Posted on 03/13/2023 12:47:52 PM PDT by cuz1961
SVB’s problem appears to have been triggered when they had to ‘mark to market’ the basket of bond holdings that they had previously designated “HTM”, “hold to maturity”.
A peculiarity of bank accounting; as long as they didn’t sell any of the bonds designated “HTM” the basket could still be valued at par. But once one HTM bond was sold the entire HTM basket had to be repriced at present value and that made the bank underwater.
If SVB had been managed better they wouldn’t have put themselves in that position.
“Anything over that is bailout by government using tax dollars.”
Maybe not. I can see the Fed providing the cash to cover the deposits over the $250k fdic limit, maybe in exchange for SVB’s underwater Treasuries. There’s no real benefit to simply letting those depositor dollars vanish and go to money heaven. SVB stock and bond holders still get punished, the bank goes out of existence.
Where should Roku hold that money?
I prefer they liquidates all bonds and other assets anddistribute proceeds proportionally to depositers.
Are you supplying application forms ?
Fire sales are awesome!!!
Depositers took the risk of placing more than $250k.
Why should tax payers (through government bureaucrats) bail them out?
The first $250k deposits in bank were paid for by depositors in the form of reduced interest on savings and therefore they should get that reimbursed through FDIC. Just like we get paid from Social Security because we paid taxes for social security.
Bookmark
Wouldn’t spreading it around money market funds have been a better choice for some of that cash? Even during Bear Stearns the broken buck was only 97 cents compared to what they are looking at here.
Yes they did.
Why should tax payers (through government bureaucrats) bail them out?
I haven't seen any taxpayer money being used, yet, to bail them out.
The first $250k deposits in bank were paid for by depositors in the form of reduced interest on savings and therefore they should get that reimbursed through FDIC.
It's possible that after the sale, no FDIC funds will be spent.
Maybe, but can you use a money market fund to meet payroll?
Is there a limit on the number of deposits and withdrawals per month?
Even during Bear Stearns the broken buck was only 97 cents
When they froze it. What would it have dropped to if they had to keep selling securities to meet more redemptions that day?
HAHAHAHAHAHAHAHAHA
Where do you think the federal govenment gets money to bail out anyone? DO they have a money tree in DC? COME ON MAN, every penny federals have is liability to tax payers, including the FUGLY big national debt.
“Maybe, but can you use a money market fund to meet payroll?
Is there a limit on the number of deposits and withdrawals per month?”
These are valid questions that I can’t answer. I’ve never seen a description of how corporations manage huge cash balances. That has to be its own industry.
“When they froze it. What would it have dropped to if they had to keep selling securities to meet more redemptions that day?”
But wasn’t that 97 cents the worst that it got? The fund didn’t disappear and was reopened IIRC. My understanding is that MMFs invest in very short term obligations so they don’t have the sort of interest rate risk that SVB had with its bond portfolio.
The sale of SVB’s Treasuries may be sufficient to cover the uninsured portion of their depositor’s accounts. No taxpayer money needed.
I thought they froze redemptions at that point.
The fund didn't disappear and was reopened IIRC.
I thought it was liquidated.
My understanding is that MMFs invest in very short term obligations so they don't have the sort of interest rate risk that SVB had with its bond portfolio.
They had a Lehman commercial paper issue.
SURELY!
THIS!
IS!
ILLEGAL!
This what I found on the busted buck Reserve Primary money market fund which as you noted had a Lehman problem:
“Shortly after Lehman filed for Chapter 11, Reserve Primary Fund, a major money market fund that held a large amount
of Lehman’s commercial paper, announced that it would be forced to “break the buck”—
that is, it could not pay its investors a full dollar for each dollar they had invested.
This triggered a run on money market funds that the Fed countered by promising to guarantee money market fund assets.”
The Fed swooped in to backstop the fund which is what I vaguely remembered. My impression is that the Fed would do that again but who knows.
Bear Stearns’ demise came when its mortgage based hedge funds blew up, with JP Morgan Chase buying the carcass.
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.