Looks like this week will determine whether or not Silicon Valley Bank was a terrible manager of risk and is a one-off failure, or if everyone who has been saying "the banks are more well capitalized than ever post-2008" have been living a lie.
Discussion
yeah.
shit.
pretty much everything you realise about this makes it worse, eh?
They were very well capitalized unless you think government debt securities are sometimes not "risk free"
They are well capitalized with marked to maturity long duration govt bonds.
Feds already on-site at First Republic...
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The next decade will be about asset quality. “Well capitalized balance sheets” can evaporate when they are full of junk assets.
Isn’t the issue not that they were under-capitalized, but that they had a lot of capital in long-dated agencies and didn’t hedge interest rates?
There was that terrible UST auction this week. I think on Wednesday? Related?