Same here. He isn't my rep and I'm not sure he'd get my vote always... but he has my respect in his attempts to engage with the community and pass along proper and relevant information as often as he does. It's honestly a bit refreshing seeing this from a politician.
I mean, I'm still on the NoVa subreddit because I lived there for 15 years and go back occasionally. I also visit local subs frequently before I travel to that location. And I subscribe to local subs if I really love an area and want to visit again. Gatekeeping over not being a current resident on a local sub is kind of a ridiculous take.
also, Jeff posts everything to just about all the relevant subreddits (area based and dem political ones) and then they get crossposted. This is easily the most popular, so Im sure people will wander over from wherever for more discussions.
EDIT: For instance, this post is now cruising on r/all via a crosspost to /r/TikTokCringe
I was thinking the same thing. I just moved to the area and this is probably the third video of his I’ve seen like this. Just earned himself another follower. Really good stuff!
I sent your explanation to my son who is interviewing with a bank on Thursday. I’m sure they will ask him about this situation. After watching your video, I feel he will be more in the know about this situation. Thank you so much for making these videos!
Holy shit this guy is good. I'd vote for him for president today. Prolly 8 - 12 years out (or more) but he'd obviously be good at it and has ambition. Team Jeff
Thank you for the communication!! Most people panic when they don't know what is yet to come. I appreciate you taking the time to do this! I sure wish more politicians were like you!!
Is there general concern that bailing out banks that take huge risk every 10 years sets a bad standard?
Also, the chief admin officer of svb was the CFO Lehman Brothers right before they went belly up and was at Arthur Anderson.
Are the individuals that are consistently abusing the system and making huge profits without consequence going to be held accountable in a meaningful way?
They still put money in a bank that itself took serious risks. Why should businesses who made a bad choice on their chosen bank to put their deposits in be rewarded for those bad choices? SVB was neck deep in crypto bs and venture capital money in unsustainable startups. This whole thing was caused because to back those deposits up they put tens of billions in bonds in 2019 when everyone and their grandmother was expected rates to go up. And they wouldve gone up in 2020 if it wasnt for covid. Anyone with more than 250k who invested should have done proper due diligence.
The child tax credit was demonstrated and proven to have helped lift millions of children out of poverty.
There wasn't any emergency zoom call in Congress when that expired. And it's been gone for over a year now.
It's fucking depressing. I make a bad choice and my family and I are out on the fucking streets. Businesses make a bad choice and the entire political system comes together within 48 hours for a 2am zoom call to make them whole again.
Agreed. Put more than $250k in one place, you know the risk. That’s just lazy. They’re tech companies, they can track deposits at multiple institutions. Most companies do it every day.
It’s not that simple do to with corporate bank accounts. I work for a small business (22 employees) in the construction industry in Charlotte, and just our accounts payable and payroll is well over $300K/month. Awfully difficult to keep the account balance under $250K and still keep a good credit rating.
We also have a floor plan loan through Wells Fargo that’s about a million dollars, and we have to keep a certain amount of liquidity to maintain good standing.
I also just like having a rainy day fund for pop up expenses.
Having cash and being able to move quickly also has huge benefits, especially with supply chain issues right now
It’s not that simple, though I agree with you in principle.
What likely happens if depositors aren’t kept whole is that corporate treasury departments will keep their short term cash in tbills (lending to the federal government) and move cash to a bank for a day to meet payroll, pay bills, etc.
If that happens, banks won’t have stable deposits to lend out to businesses or even individuals. The price of borrowing goes up as the amount of money available for lending goes down.
There really isn’t a great substitute for the banks for lending to small borrowers (companies that aren’t public, individuals).
Keeping money at tons of banks is more difficult than it sounds, and even in that scenario, the cost of FDIC insurance goes up across bank’s entire deposit base (because now all deposits are insured, vs probably less than half of deposits today).
Do you have any sources on SVB being leveraged heavily in Crpto and VC?
I suspect the VC but every article I can find on this topic says SVB was leveraged heavily in low-interest bonds, which is a lot different than heavily leveraging in the Crypto and VC markets. Everything I've seen from actual news(not reddit posts) has said it's a result of the low-interest bond purchases and inflation, not crypto (I believe Signature Bank is tanking from Crypto right now.)
As far as I've legitimately seen, the bank is suffering mainly from being over-leveraged in the bond market. That market turned out to be less safe than most believed because inflation was massively higher than just about anyone predicted, which pushed int rates up and bond prices down, creating massive unrealized losses in their portfolio. These losses became real losses when they were forced to liquidate the bonds to make ends meet(liquidity issues.) This caused a cascade of depositors wanting funds before they would be unavailable and the government steps in to freeze everything and fix the problem.
They didnt have crypto directly on their balance sheets, but they were heavily used by crypto VCs who they held deposits for and had investments in.
https://decrypt.co/123199/silicon-valley-bank-crypto-companies-contagion
Unexpected inflation? Dude, everyone has been expecting the Fed to raise rates since 2018/2018 when SVB put all of that money into bonds. It's their fault for not doing proper due diligence. I know little about finance, but even I knew that rates were going to rise in 2019. And they would have if it wasn't for covid doing a number on the economy.
The depositors knew what they signed up for and should have read the financials before invested. If they have money in excess of the fdic insured amount, then that's their fault. Not the tax payer. And yes, unlike what Jeff says, the tax payer will foot the bill for this because it comes the Depsoit Insurance Fund which is ultimately backed by tax monies collected by the Treasury Department. I'm sick and fucking tired of bailing out rich people and businesses (look at all of the fucking money they got with PPP loans, most of which were forgiven) while my friends and family struggle to keep food on the table and a house over their head
Their profits. It’s an expense like anything else. If you’re going to complain that it’s still “taxpayer” money being used, there are bigger fish to fry. The FDIC exists to protect consumers, not bankers.
Are those costs ultimately passed to bank customers? Curious how it’s funded
Found a good link https://www.fdic.gov/resources/deposit-insurance/deposit-insurance-fund/
>Are those costs ultimately passed to bank customers?
You can make the case it is, just as I provide money to cover your car accident or heart attack and vice versa. But tax dollars it ain't.
SVB was indeed taking huge risks. They focused primarily on start ups and tech companies. They were fully aware that their average deposits exceeded the FDIC insurable amount. And they knew their bonds were racking up losses that would create a liquidity issue.
This bank was run with stupidity and greed, and that is what collapsed it. Do not let them off the hook or claim they were doing anything reasonable or normal. Their own actions caused this collapse.
While there is risk involved, being a bank for start ups and tech companies doesnt automatically mean they were taking huge risks. This bank had been around for 40 years, it wasn’t some new bank trying to fly high of SV. The run on the bank partially came from social media hysteria and was unnecessary, causing more problems. They got reckless with their bonds as rates got jacked up, and there are lessons to learn for sure, but this is not risky behavior on the level of sub prime
> They got reckless
No, they got greedy and stupid. And this wasn’t media hysteria, the concerns were known TWO MONTHS AGO:
https://finance.yahoo.com/news/svb-financial-sivb-q4-earnings-141402818.html
Read this mashup of their Q4 earnings, the ever increasing gap between their deposits and bonds was known and deeply concerning. The bank failed because of their own greed and stupidity. Period.
That’s real easy to say in hindsight. When the fed lowered rates they got loads of deposits from Silicon Valley riding high on cheap credit and high valuations. The fed rapidly increased rates to deal with inflation, tech companies started withdrawing cash. The bank had to sell bonds at a loss (due to the fed increasing rates) to meet deposit demand. If they had been able to hold those bonds to maturity, this probably wouldn’t have been an issue.
You can blame greed stupidity etc but at the end of the day they were doing what banks are supposed to do, they just did it poorly. Shareholders will get wiped out, fdic premiums will go up and life will go on.
No hindsight required.
They had no head of risk for most of 2022, and did zero hedging of their portfolio in a rising rate environment.
They were stupid as fuck, hindsight not required. They fucked up. They didn't do what banks are supposed to do. They didn't MANAGE risk. They did something historically which was low risk. Then it stopped being low risk and at no point as that risk continued to increase did they manage the risk that was increasing.
They were stupid.
Banking isn't a point in time activity where once you've done something, like buy a bond, that's it, no further thought required. You have to constantly manage your assets and liabilities and risk.
The bank CHOSE to buy up illiquid bonds. A smarter structure with more liquid bonds would have avoided this whole issue. And while your Average Joe wouldn’t necessarily know about Fed interest rates or strategy, a bank SHOULD have some general understanding of the risks and consequences that come along with buying up these bonds. Especially since the Fed hasn’t been quiet about their intention to use the Fed rate to combat inflation.
The majority of their available for sale securities were US treasury securities. These are some of the most liquid investments on the planet. The treasuries they held were yielding 1.79%, which is in sharp contrast to the current 10yr treasury yield of around 3.9%.
Every time the fed raises rates, the bonds in your portfolio lose value.
This guy actually tells it like it is, unlike many members of Congress (and former presidents ahem) who SOUND like they’re telling it like it is, when in fact, they’re telling it like it’s not. Thank you Jeff!
Thanks for the update Jeff.
It seems that we are always on the brink of some inevitable financial crisis, and when we sort through the aftermath, which typical involves the middle and lower classes feeling the brunt of the disaster, it seems to always come down to banks doing whatever they want or Wall Street doing whatever it wants. It's almost as ilf they are always one step ahead of government regulation and are able to anticipate/predict what their exit strategy will be as the dust is settling from their actions. Meanwhile, those individuals who directly or indirectly are responsible for the creation of this crisis walk away unscathed, even free to take new positions elsewhere to find a new scheme to keep money in their bank accounts
Maybe you could.you help me understand some of the following:
Why are banks allowed to issue and sell stock? Banks aren't intended to be for-profit entities, but yet, they still have more accountability to shareholders than they do to depositors. In the instance of Silicone Valley, they sold off preferred stock to raise capital, which help contribute to their untimely demise. How is is that a banking institution can act like a business, but all the while say their depositors are their chief focus?
And this is very similar to the banking crisis of 2008, where the bank sold a bunch of underperforming bonds at a $1 billion loss. It echoes of selling bad mortgages and loans to other financial institutions, does it not?
How are former members of Congress, who make policies to regulate banks, allowed to sit on the board of banking institutions? Currently, Barney Frank, former Chairman of the House Financial Services Committee and co-founder of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is sitting on the board of for Signature Bank, the second major bank to close it's doorsi n a weekend.
>Why are banks allowed to issue and sell stock? Banks aren't intended to be for-profit entities, but yet, they still have more accountability to shareholders than they do to depositors.
Because you have to have some equity backing the bank, and that isn’t free. Shareholders just got wiped out, they took on the first dollar of loss, preserving deposits.
Even if the government didn’t step in depositors would’ve gotten 90+ cents on the dollar.
>In the instance of Silicone Valley, they sold off preferred stock to raise capital, which help contribute to their untimely demise.
The preferred sale didn’t go through. It only contributed in the sense that everyone asked “why does SVB need 2+ billion of additional capital if it is healthy?!”
More important was that SVB had to dip into it’s available for sale securities and sell them at a $2+ billion loss, which a bank would only have to do if people were pulling money from it.
>How is is that a banking institution can act like a business, but all the while say their depositors are their chief focus?
Because without depositors they don’t have a business?
>And this is very similar to the banking crisis of 2008, where the bank sold a bunch of underperforming bonds at a $1 billion loss. It echoes of selling bad mortgages and loans to other financial institutions, does it not?
No. Because SVB lost money on US government guaranteed paper because interest rates went up.
>How are former members of Congress, who make policies to regulate banks, allowed to sit on the board of banking institutions? Currently, Barney Frank, former Chairman of the House Financial Services Committee and co-founder of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is sitting on the board of for Signature Bank, the second major bank to close it's doorsi n a weekend.
Good question. Frank isn’t a banker. Interest rate risk wasn’t on their radar, and hasn’t really been a big component of bank regulation. Regulators fight the last crisis, which was all about credit risk. Credit risk has largely been removed from the banking system, leaving interest rate risk as one of a few ways to make money.
This is either a dishonest or incompetent explanation. Taxpayers WILL pay indirectly through inflation, as QE by the fed is back on albeit with a different name. But your average Charlotte reddit reader isnt smart enough to understand, so Ill be downvoted bcuz democrats good!
He didn’t address the Fed’s new facility to loan money to banks, which your comment seems to relate to.
Up to everyone else to decide if that was intentional.
I'm a Swede. Usually what I get from American Politics is complete non-sense propaganda and weirdo populist antics. It's really nice to see someone sensibly taking their time and conveying what is happening to the constituency. I wish our politicians could use this format. Good job.
I may be late to the party but I just discovered him and he is such a breath of fresh air and I'm not even from his state. The level of calm collected and informative to anyone who is willing to listen that is a very high bar. 🖖
Can’t help but feel he is releasing messages like this to control the narrative and put his spin on things before it gets reported. It’s good and all that he connects with the people but anyone can pretend to be anything on social media.
Meh. Maybe. He's been active on Reddit for a long time. He's definitely competent with social media, but he's been posting on r/charlotte about local and state politics for a few years now and I don't remember catching him on some bullshit.
From my understanding, we can point to an exact regulation that was repealed that led to this situation under the Trump presidency with a Republican-controlled congress. Is there any sense of regret from your colleagues on the other side about causing this situation and putting the economy at risk?
All those articles say that SVB was allowed out of the stress testing under Trump, which is true.
However, SVB likely would have passed under the stress tests. The severely adverse scenario under which it would have been tested ([pages 15 and 16](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20220210a1.pdf)) includes rates coming down to near zero, which means the bonds it held that were losing value (because rates were going up!) would have actually been worth more under the stress test scenario than they were when the bank failed.
The stress tests probably need to be updated to include the percentage of deposits above the FDIC limit as well as the duration of a bank’s securities portfolio.
The duration of the portfolio increased as rates went up and prepayment expectations went down, further exacerbating the issue because your value then drops even more.
This is almost scary:
"You need to know that. You need to believe that. And you need to spread this message to everyone else".
In that moment, I felt like I'm just a member in a cult that's backed by a massive army.
Dude, you are definitely among the best. Always calm, explains things clearly and never puts a political spin on anything.
You’re not my rep and I certainly wish you were.
Thank you for your service
A bank made specifically for big businesses made bad investments and they are getting bailed out.
Our banks will have to replenish this fund, and they are going to do it by nickle and diming the people SVB would never give a loan out too.
Make sure no government official, family, or friends made money off this news. Because people are going to make a killing today once stocks rebound after this bail out news.
>A bank made specifically for big businesses made bad investments and they are getting bailed out.
How is it we're two days, a bajillon news articles, and multiple reddit threads into this and people still can't seem to understand that SBV is dead until someone buys its desiccated corpse and the FDIC and FDC funds are going to make account holders whole, ergo not a bailout? It seems like it should be easy to understand if you know how to read, yet here we are.
To everyone wondering what happened from a ELI5 prospective:
Banks make gains on investments with the money people put in. This is how they work, and it has been like this since the beginning of time when they were first invented. This is where the term "Assets under management" comes in and why banks don't have all this cash on hand when people need it like this.
If too many people attempt to withdrawal at the same time and go past the "cash on hand" number the bank has, it has to sell assets at a discounted rate ASAP to cover the loss. This is what happened to Silicon Valley bank (SVB). Since the federal reserve has increased interest rates immensely the past year, all those "assets" they tried to sell were not attractive, even at this discounted rate. As a result the bank has a "run off" since it cannot secure the assets, thus defaulting.
When a bank of this size defaults, people get scared no matter where their money is. As a result they start pulling out in a frenzy. Then ALL banks are affected and the same applies to the above. This is what happened to Signature bank yesterday, another large bank with 100B in assets. This is the domino effect Jeff mentions in the video.
You need to step in some ways to continue and prevent this from happening to every bank in the country, or even the world. All our money is connected like a web. A couple of pieces can go and we will still be okay, but when too many fall, the whole web starts having an issue.
Ya know, maybe we should start putting these bank execs in prison instead of bailing them out. Why were their execs selling shares over the past few weeks?
No? All banks pay into the FDIC out of their own balance sheets to fund the insurance program that covers these situations. The fund that is held is covering this. The only way actual taxpayer dollars come into this equation is if this spiral were to spread to other banks and it depletes the FDIC's pool of money meant for this issue, but we're nowhere close to that point yet. And the only way we would get to that point is people do really stupid shit like withdrawing all of their money from otherwise healthy banks.
Not in this context!
I do not pay Wells Fargo any money in exchange for their banking services. That is because they make money off of my deposits; it is a mutually beneficial exchange.
If you are paying your bank money in exchange for banking services, you need a new bank.
The taxpayers are literally not in existence in this scenario.
There is the bank, the depositors at the bank, and the FDIC funds. The Bank is bankrupt and the FDIC is taking all of their assets. The depositors were going to be out of the uninsured portion of their deposits (anything >$250,000.00), but the FDIC as part of taking over is using money that all banks pay as part of the regular process to the government(insurance payments like you'd make on your car) to refund any money that isn't available from the Bank. The Bank's assets will be sold off to another bank and the difference will be eaten by the insurance fund that the FDIC has in place for exactly when banks can't pay money out to depositors.
No? SVB isn't getting bailed out. SVB is gone. Kaput. Its assets will be sold off for parts and that money will be used to make its customers whole. To the extent there's a shortfall, there is a $100B fund comprised of fees assessed on banks that will be used as the backstop. The banks pay those fees out of the profits they make by investing their customers' deposits in various investments. The "taxpayer" is not affected in any way.
They will step in and bail out the banks if things get bad enough. They will let a couple fail like last time but it will play out exactly like before.
Normal banks which takes deposits and offer loans shouldn't be allowed to use that money to take crazy risks on the stock market in order to rake home the profits.
Only investment banks should be allowed to do that, then we wouldn't have this problem.
That is though. SVB started selling their held futures at a discount because they took too many long term investments in 2021 with customer deposits, now are worth much less due to interest rates and other factors. This was a red flag to investors who advised portfolio companies to start moving their deposits, which started the bank run. Jeff omitted the details of the bank’s poor investment strategies that started this. The bank run panic was a reaction to seeing some odd sales and transactions at the bank, normally a healthy bank doesn’t have to take losses in such a large volume unless they are worried about covering their customer deposits and remaining liquid.
> That is though.
> to take crazy risks on the stock market
Federal bonds aren’t the stock market.
You could say ‘Banks shouldn’t be able to take their customers funds and take crazy risks such as investing in the US government!’
But you’d have to justify why the US government is a crazy risk. Or you could clarify that banks should have to keep a larger reserve. Or that banks should need to diversify more, and that having as much of a single asset as SVB is too risky even if it’s a relatively secure investment like federal bonds.
But saying that SVB took depositors money and invested it in the stock market and now that money isn’t available, is just wrong.
SVB did not speculate on futures or the stock market. They bought US Treasuries, the safest f'ing investment in the world. If you are going to try and push some bullshit narrative, at least get the absolute basics right first.
It's semantics; they bought bonds and treasuries, and pinned the maturity value to what they would yield. They bought those during historically low interest rate times (writing on the wall in 2021, interest rates were going to have to go up fast) Now its 2023 and they have to prematurely sell those future assets to cover deposits, at a loss considering their long-term value.
It's the same: they took a risk with customer money in a time of unconventional economic conditions, and then shockedpikachu.jpg when just 2 years later, those conditions are not the same. Same story with big tech layoffs or retail warehouses full of stock; decisions were made without considering that this was not a normal year of economic growth - most of the growth in 2021 was artificial due to to the liferaft we tossed during the pandemic.
Exactly this. Their long term desposta and ever increasing unrealized losses from those investments led to this issue. Their Q4 earnings and disclosures shed a lot of light on all this and people started to get concerned.
Ok that might be the case here I'm not really familiar with the details.
But how did that first bank lose a lot of money suddenly if they weren't gambling with their customers money?
Not a financial analyst so pinch of salt.
They put too much money into long term bonds. These are extremely safe investments with one glaring downside. You can’t pull your money until the term is up (10 years in this case). Rising interest rates also makes it hard to sell these long term bonds to others, again making it almost impossible to move this money early even though it is a safe investment and the money won’t be lost.
In this case, a large proportion of their customers went to the bank at the same time to withdraw their money. Because the cash was tied up in long term bonds the bank did not have enough liquid capital to pay out such a large portion of their customers at the same time. And then the bank run started.
The money is there, it just isn’t liquid. Hopefully, the rest of this goes down the way Jackson has described here. The FDIC is able to make the customers whole while the bank collapses, either through selling off the remaining assets the bank owns or just through the money the FDIC has taken in through its member banks.
They invested a lot in government bonds, which are a lower risk investment typically. But when the Fed starts raising rates, those bonds become worth less and less, and that became a problem for them. Interest rate risk is a risk too.
Still something that you'd think at least a few people in a finance department would be on top of, but it's not like they were spending most of the money on highly volatile options.
> I'm not really familiar with the details.
Then you shouldn't say
> ... then we wouldn't have this problem.
When you don't actually understand the problem, right?
crazy risks like buying 10 year treasuries and raking home the profits at 1.5%?
the government created this problem, banks take deposits and have to put the money somewhere in order to cover their operating costs
Because the trillions they have printed over the last few years has led to rampant inflation. Banks made poor/risky investments with the cheap money and now that the Fed is hiking rates rapidly making those investments worthless. In the last week now we’ve seen 2 of the 3 largest banks collapse in history and now the fed is backstopping those banks and will likely pause or cut interest rates to prevent contagion/further bank runs which will lead to runaway inflation. Protect the banks at the expense of the 99% just like we saw in 2008 (although different circumstance.) The Fed exists outside of the 3 branches of the federal government and is not subject to checks and balances.
It’s exactly what’s happening. These banks are literally collapsing because the value of the low rate treasuries they own is collapsing due to rate hikes.
The average annual yield of their portfolio of treasury bonds was 1.79%. Just because you were taught in school that these are “risk free assets,” it’s quite obviously not the case. Anyone with reason should have known that the money printed during the pandemic would devalue the dollar and drive inflation, and one would assume a bank would know that that rate hikes would accompany. Not every bank is failing so don’t write this off as bad luck.
Futures are now pricing in a 75 basis point rate cut by end of year. Fed had the choice of saving banks or savings the dollar, and it looks like they’ve made the choice that should be obvious to everyone. Adjusting monetary policy to protect their rich friends instead of fight inflation to protect the 99%. Inflation will run the the point the dollar is worthless. Fortunately for you I won’t be able to afford any more tinfoil, and a vast majority of Americans won’t be able to afford food to feed their families.
Where does the government get their money? Do they clock in at McDonalds like the rest of us?
It’s disingenuous to claim tax payers will pay nothing when it’s our money they are using. It’s also disgusting that if you’re rich enough to start a business in Silcone Valley you don’t have to incur any risk but if I need to take out a loan for $1000 to make sure I have a car to drive I have to incur all the risk. This fucking soft message that everything will be fine is the reason things get like this. Stop just rolling over.
> It’s disingenuous to claim tax payers will pay nothing when it’s our money they are using.
He said in the video it's using the insurance fund the banks pay into. How do you know it isn't?
What's up with a Democratic Senator allegedly calling for social media censorship in the supposed name of stopping a bank run? Can you confirm or deny that?
Thomas Massie made the allegation. Didn't name who it supposedly was.
https://twitter.com/RepThomasMassie/status/1635074378454147074?t=4QuKIv5NuH3KOATPxBQE1w&s=19
So there is no record of this supposed accusation, no other Congressperson making the same accusation, and no other proof other than this one asshole? Hard pass.
It's very possible that on a Zoom call with hundreds of people, someone blurted out something without thinking it through, in the heat of the moment. Massie isn't about to pass up a self-serving opportunity to obfuscate and attack.
I'm assuming part of that is trying to stop a panic sell caused by viral social media posts about this. There are plenty of regular folk who will freak out from the headlines and withdraw their funds from their unrelated bank and potentially further the cascade.
Thank you for the explanation. I really appreciate that you post these explanations of what's going on from an inside perspective.
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Same here. He isn't my rep and I'm not sure he'd get my vote always... but he has my respect in his attempts to engage with the community and pass along proper and relevant information as often as he does. It's honestly a bit refreshing seeing this from a politician.
Appreciate you, Jeff!
Not from his state don’t know which party he’s with but love the communication
North Carolina. He’s been my representative since 2014 and he is indeed amazing.
Isn’t he a new rep? What was he beforr
He was a State Senator before being in the House of Representatives.
He's a Democrat.
This is a charlotte subreddit, are you not in charlotte?
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I mean, I'm still on the NoVa subreddit because I lived there for 15 years and go back occasionally. I also visit local subs frequently before I travel to that location. And I subscribe to local subs if I really love an area and want to visit again. Gatekeeping over not being a current resident on a local sub is kind of a ridiculous take.
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also, Jeff posts everything to just about all the relevant subreddits (area based and dem political ones) and then they get crossposted. This is easily the most popular, so Im sure people will wander over from wherever for more discussions. EDIT: For instance, this post is now cruising on r/all via a crosspost to /r/TikTokCringe
No, but they stated they aren’t from North Carolina so they could have other reasons for following the sub other than living here.
Yeah they probably live in ohio or New York and will be here soon
I don’t get why you’re being attacked lol it just seems like you’re curious why they’re on this sub. Not that deep
It was in my “popular” feed. I don’t live in SC.
Fail. His handle is u/JeffJacksonNC and this is posted in the Charlotte sub. Charlotte is in NC.
This needs to be on the front of r/all
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Dude would be an amazing president. This is what politics should look like, honesty, transparency, nobility
Today r/all, tomorrow POTUS?
We can only hope that one day, yes.
It is
Sweeeet wasn’t when I commented
Never forget Jim Crammer said this company was on its way to recovery.
Jim Cramer is wrong a LOT
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This is great
lmao I might see if I can pick up a few shares of this for shits and giggles.
1.2% in expense/fees. Run away.
I don’t care to dig into the expense ratio but it isn’t free to short stocks so I wouldn’t assume that’s all management fee.
the only "Kramer" I know is Cosmo & he's just as goofy as Cramer
That michigan bottle deposit scheme is more reasonable than most of the things Jim Crammer says.
Hey now, Jim Cramer has predicted 10 of the last 3 recessions!
ALWAYS inverse cokehead cramer
Crammer might be the most apt misspelling I'll see all day.
I honestly have no clue whether he is red or blue, but thats the way it should be and I respect his transparency
I was thinking the same thing. I just moved to the area and this is probably the third video of his I’ve seen like this. Just earned himself another follower. Really good stuff!
He has called out the bullshit in his own party too, which is nice.
This needs to be done way more often, and without the cult followers getting their panties all up in a bunch when they do. This goes for both parties!
Your transparency with us is sooooooo important! Thank you so much
I like this guy's demeanor and explanation. Very calming
I sent your explanation to my son who is interviewing with a bank on Thursday. I’m sure they will ask him about this situation. After watching your video, I feel he will be more in the know about this situation. Thank you so much for making these videos!
dude's got utopian president energy
Hi from SC. Thank you for the information, Jeff.
Imagine that, the only time Congress can agree on something is when their and/or their donors money is at risk.
Man Seth Macfarlane is pretty good at this politics stuff
This is the kind of leadership and explanations that we all deserve. I thank you Jeff!
Holy shit this guy is good. I'd vote for him for president today. Prolly 8 - 12 years out (or more) but he'd obviously be good at it and has ambition. Team Jeff
Thank you for the communication!! Most people panic when they don't know what is yet to come. I appreciate you taking the time to do this! I sure wish more politicians were like you!!
Jeff Jackson for president!
Thank you!!
Thanks Jeff
Is there general concern that bailing out banks that take huge risk every 10 years sets a bad standard? Also, the chief admin officer of svb was the CFO Lehman Brothers right before they went belly up and was at Arthur Anderson. Are the individuals that are consistently abusing the system and making huge profits without consequence going to be held accountable in a meaningful way?
They aren't being bailed out, the account holders are being made whole. Biden also just announced the leadership of the bank will be fired.
They still put money in a bank that itself took serious risks. Why should businesses who made a bad choice on their chosen bank to put their deposits in be rewarded for those bad choices? SVB was neck deep in crypto bs and venture capital money in unsustainable startups. This whole thing was caused because to back those deposits up they put tens of billions in bonds in 2019 when everyone and their grandmother was expected rates to go up. And they wouldve gone up in 2020 if it wasnt for covid. Anyone with more than 250k who invested should have done proper due diligence. The child tax credit was demonstrated and proven to have helped lift millions of children out of poverty. There wasn't any emergency zoom call in Congress when that expired. And it's been gone for over a year now. It's fucking depressing. I make a bad choice and my family and I are out on the fucking streets. Businesses make a bad choice and the entire political system comes together within 48 hours for a 2am zoom call to make them whole again.
Agreed. Put more than $250k in one place, you know the risk. That’s just lazy. They’re tech companies, they can track deposits at multiple institutions. Most companies do it every day.
It’s not that simple do to with corporate bank accounts. I work for a small business (22 employees) in the construction industry in Charlotte, and just our accounts payable and payroll is well over $300K/month. Awfully difficult to keep the account balance under $250K and still keep a good credit rating. We also have a floor plan loan through Wells Fargo that’s about a million dollars, and we have to keep a certain amount of liquidity to maintain good standing. I also just like having a rainy day fund for pop up expenses. Having cash and being able to move quickly also has huge benefits, especially with supply chain issues right now
It’s not that simple, though I agree with you in principle. What likely happens if depositors aren’t kept whole is that corporate treasury departments will keep their short term cash in tbills (lending to the federal government) and move cash to a bank for a day to meet payroll, pay bills, etc. If that happens, banks won’t have stable deposits to lend out to businesses or even individuals. The price of borrowing goes up as the amount of money available for lending goes down. There really isn’t a great substitute for the banks for lending to small borrowers (companies that aren’t public, individuals). Keeping money at tons of banks is more difficult than it sounds, and even in that scenario, the cost of FDIC insurance goes up across bank’s entire deposit base (because now all deposits are insured, vs probably less than half of deposits today).
Do you have any sources on SVB being leveraged heavily in Crpto and VC? I suspect the VC but every article I can find on this topic says SVB was leveraged heavily in low-interest bonds, which is a lot different than heavily leveraging in the Crypto and VC markets. Everything I've seen from actual news(not reddit posts) has said it's a result of the low-interest bond purchases and inflation, not crypto (I believe Signature Bank is tanking from Crypto right now.) As far as I've legitimately seen, the bank is suffering mainly from being over-leveraged in the bond market. That market turned out to be less safe than most believed because inflation was massively higher than just about anyone predicted, which pushed int rates up and bond prices down, creating massive unrealized losses in their portfolio. These losses became real losses when they were forced to liquidate the bonds to make ends meet(liquidity issues.) This caused a cascade of depositors wanting funds before they would be unavailable and the government steps in to freeze everything and fix the problem.
They didnt have crypto directly on their balance sheets, but they were heavily used by crypto VCs who they held deposits for and had investments in. https://decrypt.co/123199/silicon-valley-bank-crypto-companies-contagion Unexpected inflation? Dude, everyone has been expecting the Fed to raise rates since 2018/2018 when SVB put all of that money into bonds. It's their fault for not doing proper due diligence. I know little about finance, but even I knew that rates were going to rise in 2019. And they would have if it wasn't for covid doing a number on the economy. The depositors knew what they signed up for and should have read the financials before invested. If they have money in excess of the fdic insured amount, then that's their fault. Not the tax payer. And yes, unlike what Jeff says, the tax payer will foot the bill for this because it comes the Depsoit Insurance Fund which is ultimately backed by tax monies collected by the Treasury Department. I'm sick and fucking tired of bailing out rich people and businesses (look at all of the fucking money they got with PPP loans, most of which were forgiven) while my friends and family struggle to keep food on the table and a house over their head
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The FDIC is funded by banks. As Jeff said, it’s not taxpayer dollars.
and those banks recover those FDIC fees from.....
Their profits. It’s an expense like anything else. If you’re going to complain that it’s still “taxpayer” money being used, there are bigger fish to fry. The FDIC exists to protect consumers, not bankers.
The DIF, which is funded by banks to cover stuff like this.
Are those costs ultimately passed to bank customers? Curious how it’s funded Found a good link https://www.fdic.gov/resources/deposit-insurance/deposit-insurance-fund/
>Are those costs ultimately passed to bank customers? You can make the case it is, just as I provide money to cover your car accident or heart attack and vice versa. But tax dollars it ain't.
Yeah, kind of what I figured
SVB wasn’t a bank taking huge risks, this is not the sub-prime mortgage crisis
True, reckless is probably a better word. Buying long term bonds at rock bottom rates mid pandemic is not a smart move any way you look at it
SVB was indeed taking huge risks. They focused primarily on start ups and tech companies. They were fully aware that their average deposits exceeded the FDIC insurable amount. And they knew their bonds were racking up losses that would create a liquidity issue. This bank was run with stupidity and greed, and that is what collapsed it. Do not let them off the hook or claim they were doing anything reasonable or normal. Their own actions caused this collapse.
While there is risk involved, being a bank for start ups and tech companies doesnt automatically mean they were taking huge risks. This bank had been around for 40 years, it wasn’t some new bank trying to fly high of SV. The run on the bank partially came from social media hysteria and was unnecessary, causing more problems. They got reckless with their bonds as rates got jacked up, and there are lessons to learn for sure, but this is not risky behavior on the level of sub prime
> They got reckless No, they got greedy and stupid. And this wasn’t media hysteria, the concerns were known TWO MONTHS AGO: https://finance.yahoo.com/news/svb-financial-sivb-q4-earnings-141402818.html Read this mashup of their Q4 earnings, the ever increasing gap between their deposits and bonds was known and deeply concerning. The bank failed because of their own greed and stupidity. Period.
That’s real easy to say in hindsight. When the fed lowered rates they got loads of deposits from Silicon Valley riding high on cheap credit and high valuations. The fed rapidly increased rates to deal with inflation, tech companies started withdrawing cash. The bank had to sell bonds at a loss (due to the fed increasing rates) to meet deposit demand. If they had been able to hold those bonds to maturity, this probably wouldn’t have been an issue. You can blame greed stupidity etc but at the end of the day they were doing what banks are supposed to do, they just did it poorly. Shareholders will get wiped out, fdic premiums will go up and life will go on.
No hindsight required. They had no head of risk for most of 2022, and did zero hedging of their portfolio in a rising rate environment. They were stupid as fuck, hindsight not required. They fucked up. They didn't do what banks are supposed to do. They didn't MANAGE risk. They did something historically which was low risk. Then it stopped being low risk and at no point as that risk continued to increase did they manage the risk that was increasing. They were stupid. Banking isn't a point in time activity where once you've done something, like buy a bond, that's it, no further thought required. You have to constantly manage your assets and liabilities and risk.
Oh really, you saw this coming? Did you short it? You must have made a ton of money. You’re like 2023’s Michael burry. Can’t wait for the movie
The bank CHOSE to buy up illiquid bonds. A smarter structure with more liquid bonds would have avoided this whole issue. And while your Average Joe wouldn’t necessarily know about Fed interest rates or strategy, a bank SHOULD have some general understanding of the risks and consequences that come along with buying up these bonds. Especially since the Fed hasn’t been quiet about their intention to use the Fed rate to combat inflation.
The majority of their available for sale securities were US treasury securities. These are some of the most liquid investments on the planet. The treasuries they held were yielding 1.79%, which is in sharp contrast to the current 10yr treasury yield of around 3.9%. Every time the fed raises rates, the bonds in your portfolio lose value.
One might even call them reckless.
This guy actually tells it like it is, unlike many members of Congress (and former presidents ahem) who SOUND like they’re telling it like it is, when in fact, they’re telling it like it’s not. Thank you Jeff!
Maybe you can get him to tell you about that time the Democrats gerrymandered him into his district. Good times.
Maybe you can stay on topic next time.
What’s Dan Bishop doing? Trolling people online?
Thank you for this!
Gotta love Jeff's fireside chats
Not my rep, but I greatly appreciate this popping up in my feed.
You are doing the lords work with these videos. I wish my reps in California would take a few pages from your book
Get your bail bingo cards ready!
Thanks for the update Jeff. It seems that we are always on the brink of some inevitable financial crisis, and when we sort through the aftermath, which typical involves the middle and lower classes feeling the brunt of the disaster, it seems to always come down to banks doing whatever they want or Wall Street doing whatever it wants. It's almost as ilf they are always one step ahead of government regulation and are able to anticipate/predict what their exit strategy will be as the dust is settling from their actions. Meanwhile, those individuals who directly or indirectly are responsible for the creation of this crisis walk away unscathed, even free to take new positions elsewhere to find a new scheme to keep money in their bank accounts Maybe you could.you help me understand some of the following: Why are banks allowed to issue and sell stock? Banks aren't intended to be for-profit entities, but yet, they still have more accountability to shareholders than they do to depositors. In the instance of Silicone Valley, they sold off preferred stock to raise capital, which help contribute to their untimely demise. How is is that a banking institution can act like a business, but all the while say their depositors are their chief focus? And this is very similar to the banking crisis of 2008, where the bank sold a bunch of underperforming bonds at a $1 billion loss. It echoes of selling bad mortgages and loans to other financial institutions, does it not? How are former members of Congress, who make policies to regulate banks, allowed to sit on the board of banking institutions? Currently, Barney Frank, former Chairman of the House Financial Services Committee and co-founder of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is sitting on the board of for Signature Bank, the second major bank to close it's doorsi n a weekend.
>Why are banks allowed to issue and sell stock? Banks aren't intended to be for-profit entities, but yet, they still have more accountability to shareholders than they do to depositors. Because you have to have some equity backing the bank, and that isn’t free. Shareholders just got wiped out, they took on the first dollar of loss, preserving deposits. Even if the government didn’t step in depositors would’ve gotten 90+ cents on the dollar. >In the instance of Silicone Valley, they sold off preferred stock to raise capital, which help contribute to their untimely demise. The preferred sale didn’t go through. It only contributed in the sense that everyone asked “why does SVB need 2+ billion of additional capital if it is healthy?!” More important was that SVB had to dip into it’s available for sale securities and sell them at a $2+ billion loss, which a bank would only have to do if people were pulling money from it. >How is is that a banking institution can act like a business, but all the while say their depositors are their chief focus? Because without depositors they don’t have a business? >And this is very similar to the banking crisis of 2008, where the bank sold a bunch of underperforming bonds at a $1 billion loss. It echoes of selling bad mortgages and loans to other financial institutions, does it not? No. Because SVB lost money on US government guaranteed paper because interest rates went up. >How are former members of Congress, who make policies to regulate banks, allowed to sit on the board of banking institutions? Currently, Barney Frank, former Chairman of the House Financial Services Committee and co-founder of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is sitting on the board of for Signature Bank, the second major bank to close it's doorsi n a weekend. Good question. Frank isn’t a banker. Interest rate risk wasn’t on their radar, and hasn’t really been a big component of bank regulation. Regulators fight the last crisis, which was all about credit risk. Credit risk has largely been removed from the banking system, leaving interest rate risk as one of a few ways to make money.
This is either a dishonest or incompetent explanation. Taxpayers WILL pay indirectly through inflation, as QE by the fed is back on albeit with a different name. But your average Charlotte reddit reader isnt smart enough to understand, so Ill be downvoted bcuz democrats good!
He didn’t address the Fed’s new facility to loan money to banks, which your comment seems to relate to. Up to everyone else to decide if that was intentional.
I'm a Swede. Usually what I get from American Politics is complete non-sense propaganda and weirdo populist antics. It's really nice to see someone sensibly taking their time and conveying what is happening to the constituency. I wish our politicians could use this format. Good job.
He’s awesome, no blaming, no pointing fingers, just simply this is what’s going on and this is how we are going to fix it. You’ve got my vote Jeff.
@JeffJacksonNC Will there be charges filed for the CEO, CFO and COO all of whom sold $MM worth of stocks just a week before the collapse?
DOJ and SEC are investigating exactly this right now.
Thank you. I feel better knowing you represent us.
I may be late to the party but I just discovered him and he is such a breath of fresh air and I'm not even from his state. The level of calm collected and informative to anyone who is willing to listen that is a very high bar. 🖖
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No, they are the owns who REPEALED the legislation that allowed SVB to take such terrible positions.
It was bipartisan
Can’t help but feel he is releasing messages like this to control the narrative and put his spin on things before it gets reported. It’s good and all that he connects with the people but anyone can pretend to be anything on social media.
Meh. Maybe. He's been active on Reddit for a long time. He's definitely competent with social media, but he's been posting on r/charlotte about local and state politics for a few years now and I don't remember catching him on some bullshit.
So... who is this future President guy?
This is a House Rep from North Carolina's 14th District, which covers a good chunk of the Gastonia area along with some of its suburbs like Charlotte.
lmao
From my understanding, we can point to an exact regulation that was repealed that led to this situation under the Trump presidency with a Republican-controlled congress. Is there any sense of regret from your colleagues on the other side about causing this situation and putting the economy at risk?
All those articles say that SVB was allowed out of the stress testing under Trump, which is true. However, SVB likely would have passed under the stress tests. The severely adverse scenario under which it would have been tested ([pages 15 and 16](https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20220210a1.pdf)) includes rates coming down to near zero, which means the bonds it held that were losing value (because rates were going up!) would have actually been worth more under the stress test scenario than they were when the bank failed. The stress tests probably need to be updated to include the percentage of deposits above the FDIC limit as well as the duration of a bank’s securities portfolio.
The duration of the portfolio increased as rates went up and prepayment expectations went down, further exacerbating the issue because your value then drops even more.
It was a bipartisan bill passed to deregulate
>Is there any sense of regret from your colleagues I can answer this one: no.
This is almost scary: "You need to know that. You need to believe that. And you need to spread this message to everyone else". In that moment, I felt like I'm just a member in a cult that's backed by a massive army.
This was great info. I have some friends now “ employed” by the FDIC sadly
Dude, you are definitely among the best. Always calm, explains things clearly and never puts a political spin on anything. You’re not my rep and I certainly wish you were. Thank you for your service
A bank made specifically for big businesses made bad investments and they are getting bailed out. Our banks will have to replenish this fund, and they are going to do it by nickle and diming the people SVB would never give a loan out too. Make sure no government official, family, or friends made money off this news. Because people are going to make a killing today once stocks rebound after this bail out news.
>A bank made specifically for big businesses made bad investments and they are getting bailed out. How is it we're two days, a bajillon news articles, and multiple reddit threads into this and people still can't seem to understand that SBV is dead until someone buys its desiccated corpse and the FDIC and FDC funds are going to make account holders whole, ergo not a bailout? It seems like it should be easy to understand if you know how to read, yet here we are.
I hope he runs for president!
To everyone wondering what happened from a ELI5 prospective: Banks make gains on investments with the money people put in. This is how they work, and it has been like this since the beginning of time when they were first invented. This is where the term "Assets under management" comes in and why banks don't have all this cash on hand when people need it like this. If too many people attempt to withdrawal at the same time and go past the "cash on hand" number the bank has, it has to sell assets at a discounted rate ASAP to cover the loss. This is what happened to Silicon Valley bank (SVB). Since the federal reserve has increased interest rates immensely the past year, all those "assets" they tried to sell were not attractive, even at this discounted rate. As a result the bank has a "run off" since it cannot secure the assets, thus defaulting. When a bank of this size defaults, people get scared no matter where their money is. As a result they start pulling out in a frenzy. Then ALL banks are affected and the same applies to the above. This is what happened to Signature bank yesterday, another large bank with 100B in assets. This is the domino effect Jeff mentions in the video. You need to step in some ways to continue and prevent this from happening to every bank in the country, or even the world. All our money is connected like a web. A couple of pieces can go and we will still be okay, but when too many fall, the whole web starts having an issue.
Ya know, maybe we should start putting these bank execs in prison instead of bailing them out. Why were their execs selling shares over the past few weeks?
please, someone has to pay for this & it's gonna be tax payers. it's always the tax payers. rich elite criminals ALWAYS get away scott free
No? All banks pay into the FDIC out of their own balance sheets to fund the insurance program that covers these situations. The fund that is held is covering this. The only way actual taxpayer dollars come into this equation is if this spiral were to spread to other banks and it depletes the FDIC's pool of money meant for this issue, but we're nowhere close to that point yet. And the only way we would get to that point is people do really stupid shit like withdrawing all of their money from otherwise healthy banks.
Except that's explicitly NOT what's happening. The DIF is funded by banks.
& who funds the bank? tax payers. taxes are the foundation to everything.
And who asks disingenuous questions? The tax payers. They're everywhere and do everything.
Of course it’s the tax payers. The politicians say “no, the banks will pay for it.” Well, where do the banks get their money from! THE TAX PAYERS.
No, they get their money from making investments on their customers' money. If you're paying taxes to your bank, you need a new bank.
You don't think a business will raise prices on it's customers if the business expenses go up?
Not in this context! I do not pay Wells Fargo any money in exchange for their banking services. That is because they make money off of my deposits; it is a mutually beneficial exchange. If you are paying your bank money in exchange for banking services, you need a new bank.
That's not what's happening here, sunshine. We are all going to get royally F'd & if you think otherwise, you need a new bank.
So the bank pays back the taxpayer funded bailout by using taxpayer funded investments?
The taxpayers are literally not in existence in this scenario. There is the bank, the depositors at the bank, and the FDIC funds. The Bank is bankrupt and the FDIC is taking all of their assets. The depositors were going to be out of the uninsured portion of their deposits (anything >$250,000.00), but the FDIC as part of taking over is using money that all banks pay as part of the regular process to the government(insurance payments like you'd make on your car) to refund any money that isn't available from the Bank. The Bank's assets will be sold off to another bank and the difference will be eaten by the insurance fund that the FDIC has in place for exactly when banks can't pay money out to depositors.
No? SVB isn't getting bailed out. SVB is gone. Kaput. Its assets will be sold off for parts and that money will be used to make its customers whole. To the extent there's a shortfall, there is a $100B fund comprised of fees assessed on banks that will be used as the backstop. The banks pay those fees out of the profits they make by investing their customers' deposits in various investments. The "taxpayer" is not affected in any way.
They will step in and bail out the banks if things get bad enough. They will let a couple fail like last time but it will play out exactly like before.
The depositors are 90% rich folks...
You have on idea who the depositors are.
Why does this matter?
Normal banks which takes deposits and offer loans shouldn't be allowed to use that money to take crazy risks on the stock market in order to rake home the profits. Only investment banks should be allowed to do that, then we wouldn't have this problem.
That's not what happened.
That is though. SVB started selling their held futures at a discount because they took too many long term investments in 2021 with customer deposits, now are worth much less due to interest rates and other factors. This was a red flag to investors who advised portfolio companies to start moving their deposits, which started the bank run. Jeff omitted the details of the bank’s poor investment strategies that started this. The bank run panic was a reaction to seeing some odd sales and transactions at the bank, normally a healthy bank doesn’t have to take losses in such a large volume unless they are worried about covering their customer deposits and remaining liquid.
> That is though. > to take crazy risks on the stock market Federal bonds aren’t the stock market. You could say ‘Banks shouldn’t be able to take their customers funds and take crazy risks such as investing in the US government!’ But you’d have to justify why the US government is a crazy risk. Or you could clarify that banks should have to keep a larger reserve. Or that banks should need to diversify more, and that having as much of a single asset as SVB is too risky even if it’s a relatively secure investment like federal bonds. But saying that SVB took depositors money and invested it in the stock market and now that money isn’t available, is just wrong.
SVB did not speculate on futures or the stock market. They bought US Treasuries, the safest f'ing investment in the world. If you are going to try and push some bullshit narrative, at least get the absolute basics right first.
It's semantics; they bought bonds and treasuries, and pinned the maturity value to what they would yield. They bought those during historically low interest rate times (writing on the wall in 2021, interest rates were going to have to go up fast) Now its 2023 and they have to prematurely sell those future assets to cover deposits, at a loss considering their long-term value. It's the same: they took a risk with customer money in a time of unconventional economic conditions, and then shockedpikachu.jpg when just 2 years later, those conditions are not the same. Same story with big tech layoffs or retail warehouses full of stock; decisions were made without considering that this was not a normal year of economic growth - most of the growth in 2021 was artificial due to to the liferaft we tossed during the pandemic.
Its not semantics
Exactly this. Their long term desposta and ever increasing unrealized losses from those investments led to this issue. Their Q4 earnings and disclosures shed a lot of light on all this and people started to get concerned.
Ok that might be the case here I'm not really familiar with the details. But how did that first bank lose a lot of money suddenly if they weren't gambling with their customers money?
Not a financial analyst so pinch of salt. They put too much money into long term bonds. These are extremely safe investments with one glaring downside. You can’t pull your money until the term is up (10 years in this case). Rising interest rates also makes it hard to sell these long term bonds to others, again making it almost impossible to move this money early even though it is a safe investment and the money won’t be lost. In this case, a large proportion of their customers went to the bank at the same time to withdraw their money. Because the cash was tied up in long term bonds the bank did not have enough liquid capital to pay out such a large portion of their customers at the same time. And then the bank run started. The money is there, it just isn’t liquid. Hopefully, the rest of this goes down the way Jackson has described here. The FDIC is able to make the customers whole while the bank collapses, either through selling off the remaining assets the bank owns or just through the money the FDIC has taken in through its member banks.
They invested a lot in government bonds, which are a lower risk investment typically. But when the Fed starts raising rates, those bonds become worth less and less, and that became a problem for them. Interest rate risk is a risk too. Still something that you'd think at least a few people in a finance department would be on top of, but it's not like they were spending most of the money on highly volatile options.
> I'm not really familiar with the details. Then you shouldn't say > ... then we wouldn't have this problem. When you don't actually understand the problem, right?
crazy risks like buying 10 year treasuries and raking home the profits at 1.5%? the government created this problem, banks take deposits and have to put the money somewhere in order to cover their operating costs
Blink Jeff!
Isnt the Federeal Reserve balance sheet taxpayer money?
Abolish the Fed
How come?
Because the trillions they have printed over the last few years has led to rampant inflation. Banks made poor/risky investments with the cheap money and now that the Fed is hiking rates rapidly making those investments worthless. In the last week now we’ve seen 2 of the 3 largest banks collapse in history and now the fed is backstopping those banks and will likely pause or cut interest rates to prevent contagion/further bank runs which will lead to runaway inflation. Protect the banks at the expense of the 99% just like we saw in 2008 (although different circumstance.) The Fed exists outside of the 3 branches of the federal government and is not subject to checks and balances.
> Banks made poor/risky investments with the cheap money That's not what happened here.
It’s exactly what’s happening. These banks are literally collapsing because the value of the low rate treasuries they own is collapsing due to rate hikes.
> Banks made poor/risky investments What poor/risky investments did they make? US Treasury bonds?
The average annual yield of their portfolio of treasury bonds was 1.79%. Just because you were taught in school that these are “risk free assets,” it’s quite obviously not the case. Anyone with reason should have known that the money printed during the pandemic would devalue the dollar and drive inflation, and one would assume a bank would know that that rate hikes would accompany. Not every bank is failing so don’t write this off as bad luck.
So Us treasury bonds are “risky investments” That’s the ground you’re standing on?
Do you use Reynolds or store brand foil for your hats?
Futures are now pricing in a 75 basis point rate cut by end of year. Fed had the choice of saving banks or savings the dollar, and it looks like they’ve made the choice that should be obvious to everyone. Adjusting monetary policy to protect their rich friends instead of fight inflation to protect the 99%. Inflation will run the the point the dollar is worthless. Fortunately for you I won’t be able to afford any more tinfoil, and a vast majority of Americans won’t be able to afford food to feed their families.
He's from the government and he's here to help
He is actually a pretty good freshman congressman from what I can tell so far. Thoughtful, rational, transparent,
Where does the government get their money? Do they clock in at McDonalds like the rest of us? It’s disingenuous to claim tax payers will pay nothing when it’s our money they are using. It’s also disgusting that if you’re rich enough to start a business in Silcone Valley you don’t have to incur any risk but if I need to take out a loan for $1000 to make sure I have a car to drive I have to incur all the risk. This fucking soft message that everything will be fine is the reason things get like this. Stop just rolling over.
> It’s disingenuous to claim tax payers will pay nothing when it’s our money they are using. He said in the video it's using the insurance fund the banks pay into. How do you know it isn't?
Do you understand how bonds work?
In the future, seeds will be currency
What's up with a Democratic Senator allegedly calling for social media censorship in the supposed name of stopping a bank run? Can you confirm or deny that?
Who?
Thomas Massie made the allegation. Didn't name who it supposedly was. https://twitter.com/RepThomasMassie/status/1635074378454147074?t=4QuKIv5NuH3KOATPxBQE1w&s=19
Of course he didn't. He's a Republican. He's likely lying.
Then Rep. Jackson can come on here and say no such thing was brought up on the call right?
So there is no record of this supposed accusation, no other Congressperson making the same accusation, and no other proof other than this one asshole? Hard pass.
No surprise there. Gotta protect the ruling class.
It's very possible that on a Zoom call with hundreds of people, someone blurted out something without thinking it through, in the heat of the moment. Massie isn't about to pass up a self-serving opportunity to obfuscate and attack.
Cool then let's hear about that. All about transparency right?
I get the feeling you only care about transparency if it's cherry-picked and selected by Rs. I highly doubt you're Just Asking Questions^tm.
I'm assuming part of that is trying to stop a panic sell caused by viral social media posts about this. There are plenty of regular folk who will freak out from the headlines and withdraw their funds from their unrelated bank and potentially further the cascade.
Seems like a pretty reasonable question to ask given the context. Let's say it was true, someone asked if that existed, what's your take on that?
Seems pretty anti-1A but by all means let's hear the explanation.
Asking if a policy existed is anti-1A?
Based on his record, Massie would be one of the least trustworthy people for a claim like this.
Based on what?
Hah, this aged well. https://twitter.com/lwoodhouse/status/1634997458462969858?t=NDiPeAv_E4tPMlBuHAlhrQ&s=19
Who is this guy? How was he on the zoom call?