General > General Technical Chat
Silicon Valley Bank Collapses
TimFox:
Side bit of amusement:
A big problem with this bank failure is that most of the deposits were commercial, rather than personal.
In the US, bank deposits are guaranteed up to $250 k USD per depositor (joint account), but the commercial accounts were much, much larger.
Many companies have been caught short, and will have difficulty making payroll while their accounts are frozen.
That's not funny, but the US newspapers discussed the related closure of this bank in the UK, and reported the legal limit there as "$204,544", a rather precise value, which I assume is really 170 k GBP (for a joint account)?
This reminds me of when banks were robbed the old-fashioned way: an American newspaper would report a robbery in UK as being "$2,350,000", because the UK police had reported "about a million pounds".
bdunham7:
--- Quote from: nctnico on March 12, 2023, 10:12:30 pm ---I agree. Even a Dutch company had tens of millions of pounds and dollars at that bank. If you do business like that, you'd at least choose a big bank that is financially healthy. But maybe the beancounters thought it was a better idea to choose a small bank with lower costs over financial security... Penny wise, pound foolish.
--- End quote ---
SVB was 1/3 to 1/2 the size of Credit Suisse (IOW huge, just not JP Morgan huge) and up until last Wednesday it had top grades for capitilization and overall soundness according the the first level of metrics currently in use. You have to dig a little to see what the problem was, although now that everyone is talking about it I'm sure it will be claimed that it should have been obvious.
tom66:
--- Quote from: coppice on March 12, 2023, 10:15:11 pm ---
--- Quote from: SiliconWizard on March 12, 2023, 10:06:55 pm ---Uh, the new financial crisis has been going on for a good while now. It's just handled in a different way so that impacted people tend to suffer just as much, but they are told to look elsewhere.
Just a thought.
--- End quote ---
Its not really a new financial crisis. They never really dealt with the old one. That band aid is just starting to fall off.
--- End quote ---
It's a really weird financial "crisis" though, if you think about it:
- Record high employment / low unemployment
- Some companies are laying off but net employment increasing and time to fill a vacancy climbing, with the effect that salaries (at least for joiners) are being pushed up
- Productivity staying broadly similar per worker
- Inflation biting everyone but spending still remaining pretty solid in discretionary sectors
- Property prices and stock market still staying reasonably steady (a 'slump' but not a 'collapse')
IMO we are seeing the impact more from Covid/Ukraine than the after effects of QE. It just happened that the economy was such a feather touch due to a decade of QE that when an actual crisis did happen, banks had no where to go. They couldn't really increase money supply more than they already had and ECB were worried higher interest rates would kill off weaker economies.
The US Fed has done well being that they started relatively high (peak of 2.5% lending rate pre-Covid) so returning to that baseline and going a bit beyond it was not a dangerous from a monetary policy perspective. The Bank of England on the other hand has had a real battle against politicians convincing them that 0.5% lending in an inflationary crisis is a bad move.
SiliconWizard:
--- Quote from: coppice on March 12, 2023, 10:15:11 pm ---
--- Quote from: SiliconWizard on March 12, 2023, 10:06:55 pm ---Uh, the new financial crisis has been going on for a good while now. It's just handled in a different way so that impacted people tend to suffer just as much, but they are told to look elsewhere.
Just a thought.
--- End quote ---
Its not really a new financial crisis. They never really dealt with the old one. That band aid is just starting to fall off.
--- End quote ---
True, same causes and nothing fundamental was done to address it.
I call it "new" in the sense that this time, most people don't seem to realize it's ungoing.
EEVblog:
MOD: Two different threads merged
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