Crash the train to stop it

[Dondilion]

Originally Posted by whell

The SVB struggled to weather the Federal Reserve's efforts to stymie inflation; higher borrowing costs throttled the gains of tech stocks that could have benefitted the bank, and a significant drop in available VC funding floating around forced companies to withdraw their holdings.

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Hmm. Interesting.

[finnbow]

Originally Posted by whell

You really need to read the articles you post, Chicklet. If you had, you might have noticed this:

The SVB struggled to weather the Federal Reserve's efforts to stymie inflation; higher borrowing costs throttled the gains of tech stocks that could have benefitted the bank, and a significant drop in available VC funding floating around forced companies to withdraw their holdings.

You can invest yourself in the blatherings of a lefty Harvard radiologist who sounds like he knows nothing about the banking industry if you want. In the meantime, here is an explanation of what happened to SVB from folks who do know what they're talking about:

Silicon Valley Bank is a reminder that ‘things tend to break’ when Fed hikes rates: https://www.marketwatch.com/story/sv...ssive-b762936f

Silicon Valley Bank imploded in a single day. It could be just the tip of the iceberg: https://markets.businessinsider.com/...l-risks-2023-3

Sorry, bank regulations or lack thereof had nothing to do with it. In fact, SVB's assets were invested in exactly the type of low-risk vehicles that regulators love.

There's a great deal of truth to Chick's assertion unlike the position of Ron DeSantis on the matter where he blames the bank for their focus on DEI initiatives (Diversity Equity and Inclusion) and not their core mission. I didn't realize that wingnuts now consider 10-year Treasury Bonds to be DEI initiatives.

And the simple fact remains that SVB successfully lobbied to roll back Dodd-Frank provisions to reduce both oversight (e.g., "stress testing") and capital requirements on regional banks such as SVB.

[whell]

Originally Posted by finnbow

There's a great deal of truth to Chick's assertion unlike the position of Ron DeSantis on the matter where he blames the bank for their focus on DEI initiatives (Diversity Equity and Inclusion) and not their core mission. I didn't realize that wingnuts now consider 10-year Treasury Bonds to be DEI initiatives.

And the simple fact remains that SVB successfully lobbied to roll back Dodd-Frank provisions to reduce both oversight (e.g., "stress testing") and capital requirements on regional banks such as SVB.

The only "great deal of truth" in Chickie's post is the section I posted. The simple fact is that SVB got caught doing the same thing most other banks have done:

Back when interest rates were near zero, US banks scooped up lots of Treasuries and bonds. Now, as the Federal Reserve hikes rates to fight inflation, those bonds have declined in value.

When interest rates rise, newly issued bonds start paying higher rates to investors, which makes the older bonds with lower rates less attractive and less valuable.

The result is that most banks have some amount of unrealized losses on their books.

This was combined with a drawdown of "burn" funds from a larger portion of their clients than expected, which forced SVB to sell their bond portfolio at t a loss to maintain liquidity. That move prompted also prompted additional withdrawals. The oddity is that accounting rules - regardless of Dodd-Frank - allow businesses including banks to book assets such as bonds at face value, not market value.

The SVB failure is likely a one-off due to its niche. But the failure does bring to light that other banks with significant bond portfolios are similarly upside-down.

[finnbow]

Originally Posted by whell

The only "great deal of truth" in Chickie's post is the section I posted. The simple fact is that SVB got caught doing the same thing most other banks have done..

One thing's for sure, Norfolk Southern's multiple derailments and the SVB's failure, both of which can be reasonably tied to GOP deregulation fervor (at least in the public's imagination), find the GOP eager to blame anyone but themselves, from Pete Buttigieg to DEI inititiatives.

[finnbow]

[Rajoo]

Originally Posted by whell

The SVB failure is likely a one-off due to its niche. But the failure does bring to light that other banks with significant bond portfolios are similarly upside-down.

And who is to blame?

How Trump’s Deregulation Sowed The Seeds For Silicon Valley Bank’s Demise

Anyone who doubted how detrimental Trump administration policies would be should analyze the damage unfolding for those trampled by Silicon Valley Bank’s collapse. On May 24, 2018, Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Reform Act”). This was a regulatory relief bill for regional and community bill, which bank lobbyists and numerous politicians had fought hard for.

The argument at the time was that many of the provisions in the Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) were ‘one size fits all.’ Despite any proof, those lobbying for the EGRRCPA argued that capital, liquidity, and stress requirements for regional and community banks would be detrimental to the economy. In a number of Forbes columns, I argued that the weakening of bank regulations under Trump would be the seeds for the next financial crisis.

Now that the Feds are bailing out SVB against their own insurance policies, how soon before the GOP starts bitching and moaning? Remember the words "To big to fail"? We are seeing this in action.

https://www.forbes.com/sites/mayraro...h=7206fd063432

[whell]

Originally Posted by Rajoo

And who is to blame?

How Trump’s Deregulation Sowed The Seeds For Silicon Valley Bank’s Demise

Now that the Feds are bailing out SVB against their own insurance policies, how soon before the GOP starts bitching and moaning? Remember the words "To big to fail"? We are seeing this in action.

https://www.forbes.com/sites/mayraro...h=7206fd063432

The blame-game, as usual, that you guys want to play deflects attention from the real issue. Here, let me prove it to you:

Here are the changes to Dodd-Frank listed in the article you posted:

- Increasing the asset threshold for “systemically important financial institutions” or, “SIFIs,” from $50 billion to $250 billion.

- Immediately exempting bank holding companies with less than $100 billion in assets from enhanced prudential standards imposed on SIFIs under Section 165 of the Dodd-Frank Act (including but not limited to resolution planning and enhanced liquidity and risk management requirements).

- Exempting bank holding companies with between $100 billion and $250 billion in assets from the enhanced prudential standards.

- Limiting stress testing conducted by the Federal Reserve to banks and bank holding companies with $100 billion or more in assets.

Please tell me, specifically and exactly how, any one or a combination of these would have prevented SVB from defaulting.

Let me help you with the first one. Did SVB meet the threshold of a "systemically important financial institution"? In other words, since SIFI is an institution that would cause a financial crisis if it failed, did the failure of SVB cause, or does it threaten to cause, a financial crisis?

The answer is: of course not. SVB by nature was a bank whose customers were, in fact, exactly the kind of companies liberals love to hate. Many of those companies are venture capital firms. SVB's failure - whatever the government response looks like - has failed but there is no one who currently thinks that a banking system failure or other major financial crisis will be triggered by its demise.

OK, that's all the help I'm going to give you. Let's see what you do with the other three.

[whell]

Originally Posted by finnbow

One thing's for sure, Norfolk Southern's multiple derailments and the SVB's failure, both of which can be reasonably tied to GOP deregulation fervor (at least in the public's imagination), find the GOP eager to blame anyone but themselves, from Pete Buttigieg to DEI inititiatives.

OK, cool. I'll ask you the same thing that I asked Rajoo above:

Since it's your claim that "GOP deregulation" can be "reasonably tied" to SVB's failure, specifically tell me which elements of Dodd-Frank as modified in the final rules published in 2019, caused SBV's failure, and exactly how those modifications caused the failure.

[whell]

Oh, Finn and Rajoo, before you formulate your answer, it's interesting to note that the usual composer of your talking points, your favorite Dems, have yet to agree on who to blame.

Barney Frank - a bank regulator's favorite regulator, saw his own bank collapse over the weekend: Signature Bank. According to Frank:

Frank disputes that a bipartisan regulatory rollback signed into law by former President Donald Trump in 2018 had anything to do with it, even if it was driven by a desire to ease regulation of mid-size and regional banks like his own.

“I don’t think that had any impact,” Frank said in an interview. “They hadn’t stopped examining banks.”

Elizabeth Warren, who has probably never had an original thought in her life, is predictably joining the "blame Trump" bandwagon.

Warren argues that, had Congress and the Federal Reserve not rolled back stricter oversight, Silicon Valley Bank and Signature would have been better able to withstand financial shocks.

She, of course, doesn't specify exactly how this would have been the case.

But, and here's a clue for you Finn and Rajoo, Frank is correct. Banks still submit to periodic examinations. They also must still satisfy liquidity standards which, up until the failure, SVB was complying with.

[finnbow]

Originally Posted by whell

OK, cool. I'll ask you the same thing that I asked Rajoo above:

Since it's your claim that "GOP deregulation" can be "reasonably tied" to SVB's failure, specifically tell me which elements of Dodd-Frank as modified in the final rules published in 2019, caused SBV's failure, and exactly how those modifications caused the failure.

So, you're arguing that the modified Dodd-Frank was insufficiently strong to prevent the SBV collapse? Let's see if you argue in favor of tightening up regulations to prevent the next one. Maybe we should prohibit Republican super donors (like Peter Thiel) from backing such banks and then leading runs on them, thereby creating a crisis (and then demanding from government to be made whole by the regulators they vehemently oppose).

Contrary to your assertion, I did not make an argument that either the derailments or the SVB collapse were immediately and directly tied to deregulation, but that these events "can be reasonably tied to GOP deregulation fervor (at least in the public's imagination) and that accordingly the GOP is "eager to blame anyone but themselves, from Pete Buttigieg to DEI inititiatives." The Dems have a far more credible argument than those Republicans blaming "wokeness" banks and DEI initiatives.