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Silicon Valley Bank and Tesla suppliers

1024 Views 22 Replies 9 Participants Last post by  JasonF
Have there been any reports on the SVB failure and Tesla and suppliers?

Bob Wilson
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No one should loose their money because a banker has made an unfortunate choice of investing in safe Treasury bonds that lost value because of quickly raising interest rates. These Treasury bonds if held until their redemption date would have returned their full amount. The banker's mistake was that he didn't promptly adjust their investment strategy in the light of raising interest rates as others have successfully done.
From what I’ve read on this, the root cause of all of this wasn’t treasury bonds, it’s that banks are allowed by regulators now to behave like risky investors and invest nearly all of their deposit money. Most large banks won’t do that and risk collapse, but the smaller and ‘scrappier’ ones will - but that’s also how they promise higher returns to their clients than the bigger banks.

Exacerbating that right now is that all of the investments fell apart at once. The silicon valley companies who have loans with them aren’t making payments, or are paying late, cutting off the cash flow they normally use to cover some deposits. Their stock market and bitcoin investments became too volatile to sell and fill the gap. So the least damaging loss they could take were selling treasury bonds too early, except that act triggered questions about their stability and a run on deposits.

I listed all of those because if any one of those wouldn’t have happened, SVB would still be doing business today. Limping along, but still there.
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It's really about the loss svb incurred when they had to sell their Treasury bonds at a loss due to the bank run
But that's not the root cause. The bank run wasn't some random event that they had the bad luck to endure. I actually looked into it because I was worried that was the case, and that every bank - even big ones - are at equal risk for collapse soon. It turned out that wasn't the case.
Heard on Public Radio news, SVB got in trouble because they had too much of their assets in long term, low interest rate, USA bonds. A conservative, low risk investment until ... one political party started talking up 'not extending the debt limit.' Suddenly these SVB investments did not look so good. Trying to sell them to stay liquid ... necessary but bad idea.
I heard that was the ending cause but not the root cause - i.e. they would not have had to sell the bonds if other factors hadn't occurred.

And that seems to be correct so far, because if every bank regularly must sell govt bonds to cover deposits, we'd be looking at a full banking system collapse within the next 30 days. The symptoms don't seem to be pointing that way right now.
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