Utopia Talk / Politics / Credit Suisse

Seb Member	Wed Mar 15 07:18:17 Oh here we go.
murder Member	Wed Mar 15 08:54:43 For profit banking will be the death of capitalism.
earthpig GTFO HOer	Thu Mar 16 00:45:11 This complete fucking bullshit handouts to American banks will be the fucking death of it. There needs to be something between "let it all burn" and this gibberish fake capitalism. There cannot be "gov't buyback guarantees at your original sales price for speculative investments, but ONLY if you're a bank," that is completely absurd, a perversion, and an abomination. --------- The second part of the program is valuing bank’s Treasuries and other securities at “par.” The Fed’s rate hikes have undermined the value of the Treasury bonds that banks rely on as a critical source of capital (you can read more about that here). US banks are currently sitting on about $620 billion in unrealized losses in bonds, according to the FDIC — if any of them need access to a lot of cash quickly, they’d have to sell them at a loss – perhaps a substantial loss, like SVB did last week. The BTLP aims to fix this problem by valuing the bonds used as loan collateral at “par.” If a bank brings in a bond they purchased for $1,000 that’s only worth $600 now, they’ll still get $1,000 in cash. https://www.cnn.com/2023/03/15/investing/premarket-stocks-trading
Seb Member	Thu Mar 16 03:23:03 EP: I suppose that wanted to head off ever more fire-sales crashing the market in a self fulfilling prophesy. But how we still haven't figured out a middle ground for this given it was part of the 08 crash...
Seb Member	Thu Mar 16 03:25:19 Oh wait, these are treasury bonds?
Seb Member	Thu Mar 16 03:26:21 Need to think about that a bit more.
Seb Member	Thu Mar 16 03:27:45 I wouldn't call a treasury bonds a speculative investment.
jergul large member	Thu Mar 16 08:12:57 I would with the way the US bonds are priced. They are auctioned off for redeemment at face value. Say the hightest bid on on a 10 year bond is 90 dollars. It means 90 dollars paid now will give you 100 dollars back in 10 years. You can sell it at any time of course for whatever the market is willing to pay. Perhaps 91 dollars in a year. And 99 dollars in 9 years. If interest rates are going up however, you will get nowhere near 91 dollars for a 100 dollar bond maturing in 9 years (called note technically, but who cares). You might get 70 dollars for it. Or less. Nobody knows for sure because its value is uncertain in a increasing interest rate environment. Assets no one knows the value of = toxic.
Rugian Member	Thu Mar 16 09:38:20 Investing in Treasuries isnt speculation per se - after all, if you simply hold them for the entire term, you know exactly what your position will be. Its only if you've invested so heavily in Treasuries that you're forced to offload your position in order to cover a cash crunch that they become open to risk. SVB over-invested in Treasuries. My understanding is that is atypical for banks in general.
Seb Member	Thu Mar 16 10:15:09 jergul: Yes, but I would not say that's speculative. They are supposed to be predictable.
Seb Member	Thu Mar 16 10:15:39 In nominal terms at least. The issue is they are making a massive loss.
jergul large member	Thu Mar 16 11:14:21 Well, they are not predictable. Or rather, no one knows what 100 bucks will be worth in say apples 10 years from now. You will always get the 100 bucks, but if that can buy you 1 apple or 200 in a decade is unknown. Assuming there is a strong correlation between treasury rates (implicit) and the price increase of apples. The problem is that the today value of the bond you hold is a reflection of the implicit interest on bonds issued today. A weakness of the facevalue system. Better to buy a bond for 100 buck and get whatever compound interest promised for the series when you redeem it in a decade. Most debt issues of this type have that scheme. Then your bond is work 100 buck plus whatever right now, instead of 100 bucks minus whatever right now.
jergul large member	Thu Mar 16 11:17:12 It is also possible to calculate the current value of bonds held by a company as those are not subject to fluctuations following interest variations in real time.
Rugian Member	Thu Mar 16 11:22:01 "It is also possible to calculate the current value of bonds held by a company as those are not subject to fluctuations following interest variations in real time." Maybe I'm reading this incorrectly...but this is absolutely not true.
jergul large member	Thu Mar 16 11:38:02 Ruggy For bonds bought at face value with a fixed interest rate to term. Like I buy a 100 kr bond at 3% interest with maturity in 10 years. I will be paid 134 kr when I redeem it in a decade.
Rugian Member	Thu Mar 16 12:42:27 Jergul And if the markets one day say that a 100 kr bond for companies of similar profile should bear 5% interest, then FMV accounting rules mandate that you post an unrealized loss. (At least in the US it does...not sure what IFRS guidance says)
jergul large member	Thu Mar 16 13:34:56 Ruggy That sounds odd. In any event, the bond bought for 100 kr is worth more than 100 kr at any given time. Not so the case with a bond with a face value of 100 USD. That could be worth anything less than 100 USD at any given point in time. We know what the Norwegian bond is worth in a year. What the US bond is worth is anyone's guess.
earthpig GTFO HOer	Thu Mar 16 16:34:20 "then FMV accounting rules mandate that you post an unrealized loss." Could have sworn I read that SVB and similar size banks (below whatever billions in assets) get to keep reporting their value as the nominal value rather than having to report current actual likely price if they had to sell. @seb "I wouldn't call a treasury bonds a speculative investment." They were using 10 year bonds to cover short term checking/savings deposits. They made an implicit bet that EITHER the fed wouldn't raise rates within that 10 years OR cash-rich silicon valley deposits would only go up, never down. As it turns out, neither of those things proved true. And hindsight is 20/20. But let's pretend it's the year 2021, and I'm pitching you on the notion that "hey I have a brilliant idea, and we will do well, but it requires that the fed either never raises rates, or that silicon valley deposits will always and only go up. As long as one of those is true, we will be great!" -- do you go along with my pitch? I'm a small biz owner, mortgages. But I sure as fuck wasn't making the similar bet. Every quarter in the boom years of 2020/2021 I stress-tested my P&L by imagining that all the refis were gone and purchases were 25% less. "If that had been my revenue, would I still be in the green, after these expenses?" -- and then position to be able to slash expenses on a dime when the answer was "no"... my expenses ballooned a bit, but I was careful about medium/long term commitments, in some cases opting for a more expensive month to month thing [which still paid out in the boom years] rather than the "total cost of ownership" cheaper per month version with a longer obligation. And I am far from the smartest person in finance. It turns out refinances vanished and purchases dropped by about 40%, worse than what I'd stress tested. I recognize that publicly traded companies cannot be as conservative as I can since I own all the shares (7000 at $1 each back in 2019 lolol) and can think big picture instead of just quarterly, but (I feel myself saying this more and more) there's got to be middle ground between an approach like mine (which felt overly conservative at the time, but wasn't it turns out), and the completely fucking insane approach of implicitly assuming "Deposits Always Go Up + The Fed Never Raises Rates."
Seb Member	Thu Mar 16 17:59:18 EP: Yeah, but if there's a substantial issue where a bunch of banks have overly concentrated on T bonds, they blow up, T bonds start to flood the market, prices continue to fall etc. So isn't the point of valuing at par here to prevent bank runs by ensuring access to liquidity and stop contagion from fire sales of T bonds bringing down the entire economy? The penalty for banks should be in the terms of the loan or by taking a chunk of the bank's own equity - something that punishes shareholders and bond holders but not making it hard to access liquidity and threatening depositors. It may err on the side of generosity but equally I remember the 08 crash was much worse than it could have been because initially everyone thought moral Hazard was the biggest problem. The way you stop cities catching fire is building codes, not standing around burning buildings as the fire spreads from block to block saying "whelp, shouldn't have built that out of wood". That's true, and the building owner will lose his shirt, and others in future may well learn a lesson. But it's pretty expensive way for everyone else.
Nimatzo iChihuaha	Sun Mar 19 05:34:48 It all makes sense in light of the report of SVBs chaotic/DIE clown risk management organization. The erosion of competency has conquences.
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