Isnt this nationalisation of banks? The core function of a private bank is to manage risk and generate profit from deposits and securities. Wont banks run amok knowing everything is insured ?
@theallinpod has been my every Sat morn must-listen pod for last 6mths+ and they have manage to have my complete attention no matter what, which no other show has managed, esp this episode https://t.co/xwStgIYVjy
1. When banks accept deposits from clients, they OWE the client that money. So deposits are liabilities to the bank.
Liabilities cost money…
…”cost” both to serve those clients (branches, tellers, apps) and any interest the bank pays you on your checking account (deposit). pic.twitter.com/2in9kir8qi
>In 2021 SVB saw deposits jumped from $61.76bn to $189.20bn – read free cash startups got to grow >to generate better yield they purchased a large amount, ~ $80bn! in mortgage backed securities (MBS) with customer deposits – Yes the same dreaded instrument that cause 2008 crash
>97% of these MBS were 10+ year duration with average yield of 1.56% >with FED’s interest rate of ~4.5% and increasing in 2023 > customers with deposits who were earning little less than 1.56% (bank spread) can now purchase govt backed sec with >4.5% yield
>This is not a liquidity issue as long as SVB maintains their deposits as they are earning ~1.56% on these deposits and the MBS has not gone bust (like in 2008)
