Thread regarding U.S. Bank layoffs

The same thing as the 2008 crisis or not?

To the comment that this will be way worse than 2008 - that is utter nonsense. Banks are far better capitalized than they were leading up to the 2008 financial crisis. SVB had a mismatch of asset and liabilities. It is true that most other banks have MTM losses in their bond portfolio. The industry had >$600 billion in unrealized losses at the end of 2022 (BofA is the most upside down). That said the critical issue with SVB is the concentration in the high tech industry that created the deposit bleed coupled with investments tied to long duration treasuries. The loss from the sale of their securities portfolio to raise cash to meet deposit outflows is what created the loss of confidence and ultimately the run.

This is NOT the same thing as the 2008 crisis where exposure to toxic loans cratered bank balance sheets. Since then capital
requirements have increased significantly and most banks are diversified in their funding sources. Particularly larger banks who have a large portion of retail deposits well under the FDIC limits…
___________________________________
I pulled this from @uur+1lB1d4Wq because I'm curious whether people agree or not.

by
| 1751 views | | 3 replies (last ) | Reply
Post ID: @OP+1lCKRzV1

3 replies (most recent on top)

Current situation is not even remotely similar in any way to 2008.

by
| | Reply
Post ID: @1cby+1lCKRzV1

Nope!

by
| | Reply
Post ID: @1czj+1lCKRzV1

No! The 2008 financial crisis was about loans going bad and deteriorating capital. This was a liquidity event because SIVB had huge inflows of deposits (as did most banks) during COVID years and didn't know what to do with the money. So they purchased treasuries and other "safe investments" that have gone down in value due to the unpresidented increase in interest rates. As long as they intended to hold tell maturity they would have gotten all their money back. Many of SIVB's depositors are large private equity sponsors that started withdrawing money to support their companies (tech start ups). All of a sudden there were rumors SIVB didn't have enough cash. They liquidated their treasuries at a loss and panic stuck. Everyone else started pulling deposits and the bank failed even though it had, and still has, a strong asset base.

Well, that is what we think so far. Nonetheless, having underwater treasuries that WILL mature at par is different to Lehman Bros, which had worthless mortgage securities.

by
| | Reply
Post ID: @hdr+1lCKRzV1

Post a reply

: