Roku Says 26% of Its Cash Reserves Are Stuck In SVB (cnbc.com) 94
Roku has $487 million of cash and cash equivalents in uninsured deposits at failed Silicon Valley Bank, the streaming media company said in an filing on Friday with the Securities and Exchange Commission. CNBC reports: About 26% of Roku's $1.9 billion in cash was deposited with SVB, which was placed into receivership by the Federal Deposit Insurance Corp. midday Friday. Roku shares fell over 4% in extended trading on the news. "At this time, the Company does not know to what extent the Company will be able to recover its cash on deposit at SVB," Roku said in a press release.
Nonetheless, Roku said it believed it would be able to meet its capital obligations for the "next twelve months and beyond" with its unaffected $1.4 billion in cash reserves at other "large financial institutions." "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted," a Roku spokesperson said in a statement to CNBC. Important note: FDIC insurance only covers the first $250,000 in deposit accounts.
Nonetheless, Roku said it believed it would be able to meet its capital obligations for the "next twelve months and beyond" with its unaffected $1.4 billion in cash reserves at other "large financial institutions." "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted," a Roku spokesperson said in a statement to CNBC. Important note: FDIC insurance only covers the first $250,000 in deposit accounts.
We will find out next week (Score:3)
Re: We will find out next week (Score:3)
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If the markets can survive JP Morgan, Fanny Mae and Goldman Sachs, *vastly* larger banks, simultaneously shitting the bed in the subprime mortgage stock market crash, and yes, I acknowledge it was bad, but capitalism is still here, then I *highly* doubt SVB will "end fiat banking".
Re:We will find out next week (Score:5, Interesting)
If the markets can survive JP Morgan, Fanny Mae, and Goldman Sachs
Those banks got bailouts. That is much less likely for SVB.
But Roku's CFO is a moron. You don't leave $490M sitting in an uninsured account. The money shoulda been in a MM or treasury fund.
Re:We will find out next week (Score:5, Informative)
=The money shoulda been in a MM or treasury fund.
It should absolutely not have been in a money market fund, where it could also be trapped or even lost by bank incompetence. If you put your money in a MM fund, or a deposit account, it's not actually under your control any more. You're trusting the bank to handle it for you.
It should have been in the form of US Treasuries or other high grade bonds. Those you actually own and no bank collapse will leave you unable to sell them.
Re: We will find out next week (Score:2)
It should have been in pennies stashed in my basement. I'll keep it safe, I promise.
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Those you actually own and no bank collapse will leave you unable to sell them.
The US has defaulted before: https://www.zocalopublicsquare... [zocalopublicsquare.org]
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Not really; it was spit among different banks, and it was used for operating cash. My small company has over $2 million in checking accounts. We have two different institutions and 4-5 accounts total, but we would still have FDIC risk in a collapse of one of the largest US banks.
Way back when I suggested to my business partners that we use ~15% of our cash reserves to invest for capital appreciation; we did need to have liquid assets on our balance sheet, but it seemed silly to have it atrophy in a bank a
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If you're maintaining almost half a billion dollars in ready cash you'd better be doing it because you have some super-duper project that requires the funds to be available now or soon. Even large infrastructure projects have cash flow management (i.e. parking funds in bonds timed to mature as you meet disbursement milestones) as part of the design of the project so that you don't expose your capital to excess risk, like what Roku seems to have done.
Either they were in the middle of some multi-million-dolla
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When your operating expenses are around $600M per quarter, and you are pushing at growing the business, that cash reserve amount may appear a bit high - but certainly not that out of the ordinary. (And cash equivalents includes things like CDs and Treasury Bonds)
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I'm not qualified to be a CFO, and maybe Roku's CFO is a moron, but "cash in a bank" and "money in a T-bill" serve different purposes. Cash in a bank is something you can spend right away if say payroll is due tomorrow, or you see a company you want to buy, or you decide a bunch of shows Netflix decided not to renew are something you want to bid on. A T-bill is some place you l
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What markets do in reaction to this. I person think lots of the gold and silver bugs are screaming from the rafters that it's the end of the fiat banking system as we know it. Other fear mongers are out banging the drum because they're short a lot of the smaller banks and hoping to cause contagion. More objective commentators say that SVB had unusually high concentration of crypto scam company deposits and a few larger silicon Valley companies like Roku with unusually high cash deposits. It sounds like all depositors will be made whole and equity investors will be wiped out (as it should be). This shouldn't cause a contagion with other banks / depositor bank runs since the other smaller banks don't have huge cash deposit customers like SVB does. Anyhow, if the market drops next week, I'll have a shopping list ready to buy. :)
Not saying there isn't market reaction to come but afaik this happened friday, before markets closed.
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Re: We will find out next week (Score:1)
You can look what is happening on Friday and go from there. PacWest Bancorp down 37%, Signature Bank down 22%, Western Alliance Bank 20%, several other banks and investment groups are down in the last week from 20-60%.
As far as bigger units: Bank of America down several percents over 30% year over year and other big banks, and BoA, JP Morgan Chase, Citigroup and a few others have failed their stress test, meaning they donâ(TM)t have the capital to fund their accounts. Credit Suisse down 60% and their d
Roku got (Score:1)
...Fuku'd
NEVER shoot yourself in the foot like this (Score:5, Informative)
FDIC insurance used to be 100K per account, but it was increased to 250K in response to the 2008 meltdown.
If you put money into a bank account in the USA, and the bank (like all reputable ones) carries FDIC insurance, then each of your accounts will be made whole by FDIC should the bank collapse BUT ONLY UP TO $250K. If you have $260K in an account and the bank fails, you're only getting $250K back. Any amount beyond that $250K limit will just be an IOU that MIGHT get partly repaid if there are any bank assets to sell-off, and if YOU are close enough to the head of the line of creditors (unlikely). Frankly, if the bank had the money to make people whole, then it would not have collapsed - so anybody with accounts at SVB should assume all money beyond $250K per account is gone, lost, finito, adios, kaput, smoked...
Re:NEVER shoot yourself in the foot like this (Score:4, Interesting)
Re:NEVER shoot yourself in the foot like this (Score:5, Insightful)
Somebody who was smart enough to put the other three-quarters of their company's cash reserves in different assets?
As other people in the thread mentioned, it's not practical to break up billions of dollars into $250,000 nuggets in different banks. That would look pretty suspicious to regulators anyway. It's definitely going to be a problem for Roku given that they have only sometimes been profitable, but it's far from the worst outcome one could have expected.
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The devil's in the details.
Roku has $487 million of cash and cash equivalents in uninsured deposits.
Cash equivalents cxould be short term Treasury Bonds. Gasp! [texas.gov]
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That's only the fraction of their liquid assets that were at this particular bank. They had (past tense...) $1.9 billion in total liquid assets.
Re:NEVER shoot yourself in the foot like this (Score:5, Informative)
NEVER shoot yourself in the foot like this
They didn't "shoot themselves in the foot", they just weren't going to open accounts at 7,600 different banks, on the off chance of something like this happening. Not that they could if they wanted to, what with there only being about 4,700 banks insured by the FDIC. [fdic.gov]
Re: NEVER shoot yourself in the foot like this (Score:2)
"Boy they really shot themselves in the foot there"
"No, they didn't shoot themselves in the foot! They just weren't going to keep a dollar under 487 million different mattresses! That would be impossible, there's only about 300 million beds in the whole USA, duh!"
See the point you seem to be missing is that they shouldn't have been keeping their money under a mattress at all, that was the mistake. Or in this case
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Honest question: how do you cover yourself against a situation like this?
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how do you cover yourself against a situation like this?
Guaranteed bonds. The return is low, but so is the risk.
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No. SVB failed because the price of T-bonds fell. T-bills are very short-term, so are easy to manage against interest rate risk, and are highly liquid so are essentially as good as cash.
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Some of it, however, *has* to be in cash-equivalents in order to conduct operations - Roku unfortunately had a big chunk of that stashed in a place that failed. The other people responding to you are a little too dumb to figure that part out.
Roku is not an oil major. Their ongoing business does not depend on instant access to $450million of liquid capital to conduct operations.
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How, exactly, do you think companies, or anyone else for that matter, engage in day-to-day operations? I know your answer is going to be really stupid, I just can't help but wonder exactly *how* stupid and in what manner.
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It can be per account if you create a separate corporate entity that opens the account.
Re: NEVER shoot yourself in the foot like this (Score:2)
Creating a corporate entity costs about 1k per year or so, depending on jurisdiction.
If you create 4 of them to stash 1 million dollars in the same bank, that's essentially a -0.4% interest rate your charging yourself. That's gotta be balanced against the probability of the bank failing.
It's like people bitching about credit card fees. Well guess what: handling cash costs money too unless your gross receipts fit into your wallet every day.
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Re: NEVER shoot yourself in the foot like this (Score:2)
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If you have $260K in an account and the bank fails, you're only getting $250K back.
Complete and utter bullshit.
There are all sorts of nuances to FDIC insured accounts beyond what you have stated. Your information is woefully lacking in detail and could be interpreted by many to come to incorrect conclusions..
You are NOT only insured up to $250K. Different types of accounts can be covered simultaneously. The FDIC specifically mentions that Savings Accounts and Checking Accounts are insured independently. Now, if you have two checking accounts and both have $250K in them, you're onl
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Also - in practice the FDIC forms a consortium of banks to acquire the distressed entity and usually everyone except those who committed fraud against the failed entity is made whole.
Re: NEVER shoot yourself in the foot like this (Score:2)
Complete and utter bullshit? You act as if he lied and made some egregious factual error using that language. Perhaps what you should have said was âoewell, thatâ(TM)s the simplest explanation, but thereâ(TM)s more to it, sometimes. âoe
For instance, it is true different types of accounts can each get their own insurance payout (checking vs saving, joint accounts, trust accounts, etc. ). Itâ(TM)s also true that the bank seems to still have a lot of assets that can be liquidated and
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PLEASE GOD STOP BEING STUPID.
No you don't get double insurance by splitting between checking and savings. Can you at least use Google before talking out of your ass next time?
https://www.fdic.gov/consumers... [fdic.gov]
Calm down (Score:2)
I was attempting to inform the typical Slashdot reader, NOT write a complete accounting/banking/insurance/government primer. The typical Slashdot reader is entirely capable of earning,saving,investing over a lifetime to end up with perhaps a million dollars or more before retiring (most won't, but it's a reasonable possibility for those with enough discipline). Most Slashdot readers are not, however, going to end up helming a billion+ dollar corporation, or doing the legal or accounting work for one. As a r
You should assume most of it will be gone (Score:2)
The key point most folks miss is this part you had in bold:
UP TO.
I would like to draw your attention to this language on the FDIC's site [fdic.gov] explaining how the Deposit Reserve Ration on the Deposit Insurance Fund works:
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UP TO.
I would like to draw your attention to this language on the FDIC's site [fdic.gov] explaining how the Deposit Reserve Ration on the Deposit Insurance Fund works:
Of course like any insurance, if the coverage due to pay out exceeds the reserve, the insurance might default the payment, but this is true in general for any liability. It has nothing to do with the "up to" mentioned above.
That "up to" means that, of course, you are insured only of the amount you had in the account up to a cap of 250k: if you have only 50k that's what you are gonna get, no more, whereas if you had 500k you are only getting half of it. This regardless of whether the insurance would have mor
Re:You should assume most of it will be gone (Score:4, Informative)
You had better be prepared mentally and emotionally for anything from a hair cut to a straight up guillotining.
Why? When was the last time anyone under the FDIC limit had even the slightest "hair cut"? (According to the FDIC, "since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds.")
Most years have multiple bank failures [fdic.gov]. The 2% thing is only a problem if enough banks that fail with fewer assets than insured deposits, and that total shortfall exceeds 2% of insured deposits. That implies a pretty huge implosion of the normal financial system. At that point, the goldbugs will probably be more concerned about what they're going to eat the next week than whether they were right all along.
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It's not a problem even then. If the DIF runs out of money, the federal government eats the loss, not the insured depositors. "FDIC deposit insurance is backed by the full faith and credit of the United States government. This means that the resources of the United States government stand behind FDIC-insured depositors."
https://www.fdic.gov/consumers... [fdic.gov]
The DIF is there because the government thinks it's fairer for banks to pay insurance premiums to cover the risk of them failing than for taxpayers to be o
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backed by the full faith and credit of the United States government
One day you believe in Santa Claus, and the next day you don't.
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Hmm, yes, believing that an entity which can raise US dollar revenue from the largest economy on Earth through taxation and which can also create new US dollars at will is not going to default on its US dollar-denominated debt is akin to believing in Santa Claus. You're so wise.
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PLEASE GOD STOP BEING STUPID.
No, you will not eat a loss if the DIF runs out of money. FDIC insurance is backed by the full faith and credit of the US federal government. Hence, the federal government must pay claims if the FDIC becomes insolvent. The DIF is just there as a mechanism to try to make bank shareholders eat losses, through insurance premiums, instead of taxpayers.
Don't believe me? Your doomsday scenario happened in the 80s with the FDIC parallel for S&Ls. The FSLIC became insolvent, so
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Since the creation of the FDIC very few people have lost money from accounts of any size due to a bank failure, despite the published $250k limit. Usually the FDIC or Federal Reserve steps in and forms a consortium of larger and more stable banks which buys the distressed entity, cleans up the books, and makes everyone whole except any involved in actual fraud. In extreme cases the Secretary of the Treasury makes a phone call and "suggests" that this process be carried out which is how Wells Fargo took co
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If you have $260K in an account and the bank fails, you're only getting $250K back. Any amount beyond that $250K limit will just be an IOU that MIGHT get partly repaid if there are any bank assets to sell-off
All true but IMHO a bit alarmist. SVB, for example, still has a lot of assets. I suspect the chances of getting exactly nothing beyond the FDIC limit is quite small. That's the case for most failed banks.
What we're all hoping is this is a cash flow problem, not a balance sheet problem. The Fed will be looking for someone to buy the bank so depositors can trust they can get their assets back to give time for depressed assets to regain their value. Of course, it's not at all guaranteed that will happen but th
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The problem is this particular segment -- SV tech -- is based on trust which is now evaporating. Roku like many of them isn't profitable and that's where trust falters most easily.
Re: NEVER shoot yourself in the foot like this (Score:2)
They were only 2B short and noted they needed to raise that. This would be nothing in most other market situations, except the Great D&R. But the VCs freaked out and pulled all their cash out; aka a Bank Run. This severely raised the shortfall because those no longer supply the non-reserves. This made the bank unviable.
The original shortfall is because as interests rates rise, interest payments rise, the cash needed by businesses goes up, and they withdraw more and keep less in banks. This is more s
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Most people shouldn't be keeping cash in the bank because it's just sitting there doing nothing for you but tons for the bank. It should be put to work. If you have cash in the bank, it should be there for immediate use - so you have cash to pay off bills and cash to easily withdraw in case of an emergency (e.g., a couple thousand dollars for things like an emergency car repair or something). You don't need much "now" money. And maybe a few hundred dollars as cash at home for say, the banking network goes d
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They can stand in line as a creditor during the dissolution of bank assets. I'm sure there will be other folks in line.
Re: NEVER shoot yourself in the foot like this (Score:1)
The FED already bailed out one of these banks with capital earlier and the CEO of SVB was a director at the San Francisco Fed.
Jim Cramer (Mad Money) says this should prevent the economy from collapsing so⦠sorry to say, this will be the cause of the economy to collapse.
"had" (Score:3)
The clue is in the name. (Score:5, Insightful)
Why the fuck would you trust them with your money?
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You wouldn't trust Silicon Valley with your data.
Why the fuck would you trust them with your money?
I'm going to guess that SVB operated exactly like the crypto exchanges do, meaning that to get and keep deposits they offered a higher than normal interest rate.
I get that companies can't realistically open over 7,000 bank accounts to maximize FDIC insurance, but there must be a smarter way to handle big money deposits and here's why I say so. I used to work for a US based Fortune 500 company. They gave me a generous severance package and forced me to agree to not talk bad about them for several y
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It's not a perfect system but it's miles better than any crypto set-up. It seems like they are incapable of doing simple compliance things, like not dumping all the customer's money into one account.
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> Why the fuck would you trust them with your money?
SVB was a 40 year old bank. It's as old as half the users here; it wasn't some fly-by-night Fintech operation.
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by Bill Biggerstaff and Robert Medearis, who came up with the idea over a poker game.
Sounds like it was. Literally set up by gamblers.
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You wouldn't trust Silicon Valley with your data.
I wouldn't be the one promoting judging someone or something purely on their name if I had your nickname.
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Re: The clue is in the name. (Score:1)
I heard their ESG scores were great!
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"Trust no one." --The X-Files
Cut interest rates. Now (Score:2)
This is by design. This is exactly what the high interest rates are meant to cause. Dumb Panicky animals causing a massive recession. Ostensibly to control inflation, although given that inflation is still going on and wages have been flat the last quarter we know that's not true...
Interest Rates (Score:3)
Modern monetary theory says you want to keep prime interest rates moderate - typically they are around 8-10%. That's so when a recession comes, you can lower them a couple of points to goose the economy. You are only supposed to do this for a year or so, then slowly raise them back up. These high interest rates also provide an incentive to keep your money in the bank to collect interest on it. It makes safe investments more appealing, and makes regular mortgages profitable for banks.
The federal reserve has
*Modern Keynesian theory (Score:3)
Sorry, that's modern Keynesian theory. Modern monetary policy says inflation shouldn't be happening at all right now.
Re: Interest Rates (Score:3)
I donâ(TM)t know anyone who thinks prime rates should be 8-10%. Thatâ(TM)s a very high number, and while needed sometimes to squelch inflation, it is a crazy drag on the economy. While your comment about needing some room to lower and spur demand is important, I canâ(TM)t imagine starting at 8 is right.
It's a bank, right? (Score:2)
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They are insured, but only up to $250,000.
why Berkshire Hathaway buys treasuries (Score:1)
At least they were smartish (Score:2)
And didn't put all eggs in one basket.
I bet there are some companies that did a LOT worse.
They will get a certificate (Score:2)
Roku and other big depositors will get a certificate showing how much they had in the bank. They can pledge that certificate and get a line of credit in any other bank for some percent of the value to continue operations. Eventually they will get a big part of the deposit back, of the order of 90%.
The bank mistimed the purchase of t-bills last year, and panicked and sold at a loss and realized the loss. The owners and shareholders of the bank will lose their stake. Big dep
How does this normally work? (Score:2)
Many have mentioned the FDIC insurance limit of $250k. That's fine for individual retail customers but trivially small for companies.
How do companies with hundreds of millions in cash insure their deposits? Can they buy private deposit insurance? Or do they spread their assets around multiple institutions to hedge their risk?
Banks fail often enough that I can't imagine any competent treasurer not taking steps to protect the company.
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Many have mentioned the FDIC insurance limit of $250k. That's fine for individual retail customers but trivially small for companies.
How do companies with hundreds of millions in cash insure their deposits? Can they buy private deposit insurance? Or do they spread their assets around multiple institutions to hedge their risk?
Banks fail often enough that I can't imagine any competent treasurer not taking steps to protect the company.
Yes, independent insurance is an option. Another option is to buy treasuries. Another option is to have many many man bank accounts, one per banking institution. Each carry their own pros and cons, costs and benefits. Lots of accounts means more to manage and audit; treasuries tend to be uncompetitive; insurance premiums tends to be costly but also nontaxable. Pick your poison - and be glad you face any of these "problems". ;-)
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Pick your poison - and be glad you face any of these "problems". ;-)
Thanks. I'm glad there's someone who thrives figuring out how to juggle 200 accounts because that would drive me to drink. Well, more than I already do.
Re: How does this normally work? (Score:1)
Most companies donâ(TM)t keep that cash around, they invest it. This is only the money they need to pay their employees and vendors. Itâ(TM)s likely the fed will just backstop this money through other means. Works well until the rest of the banks start collapsing, currently several banks (BoA, GS, JPMorgan and a few others) with a combined 4T of deposits are under water. If the FDIC needs to start bailing all of them out in the next 2 years, thatâ(TM)s the entire US government budget for both
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Most companies don't keep that cash around, they invest it.
OK, in what? I haven't looked at balance sheets in a while but you've got to imagine a company with a $1 billion run rate will have at least have tens of millions in cash.
A few decades ago, Apple and Microsoft were being criticized because they had huge war chests, tens of billions of dollars worth. They claimed that was to weather downturns and/or to make acquisitions. Microsoft, at least, got their arms twisted into paying dividends to unload the cash. I have to believe other companies have substantial "c
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If you need the "cash on hand" you should use sweep accounts at multiple banks. Microsoft/Apple however don't have that much "cash on hand", they probably use a combination of investments, bonds and sweep accounts. I highly doubt Microsoft could liquidate a billion dollars tomorrow over their regular planned cash flows.
In the case of SVB however, most of it was tied to US bonds in order to fund high-risk investments in the tech market. Basically they bought US bonds with the massive influx of government mon
Something banks never seem to lose (Score:2)
While banks can lose your money. They never seem to lose your debt.
Re: Something banks never seem to lose (Score:2)
Actually, the do. With inflation, assuming you have received raises or your assets have floated up with inflation, the original deal the bank made with you has you now in the drivers seat. Depending on how high inflation goes, you could wind up paying your loans off for a pittance in real terms. True, the bank didnâ(TM)t literally forget the debt. But itâ(TM)s become a much smaller thing than ever anticipated.
Debtors tend to win in this regard with inflation. ( there are various ways they, and al
They're not losing much, relatively speaking (Score:2)
Hardly the first time. (Score:1)
1987 all over again.
Re: Hardly the first time. (Score:1)
There is nothing capitalism about this, itâ(TM)s cronyism with ESG, Marxism on steroids.
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