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March 11, 2023
Where were the regulators on SVB?
The Federal Reserve and FDIC get call reports every quarter to show each bank's financial conditions. Those are public reports that the "experts" on Wall Street can also see.
The report for SVB, or, Silicon Valley Bank, for Sept. 30, 2022 showed that if SVB had to recognize the losses on its portfolio, it had negative equity. The reports also show how many uninsured deposits they have, which appear to be over 90% of their total deposits. These are not core deposits.
Essentially, when investment rates were near zero, SVB took in massive amounts of volatile deposits and invested in longer-term bonds. As inflation and yields started rising, the market value of the investments were tanking.
So why didn't the FDIC, and the Federal Reserve, start putting severe restrictions on SVB to protect the customers and the taxpayers since that is their main job?
Were they more focused on climate change and diversity than financial stability?
Heres what the bank looked like to market participants:
SVB’s Balance-Sheet Time Bomb Was ‘Sitting in Plain Sight,’ Short Seller Says
So-called banking expert Sen. Elizabeth Warren, and other supporters of big government as the solution to everything, should be asked why the bureaucrats didn't spot that elephant in the room.
How many other banks have the same liquidity issues that SVB had? A huge number clearly have mark-to-market problems?
Lessons for Depositors:
Do not keep deposits above the insured limits at any bank.
If you want to put excess deposits in a bank, ask them for a repurchase agreement where they essentially put up a security as collateral for the excess money.
Lessons for Investors:
Don't trust so-called experts, especially people like Jim Cramer of CNBC, who recommended FTX, and SVB in February of this year. If he, or any analyst had looked at the balance sheet, they should have seen the problem.
Image: Logo, via Wikimedia Commons (border added) // fair use