Silicon Valley Bank - Part 2. New Updates Since 13 Mar 2023.
It was a mere 2 days ago 13 Mar 2023, monday late afternoon (singapore time) that I had a post on Silicon Valley Bank (SVB) saga.
Click here to read ,if interested !
This came about after reading 1 or 2 well-researched posts and alot of regurgitated ones with nary an insight or understanding leading up to the “mini-crisis”.
When trading came around on Mon, 13 Mar (US time), a new week with regulator FDIC on hand; ready to dispense cash to those who wanted to withdraw from SVB.
US market started unsure but as the day progressed, an upwards trend was sighted.
By the time market called it a day, both DJIA and S&P 500 witnessed a negligible dipped.
Conversely, Nasdaq registered a negligible rise.
Overall, US market sentiments were way better on Tue (14 Mar 2023) that started with the European market.
By the time States sides trading started, everyone was raring to go.
Could this attributed to a “positive” (at least to me) Feb 2023 CPI data being released ?
With SVB’s bank-run possibly ran its course, market took a deep breath and rallied.
A rich green hue greeted us (our eyes) this morning as we dived headlong to find out how the US market fared.
While happy with the 1-day results, there’s still much to do at SVB.
(1) The SVB Incident Could’ve Been Mitigated
After the 2007-2008 Global Financial Crisis blew over, in June 2009, President Barack Obama introduced a proposal for a "sweeping overhaul of US financial regulatory system”.
This was in direct response to widespread calls for changes to the financial regulatory system.
A transformation that was on a scale not seen since the reforms that followed the Great Depression.
The end result was the implementation of the Dodd-Frank Act on 21 Jul 2010. In layman terms,
An Act to promote the financial stability of the United States by improving accountability & transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
So why wasn’t this a “happily ever after” fairy tale ?
(2) The Trump Administration Year 2018
So, something happened in between 21 Jul 2010 (the year the Act was enacted) and 08 Mar 2023 (the SVB meltdown).
Looking at the above title - guessed who was the culprit (SVB CEO Greg Becker) and who turned a blind eye to the “do-good” legislation (ex President Trump) ?
There are a lot more juicy bits that due to space and article’s length constraint could not be touched on in details. Do recommend reading this insightful & well researched post !
There is truth afterall in the English sayings - “spare the rod and spoil the child” ! The SVB saga couldn’t have been a more apt illustration.
More importantly, should (a) SVB CEO, (b) ex-president Donald Trum and (c) the then House Of Representatives members (the 2018 cast) be hauled back for questioning ?
This is known as “accountability” right ?
Sidetrack thought - will this saga be a political suicide for ex-president who has been mulling as the comeback kid to lead party Republican to face off current president in his quest for his 2nd term in office ?
(3) Federal Reserves’ Internal Board Of Inquiry
The Fed on its own will be conducting an in-depth investigation into the collapse of SVB.
Led by Mr Michael Bar (2nd Vice Chair, Federal Reserve for supervision) the inquiry report will need to be released by 01 May 2023.
Looks like Mr Powell has heeded senator Elizabeth Warren’s call for him to recluse himself from the overall investigation.
On Mr Trump’s 2018 signoff to relax the Dodd-Frank Act, although Ms Warren has put the blame squarely on Mr Powell (who incidentally was nominated by Mr Trump to lead the Fed); its a puzzle on how much the Central Bank has influenced over the President on legislation when it comes to running of a country ?
Rounding things off - lawmakers on both sides of the aisle, including President Biden and Senate Banking Committee member Bill Hagerty (R-Tenn.), have also called for an examination of the San Francisco Fed’s oversight of SVB.
(4) US Justice Department and Security & Exchange Commission Investigates
For sure there will be repercussions from this fall out in SVB; not to mention Silvergate and Signature Bank as well.
Insiders’ trading is being considered as one of the catalysts in this probe as well.
How could there not be an investigation when Silicon Valley Bank (SVB) has became the 2nd largest bank failure in US history ?
The investigation is in early stages and may not result in allegations of wrongdoing or charges being filed; its just too early to tell on what direction the investigation will take.
What do you think of the whole saga while it is still playing out right in front of our eyes ?
Do you think there will be a sacrificial lamb in the end ?
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