The 2022-23 Economic Crisis Megathread

[The Minsky Moment]

One thing I don't get though, maybe you can explain.  If all their assets were Treasuries and agencies, why the sudden crash in asset value?  I understand the inverse relationship between bond price and market yield, but if they were in fact holding to maturity, par is par, right?  I mean their balance sheet only looks bad if they mark to market, right?

Correct and initially there wasn't a crash in asset value because under the banking regs they didn't have to MTM the hold to maturity portfolio for accounting purposes.  But the current market values were still disclosed in regulatory filings.  And once those values started circulating word-to-mouth, deposits starting streaming out, forcing the bank to liquidate assets, kicking off a malign feedback loop.

[The Minsky Moment]

Ironically, the same characteristics of government securities that make them seem like safe investments also make it more transparent when there is a decline in value.  Safe doesn't necessarily make for safety.

[Admiral Yi]

gotcha

[Admiral Yi]

and Tricky

[Legbiter]

Forbes, maybe not to be trusted in the future. 

Like local restaurants here who win awards and get rave professional reviews and then close down 2 weeks later...

[Oexmelin]

Looking at the Canadian ones - did not have Nova Scotia down as a big financial hub

From the time of merchant capital loans for shipping operations out of Nova Scotia. Think Cunard and Co., though the Cunards actually created what became the Royal Bank of Canada.

[Tamas]

[Josquius]

Credit suisse is slipping too. They were recruiting quite heavily just before Xmas.
Broader banking bust or just the shit going under?

[Valmy]

Credit suisse is slipping too. They were recruiting quite heavily just before Xmas.
Broader banking bust or just the shit going under?

Banks failing to adjust to highet interest rates I think.

I worry about it creating a general bank panic.

[Grey Fox]

They could just raise checking/regular account interest.

[crazy canuck]

Credit suisse is slipping too. They were recruiting quite heavily just before Xmas.
Broader banking bust or just the shit going under?

Banks failing to adjust to highet interest rates I think.

I worry about it creating a general bank panic.

That's odd, the increase has generally helped Canadian banks as the interest rate spread they make their profits on has increased.

[Jacob]

The investment folks at my wife's work were discussing the Silicon Valley Bank troubles and they said that it was basically a textbook case of poor and insufficient hedging at SVB.

Now, this is second hand and all but my impression is that those folks know what they're talking about.

... and that would also line up with your observation. Banks who managed their risk competently (or even made bets in the right direction) could very well  prosper in this environment, while those who relied on erroneous assumptions do not.

[Razgovory]

I thought they went bankrupt because they were "woke".

[HVC]

Been reading stuff like only one board member had a finance background and the chief risk officer was on a nine month uncovered leave. You'd think banks would be a lot more regulated in the states after all the "hiccups", but I guess money and lobbying talks.

I guess svb fell out of normal regulation regardless? How does a bank that big get to act as a "shadow bank" in the first place?

[Tamas]

The investment folks at my wife's work were discussing the Silicon Valley Bank troubles and they said that it was basically a textbook case of poor and insufficient hedging at SVB.

Now, this is second hand and all but my impression is that those folks know what they're talking about.

... and that would also line up with your observation. Banks who managed their risk competently (or even made bets in the right direction) could very well  prosper in this environment, while those who relied on erroneous assumptions do not.

I have read and heard that from several people in the finance sector - SVB was extremely mismanaged. I guess we'll learn in a year or two if it was incompetence or something shady.