The biggest bank failure in almost a generation explained

[middleview]

Wonder what policy could have stopped that type of business transaction from happening in the first place?

I've seen some very bizarre practices in accounting....like when the company I worked for called "good will" an asset in borrowing. The money was used for bonuses for the directors, two VPs and the president....privately owned company. That was then burrowed under a lot of other fake assets when we were sold to a larger company.

I'm not sure how you change the rules to fix it....if a company is about to issue an IPO, is the proposed stock price wishful thinking or a true measure of the company valuation?

 

[Addy]

I've seen some very bizarre practices in accounting....like when the company I worked for called "good will" an asset in borrowing. The money was used for bonuses for the directors, two VPs and the president....privately owned company. That was then burrowed under a lot of other fake assets when we were sold to a larger company.

I'm not sure how you change the rules to fix it....if a company is about to issue an IPO, is the proposed stock price wishful thinking or a true measure of the company valuation?

Scroll down to the second page on the link, it tells the story.
______________________________________

https://www.jec.senate.gov/public/_cache/files/1f3f2e7c-ca31-4976-976e-cd48b0a788c9/dodd-frank-roll-back-bill--a-windfall-for-big-banks.pdf?

 

[middleview]

Scroll down to the second page on the link, it tells the story.
______________________________________

https://www.jec.senate.gov/public/_cache/files/1f3f2e7c-ca31-4976-976e-cd48b0a788c9/dodd-frank-roll-back-bill--a-windfall-for-big-banks.pdf?

I was a programmer doing software for a brokerage service bureau at the time and had a lot of work to change programs to comply. It was a pain, but I could see the advantage to a lot of what was in Dodd Frank. I'd bet I spent 8 months changing programs for compliance issues.

Trump bragged a lot about his efforts to deregulate banking and to gut Dodd Frank.

 

[Addy]

Trump bragged a lot about his efforts to deregulate banking and to gut Dodd Frank.

The idea of banks passing all levels re: stress test seems like it would have been an appropriate and secure measure for their customers.
Too bad now, how this was undermined by Trump's deregulation policy.

 

[as seen on tv]

I've seen some very bizarre practices in accounting....like when the company I worked for called "good will" an asset in borrowing. The money was used for bonuses for the directors, two VPs and the president....privately owned company. That was then burrowed under a lot of other fake assets when we were sold to a larger company.

I'm not sure how you change the rules to fix it....if a company is about to issue an IPO, is the proposed stock price wishful thinking or a true measure of the company valuation?

under GAAP (generally accepted accounting practices) the IRS has consistently allowed "goodwill" and "trademarks" to be classified as an asset. Along with patents, copyrighted material, and other intellectual property.

I don't think "accounting" will turn out to be SVB's self inflicted wound. So far most people are on the same page here:

1. Shitty loans to shitty companies with low/no profits.
2. Crypto entanglement
3. Ultra high rate jumbo CDs - sold to wall street guys - to fund these schemes
4. A bank president who is ALSO a federal reserve board governor, and who had the power to delay/halt/deflect regulatory investigations into the bank's risky activities.

I doubt if the DOJ is on this, but here's what they need to do: serve an MOU (memorandum of understanding) or court order to prevent the destruction of ANY SVB documents. Emails. Text messsages. Privilgeged communications with the federal reserve board of governors. All of them. If there's a smoking gun in terms of fraud and corruption it will be found there.

But of course, the evidence destruction process started even before the bank failed. Probably around the time their President sold his 12,500 shares of SVB stock at nearly $300 a share.

It's like throwing a gun in the ocean after it's used for a crime.

 

[as seen on tv]

The idea of banks passing all levels re: stress test seems like it would have been an appropriate and secure measure for their customers.
Too bad now, how this was undermined by Trump's deregulation policy.

SVB's president is a current member of the federal reserve board. he seems to have abused his position to prevent regulators from interfering with his scheme to load up on risky "startup" loans and crypto.

 

[as seen on tv]

I was a programmer doing software for a brokerage service bureau at the time and had a lot of work to change programs to comply. It was a pain, but I could see the advantage to a lot of what was in Dodd Frank. I'd bet I spent 8 months changing programs for compliance issues.

Trump bragged a lot about his efforts to deregulate banking and to gut Dodd Frank.

i'm still waiting to see what "gutted sections" of Dodd Frank led to SVB going on a bizarre journey into crpto and loans to startups with no profits.

None of America's "safe banks" appear to have gone down this path. It doesn't seem like Dodd Frank is the problem if its ONLY crypto banks dying, no?

 

[Addy]

SVB's president is a current member of the federal reserve board. he seems to have abused his position to prevent regulators from interfering with his scheme to load up on risky "startup" loans and crypto.

Well, a conflict of interest... what a surprise. Not!

 

[middleview]

SVB's president is a current member of the federal reserve board. he seems to have abused his position to prevent regulators from interfering with his scheme to load up on risky "startup" loans and crypto.

He has not been a member of the board since December 2021.

 

[middleview]

i'm still waiting to see what "gutted sections" of Dodd Frank led to SVB going on a bizarre journey into crpto and loans to startups with no profits.

None of America's "safe banks" appear to have gone down this path. It doesn't seem like Dodd Frank is the problem if its ONLY crypto banks dying, no?

See post #42

 

[as seen on tv]

Well, a conflict of interest... what a surprise. Not!

It's a conundrum. You can't have federal reserve boards which are composed of people with "no backgound in banking".

but perhaps you shouldn't be RUNNING A BANK at the same time you're on a government committee to regulate your own bank?

This happens across all sorts of activities - insurance, pharmaceuticals, defense contractors, lawyers.

The bar association approves every nominee for the federal bench. and the rest of us all agree that most of said judges are partisan players who put their parties' interests above strict interpretation of the constitution and other relevant law.

 

[Dawg]

Bammmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm

Failed bank's management called out for woke 'obsession,' Democrat-filled board: This is 'madness' (msn.com)

 

[Dawg]

WOKE killed SVB

SVB Gave $74 Million to Black Lives Matter. Its Explains a Lot About the Bank's Collapse | Opinion (msn.com)

 

[as seen on tv]

WOKE killed SVB

SVB Gave $74 Million to Black Lives Matter. Its Explains a Lot About the Bank's Collapse | Opinion (msn.com)

Thats a surprisingly large "donation". To an organization which is facing multiple investigations for misuse of donations by its leaders.

I hope this gets a deeper look.

 

[Dawg]

Thats a surprisingly large "donation". To an organization which is facing multiple investigations for misuse of donations by its leaders.

I hope this gets a deeper look.

It is and it sure should be investigated
Think I read Corps donated over $600 Billion to BLM
so of course there is misuse

 

[EatTheRich]

We also shouldn't lose sight of the systemic risk posed by derivatives:

https://www.counterpunch.org/2023/03/13/why-the-banking-system-is-breaking-up/

"There is an even larger elephant in the room: derivatives.

"Volatility increased last Thursday and Friday.

"The turmoil has reached vast magnitudes beyond what characterized the 2008 crash of AIG and other speculators.

"Today, JP Morgan Chase and other New York banks have tens of trillions of dollar valuations of derivatives – casino bets on which way interest rates, bond prices, stock prices and other measures will change.

"For every winning guess, there is a loser.

"When trillions of dollars are bet on, some bank trader is bound to wind up with a loss that can easily wipe out the bank’s entire net equity."

Casino capitalism is an inevitability in the modern world in which industrial production has become generally unprofitable.

 

[EatTheRich]

It's a conundrum. You can't have federal reserve boards which are composed of people with "no backgound in banking".

but perhaps you shouldn't be RUNNING A BANK at the same time you're on a government committee to regulate your own bank?

This happens across all sorts of activities - insurance, pharmaceuticals, defense contractors, lawyers.

The bar association approves every nominee for the federal bench. and the rest of us all agree that most of said judges are partisan players who put their parties' interests above strict interpretation of the constitution and other relevant law.

The obvious solution is nationalization of the industries so that the wealth is no longer in private hands.

 

[georgephillip]

Casino capitalism is an inevitability in the modern world in which industrial production has become generally unprofitable.

Another inevitability in today's casino capitalism is government bail-outs (or loans). This is where I'm a little confused about SVB. If it has sufficient assets in 10 year Treasuries, does the government saving depositors qualify as a (long term) loan?

https://braveneweurope.com/dean-baker-svb-was-donald-trumps-bailout

"There are two key points that people should recognize about the decision to guarantee all the deposits at Silicon Valley Bank (SVB):

• It was a bailout
• Donald Trump was the person responsible.

"The first point is straightforward.

"We gave a government guarantee of great value to people who had not paid for it.

We will get a lot of silly game playing on this issue, just like we did back in 2008-09.

"The game players will tell us that this guarantee didn’t cost the government a penny, which will very likely end up being true.

"But that doesn’t mean we didn’t give the bank’s large depositors something of great value."