SVB Bank Collapse in the US

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PrivatePilot said:
One could split hairs endlessly on media bias, and (apparently, even) on the websites that define levels of bias.

But I'll stand by my assessment based on the facts and choice of outlet that provided the related information. And most importantly, my argument that regulations work. If you feel differently, I'm all ears.
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My only opinion is that the government should have as minimal say so as possible in how business conducts itself.

Humans aren't perfect entities, so maybe some regulation is a good backstop to prevent 'disaster'. However it should not and cannot be a default security blanket in lieu of appropriate management and responsibility.

Maybe the roll back of regulation was a factor in the bank ultimately failing, but it was not the cause and I'd rather the political and public spheres bemoan the millionaire morons who led it down that path and take a few pieces out of them instead of a defunct President for cheap political points or anyone else who decided to tweak regulations. If I had money in that bank I would not be bitching about Trump, his name isn't on the door at SVB HQ. And I would not be bitching because it's not (again my personal opinion) the governments responsibility to do the job 'we' pay other people millions of dollars to do.

But, as usual, people are sheep. "Trump man bad!!"

Ex fired SVB exec? Takes his millions and moves to Bahamas. "Ooops"

Le sigh.
 
Evoex said:
However it should not and cannot be a default security blanket in lieu of appropriate management and responsibility.
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Appropriate management and responsibility is great.

Unfortunately capitalism often plays havok with that.

When profit, greed, and "shareholder value" come before all else, things go pear shaped quickly in the absence of regulatons.
Go back to all my examples in my last reply and it becomes clear that if capitalism was left to run amok without government regulation, we'd have auto manufacturers putting cars on the roads that crumple like a wet paper bag and burst into flames in an accident (but hey, maximum profits!), 75% of the trucks on the road would be uninspected rolling deathtraps being driven by unlicensed and untrained idiots who haven't slept in a week and are just popping pills to stay awake behind the wheel, the aviation industry would be able to sell $249 return tickets to Australia but hey, you might not make it because your pilots weren't trained well, or the plane falls apart in midair over the ocean.... the Chinese toaster you bought at Walmart for $10 might send you flying across your kitchen and kill you when you plug it in because who cares it was built to zero safety standards....etc etc etc.
 
PrivatePilot said:
I knew you'd say that....because *everyone* on the right is saying the same thing.

But not based in reality either. That's the main reason I linked to the website I linked to actually, is because it's politically centred.

www.allsides.com

FactCheck.org Media Bias Rating

Learn the AllSides Media Bias Rating of FactCheck.org. AllSides rates the media bias of hundreds of news outlets, media sources and writers.
www.allsides.com www.allsides.com

Facts are facts regardless if they don't fit your desired political viewpoints. I'd suggest actually reading the story I linked to above in it's entirety, not just dismissing it as a "democratic hack-job" because you support the US Right.



Actually, protecting against companies making reckless, dangerous, stupid, or greedy (amongst other things) decisions is exactly one of the things regulations do.

Can you imagine the automotive industry without regulations? Companies would be pumping out maximum profit total shitboxes that don't adhere to any standards for crash safety, rollover safety, etc etc etc. Go take a look at how a lot of cars made in India fare in crash testing if you want to see a mostly unregulated auto industry in all it's glory. Anyone remember the Pinto? Regulations ensure that sort of fiery death **** doesn't happen much anymore.

The trucking industry? It's bad as it is with all the regulations it currently has...can you imagine if it was a free for all?

Aviation? The safest mode of transportation in the world because it's HIGHLY regulated.

Electrical? Do you care that things you buy and plug in don't have a habit of killing you, and the wires in your house don't have a habit of catching on fire and buringin your house down? You can thank regulations.

Water systems? (Walkerton, anyone? New regulations were put into place to replace weak ones that actually killed a lot of people...)

I could go on...and on....and on. Our whole society is glued together with regulations that make our lives better and safer. Including banks. And the reality our banks are more regulated than US banks is one of the reasons why we magically don't seem to have these problems while the USA has, on average, a bank failure every 3 days. Think about that.

EVERY THREE DAYS.

Want even more sobering numbers? Look at the list of all the USA banks that have failed dating back a few decades....

So yes, I'll have to respectfully disagree on your statement that regulations don't work or don't "protect against those things"
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Whoa Nelly!

Your every 3 day rule is a 20 years ago, decades before reforms. Read your wiki piece again in details. After the last regulation reforms in 2018, bank failures plummeted to the lowest levels in the last few decades. The reforms unlocked success for most, but not all - I said before, reform can't fix stupid. Roll back reforms and many of those flourishing small banks would be cripples, and would again begin to fail.

I'm not against regulations. I agsinst regulations that do more harm than good. In this case, SVB was poorly run and failed, but countless other small banks succeeded because of lower regulatory burden. I call that a win.
 
PrivatePilot said:
One could split hairs endlessly on media bias, and (apparently, even) on the websites that define levels of bias.

But I'll stand by my assessment based on the facts and choice of outlet that provided the related information. And most importantly, my argument that regulations work. If you feel differently, I'm all ears.
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Yes regulations work providing they are reasonable, and enforced. The argument is really how much do you need? You could reduce road deaths be prohibiting motorcycles. Reduce deaths by banning alcohol, tobacco and adopting a calorie tax.

When the burden of regulation outstrips the benefit, what do you do?
 
www.sanjoseinside.com

Federal Reserve's Repeated Warnings Were Not Enough to Save Silicon Valley Bank | San Jose Inside

The picture that is emerging of SVB is one of a bank whose leaders failed to plan for a realistic future and neglected looming financial and operational problems, even as they were raised by Fed supervisors.
www.sanjoseinside.com www.sanjoseinside.com

Silicon Valley Bank’s risky practices were on the Federal Reserve’s radar for more than a year — an awareness that proved insufficient to stop the bank’s demise.

The Fed repeatedly warned the bank that it had problems, according to a person familiar with the matter.
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What's the regulation for stupidity.
 
This bank clearly did not do adequate risk management. (Too many long-term bonds in search of the highest nominal interest rate if the bond were to be held to maturity - but without consideration of the risks of that.) That's incompetent management.

Regulations requiring "stress testing" would have, for example, encouraged that incompetent management to hire someone who knew what they were doing, and that person would have had to shift the balance of their investments to pass the stress tests - some of which are intended to analyse the effects of, for example, increasing interest rates. They would have had to shift their investments in order to pass the stress tests.

NO this is not 100% protection against all risk ... but by forcing the incompetent management to do that, or hire someone who knew what they were doing, it would have tipped the balance towards survival, and mitigated losses even in the event of a bank run leading to forced premature sale of bonds.
 
Mad Mike said:
When the burden of regulation outstrips the benefit, what do you do?
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In what way is causing someone at the bank to submit a bunch of calculations (that they ought to be doing anyway), an unreasonable burden?

In what way is it unreasonable to have a stable banking system when the economy goes sour, even if it means lower profits (to the owners and shareholders) in the good times?

I am a shareholder in Canadian banks. I am not a shareholder of any US banks! Why? Because I trust our (regulated) system more to still be functioning in 15 or 20 years without having gone bankrupt at some point in the meantime.

Earning (let's say) a stable 5% - 6% for 15 or 20 years is better for my investment objectives than earning 20% for 5 years and then losing it in a bankruptcy!
 
Evoex said:
www.sanjoseinside.com

Federal Reserve's Repeated Warnings Were Not Enough to Save Silicon Valley Bank | San Jose Inside

The picture that is emerging of SVB is one of a bank whose leaders failed to plan for a realistic future and neglected looming financial and operational problems, even as they were raised by Fed supervisors.
www.sanjoseinside.com www.sanjoseinside.com



What's the regulation for stupidity.
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There's a big difference between "It would be nice if you shifted your investment balance to reduce risk", and "Submit the following calculation by date X to prove that your investment balance passes stress-test calculation Y otherwise your operating license will be withdrawn".
 
Brian P said:
I am a shareholder in Canadian banks. I am not a shareholder of any US banks! Why? Because I trust our (regulated) system more to still be functioning in 15 or 20 years without having gone bankrupt at some point in the meantime.
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This!
 
Brian P said:
In what way is causing someone at the bank to submit a bunch of calculations (that they ought to be doing anyway), an unreasonable burden?

In what way is it unreasonable to have a stable banking system when the economy goes sour, even if it means lower profits (to the owners and shareholders) in the good times?

I am a shareholder in Canadian banks. I am not a shareholder of any US banks! Why? Because I trust our (regulated) system more to still be functioning in 15 or 20 years without having gone bankrupt at some point in the meantime.

Earning (let's say) a stable 5% - 6% for 15 or 20 years is better for my investment objectives than earning 20% for 5 years and then losing it in a bankruptcy!
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We're not talking about a simple calculations. The US depends on banking in a lot of smaller centers, which big banks have no interest in serving. Those smaller banks have less regulatory overhead, so they can operate viable. Having less regulation on small banks reduces burden, it helps more thrive.

As a whole lowering regulatory burden on small banks in 2018 reduced failures to their lowest levels ever. A win by all measures. SVB was on the border of being a big bank and regulators took were watching it teeter for a while. They stepped in a bit late, but they managed to keep depositors whole and contagion minimized (so far).

Don't think Canadian banking is perfect, read up on Canadian CU rollups... these are mostly failed little banks that are forced to sell out when they are facing imnenent failure. There are close to 200 liquidated in Ontario alone in the last 20 years. Here's the list https://www.fsrao.ca/consumers/cred...s-ontario/history-closed-insured-institutions
 
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Wingboy said:
Even tho i have lost about $10,000 in stock value because of the stupidity in the USA. Meh... It'll come back.
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Look at it as a buying opportunity.
 
Wingboy said:
Even tho i have lost about $10,000 in stock valu
because of the stupidity in the USA. Meh...
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I don't worry about my bank stock, it's there to puke out dividends and appreciate over the long haul. It's been about 4% dividend and 8% annual appreciation since 2015. Even with a 10k loss, you'd be up 60% in in the last 5 years.

Buy her a Spyder to go with that new Klim jacket.
 
Mad Mike said:
I don't worry about my bank stock, it's there to puke out dividends and appreciate over the long haul. It's been about 4% dividend and 8% annual appreciation since 2015. Even with a 10k loss, you'd be up 60% in in the last 5 years.

Buy her a Spyder to go with that new Klim jacket.
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Not worried about my BMO stocks at all. It's a nice chunk of change that my kids will probably inherit. She doesn't want any part of piloting her own machine. She is very savvy with mechanical things. Her late husband was a "super modified" race driver.
I told her i was buying the Ural, and she asked.... Is it a pushrod motor?
 
Wingboy said:
I told her i was buying the Ural, and she asked.... Is it a pushrod motor?
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Does she have a younger sister?

Asking for a friend.
 
Mad Mike said:
The US depends on vsnking in a lot of drilling centers, which big banks have no interest in serving. Those smaller banks have less regulatory overhead, so they csn operate viable.
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Banks often don't have much interest in businesses that are not in a situation for long term (or even short term in many cases) sustainability, producing (potentially, if they're successful) a product that is subject to high price volatility.

I think that's just called common sense business decisions, and nothing else.

The fact, as you mention, that some smaller banks in the USA with less regulatory overhead are willing to serve these potentially high risk businesses, and the fact that said small banks frequently fail, should speak volumes.

In a somewhat related note, I follow a lot of other forums and such for the RV industry and a lot of Americans are now starting to yell loudly that they're having trouble getting banks to finance that shiny new RV that they want to rush out and buy - why? Because the industry is teetering on the edge of disaster after an artificial bubble that was created during Covid where manufacturers couldn't make units fast enough, dealers jacked prices by anywhere from 20 to 50% taking advantage of the hysteria, and now that house of cards is all falling down - people that paid $50K for a trailer during covid that was worth $30K in normal pre-pandemic times and is now only worth $20K (a double whammy of post covid price correction plus the customary horrible first 2-3 year depreciation which is common in the RV industry) are struggling to make payments and coming to the realization that they're massively upside down on an asset that they still owe the same amount for another 10...15....20 years. And many are thinking about walking away from them and letting the bank repo them instead.

So, is a small "less regulatory burdened" bank still willing to lend to people in a market that is on the verge of seeing an impending collapse of epic proportions where the value of the financed product is going to crater being "easy to deal with", or are they being incredibly stupid simply because they can get away with it in the interest of maximizing profits and "shareholder value" (*cough*, greed) even if it means that a year or two from now they risk collapse, screwing a lot of their customers along the way?
 
The entire concept of fractional reserve banking requires at least some regulation. How much can be debated but results show what was there for SVB was not enough, be it regulations themselves or enforcement. Regulation at least in part is there to control/prevent bad actors.

For us commoners, this is a buying opportunity as the industry will be punished for the actions of poorly regulated bad actors. Opportunity to buy into well regulated better actors.
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