It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007-2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.
I believe SVB was making an effort to reorganize their bond portfolio. Yes, they would lose money if they sold their low-yielding bonds. But, they were trying to make up for it by repurchasing bonds on the open market at the higher interest rate.
Although the economy has so far held up, the SVB scenario serves as a warning that Fed rate hikes are still having an impact. At times like this, investors must be vigilant about the next inevitability. You don't have to act on every forecast, therefore I'll advise you to hire a financial counselor. This has been my fallback position for a while.
The rising interest rate can surely control inflation, but won't prevent erosion of the eroding purchasing power of the US dollar. I have learnt my lesson this time. The banks can't be making money off my money, while inflation eats into it. I have set aside 650k to invest in the stock market now, since that keeps up with inflation, but I don't know how to get started.
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
Keeping money in the bank is like paying banks and the Govemment. Here's how it works: The bank gives out your money as loan, and charge interest obviously higher than inflation rate, and then give you, the depositor, interest lower than inflation rate. That means net loss for you. That is why I prefer to invest, and on average, my advisor makes returns that always beats inflation!
To be honest, I've been wary of banks for a while, but I wasn't sure how to speak with an advisor first. Please let me know who your adviser is if it's okay; I need some recommendations.
Vivian Jean Wilhelm a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
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The banking situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far,” It’s precisely at times like these that investors need to be on guard against the next certainty. First SVB, then signature bank and now first republic bank, these are all the signs of yet another 2008 market crash 2.0
In my opinion, some of these banks were attempting to restructure their bond portfolio, which involved selling their low-yielding bonds despite the potential loss, and compensating for it by buying higher-interest-rate bonds on the open market.
Investors should commit to reputable companies by holding steady or increasing investments during market downturns, as well-managed enterprises eventually rebound with renewed strength. Seeking guidance from a financial advisor can help identify opportune entry and exit points for long-term profits through stock appreciation. Working with an investment advisor can result in significant gains, as seen during the pandemic with a gain of $530k in just 8 months.
@adakkristinn My Financial adviser is ‘’Colleen Janie Towe’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
The situation is just what happens with asinine deregulation. Everyone warned this would happen if the regulations were repealed and Trump did it anyway.
What happened to SVB is really scary, and goes to show that no corporation, however big, is immune to collapse. I have always had a deep-seated mistrust for corporations. I have plans to pull out most of my money, but don't know what to do with $350k sitting idly. I'd like to go into the stock market, maybe. Any ideas?
I have learned to not trust corporations. I was badly hit by the '08 financial crisis. Since 2019, I've just been focused on investing through a financial advisor, and it has been paying off, and I'm never going back to banks full time.
I agree. The stock market could be a really great protection for your money. You don't really need to know how the market works in order to invest. In fact, you could lose your money if you go solo. I'm no expert myself, so what I do is that I invest through an advisor. There are many you could potentially find online. I personally work with Sharon Louise Count, and she's been spectacular. But there are also many others.
The negative impact of SVB and SI debacles has been reflected in the regional bank ETF (KRE) which has witnessed a decline of over 20%. This event has triggered contagion effects, dragging the entire market lower. However, historically speaking, a localized and narrow contagion of this nature presents an opportune time to invest in strong, financially stable companies with substantial cash reserves on their balance sheets.
Indeed, the recent market downturn serves as evidence that a vast majority of individuals lacked a sufficient understanding of the underlying financial dynamics at play.
@@gracesdonny1532 I agree, that's the more reason I prefer my day to day invt decisions being guided by a init-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a init-coach for over 2years+ and I've netted over 2.8million.
@@emilybrown2719 My licensed coach, Susan Agnes Hancock is a highly experienced and knowledgeable specialist in the financial market. She possesses exceptional expertise in portfolio diversification, and is widely acknowledged as an authoritative figure in her industry.
The $17bn loss was unrealized because bonds held to maturity are not marked to market. The problem with SVB was on the liability side and a liquidity problem, not an asset side devaluation. Not until SVB had to sell some assets and realize a $1.8bn loss to cover. A similar stress has happened before under Fed Chairman Volker and we survived it. I believe what we are seeing is banks adjusting to a more normal interest rate environment as the Fed finally lifts off the zero bound. Due to its hold to maturity book, SVB was actually solvent until the bank run.
About the current bank situation, I'm really concerned. I am worried about a lot more if a bank the size of SVB may fail. I have a friend who manages a fast-growing startup and was severely impacted by the bank run. I have taken more than $840k out of my bank. Since the FDIC only provides coverage up to $250K, an implosion could have negative consequences. presently want to invest in the stock market. Does anyone have any ideas on how I might proceed?
We fail to realize that banks are commercial enterprises that are driven by greed as well. The over-leveraging of assets by banks starting in 2020 was one of the factors that led to SVB's collapse. I've never felt secure keeping a large sum of money in a bank. In other words, I invest through my financial advisor, reap the benefits, and then spend the money.
@@martingiavarini Would you mind telling me how to contact this specific coach using their service? You seem to have the solution, as opposed to the rest of us.
@@lipglosskitten2610 Christine Jane Mclean, a well-known person in her field, is my advisor. I advise doing more study on her credentials. She is a great resource for anyone looking to understand the financial market because of her extensive experience.
@@martingiavarini Thanks for the advice. The search for your coach was simple. I investigated her well before using her services. Considering her résumé, she appears competent.
Some things are left out in this video, namely the role that the California banking regulator played as well as how SVB handled such a large increase in deposits over a very short period of time.
It turns out that having long periods of Fed manipulated interest rates towards zero percent caused massive systemic risk. Once rates were allowed to move back towards a normal equilibrium we suddenly saw firms that depended on negative real rates struggle to survive. It was the Fed that created this crisis by inflating to unsustainable bubbles so they could "stimulate" the economy. Unfortunately that stimulation only lasted as long as rates remained far below market equilibrium. When rates climbed treasuries tanked .. taking down SVB with them.
WTH. It went under because rising interest rates sparked an old-school bank run!? They didn't do anything that crazy, they had parked the excess deposits in treasuries! That's nuts!
The root cause of the Silicon Valley Bank catastrophic collapse is the failure to implement the Basel Framework for Banks. After the 2008 financial crisis, all the major western democracies have implemented the recommendation of the Basel Framework for Banks, with the notable exception of the United States. The Basel Framework for Banks was implemented only for the major American banks. The smaller banks and regional banks were exempted (including SVB) because they lobbied hard and Congress bowed, they were excluded from the Basel Framework.
Actually this wouldn't have helped since SVB had an LCR that was already higher than the upper range required under Basel III for SIFI banks. The bigger issue is that long term US bonds qualified (and still qualify) under Basel as highly liquid assets as long as they are marked as held to maturity, when in reality they should have been valued using mark to market. The real issue is that no one in the company or the outside regulators seemed to consider the fundamental issue of insurance rate risk, and SVB purchased no interest rate swaps to hedge their position which is incredibly unusual. The former and new risk management officers, COO, and CEO should be prevented from ever working in the financial sector again.
This is like the greatest mismanagement of funds i’ve ever seen why would SVB tie that much money in long term bonds at least with a mortgage loan u can get returns monthly
As a econ bachelor student trying to understand what is happening, wouldn't investing in gov. bonds be considered the safest of investments to put extra money in, since they had it in the increase of their deposits?
The Silicon Valley Bank reserves were in long-term low interest treasuries, without any hedging. I do not understand the reason to buy long-term treasuries when the interest rate is near zero ? I do not understand why the management did not do any hedging for interest ? Usually big failures are caused by big management failure !
The interest rate for long term was not near 0, the interest near 0 was the short term bonds. That is why the went to buy the long term ones. Stupid management.
Several of the biggest market experts have been voicing their opinions on exactly how awful they think the next downturn would be, and how far equities may have to go, as recession draws closer and inflation continues well above the Fed's 2% objective. I'm trying to build a portfolio of at least $850k by the time I'm 60, therefore I need suggestions on what investments to make.
Many people either fail to grasp the power of compound interest or lack the patience for it. For most individuals, investing in the S&P 500 and waiting patiently, though it may take many years, is a reliable strategy. Alternatively, working with a professional analyst can accelerate wealth creation-a benefit that many people tend to underestimate.
On my end I've been in touch with a financial analyst ever since I started my business. Knowing today's culture The challenge is knowing when to purchase or sell when investing in trending stocks, which is pretty simple. On my portfolio, which has grown over $900k in a little over a year, my adviser chooses entry and exit orders.
I think this is something I should do, but I've been stalling for a long time now. Mind if I ask you to recommend this particular coach you using their service?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Rebecca Nassar Dunne” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks for sharing. I searched for her full name, found her website immediately, reviewed her credentials, and did my due diligence before reaching out to her.
"These are companies that move quickly". BS. They're not talking about the fact that a bunch of tech companies and venture capital groups all hopped on Slack and collectively decided to pull their money out at once. Investigation pending.
Yeah, because they were hoping they’d be able to crash a bank, and get bailed out for it. They were mad their money was tied up in a ten year treasury bond, and they wanted higher returns. So, naturally Yellen and the gang jumped in to bail out their wealthy buddies.
@@Fishmans If EVERYONE in the industry knew this then why did nearly all VC firms explicitly advised (demanded?) their portfolio companies to park their funds there?
Ok, look at the opposite. Where could SVB invest the cash deposits they could cash in without a loss to cover a bank deposit run? How can a bank function without getting profit on cash deposits to help cover loan obligations. Invested in low risk Bonds for profit, fed raised interest rates lowering the bond value, bonds dropped in value, run on bank, and bank sales bonds at a loss to cover the bank run. So, how do you level the playing field without limiting bank run withdrawal limits. Large depositors can manipulate bank runs to get their money out early leaving the other depositors holding the bag at the $250,000 insured level. Plus, we know in reality the fed can't cover every bank deposit in the country for $250,000.
The most amazing aspect of this whole event is that before it was seized, svb paid its annual bonuses! What a caring organization! And because the depositors are so politically involved, everything is guaranteed 100%
Yes. Please read the book called The creature of Jekyll Island. In this book many similar bank run cases are mentioned. I mean exactly the same. The bank pays the same dividend to show everything is Ok and then within the week the bank fails.
LENDER OF LAST RESORT Perhaps the most important part of the bailout, however, was that the money to make it possible was created-directly or indirectly-by the Federal Reserve System. If the bank had been allowed to fail, and the FDIC had been required to cover the losses, the drain would have emptied the entire fund with nothing left to cover the liabilities of thousands of other banks. In other words, this one failure alone, if it were allowed to happen, would have wiped out the entire FDIC! That's one reason the bank had to be kept operating, losses or no losses, and that's why the Fed had to be involved in the bail out. In fact, that was precisely the reason the System was created at Jekyll Island: to manufacture whatever amount of money might be necessary to cover the losses of the cartel. The scam could never work unless the Fed was able to create money out of nothing and pump it into the banks along with "credit" and "liquidity" guarantees. Which means, if the loans go sour, the money is eventually extracted from the American people through the hidden tax called inflation. That's the meaning of the phrase "lender of last resort." FDIC director Irvine Sprague, while discussing the press release which announced the Continental bail-out package, describes the Fed's role this way: The third paragraph ... granted 100 percent insurance to all depositors, including the uninsured, and all general creditors.... The next paragraph ... set forth the conditions under which the Fed, as lender of last resort, would make its loans.... The Fed would lend to Continental to meet "any extraordinary liquidity requirements." That would include another run. All agreed that Continental could not be saved without 100 percent insurance by FDIC and unlimited liquidity support by the Federal Reserve. No plan would work without these two elements.1
Oversimplyfying it, it all boils down to the rate of liquid assets vs investments that a bank can have. Major banks were required to have more liquidity in case of a bank run but smaller banks weren't.
It's an incorrect assessment that has been floating around, primarily pushed by political pundits. While SVB was not subject to the higher liquidity coverage ratio standards, they still would have met them had they been subject to them. This is because of a flaw in Basel standards that consider long term US bonds as part of the "highly liquid assets" as long as they are marked as held to maturity. So the rule change did not contribute either directly or indirectly to SVB's downfall.
A lot of people are blaming the looser regulations, but this misses the point. The purpose of regulations is not to prevent bank failures but to protect the average Joe. Which in this case, they are with the FDIC insurance.
You have insurance but you hope to never need it. The regulations were their to lower the risk of us ever needing it. Because when a bank fails, and the FDIC insurance or your local equivalent has to be used, it's everyone that is paying for it.
Seriously why should you trust a institution that needs to be regulated in order to not toy with peoples money if I want to do that I would go to a stock broker and not the banker
@@Hans-gb4mv this is true but the moral hazard risk is low; it’s in the bank’s best interest not to fail. So again, regulations are meant to protect, not save the bank.
The bank crisis isn't over yet, and experienced individuals know credit crises don't end quickly. Some find it amusing that some think it's resolved, but in reality, we're headed for a major economic downturn due to this ongoing bank crisis.
After the '08 financial crisis, I've learned not to trust corporations. Since 2020, I've been allocating with an advis0r and have had no major losses, so I'm not going back to relying solely on banks.
Well said . Personally ,i diversify my investments across various markets with the guidance of my financial advisor, Stacey Lee Decker. I’m happy about this decision . This routine has enabled me to achieve attractive good returns through high dividend-yield stocks, digital assets, ETFs, and bonds.
You’re welcome. I’ve made over six figures passively with Stacey Lee Decker’s guidance in a strong financial community. Market crashes doesn’t affect my returns.
They say if you don't learn about history, it repeats itself. From what I've seen in both past events, and the events happening today, it repeats itself regardless.
Humankind will never learn from history. Without preventive regulation, banks will inevitably succumb to greed and corruption whether directly or indirectly. But those who have profited from this fact don’t care. They made their profits and its the customers who are paying for it. Of course this can happen for any large corporation. And please, do NOT bail out SVB! All that teachs them is that they can do whatever they want, run the bank to the ground, and start over again. Rinse and repeat. We will NEVER learn.
the coverage fails to mention the securities were purchased under the assumption of HTM. that $17B gap would have been made good in time. the issue was, like the dude said, these particular deposits were very flighty. the VCs backing the startups got scared their investments were at risk of complete loss and contacted the various startup CEOs to pull funds ASAP.
It might even be intentional. As in, the VCs intentionally tried to make the bank collapse in order to push the Fed to lower interest rates. There is even an email trail about it. Before the bank run, the VCs exchanged emails and held meetings with each other in which they told each other that the bank was in trouble. In truth, the bank was fine so long as there wasn't a bank run (and even more amusingly, the rise in Treasuries prices after the bank collapse might even have been enough to make the bank solvent again). Only after the VCs had their meetings together did they decide, en masse, to withdraw their deposits. It wasn't a case of one VC thinking the bank is in trouble and deciding he ought to move fast to save his money, it was a case of all them moving at the same time which actually made a bank collapse much more likely and made it more likely, without the Fed bailout that occurred, that the VCs would lose money. There seems to be some collusion going on.
So why should the government back these weak paperhands? Oh yeah, these same weaksauces donated money to the politicians and the election cycle will start up again next year. Better have those fat checks ready.
So a few missing pieces of info. 1. SVB didn't have a Risk Chief for all or most of 2022. Big Red flag. 2. They never performed the stress test required even under the reduced Dodd-Frank rules that would have provided them with the tools needed.3. Even under the original Dodds-Frank rules, the stress test had the interest rates at 2%, which still would fail under those conditions as well. (I'm 90% sure Im right here. ) 4. If your deposits are not insured, whose problem is it really? 5. This is absolutely a bailout and will be another transfer of wealth from the general population to the banking executives. It's a failure at every level.
Can you elaborate on the “transfer of wealth” comment? FDIC funds come from insurance premiums from the banks themselves - not taxpayer money, unless I’m mistaken
@@andrewadventures1 Sure not a problem. From what I read and understand, the way the administration said this would be covered/paid for, would be fees that banks pay into the Deposit Insurance Fund. So that means anyone with funds under the $250k cap for FDIC insurance will pay higher banking fees. That's the sneaky transfer of wealth that is not being reported. So it will be a greater portion of the population paying for this.
As I understand ..The bail out help both the customers and the investors of the bank. It use tax money. ..In this case the help only to the customers of the bank. (as Yellen said that we wont do it again..to bail out) It will not use tax money.
@@pauleagle6281 As I stated above, from what I read and understand, the way the administration said this would be covered/paid for, would be fees that banks pay into the Deposit Insurance Fund. So that means anyone with funds under the $250k cap for FDIC insurance will pay higher banking fees. That's the sneaky transfer of wealth
There are new information on the SVB bank run. The bank run did not started in March 2023. The bank run was initiated in October 2022, when the Chinese investors started to remove their funds. Did you know that the Silicon Valley Bank opened a Chinese bank in 2007?
At 3:45, what does it mean when SVB sold securities to cover the decline of deposits? Does it mean to raise cash to pay the withdrawals? Or is there some other meaning?
The reason why the small banks don't have much regulations is so it would encourage you to put your money into larger banks, therefore, the bigger banks get bigger and the small banks fail. Think of it like Walmart taking over small ma and pa shops in the area. It's business
I understand Peter Thiel had something to do with the bank run. He has his own fingers in fintech pots. Has anyone researched his involvement? Rather important to mention.
multiple reports of him ordering his companies to pull all their money out at once, not very clear on why, might be related to treasury bonds losses but needs investigation for sure
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One thing i'm not getting is, how did their bonds drop in value? I've never heard of that before. Don't bonds always have the saem value but with different locked in interest rates?
@@gamersplayers617 Older government bond yields are constant and their buying and selling prices move to reflect their marketable value TODAY when compared to newly issued similar bonds with higher interest yield brought to market today. "If you hold them to maturity" you get back exactly what cash you put in. If you must sell them in the market to raise cash now you get a huge haircut because your older lower interest bond must match the yield of new bonds to find a buyer. A bank with big value demand depositors putting most of its money into longer term low interest bonds is a very foolish operation.
When interest rates are raised bond prices decreases, vice versa. The Fed raised the Federal fund rates, that is the reason for the decline of the bond value which were held by SVB. They could not profit from the government bonds they held. After this, there were panic by investors and depositors who pulled back there money, which lead to the current crisis. Now according to this report, some large banks are acting as Lender of last resort to restore investors confidence, and improve liquidity.
@@DRob-gq3ki That's so dumb. I'm always amazed by how people can have brains and still be stupid. That's like saying it collapsed because it went Papa smurf.
SVB: Deposits tripped in 2 yrs! Used it to buy LT treasury Interests rates rose -> Bond prices fall -> Assets losses 37000 accounts avg >> $250,000 FDIC insured amount Withdrawal $42B -> Start ups bank run Short-term funding for long term goals: Risky!!!!
I don’t understand the bond issue. Yes rates went up and the bond price went down, but can’t SVB own until they mature and not worry about the price drop?
That works, until you have to sell them to pay back depositors. Most competent banks hedge their interest rate risks on longer term instruments, but SVB didn't even have a Risk Management Officer last year when things started going south.
@@deathbyvanity1955 Not so much the wrong place as the wrong duration. If they had shorter term T-Bills and Notes, they could have paid off depositors. You lock up your Depositors money at 5, 10, 20 years and it gets tougher to sell when your depositors want to be paid back. They didn't properly hedge (insure) their investment. When Interest rates are low, and you load up on bonds that have an average maturity of 5 years, and interest rates rise, you lose money. There are a variety of products you could buy to hedge (insure) your bonds from interest rates going up, swaps, caps, collars, etc. They chose not to do that, although most Risk Management professionals would have told them that is the right thing to do. When interest rates rose, they were likely going to lose a lot of deposits in the bank, because tech startups often rely on low interest rates for funding. So they were going to have to payout money, and they weren't liquid enough to pay out money. So they were sitting there with a Bank that was likely to be in weaker shape if interest rates rose, and they did absolutely nothing to insure against that risk. They basically screwed the pooch.
That's correct. Which is why these assets are marked as "hold to maturity". If they're forced to sell HTM assets they realize capital losses on the bond. However, going forward the Fed has announced rules to allow banks to use the "par value" of their bonds as collateral rather than market value. This means they'll be allowed to borrow cash from the Federal reserve system without realizing those losses. SVB was just the unlucky bank to fail first - I don't forsee banks with similar liquidity problems to fail given the change in collateral rules.
SVB forced many of its depositors to put EVERYTHING into their bank. This should be highly illegal. They had signed contracts to provide some sort of service to bank customers and in return the bank customers had to put ALL monies in SVB within 7d of receiving them. This "Tying" IS A DIRECT THREAT TO THE FDIC INSURANCE PROGRAM AND SHOULD BE A FELONY.
Nearly every bank has most of their eggs in this very same basket -- US Treasuries. Treasuries are to banks what a savings account is to regular people. It's where they put their money when they don't know what else to do with it.
Did you actually watch the video? This was standard bank practice, UNTIL Covid hit and everyone was stashing their cash. What do you do with a massive amount of cash if you're a bank? You either loan it out, or you try to make money with it. Treasury's are USUALLY safe. But they got caught in a draw down, (people spending again in 2022) AND a rise in interest rates that is historically unprecedented. Their CEO should have seen this coming 3 months ago. Total negiligence.
I guess it’s a lesson that even with bonds you must diversify. I don’t know how these guys didn’t expect interest rate hikes when the federal interest rate was literally at 0%. Some people at SVB were brain dead
@@jasonmachacek895 Diversify into what? Global financial markets mean that nearly all national bonds move in lockstep with each other. When the Fed raises rates, so does every other major central bank and nearly every other minor central bank. In 2021 there were 19$ trillion in US federal securities while the total global market of similarly liquid securities was 32$ trillion. This is a deep and very liquid market, so it makes complete sense that investors seeking to reduce risk buy such securities. Every other type of financial investment carries a lot more risk that national gov't securities. Suppose a bank wanted to move $200 billion from US treasuries to some other country's bonds. To do so, given the scale of the markets and the transaction, they would need to buy up a huge portion of that other country's bonds (at a premium since they need to find a lot of willing sellers) and they still wouldn't escape the interest rate risk because central banks move rates in lockstep.
I remember in the 70's when the US debt hit 1 trillion dollars, the largest debt anywhere in history. Bank failures in the USA are inevitable, there's always a bank scandal in the USA. I wouldn't invest in an american bank, no matter how big they get. 2008 credit crash is more evidence of it, I question the honesty in the US market. Canada has its problems however banks are heavily regulated by the government. They remember what happened in 1921, when some banks had their own currency, their not making that mistake again.
SVB had a Tier 1 capital ratio of 15 %. That's way above Dodd Frank. How would that made difference? It is not just SVB that holds bonds, that is the scary part.
@@pandafox12 Didn't read the whole thing because it was almost 900 pages, but don't think it took out treasuries. It was a triple wamy I think. 1. Lower value on treasuries. 2. More withdrawal because of inflation. 3. More withdrawal because of lay offs in tech.
Their problem weren't the bonds but lack of diversification on both customer base and investment portfolio. Also, ignoring risks coming from the above.
@@Johnnyprague At first the government promoted bonds to finance government spending, then radically did a 180 to counter inflation. The fast shift created a issue for those who held those bonds.
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I have incurred so much losses trading on my own..I trade well on demo. But I think the real market is manipulated. Can anyone help me out or at least tell me what I'm doing wrong
This just prove what kind of idiots financial people are. As it was their panic Tahoe really caused the issue. Thus is just another it's a wonderful life.
If the policy to guarantee all deposits had been in place before the Bank run started then there would have been no need for the bank run to start. It was the bank run that killed the bank. They could have held their bonds til the value went up again. They may have lost some money but not enough to cause the bank to fail.
@@ASMR4calmmoods this bank was mostly used by businesses. It sounds like many of them had all their seed funding in this one bank. They could not afford to lose that. They need it to pay their wages during the time it takes to start turning a profit. Most of the deposits were over the insured figure. People were going to take it all put so that's why the bank collapsed. Point is that now all of it will be covered and if this had been done faster there never would have been the collapse in the first place.
Agreed in part. Looser regulations *and* an outdated FDIC contributed to this collapse. (FDIC should be ~$350k adj f/ inflation.) -Reduce investment risks: lower banking losses -Increase individuals' insurance: lower chance of a 'run' As much as we may not like government regulation, we need it in our financial system to keep greedy banks in check and to maintain economic stability. The argument that regulation 'hinders economic prosperity' holds little weight when a banking collapse risks tanking the entire economy. We learned very little from 2008.
250K deposit insurance is not enough to cover payroll for many medium sized firms or larger. Additional classes of insurance should be provided to and paid for by depositors.
It's not even enough in light of inflation. $250k circa 2008 (the last time FDIC was raised) is ~$350k now. That's $100k difference *not* being covered over the years.
So basically there was nothing too wrong... a drop in value as with all other companies during thjs global inflation... it was the people that brought it down. Smh.
Even a layman will say buying bonds with the extra cash will be a stupid idea by the kind of artificial economic situation created by the pandemic. Govt was giving away stimulus checks and there was a discussion about inflation and interest rate hike to correct things.
Counter Points - Ryan Grimm talks about this. Roughly 200 heads of tech startups and venture capital groups all coordinated on Slack to pull their money out at once. Investigation is ongoing.
Couldn't those SVB leaders associate the sudden increase of deposits with the pandemic and forecast a future drop in the near future when the pandemic is over? I mean, why buy long-term bonds? Seems like they didn't expect the pandemic to end anytime soon
We have the highest level of educated bankers working in such banks and also in FedReserves yet nobody was able to figure out this outcome 6 months before, for what lies ahead if Fed increases interest rate. Are those financial degrees held by the senior bankers legit? Or is this the sign of reviving education system?
I read in their team in website. some of these people are not bank people or just regular bankman. but majority of them is some Venture capital and generic angel investor. this entire team is super sus in my eye.
What happened to the 5C’s of credit capacity, Capital, collateral, conditions in character. All these banks have proven the 5C’s to credit never judge people
It would be simpler to say that the government doesn't know how to handle events like this. The bank did not need to be closed (due to a problem that The Fed caused and has since created a workaround for)... Guaranteeing depositors' money isn't enough to replace the actual value that the bank created in the economy.
Did Dodd-Frank limit the amounts and type of treasury purchases smaller banks make? I know everyone is quick to blame deregulation, but it sounds like to me someone and a small group of people decided to go against standard industry practice taught in a basic banking chapter in ANY economics course.
I had the same question. They certainly implied that in this video but gave no evidence of it. Notice the framing of smart Obama and stupid Trump; the WSJ is doing NPR levels of reporting here. It would appear that SVB simply believed the Fed when they said inflation was transitory, so the bought long term treasuries thinking they were safe.
Why not reassign the ownership of the government bonds in the bank books to the account holder at face value instead market value. Account holder then can choose whether to hold until maturity (thus no loss at all) or sold in the market (with potential loss or gain). Surely it would reduce the risk and losses by the account holder.
@@saturnteatree government bonds are guaranteed. Only opportunity loss if interest continue go up n not real loss. SVB suffer cuz the sold some thus suffer actual loss.
@@saturnteatree the point is if government bonds are the only asset SVB have left, then use it instead selling it at loss to reimburse deposit holder as the cash generated will x enough. At least it can 1 to 1 exchange with govt bond held by SVB. Up to deposit holder how to utilize the bond.
Global financial markets have been significantly impacted by SVB's demise, prompting investors to sell off bank equities hastily and reevaluate their interest rate expectations. I am a $350,000 investor who is at a crossroads and wondering if it is wise to hold onto securities that are losing value. I want guidance on the best approaches to maximizing my returns in this negative market.
The banking situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far,” It’s precisely at times like these that investors need to be on guard against the next certainty. First SVB, then signature bank and now first republic bank, these are all the signs of yet another 2008 market crash 2.0
Well, people downplay advisors role until burnt by their mistakes. I remember just after my layoff early 2020 amidst covid outbreak, I needed to stay afloat, hence researched for license advisors. Thankfully, I came across someone of practical knowledge, and decades of experience, my stagnant reserve of $325K has yielded nearly $1m after subsequent investments so far.
It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007-2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.
I believe SVB was making an effort to reorganize their bond portfolio. Yes, they would lose money if they sold their low-yielding bonds. But, they were trying to make up for it by repurchasing bonds on the open market at the higher interest rate.
Although the economy has so far held up, the SVB scenario serves as a warning that Fed rate hikes are still having an impact. At times like this, investors must be vigilant about the next inevitability. You don't have to act on every forecast, therefore I'll advise you to hire a financial counselor. This has been my fallback position for a while.
I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this coach?
Her name is Annette Christine Conte can't divulge much. Most likely, the internet should have her basic info, you can research if you like
Thank you for sharing. it was easy to find her, then I scheduled a phone call with her. She seems proficient considering her résumé.
The rising interest rate can surely control inflation, but won't prevent erosion of the eroding purchasing power of the US dollar. I have learnt my lesson this time. The banks can't be making money off my money, while inflation eats into it. I have set aside 650k to invest in the stock market now, since that keeps up with inflation, but I don't know how to get started.
Investing without proper guidance can lead to mistakes and losses. I've learned this from my own experience.If you're new to investing or don't have much time, it's best to get advice from an expert.
Keeping money in the bank is like paying banks and the Govemment. Here's how it works: The bank gives out your money as loan, and charge interest obviously higher than inflation rate, and then give you, the depositor, interest lower than inflation rate. That means net loss for you. That is why I prefer to invest, and on average, my advisor makes returns that always beats inflation!
To be honest, I've been wary of banks for a while, but I wasn't sure how to speak with an advisor first. Please let me know who your adviser is if it's okay; I need some recommendations.
Vivian Jean Wilhelm a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you so much for your helpful tip! I was able to verify the person and book a call session with her. She seems very proficient and I'm really grateful for your guidance
The banking situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far,” It’s precisely at times like these that investors need to be on guard against the next certainty. First SVB, then signature bank and now first republic bank, these are all the signs of yet another 2008 market crash 2.0
In my opinion, some of these banks were attempting to restructure their bond portfolio, which involved selling their low-yielding bonds despite the potential loss, and compensating for it by buying higher-interest-rate bonds on the open market.
Investors should commit to reputable companies by holding steady or increasing investments during market downturns, as well-managed enterprises eventually rebound with renewed strength. Seeking guidance from a financial advisor can help identify opportune entry and exit points for long-term profits through stock appreciation. Working with an investment advisor can result in significant gains, as seen during the pandemic with a gain of $530k in just 8 months.
@adakkristinn My Financial adviser is ‘’Colleen Janie Towe’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
The situation is just what happens with asinine deregulation. Everyone warned this would happen if the regulations were repealed and Trump did it anyway.
What happened to SVB is really scary, and goes to show that no corporation, however big, is immune to collapse. I have always had a deep-seated mistrust for corporations. I have plans to pull out most of my money, but don't know what to do with $350k sitting idly. I'd like to go into the stock market, maybe. Any ideas?
I have learned to not trust corporations. I was badly hit by the '08 financial crisis. Since 2019, I've just been focused on investing through a financial advisor, and it has been paying off, and I'm never going back to banks full time.
I agree. The stock market could be a really great protection for your money. You don't really need to know how the market works in order to invest. In fact, you could lose your money if you go solo. I'm no expert myself, so what I do is that I invest through an advisor. There are many you could potentially find online. I personally work with Sharon Louise Count, and she's been spectacular. But there are also many others.
Put it all in Gold, over time it does better than the stock market
I have lots of confidence in USA banking system that it will collapse is guaranteed and needs resuscitation every few years 🌟😀
Gild is savety instrument... forever
The negative impact of SVB and SI debacles has been reflected in the regional bank ETF (KRE) which has witnessed a decline of over 20%. This event has triggered contagion effects, dragging the entire market lower. However, historically speaking, a localized and narrow contagion of this nature presents an opportune time to invest in strong, financially stable companies with substantial cash reserves on their balance sheets.
Indeed, the recent market downturn serves as evidence that a vast majority of individuals lacked a sufficient understanding of the underlying financial dynamics at play.
@@gracesdonny1532 I agree, that's the more reason I prefer my day to day invt decisions being guided by a init-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a init-coach for over 2years+ and I've netted over 2.8million.
@@jenniferkyle6036 Please, who is the advisor that assists you with your investments
@@emilybrown2719 My licensed coach, Susan Agnes Hancock is a highly experienced and knowledgeable specialist in the financial market. She possesses exceptional expertise in portfolio diversification, and is widely acknowledged as an authoritative figure in her industry.
@@jenniferkyle6036 Researched her accreditation. She seem very proficient, I wrote her detailing my Fin-market goals and scheduled a call.
The $17bn loss was unrealized because bonds held to maturity are not marked to market. The problem with SVB was on the liability side and a liquidity problem, not an asset side devaluation. Not until SVB had to sell some assets and realize a $1.8bn loss to cover. A similar stress has happened before under Fed Chairman Volker and we survived it. I believe what we are seeing is banks adjusting to a more normal interest rate environment as the Fed finally lifts off the zero bound. Due to its hold to maturity book, SVB was actually solvent until the bank run.
About the current bank situation, I'm really concerned. I am worried about a lot more if a bank the size of SVB may fail. I have a friend who manages a fast-growing startup and was severely impacted by the bank run. I have taken more than $840k out of my bank. Since the FDIC only provides coverage up to $250K, an implosion could have negative consequences. presently want to invest in the stock market. Does anyone have any ideas on how I might proceed?
We fail to realize that banks are commercial enterprises that are driven by greed as well. The over-leveraging of assets by banks starting in 2020 was one of the factors that led to SVB's collapse. I've never felt secure keeping a large sum of money in a bank. In other words, I invest through my financial advisor, reap the benefits, and then spend the money.
@@martingiavarini Would you mind telling me how to contact this specific coach using their service? You seem to have the solution, as opposed to the rest of us.
@@lipglosskitten2610 Christine Jane Mclean, a well-known person in her field, is my advisor. I advise doing more study on her credentials. She is a great resource for anyone looking to understand the financial market because of her extensive experience.
@@martingiavarini Thanks for the advice. The search for your coach was simple. I investigated her well before using her services. Considering her résumé, she appears competent.
Whatever you do, *DO* *NOT* give your money to the *Con* *Artists* in the comments section!
Some things are left out in this video, namely the role that the California banking regulator played as well as how SVB handled such a large increase in deposits over a very short period of time.
It turns out that having long periods of Fed manipulated interest rates towards zero percent caused massive systemic risk. Once rates were allowed to move back towards a normal equilibrium we suddenly saw firms that depended on negative real rates struggle to survive. It was the Fed that created this crisis by inflating to unsustainable bubbles so they could "stimulate" the economy. Unfortunately that stimulation only lasted as long as rates remained far below market equilibrium. When rates climbed treasuries tanked .. taking down SVB with them.
and like u said, feds manufactured the low rates to begin with... this system is garbage
Just watched the Frontline documentary. This has been a long time coming.
What incentive do big banks have not to overextend themselves when the government will just bail them out...
WTH. It went under because rising interest rates sparked an old-school bank run!? They didn't do anything that crazy, they had parked the excess deposits in treasuries! That's nuts!
The root cause of the Silicon Valley Bank catastrophic collapse is the failure to implement the Basel Framework for Banks.
After the 2008 financial crisis, all the major western democracies have implemented the recommendation of the Basel Framework for Banks, with the notable exception of the United States. The Basel Framework for Banks was implemented only for the major American banks.
The smaller banks and regional banks were exempted (including SVB) because they lobbied hard and Congress bowed, they were excluded from the Basel Framework.
Probably should have mentioned only 1 member of the board had a background in banking.
Basel framework is dumb. let banks do what they want
@@bobby7703isn’t this a result of not following the basel framework
Actually this wouldn't have helped since SVB had an LCR that was already higher than the upper range required under Basel III for SIFI banks. The bigger issue is that long term US bonds qualified (and still qualify) under Basel as highly liquid assets as long as they are marked as held to maturity, when in reality they should have been valued using mark to market.
The real issue is that no one in the company or the outside regulators seemed to consider the fundamental issue of insurance rate risk, and SVB purchased no interest rate swaps to hedge their position which is incredibly unusual. The former and new risk management officers, COO, and CEO should be prevented from ever working in the financial sector again.
Are you sure? Are you sure it wasn't wokeness? Or ashamed to admit that your political views don't actually work in the real world?
This is like the greatest mismanagement of funds i’ve ever seen why would SVB tie that much money in long term bonds at least with a mortgage loan u can get returns monthly
I'm struggling to understand the idea behind that decision, looking at the industry they are most exposed to.
As a econ bachelor student trying to understand what is happening, wouldn't investing in gov. bonds be considered the safest of investments to put extra money in, since they had it in the increase of their deposits?
@danilotoskoviasc as a student you should read the book called The creature of Jekyll Island. It will give all your answers.
Very good explanation. You have a new subscriber.
The Silicon Valley Bank reserves were in long-term low interest treasuries, without any hedging.
I do not understand the reason to buy long-term treasuries when the interest rate is near zero ?
I do not understand why the management did not do any hedging for interest ?
Usually big failures are caused by big management failure !
But check their bonuses, for these there is no mistake…
Yup. And no regulation trump rolled back was going to stop that stupid decision
@Flow Kite - Taiba - Brazil Interest rate Swaps
The interest rate for long term was not near 0, the interest near 0 was the short term bonds. That is why the went to buy the long term ones. Stupid management.
@@huckfin1598 trump is not the president in 2023.
Several of the biggest market experts have been voicing their opinions on exactly how awful they think the next downturn would be, and how far equities may have to go, as recession draws closer and inflation continues well above the Fed's 2% objective. I'm trying to build a portfolio of at least $850k by the time I'm 60, therefore I need suggestions on what investments to make.
Many people either fail to grasp the power of compound interest or lack the patience for it. For most individuals, investing in the S&P 500 and waiting patiently, though it may take many years, is a reliable strategy. Alternatively, working with a professional analyst can accelerate wealth creation-a benefit that many people tend to underestimate.
On my end I've been in touch with a financial analyst ever since I started my business. Knowing today's culture The challenge is knowing when to purchase or sell when investing in trending stocks, which is pretty simple. On my portfolio, which has grown over $900k in a little over a year, my adviser chooses entry and exit orders.
I think this is something I should do, but I've been stalling for a long time now. Mind if I ask you to recommend this particular coach you using their service?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Rebecca Nassar Dunne” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks for sharing. I searched for her full name, found her website immediately, reviewed her credentials, and did my due diligence before reaching out to her.
"These are companies that move quickly". BS. They're not talking about the fact that a bunch of tech companies and venture capital groups all hopped on Slack and collectively decided to pull their money out at once. Investigation pending.
Yeah, because they were hoping they’d be able to crash a bank, and get bailed out for it. They were mad their money was tied up in a ten year treasury bond, and they wanted higher returns.
So, naturally Yellen and the gang jumped in to bail out their wealthy buddies.
@@Fishmans If EVERYONE in the industry knew this then why did nearly all VC firms explicitly advised (demanded?) their portfolio companies to park their funds there?
Ok, look at the opposite. Where could SVB invest the cash deposits they could cash in without a loss to cover a bank deposit run? How can a bank function without getting profit on cash deposits to help cover loan obligations. Invested in low risk Bonds for profit, fed raised interest rates lowering the bond value, bonds dropped in value, run on bank, and bank sales bonds at a loss to cover the bank run. So, how do you level the playing field without limiting bank run withdrawal limits. Large depositors can manipulate bank runs to get their money out early leaving the other depositors holding the bag at the $250,000 insured level. Plus, we know in reality the fed can't cover every bank deposit in the country for $250,000.
The most amazing aspect of this whole event is that before it was seized, svb paid its annual bonuses! What a caring organization! And because the depositors are so politically involved, everything is guaranteed 100%
Yes. Please read the book called The creature of Jekyll Island. In this book many similar bank run cases are mentioned. I mean exactly the same. The bank pays the same dividend to show everything is Ok and then within the week the bank fails.
LENDER OF LAST RESORT
Perhaps the most important part of the bailout, however, was
that the money to make it possible was created-directly or
indirectly-by the Federal Reserve System. If the bank had been
allowed to fail, and the FDIC had been required to cover the losses,
the drain would have emptied the entire fund with nothing left to
cover the liabilities of thousands of other banks. In other words,
this one failure alone, if it were allowed to happen, would have
wiped out the entire FDIC! That's one reason the bank had to be
kept operating, losses or no losses, and that's why the Fed had to be
involved in the bail out. In fact, that was precisely the reason the
System was created at Jekyll Island: to manufacture whatever
amount of money might be necessary to cover the losses of the
cartel. The scam could never work unless the Fed was able to create
money out of nothing and pump it into the banks along with
"credit" and "liquidity" guarantees. Which means, if the loans go
sour, the money is eventually extracted from the American people
through the hidden tax called inflation. That's the meaning of the
phrase "lender of last resort."
FDIC director Irvine Sprague, while discussing the press release
which announced the Continental bail-out package, describes
the Fed's role this way:
The third paragraph ... granted 100 percent insurance to all
depositors, including the uninsured, and all general creditors.... The
next paragraph ... set forth the conditions under which the Fed, as
lender of last resort, would make its loans.... The Fed would lend to
Continental to meet "any extraordinary liquidity requirements." That
would include another run. All agreed that Continental could not be
saved without 100 percent insurance by FDIC and unlimited liquidity
support by the Federal Reserve. No plan would work without these
two elements.1
What were the rules that were rolled back? How did those rules being removed directly contribute to SVB’s downfall?
Oversimplyfying it, it all boils down to the rate of liquid assets vs investments that a bank can have. Major banks were required to have more liquidity in case of a bank run but smaller banks weren't.
It's an incorrect assessment that has been floating around, primarily pushed by political pundits. While SVB was not subject to the higher liquidity coverage ratio standards, they still would have met them had they been subject to them. This is because of a flaw in Basel standards that consider long term US bonds as part of the "highly liquid assets" as long as they are marked as held to maturity. So the rule change did not contribute either directly or indirectly to SVB's downfall.
orange man bad
I love watching you all fight
geopolitical failure of assuming treasury is risk-free and liquid 😁
Good video. Very informative.
A lot of people are blaming the looser regulations, but this misses the point. The purpose of regulations is not to prevent bank failures but to protect the average Joe. Which in this case, they are with the FDIC insurance.
You have insurance but you hope to never need it. The regulations were their to lower the risk of us ever needing it. Because when a bank fails, and the FDIC insurance or your local equivalent has to be used, it's everyone that is paying for it.
You're a fool if you think the
FDIC has any money..👈🤔
Seriously why should you trust a institution that needs to be regulated in order to not toy with peoples money if I want to do that I would go to a stock broker and not the banker
Problem is majority of the money this bank owes is not insured.
@@Hans-gb4mv this is true but the moral hazard risk is low; it’s in the bank’s best interest not to fail. So again, regulations are meant to protect, not save the bank.
The bank crisis isn't over yet, and experienced individuals know credit crises don't end quickly. Some find it amusing that some think it's resolved, but in reality, we're headed for a major economic downturn due to this ongoing bank crisis.
After the '08 financial crisis, I've learned not to trust corporations. Since 2020, I've been allocating with an advis0r and have had no major losses, so I'm not going back to relying solely on banks.
Well said . Personally ,i diversify my investments across various markets with the guidance of my financial advisor, Stacey Lee Decker. I’m happy about this decision . This routine has enabled me to achieve attractive good returns through high dividend-yield stocks, digital assets, ETFs, and bonds.
With high inflation, I want to invest my idle cash. Thanks for sharing her impressive resume that I found online!
You’re welcome. I’ve made over six figures passively with Stacey Lee Decker’s guidance in a strong financial community. Market crashes doesn’t affect my returns.
The three pillars of Basel III are market discipline, Supervisory review Process, minimum capital requirement.
They say if you don't learn about history, it repeats itself. From what I've seen in both past events, and the events happening today, it repeats itself regardless.
Especially the bonuses for the executives who screwed up! 😂
Humankind will never learn from history. Without preventive regulation, banks will inevitably succumb to greed and corruption whether directly or indirectly. But those who have profited from this fact don’t care. They made their profits and its the customers who are paying for it. Of course this can happen for any large corporation. And please, do NOT bail out SVB! All that teachs them is that they can do whatever they want, run the bank to the ground, and start over again. Rinse and repeat.
We will NEVER learn.
So, which rules or regs exactly were lessened for the smaller banks?
the coverage fails to mention the securities were purchased under the assumption of HTM. that $17B gap would have been made good in time. the issue was, like the dude said, these particular deposits were very flighty. the VCs backing the startups got scared their investments were at risk of complete loss and contacted the various startup CEOs to pull funds ASAP.
It might even be intentional. As in, the VCs intentionally tried to make the bank collapse in order to push the Fed to lower interest rates. There is even an email trail about it. Before the bank run, the VCs exchanged emails and held meetings with each other in which they told each other that the bank was in trouble. In truth, the bank was fine so long as there wasn't a bank run (and even more amusingly, the rise in Treasuries prices after the bank collapse might even have been enough to make the bank solvent again). Only after the VCs had their meetings together did they decide, en masse, to withdraw their deposits. It wasn't a case of one VC thinking the bank is in trouble and deciding he ought to move fast to save his money, it was a case of all them moving at the same time which actually made a bank collapse much more likely and made it more likely, without the Fed bailout that occurred, that the VCs would lose money. There seems to be some collusion going on.
So why should the government back these weak paperhands? Oh yeah, these same weaksauces donated money to the politicians and the election cycle will start up again next year. Better have those fat checks ready.
@@bobwinters5572 did the fed bailout every bank in 08 or allowed some to fail?
What is htm
@@bobwinters5572 it was definitely intentional
So a few missing pieces of info. 1. SVB didn't have a Risk Chief for all or most of 2022. Big Red flag. 2. They never performed the stress test required even under the reduced Dodd-Frank rules that would have provided them with the tools needed.3. Even under the original Dodds-Frank rules, the stress test had the interest rates at 2%, which still would fail under those conditions as well. (I'm 90% sure Im right here. ) 4. If your deposits are not insured, whose problem is it really? 5. This is absolutely a bailout and will be another transfer of wealth from the general population to the banking executives. It's a failure at every level.
Can you elaborate on the “transfer of wealth” comment? FDIC funds come from insurance premiums from the banks themselves - not taxpayer money, unless I’m mistaken
@@andrewadventures1 Sure not a problem. From what I read and understand, the way the administration said this would be covered/paid for, would be fees that banks pay into the Deposit Insurance Fund. So that means anyone with funds under the $250k cap for FDIC insurance will pay higher banking fees. That's the sneaky transfer of wealth that is not being reported. So it will be a greater portion of the population paying for this.
@@andrewadventures1but the insurance premiums only apply to the $250k insured limit, right? I thought that was the case unless I’m mistaken as well.
As I understand
..The bail out help both the customers and the investors of the bank. It use tax money.
..In this case the help only to the customers of the bank. (as Yellen said that we wont do it again..to bail out) It will not use tax money.
@@pauleagle6281 As I stated above, from what I read and understand, the way the administration said this would be covered/paid for, would be fees that banks pay into the Deposit Insurance Fund. So that means anyone with funds under the $250k cap for FDIC insurance will pay higher banking fees. That's the sneaky transfer of wealth
There are new information on the SVB bank run. The bank run did not started in March 2023. The bank run was initiated in October 2022, when the Chinese investors started to remove their funds.
Did you know that the Silicon Valley Bank opened a Chinese bank in 2007?
At 3:45, what does it mean when SVB sold securities to cover the decline of deposits? Does it mean to raise cash to pay the withdrawals? Or is there some other meaning?
The reason why the small banks don't have much regulations is so it would encourage you to put your money into larger banks, therefore, the bigger banks get bigger and the small banks fail. Think of it like Walmart taking over small ma and pa shops in the area. It's business
I understand Peter Thiel had something to do with the bank run. He has his own fingers in fintech pots. Has anyone researched his involvement? Rather important to mention.
more like peter thief
multiple reports of him ordering his companies to pull all their money out at once, not very clear on why, might be related to treasury bonds losses but needs investigation for sure
LOL maybe he has short position on the bank? That'll be interesting situation.
what are you supposed to if you discover the thing?
people should research his involvement in neo nazi organizations lol
Did the person who started the stampede also have a short bet on SVB?
Crazy how noone sees this coming , but everyone knows the story
Strange huh?
First time in internet?
@@nujin0093 its like they love loosing money
@@MrZlocktar you mean on?
This is intentional to destroy our current financial institutions and introduce cbdc
This is why I'm a credit union customer. Always will be.
i love your video.. As a beginner I learn how to use ur strategies.. I slowly wiining it.. Thanks.. really alot!! I love your channel & one day I wish to become like you a successful trader!
One thing i'm not getting is, how did their bonds drop in value? I've never heard of that before. Don't bonds always have the saem value but with different locked in interest rates?
I am also confused about this... If u know about it.. Please do post it here
@@gamersplayers617 Older government bond yields are constant and their buying and selling prices move to reflect their marketable value TODAY when compared to newly issued similar bonds with higher interest yield brought to market today. "If you hold them to maturity" you get back exactly what cash you put in. If you must sell them in the market to raise cash now you get a huge haircut because your older lower interest bond must match the yield of new bonds to find a buyer. A bank with big value demand depositors putting most of its money into longer term low interest bonds is a very foolish operation.
When interest rates are raised bond prices decreases, vice versa. The Fed raised the Federal fund rates, that is the reason for the decline of the bond value which were held by SVB. They could not profit from the government bonds they held. After this, there were panic by investors and depositors who pulled back there money, which lead to the current crisis. Now according to this report, some large banks are acting as Lender of last resort to restore investors confidence, and improve liquidity.
Somebody said they would buy your bread in 3 years for full price, but you need the money now and it went moldy.
When you go deeper, every financial instrument is like a currency. Shares, bonds, and loans can all be bought and sold whenever.
It’s becoming safer to put money in dug up holes in the backyard wow
It collapsed cause the customers went berserk and tried to take all of their money out
And because they went woke
@@DRob-gq3ki That's so dumb. I'm always amazed by how people can have brains and still be stupid. That's like saying it collapsed because it went Papa smurf.
Do they not have the right to have access to their money??
@@DRob-gq3kistfu you dweeb
At 3:15, why did deposits fall by $30bn?
SVB:
Deposits tripped in 2 yrs!
Used it to buy LT treasury
Interests rates rose -> Bond prices fall -> Assets losses
37000 accounts avg >> $250,000 FDIC insured amount
Withdrawal $42B -> Start ups bank run
Short-term funding for long term goals: Risky!!!!
SVB’s collapse had nothing to do with Silverlake or Signature. Why aren’t they talking about that!?
And Rotate taught me that banks bad. I lov u andrew tato
I don’t understand the bond issue. Yes rates went up and the bond price went down, but can’t SVB own until they mature and not worry about the price drop?
how to repay depositors then?
That works, until you have to sell them to pay back depositors. Most competent banks hedge their interest rate risks on longer term instruments, but SVB didn't even have a Risk Management Officer last year when things started going south.
@@dancahill9585 so SVB invested depositers money in the wrong place?
@@deathbyvanity1955 Not so much the wrong place as the wrong duration. If they had shorter term T-Bills and Notes, they could have paid off depositors. You lock up your Depositors money at 5, 10, 20 years and it gets tougher to sell when your depositors want to be paid back.
They didn't properly hedge (insure) their investment. When Interest rates are low, and you load up on bonds that have an average maturity of 5 years, and interest rates rise, you lose money. There are a variety of products you could buy to hedge (insure) your bonds from interest rates going up, swaps, caps, collars, etc. They chose not to do that, although most Risk Management professionals would have told them that is the right thing to do.
When interest rates rose, they were likely going to lose a lot of deposits in the bank, because tech startups often rely on low interest rates for funding. So they were going to have to payout money, and they weren't liquid enough to pay out money. So they were sitting there with a Bank that was likely to be in weaker shape if interest rates rose, and they did absolutely nothing to insure against that risk. They basically screwed the pooch.
That's correct. Which is why these assets are marked as "hold to maturity". If they're forced to sell HTM assets they realize capital losses on the bond. However, going forward the Fed has announced rules to allow banks to use the "par value" of their bonds as collateral rather than market value. This means they'll be allowed to borrow cash from the Federal reserve system without realizing those losses. SVB was just the unlucky bank to fail first - I don't forsee banks with similar liquidity problems to fail given the change in collateral rules.
At 3:55, what has Silvergate winding down got to do with SVB?
Panic in clients after looking at SVB's regulatory reporting
I think hindenburg is more interested in other countries than their own country 😅😂😂😂😂😂
SVB forced many of its depositors to put EVERYTHING into their bank. This should be highly illegal. They had signed contracts to provide some sort of service to bank customers and in return the bank customers had to put ALL monies in SVB within 7d of receiving them. This "Tying" IS A DIRECT THREAT TO THE FDIC INSURANCE PROGRAM AND SHOULD BE A FELONY.
I'm no economist, but it sounds like they had all their eggs in one basket 🤔
Nearly every bank has most of their eggs in this very same basket -- US Treasuries. Treasuries are to banks what a savings account is to regular people. It's where they put their money when they don't know what else to do with it.
Did you actually watch the video? This was standard bank practice, UNTIL Covid hit and everyone was stashing their cash. What do you do with a massive amount of cash if you're a bank?
You either loan it out, or you try to make money with it. Treasury's are USUALLY safe. But they got caught in a draw down, (people spending again in 2022) AND a rise in interest rates that is historically unprecedented. Their CEO should have seen this coming 3 months ago. Total negiligence.
I guess it’s a lesson that even with bonds you must diversify. I don’t know how these guys didn’t expect interest rate hikes when the federal interest rate was literally at 0%. Some people at SVB were brain dead
@@jasonmachacek895 Diversify into what? Global financial markets mean that nearly all national bonds move in lockstep with each other. When the Fed raises rates, so does every other major central bank and nearly every other minor central bank. In 2021 there were 19$ trillion in US federal securities while the total global market of similarly liquid securities was 32$ trillion. This is a deep and very liquid market, so it makes complete sense that investors seeking to reduce risk buy such securities. Every other type of financial investment carries a lot more risk that national gov't securities. Suppose a bank wanted to move $200 billion from US treasuries to some other country's bonds. To do so, given the scale of the markets and the transaction, they would need to buy up a huge portion of that other country's bonds (at a premium since they need to find a lot of willing sellers) and they still wouldn't escape the interest rate risk because central banks move rates in lockstep.
I remember in the 70's when the US debt hit 1 trillion dollars, the largest debt anywhere in history. Bank failures in the USA are inevitable, there's always a bank scandal in the USA. I wouldn't invest in an american bank, no matter how big they get. 2008 credit crash is more evidence of it, I question the honesty in the US market. Canada has its problems however banks are heavily regulated by the government. They remember what happened in 1921, when some banks had their own currency, their not making that mistake again.
VCの次はどこにお金が流れるんですかね？
Very interesting
*any expert opinion fm HINDENBERG ?*
SVB had a Tier 1 capital ratio of 15 %. That's way above Dodd Frank.
How would that made difference?
It is not just SVB that holds bonds, that is the scary part.
Yeah what regulation would have banned the purchase of treasuries as being too risky?
@@pandafox12
Didn't read the whole thing because it was almost 900 pages, but don't think it took out treasuries.
It was a triple wamy I think.
1. Lower value on treasuries.
2. More withdrawal because of inflation.
3. More withdrawal because of lay offs in tech.
I think one of the biggest risks they had was having a customer pool largely consisting of one sector
Their problem weren't the bonds but lack of diversification on both customer base and investment portfolio. Also, ignoring risks coming from the above.
@@Johnnyprague
At first the government promoted bonds to finance government spending, then radically did a 180 to counter inflation.
The fast shift created a issue for those who held those bonds.
Moral of the story: Risky is safe and Safe is risky!
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I wonder who coordinated this massive yet precise investors panic...
100% intentional
Explain why they there was rush to deposit money in SVB during crisis
This just prove what kind of idiots financial people are. As it was their panic Tahoe really caused the issue.
Thus is just another it's a wonderful life.
I couldn't grasp the point of inverse relationship between the value of bond and interest rate.
Fundamental rule don't put all your eggs in one basket.S.V.C invest in GOLD, REAL ESTATE,ART,and things that the Government can't print.
Why I always feel that everything linked to start ups has a maddofian sniff on it…
Because the tires are too small and new to kick without management getting a chance to pull a Potemkin village first?
Brilliant 🎉
Spread your buying.
This is why we need to invest in precious metals since they are a safe haven asset
6:54 is that a... SUPRA?
If the policy to guarantee all deposits had been in place before the Bank run started then there would have been no need for the bank run to start. It was the bank run that killed the bank. They could have held their bonds til the value went up again. They may have lost some money but not enough to cause the bank to fail.
FDIC insures up to $250K. Anyone with more than that could lose it.
@@ASMR4calmmoods this bank was mostly used by businesses. It sounds like many of them had all their seed funding in this one bank. They could not afford to lose that. They need it to pay their wages during the time it takes to start turning a profit. Most of the deposits were over the insured figure. People were going to take it all put so that's why the bank collapsed. Point is that now all of it will be covered and if this had been done faster there never would have been the collapse in the first place.
Agreed in part. Looser regulations *and* an outdated FDIC contributed to this collapse. (FDIC should be ~$350k adj f/ inflation.)
-Reduce investment risks: lower banking losses
-Increase individuals' insurance: lower chance of a 'run'
As much as we may not like government regulation, we need it in our financial system to keep greedy banks in check and to maintain economic stability.
The argument that regulation 'hinders economic prosperity' holds little weight when a banking collapse risks tanking the entire economy. We learned very little from 2008.
So the disturbing Wednesday March 8 “regulatory filing” (required by “regulation”) started the bank run?
250K deposit insurance is not enough to cover payroll for many medium sized firms or larger. Additional classes of insurance should be provided to and paid for by depositors.
It's not even enough in light of inflation. $250k circa 2008 (the last time FDIC was raised) is ~$350k now. That's $100k difference *not* being covered over the years.
So basically there was nothing too wrong... a drop in value as with all other companies during thjs global inflation... it was the people that brought it down. Smh.
Even a layman will say buying bonds with the extra cash will be a stupid idea by the kind of artificial economic situation created by the pandemic. Govt was giving away stimulus checks and there was a discussion about inflation and interest rate hike to correct things.
42$ billion in one day this insane something is wrong 🙂 the reason is some one who makes plans for this
Counter Points - Ryan Grimm talks about this. Roughly 200 heads of tech startups and venture capital groups all coordinated on Slack to pull their money out at once. Investigation is ongoing.
Couldn't those SVB leaders associate the sudden increase of deposits with the pandemic and forecast a future drop in the near future when the pandemic is over? I mean, why buy long-term bonds? Seems like they didn't expect the pandemic to end anytime soon
We have the highest level of educated bankers working in such banks and also in FedReserves yet nobody was able to figure out this outcome 6 months before, for what lies ahead if Fed increases interest rate. Are those financial degrees held by the senior bankers legit? Or is this the sign of reviving education system?
None of this makes sense at all. It sounds like sabotage to introduce cbdc.
The top executives did the typical retreat by giving themselves big bonuses and left.....
Hindenberg should have focused more on SVB than Adani stocks 😂😂
It missed such a great sorting opportunity.
In hindsight, if it had invested its money in SPY and QQQ, it would have avoided many problems.
I thought the thumbnail for this video was Oklahoma at first
I guess this was said before, but their risk management is really unprofessional.
I read in their team in website. some of these people are not bank people or just regular bankman. but majority of them is some Venture capital and generic angel investor. this entire team is super sus in my eye.
Not incompetence this was deliberate
What happened to the 5C’s of credit capacity, Capital, collateral, conditions in character. All these banks have proven the 5C’s to credit never judge people
The number one reason why SVB failed: Greed
False. Stupidity and Fear is why it failed.
Not a day and a half, it had been warned by Bank regulators, and fined by regulators
But Jim Cramer said buy buy buy or was he really saying bye bye?
0:40 There's the problem right there: zoomer-style lowercase letters in the acronym. Keep capitalized, WSJ!
It would be simpler to say that the government doesn't know how to handle events like this. The bank did not need to be closed (due to a problem that The Fed caused and has since created a workaround for)...
Guaranteeing depositors' money isn't enough to replace the actual value that the bank created in the economy.
First they made a fiat currency, then give it to random people then go bankrupt then print more money and cycly goes on and on
34 banks in worse position that SVB.. Source: Valuetainment
Where is hindenburg now
Adani's recovery and US Bank failure
Buy gold and keep it near old books and news papers. Sell tiny parts if you need money. No one will do this because advice is practical
The bank should have predicted higher interest rates were in the near future, due to the high inflation environment.
Nothing the bank could have done would help after it was hijacked by the woke mind virus.
...not to mention, only one board member actually knew about banking.
The rest were DEI plug-ins, all major Democrat donors
A critically suspicious 'run' on the bank. Almost like it were planned...
Did Dodd-Frank limit the amounts and type of treasury purchases smaller banks make? I know everyone is quick to blame deregulation, but it sounds like to me someone and a small group of people decided to go against standard industry practice taught in a basic banking chapter in ANY economics course.
I had the same question. They certainly implied that in this video but gave no evidence of it. Notice the framing of smart Obama and stupid Trump; the WSJ is doing NPR levels of reporting here. It would appear that SVB simply believed the Fed when they said inflation was transitory, so the bought long term treasuries thinking they were safe.
Why not reassign the ownership of the government bonds in the bank books to the account holder at face value instead market value. Account holder then can choose whether to hold until maturity (thus no loss at all) or sold in the market (with potential loss or gain). Surely it would reduce the risk and losses by the account holder.
Go to chase tomorrow and instead of taking out cash withdraw a bond thats u cant cash for 5 years… yielding below market interest
@@saturnteatree government bonds are guaranteed. Only opportunity loss if interest continue go up n not real loss. SVB suffer cuz the sold some thus suffer actual loss.
@@rizalmiehishamabdrahim4369 thats not the point if customers want to use their money to buy bonds they would have
@@saturnteatree the point is if government bonds are the only asset SVB have left, then use it instead selling it at loss to reimburse deposit holder as the cash generated will x enough. At least it can 1 to 1 exchange with govt bond held by SVB. Up to deposit holder how to utilize the bond.
"we are not going to do that again" then immediately proceeds to bail out the banks! Capitalists are such liars.
This is like the 5%ers problems. normal people don't have enough in a savings account to move any dial
OMG IS THAT A SUPRA 6:52
My friends and I are celebrating getting hammered with scotch and beer!
Global financial markets have been significantly impacted by SVB's demise, prompting investors to sell off bank equities hastily and reevaluate their interest rate expectations. I am a $350,000 investor who is at a crossroads and wondering if it is wise to hold onto securities that are losing value. I want guidance on the best approaches to maximizing my returns in this negative market.
Donate it 👍
If there is no withdraw in that short peroid of time, SVB is still there.
Probably, but SVB would also still be around had they demonstrated a lower risk tolerance.
Why we need to hold our money in those banks?? Why we cant just hold it in digital wallet directly in national bank?
The banking situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far,” It’s precisely at times like these that investors need to be on guard against the next certainty. First SVB, then signature bank and now first republic bank, these are all the signs of yet another 2008 market crash 2.0
My main concern now is how can we generate more revenue during quantitative times? I can't afford to see my savings crumble to dust.
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