How did you go bankrupt? – Two ways. Gradually, then suddenly
“How did you go bankrupt?" Two ways. Gradually, then suddenly.” ― Ernest Hemingway, The Sun Also Rises.
Having been through the S&L crisis in the '80's and the Great Recession in 2008, I find myself wondering why our current banking laws can't protect the economy. How great will the fallout be? And why must we go through this again?
Great piece, thank you! Hopefully things calm down and it doesn't spread. Having said that, I'm reading elsewhere that while this likely isn't systemic, some deeper investigation and reflection needed into SVB as a learning moment. Apparently, they made a lot of questionable moves in the years leading up to this event as well.
A question that I haven't seen discussed: Why didn't SVB try the discount window? Or explore a sale to other institutions? It seems they were just caught completely flat footed.
Great piece and very well explained- thank you.
So do I understand correctly that, had the run not happened, SVB would be okay right now, because:
"The bank had mark-to-market losses of $15.9B as of Q3’22 (still unrealized"
... urealised mark-to-market losses.
and: "SVB sold a $21 billion bond portfolio on Wednesday - forcing them to realize a $1.8 billion loss"...
they realised this loss because the bonds, with treasury yield rising, had deteriorated in value, but this loss would not have been consequential if not....
if then the run on deposits hadn't happened. So it was that that killed them.
This was very informative and easy to understand. It’s interesting how this kind of situation seems to repeat every now and then without learning from the past.
Informative read with simple language. I hope things get better...