Posted on 03/10/2023 12:21:07 PM PST by nuconvert
My sister called my Mom freaking out because she and my Mom both have plenty of dough at First Republic Bank..my sister has a friend who used to work there she was seriously on her way to go take her money out so now my mom is in a panic she has more than 250K there should she be removing her money?
Here, let me make it simple. The bank invested in a lot of “safe” government bonds, which had a low interest rate. So when interest rates go up, you have to dispose of those bonds at a steep discount, which means you will take a loss on them.
Example, you have a $100 bond, which pays 1% interest. Rates go up to 5%. You have to sell your $100 thing, for $90 (Or less) assuming it is a 2 year bond.
The new owner gets $100 when the bond redeems, plus 2% interest, or $102. He has made 6% for each year he has held the bond.
But you lose $10. Depending on much of this you have in your investments portfolio, and how much you are leveraged, you can lose your pants, and the pot you tinkle in, in a hurry.
So much for “safe” govt. bonds, when the Fed contracts......
SVB was gambling with customers' money and the cyber startups teetering and trembling bit them in the fiscal butt.... Nothing to see here / SARC
Bloomberg reported they lost billions in government securities and bonds.
The entire US banking system was federalized in 2008. Citi stock is still down 90% from its highs. If anyone thinks we have a viable banking system instead of a bunch of government run entities they are not informed.
“Imagine the banks holding those mortgages?”
Do banks really hold mortgages any more?
I thought they sold them off as mortgage backed securities and then the Federal Reserve bought them...
Others feel free to correct me.
The drug cartels will suffer when the Silicon Valley Bank customers have no cash for cocaine. LOL
Good, concise description of what happened. I would add one thing: Ghe bank probably had no interest in selling the bonds when they did. They would have been comfortable holding them to maturity. But they were FORCED to sell them to raise the cash they needed when their customers all started withdrawing their money from the bank in the last few days/weeks.
Yup—financial statements look very pretty—but if a business runs out of cash it is game, set and match.
AH that’s right, this is the bank Jim Cramer was talking up as a huge upside about a month ago....
Buffoon
Yes, a run on any bank will cause them to go bankrupt..
No Bank has enough money to cover their deposits....
Most actually BORROW money on a daily basis to have enough cash reserves to meet the federal minimals required to open for the day.
Back when I worked at Federated this was one of their larger activities, loaning out money at the beginning of each day to banks so they could open, then get paid back at the end of each day by the banks with interest.
Banks typically don’t hold mortgages.
They sell them to Freddie or Fannie.
Only credit unions still have hold some mortgages in house.
Many IF they sell the mortgage still keep the serving of the loan in house
That is why I got all my mortgages from local credit unions.
I’m looking forward to the eventual movies about this new market collapse.
“Margin Call” and “The Big Short” were fabulous entertainment!
Transient bank failures.
"Ruh-Roh" - Scooby-Doo
Watch as the banks go the same.
So is this bank failure caused by a run on the bank by depositors withdrawing so much cash? And not because the bank was badly managed, and/ or , had bad loans on the books?
“The Big Short”
/\
You simply would not beleive how many people I have begged to watch that movie .
Not 1 has.
Oh well, I tried.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.