loans? Hell no… we just put it in these nice safe treasuries to keep your money safe because so safe. Unrealized losses went through the roof….as it did for every FI with investments on the balance sheet. ROA was getting pinched by a weakening net interest margin…as it was for every FI, and earnings are still positive with a strong capital position so just wait a year or two and we’ll get back on track. Except that’s where they made a mistake; they wanted to tune up earnings by taking a loss now to reinvest at higher yields. And that put a slight damper on their capital position that they didn’t like a lot, so they tried to raise capital and ran into an illiquid market, and then they told everybody to not panic.
Very smart people in this thread don’t really understand ALM at a financial institution; shit, very smart people who are members of ALCO at financial institutions don’t really understand ALM at financial institutions. I fail to see how it makes sense or is reasonable for an unrelated business to have to worry about understanding it.
Bookmarks