Just hours later, tech bank Silicon Valley Bank crashed - and Alecta lost billions of dollars. - "It was a bit of bad timing," says Jacob Lapidus, press officer at Alecta.Pension giant Alecta announced that it was abandoning Handelsbanken and Swedbank to focus on niche US banks.
you tease Alecta is the fifth largest shareholder in First Republic Bank, a position it added to toward the end of last year, and the sixth biggest owner in Signature Bank. Both of those banks also suffered steep one-day losses on Thursday.The development comes only two days after Alecta told local media that it had offloaded its entire holdings in one of Sweden's most conservative lenders, Svenska Handelsbanken AB, after 71 years. The pension group's head of governance and sustainability, Carina Silberg, told newspaper Dagens Industri the group was focusing on American niche banks rather than traditional lenders.
"How could regulators have allowed this" is now the funniest thing I've ever seen from WSJ. It gets even better as the article goes on, actually, like an entire 180 on the free-est market advocacy stances held only days prior.
It’s a shame they did that, because it’s actually a really good piece up to that point. They just can’t help themselves though. Conservative media is trying to make a narrative that says this is a woke problem, so this is clearly part of that concerted effort. It’s so out of place for the rest of the op-Ed that it looks like it was thrown on at the last minute like that trump sharpie hurricane thing.
Let's be fair - conservative news coverage is outlandish in direct proportion to conservative pet theories being debunked. The basic problem is banks did all the risky shit that conservatives promised banks wouldn't do; you can expect conservative explanations for the problem to prominently feature woke vaxed drag queens teaching CRT. That's not what this editorial does, though. 1) The bank acted risky and ate shit. That's pretty fuckin' frank for an editorial from a Murdoch property. 2) They should have seen it coming. They probably did, but they're a publicly-traded firm and frankly, if Peter Thiel had pulled all his money last February and said "this bank isn't willing to take risks" they would have eaten shit last February. 3) They didn't commit suicide fast enough. I mean... yeah? But if you look at the bullshit pile-on there weren't a lot of options. Half the vulture capitalists in the valley were busy causing a run on the bank so they could buy its stock cheap. "Fast enough" in this case appears to have been "sell everything in less than 12 hours" which is AIG-grade catastro-dumping and AIG had the advantage of announcing to the world that there was a problem by unloading everything as fast as humanly possible. It didn't work for AIG either. 4) It's all rotten anyway and expecting rotten shit to not smell is dumb. 5) (waves hands) "something something DEI" Last paragraph summarizes (1), (2), (3) and (4). Is there maybe a passing reference to (5)? If you squint? But this is the WSJ and "say something about how they went tits up for being woke or else we'll get yelled at for not mentioning the wokeness" was probably a part of the editorial process on this piece. Bloomberg, meanwhile, is pointing fingers directly at Peter Thiel so yeah, it's annoying that they had to throw "LGBTQ+" in there but on balance, this piece is much more about "they deserved it for sucking" than "they deserved it for being woke pieces of shit." That's about as Lawful Good as the WSJ gets.This was mistake No. 1. SVB reached for yield, just as Bear Stearns and Lehman Brothers did in the 2000s. With few loans, these investments were the bank’s profit center. SVB got caught with its pants down as interest rates went up.
The bear market started in January 2022, 14 months ago. Surely it shouldn’t have taken more than a year for management at SVB to figure out that credit would tighten and the IPO market would dry up. Or that companies would need to spend money on salaries and cloud services. Nope, and that was mistake No. 2. SVB misread its customers’ cash needs. Risk management seemed to be an afterthought. The bank didn’t even have a chief risk officer for eight months last year. CEO Greg Becker sat on the risk committee.
Mistake No. 3 was not quickly selling equity to cover losses. The first rule of survival is to keep selling equity until investors or depositors no longer fear bankruptcy. Private-equity firm General Atlantic apparently made an offer to buy $500 million of the bank’s common stock. Friday morning, I’d have offered $3 billion for half the company. Where was Warren Buffett? Or JPMorgan?
Why did so many startups bank with SVB in the first place? Here’s a hint. Apparently, more than half of SVB’s loans went to venture and private-equity firms backed by the borrower’s limited-partner commitments, a legal but slippery way to goose venture funds’ all-important internal rate of return metric, IRR, by investing three to six months before calling investors for cash. VCs are very persuasive with startups.
Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund. Then there’s this: In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.
Management screwed up interest rates, underestimated customer withdrawals, hired the wrong people, and failed to sell equity. You’re really only allowed one mistake; more proved fatal. Was management hubristic, delusional or incompetent? Sometimes there’s no difference.
FT's hot take is way fuckin' funnier ...see, most consumers are sensitive enough to the difference between "free checking and 0% interest" and "free checking and 0% interest" that when their bank goes from 0% to 0%, they move somewhere else with 0%. On the other hand, businesses can't be bothered. LOL What I really love is FT is implying that SVB ate shit because they didn't make enough loans. You know what large-cap loan rates are right now? My landlord is about to tuck into EIGHT POINT OH FIVE PERCENT. Fuckin' 96 months. You think anyone else is lending much at fuckin' closer-to-ten-than-to-five?This does not mean that SVB was facing a liquidity crisis in which it would not meet withdrawals (although, again, any bank that screws up badly enough in any way can face a sudden run). The main problem is profitability. Businesses, unlike retail depositors, are highly price sensitive about their deposits. When rates rise, businesses expect their deposits to yield more, and will move their money if this doesn’t happen. Most retail depositors can’t be bothered. And SVB’s depositors are overwhelmingly businesses.
Damn, johan beat me to posting the anti-woke WSJ op-ed. Just beyond the pale.
Run the bankssssssss! In all seriousness, this might be the first domino in a very serious national bank run. 16th largest bank in the nation (second paragraph of article). It's hard to tell because of how disproportionately large the individual account deposit balances were at SVB, which makes them especially vulnerable when the FDIC insured amount is only $250k. Am I supposed to believe that the VC elites won't be blowing up Congressional phone lines for a much larger bail-out than something (so far) only covering (reportedly) ~93% of SVB account assets? This could be a very big deal. Or not. Economics! It's totally a science. edit: nvm, the problem is solved, Twitter might buy SVB and take it "digital". (scroll up when page loads)
WSJ has been trying to fetch the word "Richcession" into existence for a few months now. Broader point is that the bad economics of this particular moment are tilted much more towards the 1%, rather than the 99%. Know the last time the word "anti-trust" was used in a state of the union speech? 2023. Know the time before that? 1979. If I were a democratic strategist, and I were looking to not give the former Tea Party any fuckin' leverage in this moment, I would let the banks eat shit. Each and every one of them. I would throw them into receivership, I would pay out my FDIC deposits on that tiny splinter faction of America that has less than two hundred and fucking fifty thousand dollars in their checking account and I would dare the Republicans to defend Chinese venture capital at the expense of medicaid and student loans. There aren't any laws being broken here, just bad decisions. Capitalism is the freedom to make bad decisions. Schumpeter called it "creative destruction" and it's the same thing that let Uber briefly out-price taxis, that let AirBnB briefly out-price hotels. You only have to look back fifteen years to see what happens when you don't make banks face consequences. You lose Congress and you sow dragon's teeth. Since a thunderous amount of bailout money went to people who didn't need it, who put it in banks that didn't need it, who shored it up with assets that they knew would suck, this is just financial Ouruboros. let the bodies hit the floor
Looks like they're bailing it out anyway, but with some lipservice about how it's other banks paying and not the taxpayer. Gotta socialize the losses https://home.treasury.gov/news/press-releases/jy1337 edit: at least it seems like they're not bailing out investors as well which is nice
I’m having trouble squaring that circle. “Depositors made whole. No taxpayer money will be used.” Um, what? You’d think they’d elaborate a bit. Edit: This from the WSJ is thin but plausible I guess: The government’s bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said any losses to the government’s fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn’t bear any losses.
Socialized losses. It fixes the liquidity problem because these banks deposits are 100% guaranteed but does nothing to fix the solvency problem that’s going to pop up eventually. There are a bunch of banks that are now effectively insolvent with no mechanism to force a liquidation. Moral hazard 2.0. Also everyone now pays more for insurance on fdic not doing their job.
This is worth your time. The shenanigans last time basically involved bullying JP Morgan into buying Bear Stearns, followed by Lehman eating shit, followed by everyone recognizing that all these deck chair games were meaningless while AIG ate shit. This movie? This movie is about AIG. See, the proletariat loves thinking in "Big Short" terms because of course they do, that's why it exists. Big Short is about some scrappy traders that bet big who won the lottery, American Carnage is very much off-screen. TBTF and Margin Call are about clever people within their expertise who made the wrong calls despite all the information in the world and they know we're all fucked and their only rational choice is to fuck everyone else more. Big Short is 100% "look how clever our scrappers are" while the movies the traders worship are fucking horror movies. You can't avoid the slasher if you have to go camping in the woods. Because here's the problem: There isn't enough policy in the world to stave off systemic collapse, there never has been, there never will be, so all these ostensibly dispassionate regulators have to engage in horse-trading in order to keep the music going and historically? It delays the inevitable for anywhere from a few days to a few months. As of this writing, we are 21 hours past the Treasury's bid deadline for Silicon Valley Bank. Someone was supposed to swoop in, scoop up their assets and make everyone whole and all I can see is that PNC isn't someone. You've got an ocean liner. It's got 2200 passengers. It's got lifeboats for 900. You just hit an iceberg. Do you immediately begin the rational, calculating process of figuring out which 1300 passengers are designated drowners so you can get the other 900 to sea? Or do you rearrange some deck chairs and cue the band so people panic less while you get your loved ones and family afloat? We're all busy cosplaying Jack and Rose while the Treasury is doing everything they can to put off drawing straws. The 14-lifeboat idea was signed off by everyone, we all agreed it was better than nothing, and then we diligently planned on not hitting an iceberg, and here we are.
the real problem is a bit back. The long and the short of it is that banks' casino moves busted the house and the result was the Great Depression. Glass Steagall, in a nutshell, says "you can be a player or you can be the house, you can't be both" - you are either a "thrift", (place people put their money for safe keeping) or an "investment bank", (place people put their money to make it grow.) Dodd-Frank, on the other hand, recognized that thrifts starve to death under perpetually low interest rates. But rather than, you know, raise interest rates to the point where companies couldn't buy each other out for two six packs and a promise, Dodd-Frank allowed thrifts to be investment banks. The upside of this is that banks made a fuckton of money. The downside of this is that banks made a fuckton of money by doing risky shit, the more risky shit they did the more money they made, the more money they made the higher their stock price went up, the higher their stock price went up the easier they could finance buying each other out, the more they financed buying each other out the more the bond market grew, the more the bond market grew the riskier everything got, the riskier everything got the more likely the banks were to bust again. - Paul Wellstone Wellstone, of course, was dead within three years. I'm sure it was nothing.''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''
Did you read that book?! Is it crackpot or is there a there there? Of course G-S was the thing that should have been reinstated instead of Dodd-Frank, but the stranglehold that the banks have on Washington just ensures that we get what we get and we don't throw a fit, as I tell my 3 year old.
Hell nah. I'm an Ockham's Razor kinda guy and Paul Wellstone's death was a secular tragedy... but if it was arranged, it was arranged better than most. Ultimately it doesn't matter. He died, things sucked, as Harari points out, history is generally written by the biggest dicks who commit the most atrocities. I point out to my kid that we're all equal but some are more equal than others and that if you aren't very carefully making sure you're on the right side of the trade you're likely to fall victim to everyone else doing the exact same thing. It's pretty funny to me that SIVB is the biggest crash since Washington Mutual, since Washington Mutual ate shit by going neck-deep in dumb mortgages and risky loans while their credit card department also lobbied like mutherfuckers to make bankruptcy debt harder to disburse. On the one hand they really wanted unsecured loans to be forever while on the other hand they generated secured loans well past their collateral. End result? People walking away from their underwater mortgages so they could make their credit card payments and WaMu ate shit. It's the shareholder conundrum - when you conduct business one quarter at a time and your pathway to advancement is "impact" rather than "consistency" you're gonna crash the train every time.Did you read that book?! Is it crackpot or is there a there there?
also, if it was a 100% insurance, banks would have to either take 0% risk and offer 0% interest, or the money to make it up will keep coming from taxpayers i don't really care how silicon companies are doing so would rather not the second one, and the first seems to dilute what a bank is able to do by a lot edit: just saw your other post - yea it's scummy they can pick and choose when they're allowed to ignore the limit
On the one hand, you know that the WSJ editorial board is lying because their mouths are moving. On the other hand, even a broken clock is right twice a day. From a separate editorial: At this hour it remains unclear exactly how many vacation homes are owned by the uninsured customers of these institutions. Vicious.Also, perhaps regulators can explain exactly why there must be unlimited insurance payouts to those whose accounts are only insured up to $250,000.
I think the Biden administration was going to be criticized no matter what they did on this one. Had they supported deposits, they're soft soyboys who are only there for their woke leftist donors. Had they let the deposits burn, they're anti-innovation bureaucrats who are willing to spend billions in pork barrel for the CHIPS act but have no understanding of the vitality of small entrepreneurs. Had they supported investors, they're oligarchist cronies hell bent on preserving the moneyed class against the proletariat. Had they let investors burn, they're anticapitalist bureaucrats who do not properly support the market. Bernanke was 100% at "anything but the Great Depression" in 2008. This was due to the fact that he wrote his doctoral thesis on the Great Depression. As a result, we got helicopter money for rich people at any cost for any reason. Now I don't know, but I suspect, that at least a few people over the weekend said words to the effect of "What if - and work with me here - what if Occupy Wall Street and The Tea Party... but in a post-BLM, post-Jan6 environment where we're in a proxy war with Russia" and after everyone plucked their silk boxers out of their colons they all set about to the diligent task of threading the needle. Here's the thing that the money is just starting to realize: Bitcoin is up stupid right now, like 20% in 3 days. Circle? I mean... there are three banks that didn't do as well as a stablecoin. And the stablecoin that everyone's been predicting the demise of? Tether is un-fucking-shaken. I think we're maybe six weeks before "DeFi" starts getting talked about as "shadow finance" because there will be enough big players who are flat-footed enough to recognize an actual innovative threat to really get the Wurlitzer going.“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
You and I both know that the WSJ editorial board and all of conservative media would find a way to criticize Biden if he came out tomorrow and said, "Yes, Hunter and I sold out the USA to China and as penance I'm resigning and I'll spend all of my remaining days after my jail sentence is over volunteering at an orphanage that caters to kids with special needs." But that doesn't mean they don't have a point here in the one specific instance. If their goal was preventing panic, the best thing they could have done was trot out the president to say, "We're doing nothing beyond the basic FDIC mandate, because there's no systemic risk here since SVB and Signature were gambling houses and the dice came up snake eyes. The average American's money is safe and sound." He's not preventing panic, and he's making it look more and more like the conservative talking points that Dems are a bunch of rich lawyers who care only about rich lawyers is basically true. I think they fucked up big time.
I dunno, man. The firehose of economic data I point at my face every morning is a giant stack of spooky shit. I think the fact that 2009 wasn't straight sorted has everyone jumping at loud noises. I agree with you - the Biden administration is gonna get pilloried no matter what but if you take a look at the WSJ's targeted stream of vitriol it's all about Powell. Believe it or not, they seem to hate interest rates more than they hate Democrats in this moment.
You'll remember that Yellen wanted to raise rates in 2018 or whenever, so Trump didn't renominate her in favor of Powell. Then when Powell was like, "yeah she was right" Trump threatened to fire him, too, until he got in line. Clearly that was Murdoch whispering through Hannity directly into Trump's ear. They don't have that direct line anymore, so they have to just browbeat him in the media.
In what sense? It's not as if anyone was going to lose their ass. Most estimates have the likely losses of uninsured accounts at 5-15%. They could have easily extended short term low interest loan of some percentage of deposits so that depositors could have met cash payment needs without interruption.
Contagion and runs at other banks is what they had to prevent. The depositor situation at SVB wasn’t the issue. I think it was the reverse, at any rate. Something like 90% of depositors had more. Most estimates have the likely losses of uninsured accounts at 5-15%.
No the actual realized losses on accounts above the 250k cap would have been in the 5-15% range. The bank still has lots and lots of assets and lots and lots of cash. So all those assets and all that cash get distributed to account holders before creditors, and if you had $1,000,000 there, then the best estimates I've read said you stood to lose about $75,000 (10% of the sum above $250k). Not chump change, but also not exactly Armageddon. Just do a thought experiment where instead of being the bank of tech, this was the preferred bank of the Factory Farmers of America or Big Oil or whatever, and that they're all vocal Trump supporters. Do you think it would have played out differently? I do. We can't live in a world where laws don't matter. Ever since the AUMF each president has taken it upon himself to rule by decree, each more so than the last. This is just another example to me.
https://www.reuters.com/markets/us/first-republic-bank-tumbles-drags-down-shares-other-regional-lenders-2023-03-16/ It’s a desperate struggle atm. The left hates SVB depositors. No political points were scored.