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My understanding is that SVB was unusually vulnerable to this inflationary market through a combination of high deposit VC/start up customers, and being over-leveraged in the bond market --- typically considered a conservative strategy, but the fast moving interest rate bit them in the a$$. I'm sure the post-mortem will turn up some management miscues. 

 

Previous financial regulations sought to establish a difference between banks, savings and loans, insurance groups, pension funds, investment banks etc. according to the risk/reward preferences of the customers who chose them. Under deregulation, everyone with a barrel of money wanted to act like Goldman Sachs, and I think a lot of customers were unaware that the safety rails had been removed. 

 

The fallout is that some of these guys might lose their summer home.  

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18 minutes ago, Guy Chamberlin said:

My understanding is that SVB was unusually vulnerable to this inflationary market through a combination of high deposit VC/start up customers, and being over-leveraged in the bond market --- typically considered a conservative strategy, but the fast moving interest rate bit them in the a$$. I'm sure the post-mortem will turn up some management miscues. 

 

Previous financial regulations sought to establish a difference between banks, savings and loans, insurance groups, pension funds, investment banks etc. according to the risk/reward preferences of the customers who chose them. Under deregulation, everyone with a barrel of money wanted to act like Goldman Sachs, and I think a lot of customers were unaware that the safety rails had been removed. 

 

The fallout is that some of these guys might lose their summer home.  

Much of that deregulation between all those functions happened prior to the 2008 crash and that crash was worse because of it.  

 

I remember my Dad commenting, probably around 2005 or 2006 how that deregulation was bad.

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13 minutes ago, BigRedBuster said:

Much of that deregulation between all those functions happened prior to the 2008 crash and that crash was worse because of it.  

 

I remember my Dad commenting, probably around 2005 or 2006 how that deregulation was bad.

 

So did we learn a lesson from 2008 and act on it?

 

Not really. No. 

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1 hour ago, Guy Chamberlin said:

 

So did we learn a lesson from 2008 and act on it?

 

Not really. No. 

Well…..new regulations were put in. But, some people have gone through a period thinking cutting regulations is the greatest thing since sliced bread. 
 

instead of that, the discussion should be, how do we make the regulations better so they do what we want?

 

But, that conversation is too hard. 

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40 minutes ago, BigRedBuster said:

Well…..new regulations were put in. But, some people have gone through a period thinking cutting regulations is the greatest thing since sliced bread. 
 

instead of that, the discussion should be, how do we make the regulations better so they do what we want?

 

But, that conversation is too hard. 

SVB was doing exactly what Frank/Dodd wanted a bank to do in a way.  Buy long term safe bonds.  The interest rate increase was no bueno for them, partly because of inept management not realizing what is going on with rates.  

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9 minutes ago, Archy1221 said:

SVB was doing exactly what Frank/Dodd wanted a bank to do in a way.  Buy long term safe bonds.  The interest rate increase was no bueno for them, partly because of inept management not realizing what is going on with rates.  

My comment wasn't necessarily saying deregulation caused SVB to fail.  But, my comment was more of what the conversation needed to be instead of people spanking each other on the a$$ celebrating doing nothing but cutting regulations.

 

You agree that regulation is needed in the banking industry, correct?

Well, then just blindly celebrating cutting regulations should not be supported.  Changing regulations and constantly improving them is what should be celebrated.

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21 minutes ago, BigRedBuster said:

ell, then just blindly celebrating cutting regulations should not be supported.  Changing regulations and constantly improving them is what should be celebrated.

What should also not be blindly supported is the the people who immediately blame disasters and large issues like the Ohio train wreck and SVB collapse on Trump deregulations that actually didn’t cause those issues in order to score political points. 

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2 hours ago, BigRedBuster said:

Well…..new regulations were put in. But, some people have gone through a period thinking cutting regulations is the greatest thing since sliced bread. 
 

instead of that, the discussion should be, how do we make the regulations better so they do what we want?

 

But, that conversation is too hard. 

That's because electing people who are reality TV stars is more fun than electing people who will actually try to make things better.

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