The collapse of Silicon Valley Bank was as predictable and inescapable as the consequences of crossing a blackhole’s event horizon. There was literally zero chance that SVB could avoid failing.
Why? Because there was literally no one at the helm. With one single exception, the entire executive management of the bank had no experience or training in Investment Banking. Their Chief Risk Officer was a “Woke” LGBTQXYZ+ activist.
In fact, in one way or another only Tom King had any experience, the rest were major Democrat donors and Green Agenda or Woke activists. SVB’s.
One of the primary responsibilities of a banks chief risk officer, is interest rate risk management. Which is exactly what caused SVB to fail.
SVB has holding in excess of 40 billion dollars in T bills. T bills come in 4, 8, 13, 17, 26, and 52 month instruments. SVB invested their depositors money in T bills. T bills are considered to be the safest investment instruments available. But… They have 2 significant drawbacks.
Let’s say you purchase a $1000.00 4 week T bill. You pay $980.00 for that T bill, and upon it’s maturity it pays you $1000.00 dollars.
The 2 drawbacks to investing in T bills are, 1) your money is locked up until the T bill is cashed. 2) There are no official penalties for cashing a T bill before it matures. However, doing so means you forfeit the interest on the note and have to pay a commission fee on it’s premature sale.
In other-words, premature sales of the T bill means the seller loses money on the transaction. So you don’t get the $1000.00 face value of the note, nor do you get the $980.00 that you paid for it.
Silicon Valley Bank had thousands of depositors who had millions or even tens of millions in uninsured deposits.
Why? The answer is simple, because they wanted their money liquid, readily available for withdrawal, transfer or other types of transactions. Why? Because many of those depositors were Tech Start-ups or Venture Capitalists. Green Agenda start-ups.
Many other’s were high level Democrat donor’s. Like the Start-ups, VC’s the Democrat donors needed their money to be available on a moment’s notice.
The consequence of not having a chief risk officer was, that when the Fed pressured SVB into purchasing long term T bill’s, there was no one at SVB to do the interest rate risk management. The Fed had already signaled that interest rate hikes were coming, a chief risk officer would have recognized the seriously dangerous position the bank would be put in by purchasing 52 week T bill’s that only paid 2 percent knowing that the Fed would soon be raising interest rates so that new T bills would be paying a higher rate of return, making the lower rate of return T bill’s nearly impossible to sell off early without incurring significant losses.
SVB was leveraged 185 to 1 on cash on hand as opposed to investments. It’s not that SVB didn’t have their depositors money, they did. What they didn’t have was the cash on hand to pay out those deposits all at once. In fact, virtually no bank on earth does. This is why banks fear runs on deposits.
SVB was hemorrhaging money because of the rise in interest rates.
https://www.sacurrent.com/news/austin-tech-bros-newsletter-may-have-triggered-collapse-of-silicon-valley-bank-reports-say-31259618
An Austin tech bro's newsletter may have triggered the collapse of California-based Silicon Valley Bank (SVB), Fortune theorizes in a new report.
Bryne Hobart, author of the venture capital-focused newsletter The Diff, told his more than 50,000 paying subscribers on Feb. 23 that SVB had a debt-to-asset ratio of 185 to 1, essentially suggesting the bank was bank insolvent, according to Fortune.
After SVB missed earnings the wake of Hobart distributing his newsletter, depositors rushed to get capital out of the bank, leading to its collapse, the magazine further reported.
Many are asserting that Woke, Diversity, Equity, and Inclusion, the Green Agenda, and the Democrat donors had nothing to do with SVB’s failure. The truth however, it that they had everything in the world to do with it’s collapse. SVB lacked the required experience in risk management and in the place of the appropriate experience had well connected politically appointed officers.
SVB had in reality ceased to be a bank, and had become an ATM for the Democrat party. A grossly mismanaged caricature pretending to be a bank funding democrat politicians and their woke and green agenda’s. Once that situation was allowed to happen, SVB’s failure could not have been stopped, it was as inevitable as the rising of the morning sun in the east.
SVB from Woke to Broke.
Does anyone know how a layman figures out a bank debt-to-asset ratio? I know a lot of the financial docs will be online but I would think a good risk management team might be moving things around a bit and those reports are issued only quarterly, I believe. How you keep on top of that I have no clue. We're moving our money around so I did look at the board of directors line-ups. Some were laughably pathetic. Also, I figured out a bit about what's called the Pillar C documents.