MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 907 votes

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

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Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
3y

If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

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  • Jason MalabuteBusiness Member
    OP
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 907 votes
    3y
    Quote from @David Song:

    All deposits in SVB will be available tomorrow morning, guaranteed by Uncle Sam.

    Uncle Sam has a printer that can print money forever.

    no more accountability ...Another reason why wealth should be our top priority

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  • Jason MalabuteBusiness Member
    OP
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 907 votes
    3y
    Quote from @Jay Thomas:

    That's definitely a valid concern. Real Estate investors in Texas, especially those in Houston, may find themselves adversely affected if only large banks receive bailouts instead of smaller local banks. This could lead to an even more monopolistic banking environment and make it harder for Real Estate investors to access the capital they need. Ultimately this could mean that Real Estate investments become much more difficult or impossible for many people. It would be great if smaller local banks were taken into consideration when determining how bailout money is distributed so that Real Estate markets remain accessible to everyone.


     great point

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  • Jason MalabuteBusiness Member
    OP
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 907 votes
    3y
    Quote from @Doug Smith:

    @Jason Malabute Yes! I am so glad you get it. I've been a lender for 32 years, but half of that time was serving as a bank executive. Banks periodically fail...period. It's not always systemic. One community bank I worked for fired it's president (a professional banker) because the board and the chairman (largest shareholder) didn't like the fact that he refused to give anyone they wanted to give a loan to a loan. The chairman, an attorney by trade and an extremely arrogant know-it-all with no banking background at all, stepped in as president and ran it into the ground. I had delusions of grandeur thinking I could come in and right the ship. They listened for a little while then, when anyone would say "you can't do that", they went back to their old ways. When I joined, it was operating under a "memorandum of understanding", which is the FDIC version of "double-secret probation". The FDIC doesn't want the public to know when a bank is having issues as to avoid an "It's a Wonderful Life"-style run on the bank. Finally, the FDIC stepped in, removed the president, and put in a place a strong professional banker. Banks will fail, but when everyone runs around screaming the sky is falling...that's when we have issues. Economic collapses are partly caused by panic. The Obama administration changed Tier One Capital Requirements where, overnight, banks went from being considered solid to troubled with no change in the balance sheet. The banking system is fine...now if the Federal Reserve would stop injecting themselves into the mix by continually raising rates, we would be fine. Inflation is being caused by the government printing money and increasing M2, the amount of currency in circulation, not by economic growth. If they continue down the path they are on with the rate hikes, we will see issues in the banking system, but for now, I think SV was an isolated incident. I totally agree with you, let businesses/banks fail. If you bail bad actors out every time they get into trouble, they'll just keep doing it.


     thank you for sharing

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  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Brian Ellis:

    10 Year treasury is way down because of all this, meaning interest rates are going down.

    Not sure about you guys, but in my area we have lines out the door for open houses. I only see this creating even more demand for an already lacking housing inventory. 

    Interesting times for sure...


     real estate nationwide already seen uptick since january, my home sold above june 2022 comps, but yes there're houses that was sold below 2017 level, the comps variable in this particular timeframe is wide and huge.

    i guess after all.........direct RE investing is still way safer than investing at gov. issued bonds.

  • Jason MalabuteBusiness Member
    OP
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 907 votes
    3y
    Quote from @Steve K.:

    Appreciate the thoughts and the passion. It doesn't seem like this is the result of SVB making high-risk investments however. I don't think anyone considers US treasury bonds high risk. This wasn't bad lending practices like what lead to the 2008 crisis.  SVB had bought long-term bonds, usually considered a very safe investment. All banks make short-term deposits available for long-term investments. The Fed seems to have caused this by manipulating the interest rate and changing yield curves more dramatically than most people expected. Looking backward, mistakes were made by the higher-ups at SVB. But to be fair, risk management becomes very tricky when the goalposts are constantly shifting and it's easy to see those mistakes now but not as easy to predict what the Fed will do. They held interest rates too low for too long and have been raising them too fast. Now the government is stepping in and using bank fees (not taxpayer money) to make sure a bunch of tech startups can pay their employees this week and stay in business (and to prevent more widespread panic and other banks to collapse), which makes a lot of sense IMO. Making depositors whole isn't rewarding bad behavior (the depositors didn't do anything wrong). The banks CEO's should be fired if it turns out they did indeed fail at risk management, paid themselves bonuses or sold off shares/engaged in insider trading or otherwise contributed to the collapse, and losing their jobs or facing criminal charges will be their punishment. If they did indeed fail to respond to orders transferring money out, then part of that punishment will also come from a flurry of lawsuits. 

    One take-away is how social media combined with technology which makes it easier to withdraw funds more quickly has increased the risk of bank runs. VC's and Peter Thiel being alarmists also didn't help by fueling the flames. Funny how libertarians turn into communists overnight when it's their money and livelihoods at risk from the "free market". 


     great point about social media... I wasn't thinking about that 

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  • Investor · Daytona/Ormond Beach Fl, Charleston/Summerville SC · Member since 2017 · 156 posts · 73 votes
    3y

    Amen!

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Jason Malabute:

     great point about social media... I wasn't thinking about that 


     What's very stupid about all of these is that .... every high school kid now if Fed is raising the rate the bank that holds the note would collapse especially if their ratio with assets is not that great. Just 8 months ago US Gov. is trying to save "Credit Suisse" from behind without much escalation, the CS didn't need to go to bankrupt because other country (US ally) could borrow money from Fed/US gov. with low interest rate short term loan program.

    HOWEVER, they do not do the same to the US Bank until the first collapse of this SVB bank over the weekend, now they create such facility as BTFD which is similar to what they provided to Credit Suisse at the first place. 

    In my opinion it's very dumb move by gov. 

    They're inherently causing instability to financial market, then become hero at the last moment, but they could plan it way better LOL.

  • Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 738 votes
    3y
    Quote from @Ben Zimmerman:

    There are roughly 4800 FDIC banks in the United States. A billion dollars is a lot of money to regular folks like me and you, but in Corporate America a billion dollars is a drop in the bucket. At the limit of 250k per bank, in order to get FDIC insurance on a billion dollars, the company would need to spread its money across virtually every single bank in the nation, and it becomes physically impossible to do if you have 1.2 billion dollars.

    When you have a billion dollars, its not just as easy as 'diversify and buy some real estate'. With no leverage that means buying over 3300 SFR homes at 300k each, or 6600 with a meagre 50% LTV. At that scale we aren't talking about just buying some real estate, we are talking about forming a major corporation to procure and manage that many rentals. And once again, remember that a billion dollars is a small number in the corporate world. What do you do when you need to spend 10 billion, or 100 billion?

    You mention that markets like this can be beneficial for real estate investors who have preexisting relationships with people who have cash...but where do those people with cash keep their cash?  Answer:  In the bank. 

    Banks follow strict regulations when it comes to what they can and can not do with deposits, and how much reserves they are required to keep.  These regulations are put in place to prevent risky behavior.  If the federal government puts in place rules that say that "X is safe to do", and then completely and dramatically changes the financial landscape by changing from QE to QT virtually overnight, and dramatically jacking up interest rates sending the entire global financial industry into a tailspin is that really the banks problem, or is it the government themselves the problem?

    And lastly lets not forget that this bank is failing because it invested its money in the absolute safest investments possible.  Treasuries.  So if playing it safe leads to a bankruptcy then what does that tell you about the government changing the rules mid game?

    A functioning economy requires a safe place to store your money.  Until crypto takes over and people are able to self custody their wealth, banks are the only option that we have.


     Crypto will never take over! CryptoBois need to go back to their Mom;s basement and reinsate their Pornhub subscription. 

  • Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 738 votes
    3y

    If your CFO and Board Treasurer don't understand how to deposit your funds then fire them. 

  • Specialist · Austin, TX · Member since 2017 · 137 posts · 109 votes
    3y

    "In addition to the moral hazard, bailing out banks can also be costly
    for taxpayers. The funds used to bail out a failing bank are typically
    drawn from the public coffers, meaning that taxpayers foot the bill.
    "

    Concepts like this come up a lot that taxpayers lose.  The data shows that in the banking crisis (08+ era), taxpayers netted billions in profits from Citi and others who obtained true bailout investments. Overall, taxpayers lost nothing and quickly earned billion and billion in net gains.

    Tangent: FDIC Insurance, being non-bailout funds, is paid for by the premiums charged directly to banks. As many know, taxpayers funds do not cover any of the bank failures we see each year.

    When the FDIC funds took a large than normal hit in 08-10 region, ALL Banks (those that had no losses) footed the bill via super high premiums and special assessments. CUs too, in NCUA Insurance. They made all of them pay for the transgressions of a few. The taxpayers did not pay.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @John Sayers:

    "In addition to the moral hazard, bailing out banks can also be costly
    for taxpayers. The funds used to bail out a failing bank are typically
    drawn from the public coffers, meaning that taxpayers foot the bill.
    "

    Concepts like this come up a lot that taxpayers lose.  The data shows that in the banking crisis (08+ era), taxpayers netted billions in profits from Citi and others who obtained true bailout investments. Overall, taxpayers lost nothing and quickly earned billion and billion in net gains.

    Tangent: FDIC Insurance, being non-bailout funds, is paid for by the premiums charged directly to banks. As many know, taxpayers funds do not cover any of the bank failures we see each year.

    When the FDIC funds took a large than normal hit in 08-10 region, ALL Banks (those that had no losses) footed the bill via super high premiums and special assessments. CUs too, in NCUA Insurance. They made all of them pay for the transgressions of a few. The taxpayers did not pay.


     Not to mention not letting credit markets dry up. People seem to forget the system can't run without banking. Simple as that. Everybody that wants Citi or Wells to fold - just don't seem to understand how destructive that would be. not just to us but the globe. IT would make 08 seem like nothing.

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!

    And I immediately lock in new rate so my new ARM from 5.8 move down to 5% overnight LOL

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Carlos Ptriawan:

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!

    And I immediately lock in new rate so my new ARM from 5.8 move down to 5% overnight LOL


     SO here is the funny thing about all this. If the rates hold true (friday could change things yet again or Powell speaking) then I think it likely we see a rush to purchase. Which will dry up the little inventory out there and again keeps homes high. Powell might end up with exactly the opposite of what he wants.

    Honestly I hope he gives up this game on unemployment and housing. He will just break whole system if he keeps pushing. Hopefully when housing hits the peak (May) then inflation drops 3% or so since it's been about 40% give or take. But we will see.

  • Real Estate Agent · San Pedro, CA · Member since 2019 · 253 posts · 128 votes
    3y

    Interesting how the market is responding to the fed bailout. Just a couple weeks ago 10 yr treasury hit 4% and now we're back at 3.5% today. This will drive down 30 yr mortgage rates from nearly 7% back down to almost 6%.. If we see further cracks in banking or other industries expect full on fed pivot and reduction of interest rates - it could lead to home prices going back up. 

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y

    yes, got 5% ARM today LOL
    good luck guys.

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @Carlos Ptriawan:

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!

    And I immediately lock in new rate so my new ARM from 5.8 move down to 5% overnight LOL


     SO here is the funny thing about all this. If the rates hold true (friday could change things yet again or Powell speaking) then I think it likely we see a rush to purchase. Which will dry up the little inventory out there and again keeps homes high. Powell might end up with exactly the opposite of what he wants.

    Honestly I hope he gives up this game on unemployment and housing. He will just break whole system if he keeps pushing. Hopefully when housing hits the peak (May) then inflation drops 3% or so since it's been about 40% give or take. But we will see.

     been telling to @James Hamling that he uses 1930 economic book to rule 2023 economy, it just would not work as there're just too many factor involved and market is too efficient.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Michael Wooldridge:
    Quote from @Carlos Ptriawan:

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!

    And I immediately lock in new rate so my new ARM from 5.8 move down to 5% overnight LOL


     SO here is the funny thing about all this. If the rates hold true (friday could change things yet again or Powell speaking) then I think it likely we see a rush to purchase. Which will dry up the little inventory out there and again keeps homes high. Powell might end up with exactly the opposite of what he wants.

    Honestly I hope he gives up this game on unemployment and housing. He will just break whole system if he keeps pushing. Hopefully when housing hits the peak (May) then inflation drops 3% or so since it's been about 40% give or take. But we will see.

     been telling to @James Hamling that he uses 1930 economic book to rule 2023 economy, it just would not work as there're just too many factor involved and market is too efficient.

    The simple truth is it doesn't work because of the supply side issues. Housing we all know about the but talent is the same issue. All the lay offs we have had and it's gone no where. yes more lay offs are coming but we might hit what 4%? 4.2%? Meanwhile if they keep raising he will cliff the economy. Meanwhile more boomers are retiring so I'm not even sure we will hit 4% unless he craters us.

    Which is possible. Ahh well. I wasn't buying this year anyway with all the changes in my wife stopping work full time, nanny, and 3 adds last year. So I'll see what 2024 brings. 


  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Michael Wooldridge:
    Quote from @Carlos Ptriawan:

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!

    And I immediately lock in new rate so my new ARM from 5.8 move down to 5% overnight LOL


     SO here is the funny thing about all this. If the rates hold true (friday could change things yet again or Powell speaking) then I think it likely we see a rush to purchase. Which will dry up the little inventory out there and again keeps homes high. Powell might end up with exactly the opposite of what he wants.

    Honestly I hope he gives up this game on unemployment and housing. He will just break whole system if he keeps pushing. Hopefully when housing hits the peak (May) then inflation drops 3% or so since it's been about 40% give or take. But we will see.

     been telling to @James Hamling that he uses 1930 economic book to rule 2023 economy, it just would not work as there're just too many factor involved and market is too efficient.


     Yeah, surprise-surprise, raise interest rates 237% and things start to break, shocker....... 

    And that's the rub, CNN, MSNBC, all the talking heads, they ARE saying it's a "shock". Aaaaahhhhh, exactly how is it a shock? Are they really that stupid and clueless? Again, it was simple math.    

    Ok, throw the management under the bus saying they were asleep at the wheel, and they were, but so were the regulators across the board all the way to the top, EVERYONE was asleep at the wheel, yet again. The obvious was a "shock" yet again. And the gov. will bail out all actions, yet again. 

    Or.... and I prescribe to this narrative, the big power-brokers and decision makers saw it coming and just didn't give a sh#t. I am sure they shrugged and said "huh, oh well, everyone can go to J.P.".    J.P. is a big winner right now, just gobbling up deposits left right and center. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Nathan Grabau:
    Quote from @Jason Malabute:
    Quote from @Nathan Grabau:

    If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 


     I won't complain. I'll just take the opportunity. I'm a capitalist

    How long could you survive if 25-30% of your tenants stopped making payments, and all of your credit lines were frozen. How much opportunity does that create for you?

    The free flow of capital is a cornerstone of capitalism and it is at risk of freezing tomorrow. 


     Oh, you mean say something like if the government issued some kind of moratorium and tenants didn't have to pay rents, say for a year +, but all expenses were still on the landlord????? Yeah. 

    I say LET IT BURN! It will make for one hell of great fertilizer for strong, healthy entities to emerge. The whole too-big-to-fail BS is just that, BS! There is NOT supposed to be any to-big-to-fail, or to-important-to-fail, ALL are to be subject to repercussions of actions. But nowadays, it's just the taxpayer bail-out on everything EXCEPT tax-payers....... 

    The entire U.S. system is designed FOR ENTATIES TO FAIL! Yes, LET EM BURN!. All these actions to eliminate accountability are the disease. It's preventing the cleansing aspect of it all. 

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @James Hamling:
    Quote from @Carlos Ptriawan:
    Quote from @Michael Wooldridge:
    Quote from @Carlos Ptriawan:

    One good thing about this SVB collapse --> FDIC take over is that TLT is now run high !!!
        

    Ok, throw the management under the bus saying they were asleep at the wheel, and they were, but so were the regulators across the board all the way to the top, EVERYONE was asleep at the wheel, yet again. The obvious was a "shock" yet again. And the gov. will bail out all actions, yet again. 

    Or.... and I prescribe to this narrative, the big power-brokers and decision makers saw it coming and just didn't give a sh#t. I am sure they shrugged and said "huh, oh well, everyone can go to J.P.".    J.P. is a big winner right now, just gobbling up deposits left right and center. 


     what powell is saying "i am going to raise the rate til the hell and i wanna stop only after one of my friend go bankrupt"

    that's what really happened hahaha

  • Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Jason Malabute:

    The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

    Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

    When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

    Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

    In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

    As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

    In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.


     Hello, the SVB doesnt make risky investment, they only purchase MBS bonds in 2020, but the gov. choose to crash those bonds.
    I bet it's Powell intended consequence to rise the rate that high that fast for nothing. 

    nobody questioning powell LOL

    But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens. 

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @James Hamling:

    The entire U.S. system is designed FOR ENTATIES TO FAIL! Yes, LET EM BURN!. All these actions to eliminate accountability are the disease. It's preventing the cleansing aspect of it all. 


     RIght on Bro! You nailed this one!

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @John Carbone:
    Quote from @Carlos Ptriawan:
    Quote from @Jason Malabute:

    nobody questioning powell LOL

    But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens. 


    Come on, if we have a travel machine, and we all go back to February 4, 2020. Can we ask the Silicon Valley Bank CEO that what he did is a mistake :) 

    The guy is buying government asset btw, not someone's crypto funky name and or meme stock/NFT/whatever like what Elon Musk did.

    That guy Peter Thiel is right culprit, he influenced the masses to invest in crypto while he is the early founding father of crypto pyramid ponzi scheme, when everyting is crumbled , he bankrupted the bank as well, awesome right LOL 

  • Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @John Carbone:
    Quote from @Carlos Ptriawan:
    Quote from @Jason Malabute:

    nobody questioning powell LOL

    But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens. 


    Come on, if we have a travel machine, and we all go back to February 4, 2020. Can we ask the Silicon Valley Bank CEO that what he did is a mistake :) 

    The guy is buying government asset btw, not someone's crypto funky name and or meme stock/NFT/whatever like what Elon Musk did.

    That guy Peter Thiel is right culprit, he influenced the masses to invest in crypto while he is the early founding father of crypto pyramid ponzi scheme, when everyting is crumbled , he bankrupted the bank as well, awesome right LOL 


    There was a risk to hold higher yield and longer dated treasuries. It wasn’t “free money”  

  • Lender · Fort Mill, SCinstal · Member since 2016 · 68 posts · 64 votes
    3y
    Quote from @John Carbone:
    Quote from @Carlos Ptriawan:
    Quote from @Jason Malabute:

    The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

    Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

    When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

    Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

    In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

    As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

    In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.


     Hello, the SVB doesnt make risky investment, they only purchase MBS bonds in 2020, but the gov. choose to crash those bonds.
    I bet it's Powell intended consequence to rise the rate that high that fast for nothing. 

    nobody questioning powell LOL

    But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens. 

    SVB had no Chief Risk officer from April 2022 - January 2023 ... the role was not backfilled until 2 months ago.   No one was managing the systemic risk created by rising rates and their asset allocations.   People that say they weren't managing their asset portfolio in a risky way many not understand what they were doing.   No Chief Risk Officer Backfill

    - Heavily weighted asset portfolio on long term debt
    - As interest rates rose, these because unrealized losses if they had to be sold.  Dodd Frank let them hide the losses in a footnote as they didn't have to be realized unless sold.
    - Poor liquidity made them realize the losses and created the run


    SVB had an extremely risky set of positions in a rising rate environment and had no one at the wheel to manage it for them.   They built a poor business trying to capture slightly higher yield and got burned.

    Now ... did the Fed pack barrels full of gun powder, roll it under them and light it on fire?  Sure.   However, if they managed their asset allocation better they would have been able to manage it better.   Eventually the Fed was going to wreck the economy again with their policies, but SVB built a house of cards to be blown over. 
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