The banks are still gone though, once they get taken over, their equity zeroes out.
All owners of the bank will end up with nothing, I think that's a good enough deterrence against bad things.
All owners of the bank will end up with nothing, I think that's a good enough deterrence against bad things.
Minewhile these people out of their privilege as bankers got to play with much bigger leverage, while paying zero interest rates to their counterparty which turned out to be fully paid for by the government in the end.
100% investment loss in this case is hardly enough, with the leverage levels banks can access they can literally collect pennies in front of a train and have positive expectation values for shareholders, while investing in negative expectation value investments.
And they did collect pennies in front of a train. Bought 10yr treasuries at historical lows. They paid their customers nothing for it.
VC investment strategy for VC bank. They took the zero or hero attitude until the end. Again, we're taking about people with already VC mentality of "worst case 100% loss, best case 1000%".
No wonder that once VCs recognized their own shadow they fled so fast.
And now they are pretending as if it's the fate of the banking system on the line.
VC bank, managed like VC venture for VC firms. They deserve to lose VC money.
Their loans are probably also worthless than they claim, but they managed to successfully swindle the Fed in the most VC way ever with the shortest deadline. I'm betting FDIC is going to pay twice as much as expected in the end.
> worst case 100% loss, best case 1000%
See I don't understand how you can have 1000% return by buying treasuries, at any time. It was a stupid decision in hind sight, but the best case is order of magnitudes below 1000% return.
And you've put these two things right next to each other, what am I missing?
by buying with leverage? What percentage returns do you think would maintain their business?
They didn't went for the 1000%, they went for the 5-10% extra and ended up losing everything.
Had they used T-Bills or even straight up depositing it against the Federal Reserve for NO return, they would remain liquid and could now reinvest into higher yield bonds as the rates have risen. Instead they now hold 1.5% 10 year HTM bonds that are now valued at 70% original today because the prevailing rate is 4.5%.
> They would be perfectly safe have they dumped their deposits into T-Bills.
How is this different than what you described? If the rate increases beyond the coupon of a 10 year treasury, its value drops. Are you referring to extremely short term treasuries?
T-Bill: 52 weeks or less duration
T-Note: 2-10 year duration
T-Bond: > 10 year duration
They have orders of magnitude more money than most people, and will get away with no liability.
Is there a more clear cut case of insider trading? SEC should already been working on that now.
Anyhow, you're arguing that they SHOULD end up with nothing, that is an entirely different subject of its own. Because you're talking about punishment, while I'm talking about deterrence.
Punishment must be enacted from outside after the fact, while deterrence can be innate before it happens. These senior management could have years of cushy job and more equity, and now they have to rely on savings and have the SEC up their ass. It's clear which is more preferable.
Genuine question, is there any evidence that these trades were out of the norm, rather than a regular portfolio rebalancing that’s common with any employee who receives part of their comp in RSUs?
No proof at the moment, but from what I've read several of the executives conveniently sold a lot of their stock more or less at the same time right before this kicked off. Guarantee at least some of that was some insider golden-parachuting.
Edit: Also, the CEO sold stock not even two weeks in advance https://www.bloomberg.com/news/articles/2023-03-10/svb-chief...
These things can come at you fast. They probably put in the trade instructions sometime last year and they are not permitted to make modifications to the 10b5-1 when they do come into material non-public information as that is itself insider trading.
Trading (or changing a 10b5-1 plan) while in possession of material non-public information, whether in your favor or not, is insider trading.
Canceling a 10b5-1 is not in and of itself a violation, correct, but it can kill your affirmative defense as it jeopardizes the good faith element.
However, they would have had to have entered into the 10b5-1 prior to them coming into material nonpublic information in the first place for it to have been valid at all. My point is they made the decision to sell before they knew what was happening and filed a compliant trading plan.
Sounds fair, but lucky.
Nah. They should liquidate the owner's private property as well to cover uninsured depositor losses. Better than making them whole by printing money and having everyone else pay for it indirectly through inflation.