1) not in scope of conversation, Risky assets are valued at fair value and any institution worth its weight would only have minimal exposure to those assets (% of assets/equity/revenue etc)
2) time =money, it’s the future value created(par will pay 110 rather than 105) that is being discounted not current value where a binding contract exists to pay par value.. you want that uncontrolled market dynamics of discounting rate to impact sound risk management and investments due diligence. (in extreme example, look at some banks like Schwab that lost significant MV to bounce back today, what is the true MV?)
3) don’t agree, even if for extended period, it will amortize back. However provisions are in place to mark down for expected losses (look up CECL)
4) you just dismissed the entire actuarial/data science/predictive modeling industry by saying past history can’t be used for setting requirements for events that never happened
1. Is SVB an institution worth its weight? It was until a few days ago. The honor system doesn’t work, there isn’t an incentive. No matter the size, a small snowflake starts an avalanche.
2.The sound risk management failed to predict the time risk mismatch which is basic in risk management (re Schwab I suggested a time buffer, if Schwab stays down for 2 months do you still think we can value it based on the “analyst “ price ? ) Values need to more closely reflect real market value no matter how “safe “ they are.
4. The entire predictive industry + rating industry (ROTFL Moody’s cutting bank ratings today) failed to predict this so obviously their methods need rethinking.
After ‘08 we though better liquidity levels will prevent systemic risk and it would’ve perhaps prevented the ‘08 crisis but didn’t prevent this one and your idea of further raising % will probably not prevent the next crunch. Which is why I say we need more honesty and realistic insight on these balance sheets.
My suggestions are open for adjustments to banks needs but to continue down this road and not change the opacity in balance sheets will probably bring a different unpredictable failure in our banks sooner or later
We need a poll
@Abey or
@holtkup for treasury secretary 🤣🤣🤣 ?