Posted on 03/12/2023 9:25:01 AM PDT by E. Pluribus Unum
How much did pelosi sell?
The bidding on the bond portfolio begins at 50cents on the dollar if the fed waves ratio tests on the junk or something similar. Equity holders will get close to zilch.
Lived in Tx when Enron went under. Across the back fence of our yard a senior financial officer was found dead in his car. Two shots to the head. Ruled suicide. 2 shots.
There is justice, and then the courts. There is also the concept of incentive — like incentive to stay honest and not hurt others. This depends upon the perpetrator being capable of planning ahead, admittedly not a strong suit of any liberal. But, yah does what yah can.
I thought the same thing.
I lived in Sugar Land at the same time and remember it well.
There is so much more to Enron than we know.
Ken Lay’s mysterious death just in time for his property to be shielded from seizure, for instance.
I noticed he didn’t mention even once the bank’s shareholders, whose shares will be totally wiped out. But he sold his $3.6 million worth. Putz.
Maybe it was a binary trigger. They fire on pull and release.
It is the job of the boards of all banks, to manage risk. This is done by assessing the market, determine the market direction and adjust assets accordingly. This did not happen at SVB. Why did it not happen? Because the Chief Risk Officer (role, not title) was so focused on Woke ideology that they did not see the risk and/or respond in time.
It is the job of the CEO to identify and hire those that have the bank’s best interest at hart. The CEO did not do this and instead hired a woke ideologue.
The CEO selling stock days before the bank’s collapse is very indicative that he KNEW the bank was going to fail is is likely to be insider trading.
Corruption appears to be rampant at all levels.
But will this be used as an example of what happens when you hire “woke” employees? Doubt it.
I’m guessing more than a few wish they had his heart. And his head and a few other body parts.
What a guy.
Looking at it clinically, I would not call SVB a fraudulent business. I will say that they were a victim or of their own initial success and poor risk management of excess liquidity.
And Congress and the free spending Biden administration are ULTIMATELY the culprit here.
It’s all an extension of Fed policy to curb inflation, reversing a 13-year zero-rate policy. And why did inflation occur? Isn’t it because of the massive increase in government spending, which resulted in huge printing of money ?
This of course pushed up rates in the middle and right side of the yield curve, devaluing existing bond holdings locked into older rate patterns. Investors noticed and then depositors too. The high-flying institution that specialized in providing liquidity in industries that have lost their luster suddenly found itself very vulnerable.
In addition, the SVB and probably other banks were exposed with a portfolio of collateralized mortgage obligations and mortgage-backed securities. But with rates rising, those are coming under stress too as high leverage in housing and real estate become untenable amidst falling valuations. Borrowers are finding themselves under water and that in turn adds to stress on lenders.
And where did SVB, and the entire banking industry, get the funds to bulk up their portfolios with such debt holdings? You guessed it: STIMULUS PAYMENTS!’
Hundreds of Billions flooded in and it had to be parked somewhere making some return. At the time it seemed like a good deal, until Fed policy changed.
Immense government spending which produced debt that was quickly monetized and eventually caused inflation, prompting the Fed to reverse course with the largest/fastest rate increases in history. And guess what? IT’s STILL GOING ON!
This destabilized (or restabilized) production structures away from the right side of the yield curve toward the left, shifting capital in search of return to the consumer-goods sector. Labor has begun to follow, thus creating a surplus of resources in information tech and a shortage in retails.
It was always naïve to think that this shift would take place without touching the banking institutions that shoveled leverage in the direction of industries that thrived during lockdowns but are cutting back massively
While you are standing in soup lines, I'll be playing the links overseas. Sayonara, suckers.
"The LOVE of MONEY is the ROOT of EVIL"
The discussion of the adverse effects of changing course too much too fast has been had before on many other things. Why did this not happen when Volker finally pushed rates up quickly?
The bond squeeze caught everyone. Values fell even below par. You couldn’t give them away so-to-speak. You were stuck with them to maturity.
The root cause is too much spending and too much stimulus.
The xiden budget proposal is absolutely insane.
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