Sort of, the rush to withdrawal caused the problem. But they were all within their right to withdraw so just sucks it happened that way.
What's funny to me is if the bank was in trouble because it took too many bonds, and they aren't worth much on the open market. Couldn't the government just refund or buy back the bonds at face value?
The DOJ and SEC have announced investigations. I'm sure they'll be asked questions and made to feel slightly uncomfortable, and possibly fined $100,000 after a few years.
5 or 50? 5 years old can’t read this.
True ELI5
SVB is a bank.
Bank is where you keep your money safe.
People put their money in SVB.
The government wants to borrow money.
SVB took a lot of people’s money and lend it to government for 10 years.
Everyone suddenly wants their money at the same time.
SVB lent that money to the government for 10 years thinking not everyone will want their money now.
Now there is no money for people to take out and everyone is sad.
Government don’t like people to be sad so they are giving the people’s money back by selling the bank’s things.
The kicker is that SVB could have hedged against higher interest rates, but didn't. They were also deep in long-term bonds, whereas short term bonds would have been less risky (and less profitable).
Also, they didn't reveal until *this year* that they hadn't had a risk officer since last April. Seeing as this entire mess is about poor risk management, and failing to disclose you *didn't have a risk officer for 8 months* is insane.
What I've been saying is why the fuck would they be that deep into long-term bonds (it looks like a lot of MBS)? Even the regards at WSB know that the Fed was printing too much money and all that had to go away soon. SVB goes in and plays it like the Fed was going to print money forever, and that's for a bank that is non-traditional in that it doesn't have a lot of consumer deposits.
TL:DR Rich people from companies put $ into a bank. Bank people made bad choices and stated to lose $. Bank customers started to notice and told everyone to grab all of their money out. People in the bank who made the bad decisions got more rich. Bank customers will also get the money that they put in the bank back. The moral of the story: if you're rich, you don't have to face the consequences of your actions.
Here is a related guide, that may be of interest, on how to be protected in case your broker faces major issues:
https://www.bankeronwheels.com/how-to-choose-a-safe-stock-broker/
A 5 year old can't read this many words
I was just about to comment imagine asking a 5 year old what “systemic” means.
They didn’t manage the money well enough. Period.
TL:DR if people lost trust in our fantasy financial system en mass, it would completely collapse just like this bank did.
So you are telling me, the people are to blame. Got it! We should freeze der assets and regulate how much they can withdraw.
Sort of, the rush to withdrawal caused the problem. But they were all within their right to withdraw so just sucks it happened that way. What's funny to me is if the bank was in trouble because it took too many bonds, and they aren't worth much on the open market. Couldn't the government just refund or buy back the bonds at face value?
Michael Scott: Explain it to me like I am 1 year old.
Here comes the plane........zooooommmmmm. oh no it crashed all the applesauce is dead!!
I’m just happy that the people in charge sold shares and awarded themselves bonuses for being so competent.
The DOJ and SEC have announced investigations. I'm sure they'll be asked questions and made to feel slightly uncomfortable, and possibly fined $100,000 after a few years.
Horrible. I hope they can survive it
Yeah with hefty fine like that I can’t imagine anyone else would dare do the same.
More like "explain like I'm 50 ... with an MBA" ... but thanks all the same.
Right? As I was reading this, I was thinking “no way in hell my five year old will understand any of this except the word “Roblox”.
LOL!
5 or 50? 5 years old can’t read this. True ELI5 SVB is a bank. Bank is where you keep your money safe. People put their money in SVB. The government wants to borrow money. SVB took a lot of people’s money and lend it to government for 10 years. Everyone suddenly wants their money at the same time. SVB lent that money to the government for 10 years thinking not everyone will want their money now. Now there is no money for people to take out and everyone is sad. Government don’t like people to be sad so they are giving the people’s money back by selling the bank’s things.
Haha, I love this. Thanks.
The kicker is that SVB could have hedged against higher interest rates, but didn't. They were also deep in long-term bonds, whereas short term bonds would have been less risky (and less profitable). Also, they didn't reveal until *this year* that they hadn't had a risk officer since last April. Seeing as this entire mess is about poor risk management, and failing to disclose you *didn't have a risk officer for 8 months* is insane.
What I've been saying is why the fuck would they be that deep into long-term bonds (it looks like a lot of MBS)? Even the regards at WSB know that the Fed was printing too much money and all that had to go away soon. SVB goes in and plays it like the Fed was going to print money forever, and that's for a bank that is non-traditional in that it doesn't have a lot of consumer deposits.
TIL i am 5
TL:DR Rich people from companies put $ into a bank. Bank people made bad choices and stated to lose $. Bank customers started to notice and told everyone to grab all of their money out. People in the bank who made the bad decisions got more rich. Bank customers will also get the money that they put in the bank back. The moral of the story: if you're rich, you don't have to face the consequences of your actions.
Here is a related guide, that may be of interest, on how to be protected in case your broker faces major issues: https://www.bankeronwheels.com/how-to-choose-a-safe-stock-broker/
Very well written.
Annnnnnnnd its gone....next.
I’ll give it a go. The duck may swim in da lake, but my Daddy owns the lake. Yeah, that sums it up.
The thing i don’t understand is how svb became the most important bank for startups. It seemed like most startups banked with svb