Clarice Feldman ping.
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Posted on 03/19/2023 8:34:26 AM PDT by upchuck
This week, a lot of attention has been focused on the collapse of the Silicon Valley Bank. It is, in fact, a story of faulty accounting practices, poor government oversight, and the effects of government micromanaging markets at the same time that it fails in its oversight responsibilities. And you will be paying for it. Accounting Shenanigans
Over at the Wall Street Journal, William L. Silber explains this better than anyone, and in terms anyone who ever purchased a government bond can understand. They are safe. The problem is liquidity:
SVB held tens of billions of dollars in long-term government bonds. On its face, this may seem like a prudent investment for a bank, but Treasury securities are riskless only when held to maturity. If you have to sell before then, you can easily lose money if market rates have risen since you first purchased the bond. For example, buying a 10-year U.S. Treasury bond with a 2% coupon at par and holding it for 10 years earns you 2% per annum. But if you sell early and rates have jumped -- say, 4% since you bought the bond -- then the price will have declined to about $838 per $1,000 face value, meaning you incur a loss of $162 per $1,000 bond.
The bank officers know, or certainly should know that is the case, and when the Federal Reserve increases interest those bonds are worth far less than an accounting system which shows it as a “held to maturity” item. You have incurred a loss if you have to cash it before maturity. But even so the income from the bond is listed as income, allowing the bank officers and managers to reward themselves handsomely for the “profits” on investment.
(Excerpt) Read more at americanthinker.com ...
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Today’s woke bankers: “Hey we’ve got a lot of lgbtq ass to kiss, who’s got time to pay attention to interest rates!
Insane, corrupt lawyer/politicians have all the levers of power and are just openly looting America at this point.
In addition to robbing us for their 1.2 trillion enviro slush fund, they’ll rob us to bail their buddies out. Newsome’s wineries had big funds at SVB, so did the Chinese. I heard Oprah was there.
SVB was run by woke clowns funding enviro-trash startups. They didn’t have a risk manager for the last year of clownery.
Now we get to pay for it all - and more.
;)
Get used to this stuff. They are now going to collapse the currency and economy in favor of a crypto-digital Federal Reserve currency.
All things will lead to Rome (DC) and all freedoms will be extinguished like a gallon of water on a dying campfire.
ESG/climate/bugs/Klaus Schwab/Soros 24/7 surveillance state, no personal weapons or growing food. No animals.
Killing 95% of us is the goal. The other 5% are slaves.
Not conjecture.
“Openly looting America” ….. great line. Sickening
People dismiss the value of mathematics are victims of this kind of shenanigans. And this level of understanding is something everyone should learn in high school.
(To the benefit of the DNC)
Consider when the federal banking system collapses, the government will still be here.
Re: 6 - Actually it’s all conjecture.
Just like all predictions are.
400 questions
and a thousand answers.
The bank also cheated its own balance sheet. For some loans it rquired collateral capital in case of default, but in some of those cases the collateral capital was placed on the books of the bank’s holding company, not the bank, thus reflecting less capital on the banks books than would otherwise have been the case. It also “bullied” depositors who had loans to NOT make any deposits in any other banks. Some of those folks may have been some of the first to pull their deposits from SVB.
The moral hazard of the joint Fed/FDIC “rescue” is that only 10% of the banks deposits were in insured accounts, 90% were not. That is NOT a good practice - making whole uninsured depositors. [Long ago a wealthy friend of mine who was big on cash and not much trusting of Wall Street investments, got around the “insured deposit” problem for cash above the FDIC insured level. She had mulitiple savings accounts in multiple banks.]
WSJ has a very good article this weekend.
It is very clear that SVB was very good at selling - selling itself, selling prospective startup investments to venture capitalists, selling both clients and new investors to each other. It was not terribly good at banking. That became clear when the facade of selling itself collapsed in the reality of its poor banking practices and very poor risk management. That was bound to happen whenever the facadde of Federal Reserve cheap money had to be pulled down - deflated, defalting the poor money practices of banks like SVB.
The innocent "others" will pay through our noses with massive inflation, huge FDIC fees on our deposits, and the wholesale destruction of our local banks.
Coming next: centralized digital currency, social scores to access our money, and destruction of our individual freedoms and liberty. Soon America will be like Communist China without the chopsticks.
Precisely. But when the tin foil hat is fact, what do skeptics do?
Manhattan is a pleauge on America.
p
“””The problem is liquidity:SVB held tens of billions of dollars in long-term government bonds.”””
Here is why SVB got in trouble.
Say in 2021 Joe Depositor put $500,000 in his account and SVB paid him a little more than zero interest.
SVB took the $500,000 and bought $500,000 of 30 year Treasury Bonds that yielded 2% interest.
Today those $500,000 Treasury bonds are now worth $300,000.
When Joe Depositor took the $500,000 from his account, SVB had to sell the Treasury bonds and SVB took a loss of $200,000.
There is a basic rule in banking. Do not borrow short term money and lend long term money.
When interest rates rise, bond prices go down. It has always been this way.
The discussion that's happening there is very enlightening.
Bottom line: if the deal for UBS' acquisition of Credit Suisse isn't done tonight, there's going to be a major black swan event in global markets tomorrow.
Yikes.
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