Fortune: One of the world’s richest men knows why Silicon Valley Bank really failed: ‘People on iPhones’
Since the fall of Silicon Valley Bank, experts and market watchers have openly worried that the collapse of that institution, along with Signature Bank and Silvergate Bank, could lead to a contagion that would spread to the rest of the financial sector.
But the CEO of a top private equity group doesn’t think that will happen because of the specific tech-based frenzy around SVB. “This crisis was caused by people on iPhones and other devices, hearing on social media that some bank might be in trouble,” Blackstone CEO Steve Schwarzman said in an interview with Bloomberg in Tokyo on Thursday. “They responded with huge withdrawals in a very short period of time, collapsing the bank.”
Schwarzman, whose company manages $975 billion worth of assets, added that the current banking turmoil was unlike a “conventional crisis.” In SVB’s case, rather than holding risky assets, they had an imbalance of otherwise very secure bond assets that matured on a longer timeline. As the Fed hiked interest rates, the value of those bonds dipped, but would have been repaid in time if not for the bank run.
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WNU Editor: Here we go again. Blame regular people for banks collapsing, and try to make the case why social media and free speech should be restricted/censored. Here is a heads-up. In the coming weeks Japanese banks may be the next major financial group facing problems that may need a bail-out.
They made bad loans period.
ReplyDeleteThey also made bad loans based on ESG.
They also were royally f*cked by the government spending 4 trillion dollars outside for the normal deficit spending budget which created massive inflation, which the Fed sopped up with unprecedented interest rate hikes.
The Fed has had the steepest interest rate hike in 30 years or maybe ever. My provincial government has a clause where property taxes can go up not higher than x% per year. they realize that if you had double digit tax increases YoY it would ruin many common folk.
Well the Fed interest rate hikes were so large that they ruined banking. Back in Fall of 2021 or was it fall of 2022, they signaled over and over again that there would be a lot of hikes, because they knew there would be problems.
I remember in pre-Bloomberg Businessweek in the gold pages that they warned against monetary policy not working. They said the trick was the politicians would raise tax rates and it would hurt. however people would not squeal like stuck pigs, because the Fed would loosen up and print money. So John Q. Public would feel like he had some money in his wallet. They opined that with the growth of credit (cards) that this 2-step would cease to work at some point.
I think we can say that we do not have that scenario, but the at article raised good points. The Fed cannot clean up after the drunks in congress.
I regret converting my rubles into dollars several years back.
With the move, the central bank has increased the federal funds rate from nearly zero in March 2022 to a range of 4.75% to 5%.
ReplyDeletehttps://www.cnbc.com/2023/03/22/fed-announces-interest-rate-hike-of-25-basis-points.html
Consider an airplane. The wings have an angle of attack. If the angle of attack is too great the plane stalls. The plane crashes.
Now the morons in Washington expected the Fed to sweep up their droppings that they so carefully left on the floor.
Joe Biden is not an economist. He does not play one on TV. He does play a moron on TV though.
Thanks for the insights both of you.. That world I know nothing about.
ReplyDeletewhy not trial them and see how humanity does without these demonic "leaders" who just hold us back
ReplyDeleteThe most powerful economy on the planet is vulnerable to collapse if 15 people on iChat decide to withdraw their money at the same time. Time to blame iChat.
ReplyDeleteHans,
ReplyDelete11:21 and 11:33 are the same person, me.
I regret I cannot find that Business week article. I probably could if I went through paper copies of business week from the 1990s. the gold pages were about 2/3rds of the way to the back cover. I believe it was the last gold page of that issue. U fortunately I do not know of libraries have paper copies going that far back anymore. Probably would have to go to a university. Microfilm? I do not remember if it was one writer or editorial staff and my query attempts in google have fallen flat.
I regret dropping out of econometrics. Advisor talked me to attending the class after it had already started for week. I dropped it after 1 or 2 sessions. Maybe I can get a book and self teach myself. It worked for programming and I got a job.
I blame gay communists.
ReplyDeleteFor everything.
You blames yourself? Self discovery can be shocking
ReplyDeleteThat is your job
ReplyDeleteIt is your job. Putin did not see fit to issue you a field wife.
ReplyDeleteI blame Alexander Hamilton
ReplyDelete