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Firebot · 03-11-2023, 05:33 PM

Let's be clear, SVB did not collapse because of high interest rates and losing money on bonds. While that may have been the catalyst they collapsed because they had negative working capital and the perception that they were out of liquid cash (as they needed to raise funds to cover the loss on the fire sale of bonds). And with investors all looking to withdraw at the same time (a classic bank run), you have a bank who is unable to meet the demand suddenly collapsing. What bank has 42 billion sitting in cash available to make those payments? Without the bank run and hysteria, SVB would be standing today.

https://www.bloomberg.com/news/artic...on-on-thursday

A bank run can occur at any bank, all that is needed is hysteria contagion to run amock. If the general population, which includes corporations, lose confidence in the banking system, fear will set in. Most American banks went down 10% on Thursday, solely due to hysteria.

We just have to look at the TP run craze in March 2020 to see what mass hysteria can do. All of a sudden toiler paper was a rare commodity because hysteria manifested an actual shortage, which further fed the hysteria in a vicious cycle. You can also look at the Argentine financial crisis of 2001 to see the damage of a bank run when you lose confidence in the system.

https://economics.rabobank.com/publi...sis-20012002-/

I personally believe, if the feds don't step in before Monday and make a statement to assure all investors and deposits that were held by SBV that they will be made whole, this uncertainty could certainly spread unchecked.

Too big to fail most certainly holds true here.

03-11-2023, 05:33 PM	#1092
Firebot #1 Goaltender Join Date: Jul 2011 Exp:	YouTube Video Let's be clear, SVB did not collapse because of high interest rates and losing money on bonds. While that may have been the catalyst they collapsed because they had negative working capital and the perception that they were out of liquid cash (as they needed to raise funds to cover the loss on the fire sale of bonds). And with investors all looking to withdraw at the same time (a classic bank run), you have a bank who is unable to meet the demand suddenly collapsing. What bank has 42 billion sitting in cash available to make those payments? Without the bank run and hysteria, SVB would be standing today. https://www.bloomberg.com/news/artic...on-on-thursday A bank run can occur at any bank, all that is needed is hysteria contagion to run amock. If the general population, which includes corporations, lose confidence in the banking system, fear will set in. Most American banks went down 10% on Thursday, solely due to hysteria. We just have to look at the TP run craze in March 2020 to see what mass hysteria can do. All of a sudden toiler paper was a rare commodity because hysteria manifested an actual shortage, which further fed the hysteria in a vicious cycle. You can also look at the Argentine financial crisis of 2001 to see the damage of a bank run when you lose confidence in the system. https://economics.rabobank.com/publi...sis-20012002-/ I personally believe, if the feds don't step in before Monday and make a statement to assure all investors and deposits that were held by SBV that they will be made whole, this uncertainty could certainly spread unchecked. Too big to fail most certainly holds true here. Last edited by Firebot; 03-11-2023 at 05:50 PM.