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Old 03-19-2023, 01:58 AM
 
Location: Honolulu, HI
24,371 posts, read 9,240,450 times
Reputation: 22739

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More pain to come
Quote:
Economists think Fed will keep raising rates despite bank turmoil
Quote:
The latest survey, conducted in partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business, suggests the US central bank still has work to do to stamp out stubbornly high inflation, even as it contends with a crisis among midsize lenders following the implosion of Silicon Valley Bank.
https://www.ft.com/content/ad5484b6-...omments-anchor
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Old 03-19-2023, 08:03 AM
 
7,395 posts, read 3,588,129 times
Reputation: 14080
Quote:
Originally Posted by EDS_ View Post
No. Not even close. Simply allow banks to forgo, "mark to market" pricing rules on long bonds directly or indirectly.
It depends on how they classify the bonds for accounting purposes.

Banks have the option of classifying their investments as “Held to Maturity” (HTM), “Available for Sale” (AFS), or “Held for Trading” (HFT). Those categories are treated differently for accounting purposes, and thus treated differently based on management intent.

HTM securities are not ordinarily marked to market. However, if a bank sells one bond prior to maturity, it needs to demonstrate that doing so did not “taint” the remainder of their HTM portfolio. Otherwise, the entire HTM portfolio must be re-classified as AFS and marked-to-market.

AFS securities must be recorded at fair market value each quarter prior to the filing of the call report. Increases or decreases in the value are not considered ordinary income or expenses, but are instead recorded in an equity account called “Accumulated Other Comprehensive Income” (AOCI).

To further complicate the matter, banks under a certain asset size had a one time option to “opt out” of the need to include the effects of AOCI on their regulatory capital calculations. To my knowledge, all the small banks elected to opt out. Large banks (referred to as advanced approaches institutions) don’t have this luxury, so yes, changes in AOCI will affect their capital.

HFT investments must be marked to market daily. Regulators look at the banks’ daily P&L statements to monitor the risk in their portfolios. Changes in HFT investments go straight to the income statement, which hits retained earnings, which directly affects capital.

Smaller banks typically do not hold HFT investments. Large banks usually hedge them out, as they intend to make their trading profits on spreads and fees.

********

When the run started, it appears SVB needed to sell HTM bonds to generate liquidity, thereby impairing its entire HTM portfolio. Its advisor, Goldman Sachs, recommended SVB sell its HTM bonds to "get all the bad news out" prior to an equity raise from General Atlantic. Coincidentally, Goldman Sachs itself was the buyer of the HTM bond portfolio. (Things that make you go "hmmmm....")

Which gets back to the fundamental question: WHERE THE HELL WERE SVB's BANK REGULATORS???

Last edited by moguldreamer; 03-19-2023 at 08:41 AM..
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Old 03-19-2023, 09:04 AM
 
7,204 posts, read 4,008,973 times
Reputation: 16414
Quote:
Originally Posted by moguldreamer View Post
Which gets back to the fundamental question: WHERE THE HELL WERE SVB's BANK REGULATORS???
Thanks to Barney Frank, there were no bank regulators.

Quote:
WASHINGTON—Former Rep. Barney Frank co-sponsored the law that tightened banking regulations after the financial crisis, but since leaving office he has been working the other side of the street—as a board member of Signature Bank, which regulators shut down Sunday.

The 2010 Dodd-Frank legislation set tougher regulatory safeguards on banks with more than $50 billion in assets. After leaving office and joining Signature’s board, Mr. Frank, a Massachusetts Democrat, publicly advocated for easing those new standards for smaller banks.

Part of what former President Donald Trump signed into law in 2018 raised the asset threshold to $250 billion, meaning Signature and other regional banks no longer needed to comply with the extra regulation set out in Dodd-Frank.

Lifting the threshold, Mr. Frank said, was a good change that “saved smaller banks a lot of paperwork.” Mr. Frank said that as early as 2013 he began talking publicly about the need to change it, predating his employment with Signature Bank.

Mary Miller, a former Treasury official under former President Barack Obama, has been on SVB’s board since 2015. “Her investment and regulatory knowledge as well as cultural alignment will enable Mary to add unique perspective and insight,” the board’s chairman at the time said in the announcement of her appointment.

The bank’s president and chief executive officer, Greg Becker, was on the board of directors at the Federal Reserve Bank of San Francisco until Friday, and was one of its three finance executives.

All seven of Silicon Valley Bank’s registered lobbyists last year previously held government positions, according to public records. Signature Bank didn’t employ registered lobbyists last year, the records show.

During the lobbying push ahead of the 2018 legislation, Signature Bank retained former Sen. Al D’Amato (R., N.Y.) and his firm, records show.
https://www.wsj.com/articles/barney-...board-e5c8819c

I cut/pasted so its worth reading the whole article. It's all so dirty - the ties between the regulators, banks, government and lobbyist.

What's sad is the bank officials -

"Silicon Valley Bank employees received bonuses hours before government takeover" https://www.cnbc.com/2023/03/11/sili...-takeover.html

"SVB execs sold $84 million in stock over the past 2 years, stoking outrage over insider trading plans" https://www.cnbc.com/2023/03/14/svb-...t-2-years.html

"SVB CEO Sold $3.6 Million Worth of Shares Before Bank's Collapse. Greg Becker sold his shares on Feb. 27, 11 days before Silicon Valley Bank was shut down by regulators" https://www.thestreet.com/technology...banks-collapse

Last edited by YorktownGal; 03-19-2023 at 09:12 AM..
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Old 03-19-2023, 09:55 AM
 
4,885 posts, read 2,988,537 times
Reputation: 6691
This is nothing more than bank consolidation, to pave the way for CBDC; which will allow control of YOUR purchasing power.
Once we came off the gold standard, the clock began; and the road has ended for the greenback.
History has shown every currency to have had an expiration date, barring gold and silver.
http://www.youtube.com/watch?v=hwGWz6aRDw8

Last edited by Sunbiz1; 03-19-2023 at 10:04 AM..
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Old 03-19-2023, 01:21 PM
 
19,563 posts, read 17,837,171 times
Reputation: 17094
Quote:
Originally Posted by moguldreamer View Post
It depends on how they classify the bonds for accounting purposes.

Banks have the option of classifying their investments as “Held to Maturity” (HTM), “Available for Sale” (AFS), or “Held for Trading” (HFT). Those categories are treated differently for accounting purposes, and thus treated differently based on management intent.

HTM securities are not ordinarily marked to market. However, if a bank sells one bond prior to maturity, it needs to demonstrate that doing so did not “taint” the remainder of their HTM portfolio. Otherwise, the entire HTM portfolio must be re-classified as AFS and marked-to-market.

AFS securities must be recorded at fair market value each quarter prior to the filing of the call report. Increases or decreases in the value are not considered ordinary income or expenses, but are instead recorded in an equity account called “Accumulated Other Comprehensive Income” (AOCI).

To further complicate the matter, banks under a certain asset size had a one time option to “opt out” of the need to include the effects of AOCI on their regulatory capital calculations. To my knowledge, all the small banks elected to opt out. Large banks (referred to as advanced approaches institutions) don’t have this luxury, so yes, changes in AOCI will affect their capital.

HFT investments must be marked to market daily. Regulators look at the banks’ daily P&L statements to monitor the risk in their portfolios. Changes in HFT investments go straight to the income statement, which hits retained earnings, which directly affects capital.

Smaller banks typically do not hold HFT investments. Large banks usually hedge them out, as they intend to make their trading profits on spreads and fees.

********

When the run started, it appears SVB needed to sell HTM bonds to generate liquidity, thereby impairing its entire HTM portfolio. Its advisor, Goldman Sachs, recommended SVB sell its HTM bonds to "get all the bad news out" prior to an equity raise from General Atlantic. Coincidentally, Goldman Sachs itself was the buyer of the HTM bond portfolio. (Things that make you go "hmmmm....")

Which gets back to the fundamental question: WHERE THE HELL WERE SVB's BANK REGULATORS???
Thank you for that.
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Old 03-19-2023, 02:04 PM
 
6,561 posts, read 4,209,697 times
Reputation: 7011
Quote:
Originally Posted by moguldreamer View Post
It depends on how they classify the bonds for accounting purposes.

Banks have the option of classifying their investments as “Held to Maturity” (HTM), “Available for Sale” (AFS), or “Held for Trading” (HFT). Those categories are treated differently for accounting purposes, and thus treated differently based on management intent.

HTM securities are not ordinarily marked to market. However, if a bank sells one bond prior to maturity, it needs to demonstrate that doing so did not “taint” the remainder of their HTM portfolio. Otherwise, the entire HTM portfolio must be re-classified as AFS and marked-to-market.

AFS securities must be recorded at fair market value each quarter prior to the filing of the call report. Increases or decreases in the value are not considered ordinary income or expenses, but are instead recorded in an equity account called “Accumulated Other Comprehensive Income” (AOCI).

To further complicate the matter, banks under a certain asset size had a one time option to “opt out” of the need to include the effects of AOCI on their regulatory capital calculations. To my knowledge, all the small banks elected to opt out. Large banks (referred to as advanced approaches institutions) don’t have this luxury, so yes, changes in AOCI will affect their capital.

HFT investments must be marked to market daily. Regulators look at the banks’ daily P&L statements to monitor the risk in their portfolios. Changes in HFT investments go straight to the income statement, which hits retained earnings, which directly affects capital.

Smaller banks typically do not hold HFT investments. Large banks usually hedge them out, as they intend to make their trading profits on spreads and fees.

********

When the run started, it appears SVB needed to sell HTM bonds to generate liquidity, thereby impairing its entire HTM portfolio. Its advisor, Goldman Sachs, recommended SVB sell its HTM bonds to "get all the bad news out" prior to an equity raise from General Atlantic. Coincidentally, Goldman Sachs itself was the buyer of the HTM bond portfolio. (Things that make you go "hmmmm....")

Which gets back to the fundamental question: WHERE THE HELL WERE SVB's BANK REGULATORS???
Thanks for your contributions. You are one of the most knowledgeable people on this forum..
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Old 03-19-2023, 07:38 PM
 
Location: Orange County, CA
4,891 posts, read 3,337,609 times
Reputation: 2954
Quote:
Originally Posted by moguldreamer View Post
I'm trying to think of a single mainstream economist who believes the Fed should be abolished. I'm not coming up with any.
Who cares what they think lol.
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Old 03-19-2023, 07:39 PM
 
Location: Orange County, CA
4,891 posts, read 3,337,609 times
Reputation: 2954
Quote:
Originally Posted by Sunbiz1 View Post
This is nothing more than bank consolidation, to pave the way for CBDC; which will allow control of YOUR purchasing power.
Once we came off the gold standard, the clock began; and the road has ended for the greenback.
History has shown every currency to have had an expiration date, barring gold and silver.

http://www.youtube.com/watch?v=hwGWz6aRDw8
The Great Reset.

The "you'll own nothing and you'll be happy" crowd.
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Old 03-19-2023, 07:53 PM
 
Location: Texas
820 posts, read 459,128 times
Reputation: 2094
The Member Banks aren't taking on 30 billion dollars in risk without our backstop. This bank hijinks was just a more palatable way for the Fed to bail out the donors in Cali and NY. These bank failures are a tempest in a teapot. Everyone is acting like the world will end if a number of tech and maybe crypto companies don't have access to all their cash for a few months. And now the financial world is on its knees to Buffett getting on the hotline to DC and wanting a piece of the action. If you're part of the gang your beak stays wet. If not, well there's always a cow puddle to drink from.
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Old 03-20-2023, 03:08 AM
 
3,104 posts, read 1,564,028 times
Reputation: 8221
Here's "The rest of the story":

Why did First Republic have a target on its back?
Investors saw similarities between First Republic and the failed Silicon Valley Bank — another midsize Bay Area-based lender with a deep-pocketed client base.

“These depositors are particularly trigger-prone,” said Patricia McCoy, a law professor at Boston College. “They’re sophisticated, they know they have other options, and they have mechanisms in place to move money quickly.”

That “particularly volatile” base of depositors presents a risk for investors, said McCoy, who helped establish the Consumer Financial Protection Bureau.

Big banks like JPMorgan Chase have diversified their depositor bases to include more of what McCoy calls “sticky deposits.” In other words, regular folks who have less than the FDIC-insured limit of $250,000 in the bank.

About two-thirds of First Republic’s deposits were uninsured. That’s far less than the 94% uninsured that Silicon Valley Bank had, but First Republic also had an unusually large 111% loan-to-deposit ratio at the end of last year, according to S&P Global — meaning it has loaned out more money than it has in deposits.

https://www.cnn.com/2023/03/17/busin...cue/index.html

Last edited by Maddie104; 03-20-2023 at 03:58 AM..
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