Silicon Valley Bank (SVB) held too many low-yielding U.S. government-backed debt securities when the Fed began ratcheting up interest rates. The value of the bank’s securities portfolio fell and when uninsured depositors pulled their deposits, SVB failed, costing the FDIC $23 billion. It turns out all deposits were covered, increasing the loss.
The hard partying regulators were not to blame. “The bank’s over-concentration of such assets ‘far exceeded’ those of its peer banks, and the flawed strategy exposed SVB to significant interest rate risk,” Mullen explains.
“SVB’s available-for-sale securities portfolio was also mismanaged, as the executives at issue removed interest rate hedges as rates increased. ‘If this portfolio had continued to have been hedged properly, the Bank would have been protected against losses from rising interest rates,’” Gruenberg is quoted as saying.
A lump of coal for some ex-bankers who will be punished for not being clairvoyant.
Regulations by agencies are nothing more than politics disguised as law. The agencies are agents of the principle (the laws congress makes). Therefore, congress is responsible for the rules and regulations that the agencies make on their behalf due to the delegation of authority. I think the SCOTUS will be bringing this to a screeching halt because those authorities, granted in the constitution, cannot be delegated from the legislative branch to the executive branch of government. As for the frat boys at the FDIC, sayonara!