Quote:
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.