Thread by @dmoses34

🧵on $SIVB (thoughts on current situation)
1/ it may not have mattered in the end but I'm shocked that when $SIVB announced the losses in their securities book & subsequent capital raise, that the raise wasn't already subscribed; created their own bank run: "Capital Markets 101"

2/ I always talk about reading "10Q's and 10K's"; this exposure in $SIVB securities book was in plain sight & if forced to "mark to market", the losses would (did) exceed the equity capital at the bank; but I guess if the CEO sits on the Board of the San Fran #FED then all is ok

3/ b/c $SIVB had a heavy concentration of VC clients as depositors (clients) they experienced the boon of easy money & subsequent bust when the capital raising became difficult in VC world and companies were forced to spend their cash on hand which forced $SIVB to fill that hole

4/ yes, this was terrible risk management from $SIVB and they waited too long to address their issues (so did the regulators) but unlike 2008-2009, these securities are government backed and the issue was a "duration" mismatch of assets vs liabilities (deposits) and not credit

5/ there is a big difference b/w seizing a bank & how the government protects its depositors; given the previous Government Programs instituted during the #GFC (TARP/TALF/PPIP/QE etc) & then the additional stimulus during the pandemic (PPP & buying non-investment grade debt)

6/ it's hard to imagine the US Gov't not backstopping $SIVB depositors via a facility that accepts paper it has already guaranteed; forget QE vs QT for the time being, QT was always going to be paused/reversed when something broke (this qualifies); if not, contagion will ensue

7/ Lael Brainard is now the Director of the National Economic Council and served as Vice Chair at the #fed supervising the banks prior; I hope the White House is leaning on her expertise to fully understand the implications of doing nothing; this is duration risk not credit risk

8/ It's no secret that I am against "bailouts" as I am a true believer in allowing the markets to clear at fair value, but given what the government has done (starting in 2008: see tweet #5 above) how do they not do something here to protect businesses that employ thousands

9/ I rewatched The Big Short yesterday (first time since it's release) b/c I wanted to compare/contrast then to now and the emotions attached to both. Yes, it was scarier in 2008 b/c the products & leverage were more complex & misunderstood. This situation is easy to understand