Silicon Valley Bank Collapse "Second-Biggest" in U.S. History

Discussion in 'Business & Economics' started by Tiassa, Mar 10, 2023.

  1. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    It had nothing to do with whether the bank could pay higher interest to her customers. It had everything to do with not having the liquidity to give customers the money they had in their accounts when a large number of customers came looking for their money at the same time.

    The reason it didn't have sufficient liquidity to repay it's customers' deposits was because the recent hike in interest rates devalued the bonds they had invested and relied on. They therefore sold them at a loss, and the bank collapsed as a result, unable to fill the hole through raising capital.
    So higher interest rates were part of the reason for the collapse, but most certainly not for the reason you suggest.
     
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  3. billvon Valued Senior Member

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    Nope. Sounds like you either got some misinformation from a fake news site, or just made something up in your head. Had nothing to do with the interest they were paying clients.
     
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  5. Saint Valued Senior Member

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    Credit Suisse is the next to go Bankrupt?
    It is a bad bank that help laundering money from drug lords and terrorists.
     
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  7. billvon Valued Senior Member

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    Where did you get that misinformation from?
     
  8. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    There was a leak back in 2022 that detailed some c.£80 bn linked to such people. Whether Credit Suisse are a "bad bank" because of this, I can't say, as I don't know how that compares to the rest of the banking sector. Did they "help" launder money? Or did they just not stop it by not knowing about it? No idea.
     
  9. Saint Valued Senior Member

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    Credit Suisse is safe now?
     
  10. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    Safe, yes, in that it has been bought out by one of its rivals, UBS.
     
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  11. Saint Valued Senior Member

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    some of her bonds have become rubbish.
     
  12. Saint Valued Senior Member

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    investors want to sue CS for losing 14b in their bonds that become waste paper
     
  13. billvon Valued Senior Member

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    So in other words they are like . . . hundreds of other companies out there who planned poorly and lost a huge amount of value for investors.
     
  14. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    If you feel you were misled by the Bank, and were persuaded to invest in them, you, too, would have grounds for suing. Whether it succeeds or not is another matter. I guess it rests on whether CS deliberately sought to mislead their (current and potential) investors by hiding the financial troubles they were in.

    There's also the issue here that certain bondholders should have been given priority over any shareholders (preferred or common stock), but the Swiss regulators seemingly just ignored the contractual nature of that arrangement. Expect them to also be sued as a result.
     
  15. Saint Valued Senior Member

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    Has Fed tamed inflation?
    When rate hike can stop?
     
  16. candy Valued Senior Member

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    I know that the conventional thought is that raising interest rates halts inflation but I have always wondered if raising the cost of doing business is the best way to stop prices from going up. The businesses pass the increased borrowing costs along to consumers as higher prices. The assumption that consumers can cut back on purchases can only apply to some items.
    So no I do not think the Fed has tamed inflation.
     
  17. Seattle Valued Senior Member

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    Raising interest rates is a rough tool but it's about all the Fed has. There is also a lag so they usually over do raising or lowering rates and make matters worse.

    Raising rates does eventually slow the economy down though. Demand (for most items) is elastic so the more expensive it is, the less that is demanded.

    Much of the current inflation is just from shutting down the economy during Covid and then printing money to hand out to everyone. Of course that's inflationary. Raising rates may be all that the Fed can do but it isn't really addressing the problem, which is printing money.

    They continue to increase the money supply whether it's "backstopping" the banking system, forgivinging student loans, paying interest on the ever increasing federal debt, etc.

    I think inflation is coming down and if left alone will continue coming down on its own. There are also deflationary trends in society that help to offset existing inflation. Technology is deflationary. People worry about AI reducing the number of jobs. That is deflationary however.

    Housing is almost a separate issue. Land is limited, land in big cities is especially limited, if jobs are in the cities and if those jobs pay well then land in those cities is going to be expensive.

    The solution isn't "affordable housing". It's creating jobs somewhere other than those big cities. There's plenty of land in the US as a whole. There's plenty of reasonably priced housing if you match the job to the area. Buying a house has never been "easy". Move to the Midwest and and do something other than work for minimum wage and you can afford a house.
     
  18. billvon Valued Senior Member

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    Yep. And given it's their only tool, and given the inevitable directive to "DO SOMETHING!!!!!!" they raise (and lower) away.
    Agreed - which is another case of "DO SOMETHING!!!!" using limited, and often barely effective, tools.
    Well, it bears directly on the problem though. Higher interest rates = banks make fewer loans = less money is created. (Remember that most money is created through creation of new debt.)

    They continue to increase the money supply whether it's "backstopping" the banking system, forgivinging student loans, paying interest on the ever increasing federal debt, etc.

    That would indeed solve much of the problem. But it also requires central economic planning, something that is anathema to many. (it's SOCIALISM!! after all.) And it also doesn't always work - witness China's huge (and deserted) cities created for just this purpose.
     
  19. Seattle Valued Senior Member

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    It doesn't require central planning. If you can't afford to leave in Seattle go to Des Moines and find a job/start a business there.

    It's actually what happens in real life. It's the way people react. Some sit around waiting for "affordable" housing but that's mainly just on the internet forums. In reality people move to where the jobs are to to where housing is affordable to them.
     
  20. billvon Valued Senior Member

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    Well, it does require there to BE a job there. And thus there needs to be businesses there. This is generally achieved via massive tax breaks, incentives etc generally made at the state level. These incentives make up for the lack of infrastructure/labor that the company experiences at first.
    I've noticed that in reality people get a job where there ARE jobs (often large cities) then go as far as they need to go to find affordable housing. Then they are often faced with a horrendous commute - but them's the breaks. Public transportation can help with this of course but that has limits.
     
  21. Seattle Valued Senior Member

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    You can be a cop, plumber, electrician, retail worker, accountant, pharmacist, doctor, lawyer, construction worker most anywhere.

    You can start a small business most anywhere if you are so inclined as well.
     
  22. billvon Valued Senior Member

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    You can indeed. But if you start, say, a plumbing business in a small town that already has plenty of plumbing businesses, you will be less likely to be successful. Someone with little money may not be able to afford to take that chance.

    There is freedom that comes with having enough money to relocate - freedom that some people do not have.
     
  23. Seattle Valued Senior Member

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    If you move to a large city that already has plenty of plumbing businesses it's a problem as well so don't do that.

    Most people who can't afford a house in a large city would be better off to not be in a large city. If it takes central planning or "affordable housing" for you to exist, you're probably in the wrong place.
     

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