“That’s how capitalism works”!!
Has he been scrolling r/antiwork and r/collapse, signing in at the Bear of Hex, keep a copy of the Communist Manifesto bedside?
Is this just a joke?
On a serious note, if it’s not, how far are the puppets in government prepared to go in what could be a cataclysmic moment of comeuppance for the Economic Terrorists of Wall St?
The assets that are being liquidated include the liabilities the bank couldn’t cover in the short term because they were paired with a long play on low interest rates. Since it’s pretty likely the fed will lower rates now whoever buys the banks assets or even certain liabilities will make out like a bandit.
Even if they don’t lower rates, whoever buys the “bad” assets will have already benefited from the shakeout whose negative repercussions were almost completely covered by the fed.
The action the fed is taking has the outcome of covering a shortfall not for the entity “Silicon Valley Bank” but for everyone exposed to it including the investors.
There’s people at the left side of the bell curve meme saying “it’s a bailout” and people at the right side saying “it’s a bailout” and here you are saying “it’s actually not a bailout, here’s a detailed explanation”.
You’re right, it’s not technically a bailout but that’s not much solace to people seeing the fart huffing psychopaths in California whose big idea was to make investments with the stipulation that the capital be all held in this one totally not a scam institution do a trust fall with the goddamn fed.
Liabilities are not being liquidated. Assets (like their bond portfolio) are being liquidated to cover liabilities (deposits).
I have no idea if the Fed is going to lower or pause rates. The CPI numbers come out tomorrow. The fact that they are setting up this Bank Term Funding Program makes me think that they aren't going to pause. And even then, the Fed isn't going to lower interest rates to the point where those treasuries are selling at par value. They would have to decrease the interest rate 3-4% overnight to do that.
Once again, this does not cover a shortfall for investors or creditors. The FDIC is stepping in such to the point where Assets = Liabilities, not to the point where Assets = Liabilities + Equity (the balance part of a balance sheet). SVB investors and creditors are likely losing all of the investments they had made in the bank.
Yeah I should have proofread that before I posted. Hopefully this one’s not got a bigass idiot error in it.
Broadly speaking though it does cover investors. The same companies pumping vc money to startups with the stipulation that it be held in svb were investing in svb. That’s why they didn’t push ics (not that anyone (1) does) or payroll management or anything on these absolute buffoons getting free money to have adult daycares.
So they end up buying assets at a discounted price and use that to turn their lost investment into a haircut. One side of the straddle, if you can call it that, idk what the real word for that investment strategy is, is accounted for and oh look, they get to keep riding the ten wagers on black they had going too, all courtesy of the us government’s largesse, saving the hardworking job creators at “Uber for pet rentals”.
(1) I don’t even have enough to worry about it and an ics equivalent was offered me by the bank. Two small businesses I’ve worked for I know for a fact we’re covered by similar schemes. It’s always surprising when the accepted wisdom is that no one worries about that stuff although I imagine after this shakes out no one really ever will again.