Re:Joint Statement by the Department of the Treasury, Federa...
by pishpash on Sunday March 12, 2023 @07:31PM
(#35128130)
Weren't these 10-year bonds and negative-convexity MBS? 12 months doesn't improve the position at all, but maybe you can keep applying for these loans in which case it's just another QE.
Re:Joint Statement by the Department of the Treasury, Federa...
by pseudo0 on Sunday March 12, 2023 @08:04PM
(#35128540)
What interest rate does that assume for depositors? Sure, the face vale of the bonds in 2032 dollars might have been enough to pay back the 2022 obligations to their depositors, but banks are routinely offering 2-4% interest in high interest savings accounts now. So either depositors will leave for better options, or SVB would have had to offer competitive rates (digging the insolvency hole deeper).
Re:Joint Statement by the Department of the Treasury, Federa...
by everybodyknows on Sunday March 12, 2023 @09:42PM
(#35129588)
Big banks are still offering sub-1% rates:
https://www.usbank.com/bank-accounts/savings-accounts/elite-...
Compare that to a money market fund from a stock broker at 4.5%:
https://www.schwab.com/money-market-funds
The question is, how quickly do simple folks figure out they're being slowly bled, and start moving their cash to some place where it's appreciated?
The long-term bonds would have paid back enough money for SVB to pay back every depositor if there had not been a run that forced them to pay them all back at the same time. Knowing that everyone can get 12 months of runway will do much to allay fears and so reduce risk of further runs.