[chrisk]

Seems like a root cause of the problem is that regulators let banks value their bonds at a hold-to-maturity basis; they only have to mark to market when they are actually sold. According to Lawrence Kotlikoff (B.U. Econ prof):

"The trigger for the run on SVB was the sale of a collection of Treasuries that forced SVB to acknowledge that what it sold was worth $1.8 billion less than it had been advertising."

The bonds' value when they were bought seems irrelevant. What is the downside of requiring banks to disclose market values of their portfolio on a regular basis? (genuine question; there must be some issue with that?)

They do disclose the unrealized loss in footnotes. But you need to do something with that -- that is the purpose of a stress test, which SVB lobbied to be exempt from and was successful in achieving that in 2018.

Before the regulators took action, the bank announced a sale of holdings at a sizable loss and made a failed attempt to raise additional capital. That was enough fuel for the tech bros to create a $42B bank run through Slack and other channels on Thursday.

---

The Fed will conduct a review of the supervision and regulation of SVB and report by May 1.

https://www.federalreserve.gov/newsevent...0313a.html

"The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve," said Chair Jerome H. Powell.

"We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience," said Vice Chair Barr.

[chrisk]

Seems like a root cause of the problem is that regulators let banks value their bonds at a hold-to-maturity basis; they only have to mark to market when they are actually sold. According to Lawrence Kotlikoff (B.U. Econ prof):

"The trigger for the run on SVB was the sale of a collection of Treasuries that forced SVB to acknowledge that what it sold was worth $1.8 billion less than it had been advertising."

The bonds' value when they were bought seems irrelevant. What is the downside of requiring banks to disclose market values of their portfolio on a regular basis? (genuine question; there must be some issue with that?)

They do disclose the unrealized loss in footnotes. But you need to do something with that -- that is the purpose of a stress test, which SVB lobbied to be exempt from and was successful in achieving that in 2018.

Before the regulators took action, the bank announced a sale of holdings at a sizable loss and made a failed attempt to raise additional capital. That was enough fuel for the tech bros to create a $42B bank run through Slack and other channels on Thursday.

---

The Fed will conduct a review of the supervision and regulation of SVB and report by May 1.

https://www.federalreserve.gov/newsevent...0313a.html

"The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve," said Chair Jerome H. Powell.

"We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience," said Vice Chair Barr.