Silicon Valley Bank bankruptcy....

by mikeflood 18 Replies latest social current

  • TonusOH

    The similarity to 2008 is that banks tend to do a poor job of risk-management. Which is always a concern, given their role in the economy.

    In 2008, banks leveraged themselves to extreme degrees in the hopes of riding a financial wave before it crashed, and their timing was wrong. In 2022/3, SVB did not properly prepare for interest rate hikes that they had to know were coming.

    Another similarity- the government is stepping in with taxpayer dollars to rescue a bank from its bad decision-making or poor preparation. This can help avoid some pain, but it also encourages the kind of poor preparation and risk-taking that caused the problem in the first place. If you know you are "too big to fail", why not take dangerous risks?

    At the same time, this isn't the same as 2008, in that SVB took a pretty common approach to managing customer funds, and individuals with $250,000 or less in their accounts will be made whole under existing federal regulations. But SVB had a lot of investors with millions in their accounts, and without government intervention those investors and companies would have lost vast sums of money. They should have hedged for the coming rises in interest rates, and as a financial institution managing billions of dollars, this is inexcusable. But there are definite differences between this event and the crash of 2008/9.

  • ExBethelitenowPIMA

    Instead of letting the bad banks go bankrupt and letting the fire go out they have chosen to pour more gasoline on the fire

  • ExBethelitenowPIMA

    It’s all happening at once

    Vaccination never prevented anything and never will, and is the most barbarous practice...We are in the last days; and the devil is slowly losing his hold, making a strenuous effort meanwhile to do all the damage he can, and to his credit can such evils be placed. ... Use your rights as American citizens to forever abolish the devilish practice of vaccinations." Golden Age 1921 Oct 12 p.17
    "Thinking people would rather have smallpox than vaccination, because the latter sows the seed of syphilis, cancers, escema, erysipelas, scrofula, consumption, even leprosy and many other loathsome affections. Hence the practice of vaccination is a crime, an outrage and a delusion." Golden Age 1929 May 1 p.502
    "Avoid serum inoculations and vaccinations as they pollute the blood stream with their filthy pus." Golden Age 1929 Nov 13 pp.106-107
  • ExBethelitenowPIMA

    Meanwhile here in the UK banks are limiting withdrawals

    there are lines outside many banks and people desperately trying to withdraw online but the banks are limiting

  • Wonderment

    Country leaders ( Including USA) keep telling us that their bank systems are safe and sound. It seems that this is based on the confidence in the bank system that they continually promote. But how could this be? Will banks have the deposits to give back when a majority of depositors rush to pull their monies in a moment of financial panic?

    No. Banks in many countries are only required to keep a small amount of cash for normal daily activities (Ref.: "Bank, or Cash Reserve Ratio"). What happened to SVB in USA can happen again anywhere around the world, including to large banks.

    Wikipedia defines "Reserve Ratio" thus: "Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the commercial bank's reserve, is generally determined by the central bank on the basis of a specified proportion of deposit liabilities of the bank. This rate is commonly referred to as the reserve ratio."

    Reserve requirements by country

    The reserve ratios set in each country and district vary.[18] The following list is non-exhaustive:

    Country or district Reserve ratio (%) Notes
    Australia None . Statutory reserve deposits abolished in 1988, replaced with 1% non-callable deposits[16]
    Bangladesh 6.00 Raised from 5.50, effective from 15 December 2010
    Brazil 21.00 Term deposits have a 33% RRR and savings accounts a 20% ratio.[19]
    Bulgaria 10.00 Banks shall maintain minimum required reserves to the amount of 10% of the deposit base (effective from 1 December 2008) with two exceptions (effective from 1 January 2009): 1. on funds attracted by banks from abroad: 5%; 2. on funds attracted from state and local government budgets: 0%.[20]
    Burundi 8.50
    Chile 4.50
    China 17.00 China cut bank reserves again to counter slowdown as of 29 February 2016.[21]
    Costa Rica 15.00
    Croatia 9.00
    Down from 12%, from 10 April 2020[22]
    Czech Republic 2.00 Since 7 October 2009
    Eurozone 1.00
    Effective 18 January 2012.[23] Down from 2% between January 1999 and January 2012.
    Ghana 9.00
    Hong Kong None [13]
    Hungary 2.00 Since November 2008
    Iceland 2.00 [24]
    India 3.00 27 March 2020, as per RBI.[25]
    Israel 6.00
    set by the Monetary Committee of the Bank of Israel.[26]
    Jordan 8.00
    Latvia 3.00
    Just after the Parex Bank bailout (24.12.2008), Latvian Central Bank
    decreased the RRR from 7% (?) down to 3%[27]
    Lebanon 30.00 [28]
    Lithuania 6.00
    Malawi 15.00
    Mexico 10.50
    Nepal 6.00
    From 20 July 2014 (for commercial banks)[29]
    New Zealand None 1985[30]
    Nigeria 27.50
    Raised from 22.50, effective from January 2020[31]
    Pakistan 5.00 Since 1 November 2008
    Poland 3.50 Since 31 March 2022[32]
    Romania 8.00
    As of 24 May 2015 for lei. 10% for foreign currency as of 24 October 2016.[33]
    Russia 4.00 Effective 1 April 2011, up from 2.5% in January 2011.[34]
    South Africa 2.50
    Sri Lanka 8.00 With effect from 29 April 2011. 8% of total rupee deposit liabilities.
    Suriname 25.00
    Down from 27%, effective 1 January 2007[35]
    Sweden None Effective 1 April 1994[36]
    Switzerland 2.50
    Taiwan 7.00 [37]
    Tajikistan 20.00
    Turkey 8.50 Since 19 February 2013
    United States None
    The Federal Reserve reduced reserve requirement ratios to 0% effective on March 26, 2020.[38]
    Zambia 8.00



  • ExBethelitenowPIMA

    The banking crisis is going to get worse over the next six months

    its exasperated by the the BRICS countries dumping the dollar

  • Simon

    Many banks are functionally insolvent.

    But it's OK, the fed will just print more $$$ and apparently, the new magically printing they use doesn't 'cause any additional inflation.

    It's what happens when fucking morons are put in charge. There are no serious people running the show any more. Maybe there never were (although Isaac Newton did a pretty good job setting the British monetary system until WWI crashed it), but the wheels have really come off now.

  • mikeflood

    First Republic Bank, third bank failure this year (last weekend) , largest since 2008, there's a couple more of regional banks in trouble, I hope it gets fixed

  • Anony Mous
    Anony Mous

    @mikeflood: it won’t get fixed, it only gets worse. Biden guaranteed all deposits, even those above $250k (the FDIC limit) at SVB, now every bank that’s insolvent will declare bankruptcy, get bailed out by the government and assets taken over by their “parent” bank companies.

    First National got its rich customers bailed out, the bank was then taken over by JP Morgan, JP Morgan received $13B in deposits and got a $50B bonus from the Fed to do it.

    This is the Obama bank bailouts all over again.

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