Trump-Era Deregulation Deemed a Key Culprit in the Failure of Silicon Valley Bank

[AlexBailey]

Which had nothing to do with SVB or Signature failures

Keep trying.



https://fortune.com/2023/03/11/sili...k-trump-rollback-systemically-important-fdic/

SVB CEO Greg Becker lobbied the government to relax some Dodd-Frank provisions on regional lenders in 2015. Trump did in 2018.​

In 2015, SVB Chief Executive Officer Greg Becker urged the government to increase the threshold, arguing it would otherwise lead to higher costs for customers and “stifle our ability to provide credit to our clients.” With a core business of traditional banking — taking deposits and lending to growing companies — SVB doesn’t pose systemic risks, he said.

 

[Sean Renaud]

I agree that easy money and MMF was the root cause and that interest rates should have been raised long ago but Presidents don’t set interest rates.

Not directly they don't. There are a lot of things that presidents don't do that we know good and damn well they do. Its just they meet up over a game of golf, one of too many that Obama took and WAY more that Trump "I'll be too busy to play golf" did and say "Hey, we need to start moving the needle on this."

 

[AlexBailey]

https://fortune.com/2023/03/17/svb-...ng-hawaii-after-second-biggest-bank-collapse/

SVB’s disgraced ex-CEO spotted holidaying in Hawaii days after presiding over second biggest bank collapse in U.S. history​

 

[Sean Renaud]

Hey when you got money you spend it going to places like Hawaii.

 

[BabyBoomer50s]

What does this even mean? The stress tests alone would've triggered action and the liquidity required to have on hand would've reduced the impact.

Of course it has everything to do with these banks and how they chose to recklessly make investments.

It means the 2018 legislation had nothing to do with it. SVB held treasury bonds and government insured mortgage backed securities, both of which were highly liquid and safe. They would have passed the LCR stress test the large banks are subject to.

 

[AlexBailey]

Hey when you’ve just lost billions of dollars of other people’s money you spend it going to places like Hawaii.

I fixed it for you.

 

[ll74]

It means the 2018 legislation had nothing to do with it. SVB held treasury bonds and government insured mortgage backed securities, both of which were highly liquid and safe. They would have passed the LCR stress test the large banks are subject to.

Of course it did...with the legislation in place, stress testing would've been required as well as extra liquidity.

That would've happened preventing the bank management from putting it's customers at risk by dumping all of its investments in long term treasury bonds.

 

[BabyBoomer50s]

Keep trying.



https://fortune.com/2023/03/11/sili...k-trump-rollback-systemically-important-fdic/

SVB CEO Greg Becker lobbied the government to relax some Dodd-Frank provisions on regional lenders in 2015. Trump did in 2018.​

In 2015, SVB Chief Executive Officer Greg Becker urged the government to increase the threshold, arguing it would otherwise lead to higher costs for customers and “stifle our ability to provide credit to our clients.” With a core business of traditional banking — taking deposits and lending to growing companies — SVB doesn’t pose systemic risks, he said.

SVB CEO’s support for the legislation doesn’t mean the legislation caused the banks failure. The fact remains that SVB did not fail because of risky, illiquid investments. It failed because it held long term bonds which fell in value as interest rates rose. Also because the FDIC, Fed, and CA State regulators were asleep at the wheel. Had nothing to do with 2018 legislation. The LCR stress tests that large banks are subject to don’t address this. See links on post 137

 

[BabyBoomer50s]

Of course it did...with the legislation in place, stress testing would've been required as well as extra liquidity.

That would've happened preventing the bank management from putting its customers at risk by dumping all of its investments in long term treasury bonds.

You don’t understand the difference between liquidity risk and interest rate risk. See post 137. Two links from the nonpartisan Bank Policy Institute will clear up your confusion.

 

[AlexBailey]

SVB CEO’s support for the legislation doesn’t mean the legislation caused the banks failure. The fact remains that SVB did not fail because of risky, illiquid investments. It failed because it held long term bonds which fell in value as interest rates rose. Also because the FDIC, Fed, and CA State regulators were asleep at the wheel. Had nothing to do with 2018 legislation. The LCR stress tests that large banks are subject to don’t address this. See links on post 137

If Dodd Frank had not been rolled back SVB would have been subject to more scrutiny, including their heavy investment in long term bonds.


Edit: Looking into it further you seem to be correct, in this case the carelessness at SVB would not have been overseen by any Dodd Frank rules.

So apparently this is just a systemic problem that can come up when the Federal Reserve raises interest rates to curb inflation. Maybe instead of tanking banks we should consider raising taxes to curb inflation - and while we’re at it we should probably do some rethinking on our system of fractional reserve lending.

 

[ll74]

You don’t understand the difference between liquidity risk and interest rate risk. See post 137. Two links from the nonpartisan Bank Policy Institute will clear up your confusion.

I do. Having long term Treasury bonds meant less liquidity and higher interest risk. No confusion here. You're incorrect that the increased stress testing and increased liquidity (both required by the 2018 law) wouldn't have prevented this. At the very least, it would've forced management to be more.mindful and accountable for their choices, which would've been more likely noticed due to the increased levels of scrutiny.

More eyes tends to make people more attentive to risk.

 

[AlexBailey]

So let’s see, the problem is that the banks bought up mortgage backed securities and when the interest rates rose they lost value.

Since “smaller” banks are subject to less regulation they love to bundle and sell mortgage securities to get them off of their balance sheets so that they can remain “small banks”.

So the Dodd-Frank rollbacks could still be playing a role, albeit one that is a bit more obscure…

These mortgage backed securities lost value because they were purchased with an expectation of a particular rate of return which devalued against newer higher interest securities. If they had not been bundled and sold they would have remained at the original value of when they were issued. Instead our banking system is a shell game, and when banks lose, it’s the FDIC and/or taxpayers who pay the bill while bank executives cash out their bonuses and CEOs go on vacation.


Remind me how the rich pay more than their fair share?

 

[RobDownSouth]

I do. Having long term Treasury bonds meant less liquidity and higher interest risk. No confusion here. You're incorrect that the increased stress testing and increased liquidity (both required by the 2018 law) wouldn't have prevented this. At the very least, it would've forced management to be more.mindful and accountable for their choices, which would've been more likely noticed due to the increased levels of scrutiny.

More eyes tends to make people more attentive to risk.

As more and more information becomes public, we're seeing exactly what caused SVB to fail. Your explanation above (higher interest rates) was half of the banks issue.

The other issue was the makeup of the bank's portfolio base. The typical SVB customer was a thinly capitalized tech startup, funded by angel investors and basically conducting operations through their "burn rate", i.e. drawing down on their IPO money in an attempt to bring viable products to market.

SVB was created during a time of essentially "free money", stable low interest rates, that allowed for round after round of IPO financing. SVB managed their cash. When Trump's failed presidency caused inflation rates to soar, there was much less capital available to fund these IPOs, which together with the bank's gamble to buy virtually only long term bonds caused a classic run.

 

[BabyBoomer50s]

So let’s see, the problem is that the banks bought up mortgage backed securities and when the interest rates rose they lost value.

Since “smaller” banks are subject to less regulation they love to bundle and sell mortgage securities to get them off of their balance sheets so that can remain “small banks”.

So the Dodd-Frank rollbacks could still be playing a role, albeit one that is a bit more obscure…

These mortgage backed securities lost value because they were purchased with an expectation of a particular rate of return which devalued against newer higher interest securities. If they had not been bundled and sold they would have remained at the original value of when they were issued. Instead our banking system is a shell game, and when banks lose, it’s the FDIC and/or taxpayers who pay the bill while bank executives cash out their bonuses and CEOs go on vacation.


Remind me how the rich pay more than their fair share?

Unlike the subprime mortgage backed “black box” securities behind the crash of 2008, the mortgage backed agency securities held by SVB were government insured. They are considered extremely safe and are highly liquid. Same is true of the treasury bonds. The problem is when interest rates rise, bond prices fall. SCB could have sold these assets in seconds, but they would have sold them at a loss.

 

[AlexBailey]

Unlike the subprime mortgage backed “black box” securities behind the crack of 2008, the mortgage backed agency securities held by SVB were government insured. They are considered extremely safe and are highly liquid. Same is true of the treasury bonds. The problem is when interest rates rise, bond prices fall. SCB could have sold these assets in seconds, but they would have sold them at a loss.

Other banks seeing this sell-off is what began a run of sell-offs. Government and other financial institutions had to step in to provide liquidity that was needed when some wealthy bankers made bad decisions.

This is a perfect example of the hoops society will go through to help out the wealthy even when they make mistakes. I’m not saying they shouldn’t be helped, I’m just pointing out that this is part of how the US government is supposed to “promote the general welfare”. Helping out the lower end of the economy is just as important.

 

[BabyBoomer50s]

Other banks seeing this sell-off is what began a run of sell-offs. Government and other financial institutions had to step in to provide liquidity that was needed when some wealthy bankers made bad decisions.

This is a perfect example of the hoops society will go through to help out the wealthy even when they make mistakes. I’m not saying they shouldn’t be helped, I’m just pointing out that this is part of how the US government is supposed to “promote the general welfare”. Helping out the lower end of the economy is just as important.

I agree. IMO, SVB depositors with > $250K should have taken the 10% to 15% haircut. There is no such thing as a 100% risk free bank. Wealthy VCs, CEOs, tech startups should know that

 

[Lazaran]

Other banks seeing this sell-off is what began a run of sell-offs. Government and other financial institutions had to step in to provide liquidity that was needed when some wealthy bankers made bad decisions.

This is a perfect example of the hoops society will go through to help out the wealthy even when they make mistakes. I’m not saying they shouldn’t be helped, I’m just pointing out that this is part of how the US government is supposed to “promote the general welfare”. Helping out the lower end of the economy is just as important.

Follow the chain of events:

The CEO of SVB lobbies for deregulation as his bank is approaching the mandated Fed scrutiny cutoff at $50 billion in assets

The republicans and the corrupt orange traitor initiated a successful attack on regulations.

The Fed instituted a hands-off approach toward banks under $250 billion in assets after deregulation.

SVB soared to $212 billion in assets within five years of deregulation, then collapsed just short of the $250 billion in assets cutoff that triggers mandated Fed scrutiny.( Note: Under the old regulation SVB would have been mandated to be scrutinized by the Fed EACH year.)

There was a REASON the CEO of SVB wanted the mandated threshold for Fed scrutiny raised to $250 billion. - It was so he could profit from risky management (criminal mismanagement)

The fact that Peter Thiel was involved with SVB only adds to the taint of corruption.

SAD!!!

 

[BabyBoomer50s]

Follow the chain of events:

The CEO of SVB lobbies for deregulation as his bank is approaching the mandated Fed scrutiny cutoff at $50 billion in assets

The republicans and the corrupt orange traitor initiated a successful attack on regulations.

The Fed instituted a hands-off approach toward banks under $250 billion in assets after deregulation.

SVB soared to $212 billion in assets within five years of deregulation, then collapsed just short of the $250 billion in assets cutoff that triggers mandated Fed scrutiny.( Note: Under the old regulation SVB would have been mandated to be scrutinized by the Fed EACH year.)

There was a REASON the CEO of SVB wanted the mandated threshold for Fed scrutiny raised to $250 billion. - It was so he could profit from risky management (criminal mismanagement)

The fact that Peter Thiel was involved with SVB only adds to the taint of corruption.

SAD!!!

Lol. Thoroughly debunked by the Bank Policy Institute.

 

[Sean Renaud]

If it had been even partially debunked it would be all over right wing media instead of the narrative that Wokeism destroyed banking in America.

 

[Lazaran]

Before the republican’s and the corrupt orange traitor’s deregulation, SVB would have had YEARLY mandated EXTERNAL scrutiny once they exceeded $50 billion in assets.

After the republican’s and the corrupt orange traitor’s deregulation, SVB was basically only subject to its own INTERNAL scrutiny.

That ^ always works out well.



SAD!!!

 

[Sean Renaud]

It would be funny if it weren't so pathetic.

 

[JohnnySavage]

Fucking hell... The Lit Think Tank Board has gone from train experts to banking experts in a little over a week.

This has to be the smarterest place on the interwebs!

 

[Chobham]

Fucking hell... The Lit Think Tank Board has gone from train experts to banking experts in a little over a week.

This has to be the smarterest place on the interwebs!

Amazing, isn't it?

 

[XersesRayCyrus]

Adrina knows everything there is to be known and we know everything else.

I think she's a butters alt...


If deregulation is the root cause, then why isn't the whole banking industry in free fall?

 

[Chobham]

Isn't Credit Suisse one of those banks still under regulation?