Balaji

It's over, woke white.
You oppressed much of the world, but it's over.
Fed went from printing $25B to $2T in four days.
The bagholder is the dollar holder.
The system of control you inherited is ending.
The 99% of the world that isn't a white American Democrat will breathe free. https://t.co/cEN4866wwy https://t.co/8l3GfBgrb9

the pool of bagholders must be running thin https://t.co/QwanQy1j5S

crypto researcher & critic, software engineer, wikipedian • @web3isgreat creator • fellow @HarvardLIL • https://t.co/QPoSP8T1Cf • 
she/her 💗💜💙

Molly White

March 12: $25B "and we won't need it"
March 16: $2T
March XX: ♾️/ 21M

They are printing.
Buy Bitcoin and get your coins off exchanges. https://t.co/cYOrD7BgK5

Immutable money, infinite frontier, eternal life. #Bitcoin

The Fed knew a banking crisis was on the way.
And that their rapid hikes had caused it.
Just 4 community banks had issues in late 21.
But **333** did just six months later!
Due to big unrealized losses, caused by hikes.
Dangerous in a bank run…
https://t.co/i3xMQGss8z https://t.co/CJFWxyPEjZ

If it's one bank, it's a bank problem.
If it's hundreds of banks, it's a central bank problem.

To their credit, the KC Fed note acknowledges the Fed caused this ("the rising interest rate environment has led to unrealized loss positions").

PS: SVB had >$10B in assets, so didn't… https://t.co/gxN8bvJMpv https://t.co/qMWuxr4NXA

It's not just SVB which had high duration risk.

The entire banking sector has ~$620B in unrealized losses because they bought billions in 10-year bonds at low rates in 2021 before surprise hikes in 2022.
https://t.co/LmCjkf7YBb https://t.co/CWRYMgVFEi https://t.co/0yocyLYaxm

Balaji (@balajis) , you idiot,  if you can't tell the difference between duration risk and credit risk, you must stay away from finance.

Flaneur: probability (philosophy), probability (mathematics), probability (real life), Phoenician wine, deadlifts & dead languages. Greco-Levantine. #RWRI

Nassim Nicholas Taleb

Some cites, including FDIC's raw data for the $620B number. You can see that duration risk isn't unique to SVB. Many banks bought long-term bonds at low rates in 2021.

[1]: https://t.co/cZ8w1o2mHq
[2]: https://t.co/DKa6G89p6x
[3]: https://t.co/VFTvftMUdi… https://t.co/GcYO0VF7WT https://t.co/eCYbsqaQFv

Hike rates till something breaks.
That was the Fed’s plan.
To hike rates till they caused a crisis.
And they did. https://t.co/TjXZoZIYHV

Mr. Lustig is more right than he knows.

Because banks *intentionally* hid their insolvency from depositors.

Once the Fed had saddled banks with massive losses, they decided to use an accounting trick to pretend this hadn't happened.

And then, surprise.
https://t.co/E9ycW5V6Ih https://t.co/DND0TSI7iR https://t.co/Glc8LJoR9n

Unpopular position. Moral hazard is real. But.. if stock market investors failed to notice back in Jan that SVB's capital had been wiped out (you have to read footnotes in a 70 pager), not convinced that we should hold a startup founder who is trying to make payroll accountable. https://t.co/KcIAlnH8Oh

Economist at Stanford. Fascinated by exchange rates. Really wanted to be a pilot. Actually, taxes do fund spending.

Hanno Lustig

Here's what I've figured out.
In 2020-2021, the Fed forecasted low rates.
Banks bought bonds on that forecast.
Then, surprise! Historic rate hike.
All suffered enormous losses.
Anxious bankers needed to do something.
They preserved optics with an accounting trick.
Transferring… https://t.co/vv4jTRoJet https://t.co/aQ9gpv1QsI

The strategy "worked" for the banks.
Fed saddled banks with huge surprise losses.
So banks decided depositors might get a surprise!
That's why hid the losses through 2022.
Banks knew they might die in a bank run.
But just needed other banks to die first.
If other banks died, Fed… https://t.co/neOYdtOyqy https://t.co/BjMMDMA9xQ

The Fed itself admits that it's providing guidance to investors. https://t.co/04V3b1WlBN https://t.co/y1X7WmzsER https://t.co/0Z63INZVLS

The Federal Reserve is NOT in the business of providing guidance to investors. Its business is monetary and financial stability.

Technologists (particularly cryptoheads) are proving way too ignorant about basic finance. https://t.co/WwPwv1TeGR

Want the dynamics?
Here's the last 9 Fed dot plots.
As you can see, guidance was *low* through 2021.
Billions in bonds was sold on this basis.
Then the Fed shocked everyone in 2022.
Devaluing all the bonds sold.
Causing $620B in unrealized losses.
Across banks, not just SVB.
And… https://t.co/oHKQsYuoXf https://t.co/m3FCcQjJ6D https://t.co/DVMVypKstF

It will all be obvious in hindsight.
Fed gave guidance that was off by ~50X.[1]
Sold bonds on this basis.
Then devalued them massively.
Banks couldn't easily sell bonds marked "hold-to-maturity". [2]
Couldn't hedge either as many counterparties had been https://t.co/1XXjSAhc2C… https://t.co/oal6dz6uAA https://t.co/n87jryrlC3

Imagine steering a car by mail.
Stamp a letter.
Toss it out the window.
And wait till you hear back before turning the wheel.
Obviously, you'll crash!
Because you need to steer in seconds.
And it takes days to get back mail.
So now you understand how the Fed "steers" the economy.

The Fed doesn't just forecast rates.
It sets them.
So the fact that their forecasts vary so wildly is crazy.
You're asking someone to guess a number that *they themselves will set* in a few years.
And they can't do it.
Just look at the oscillation.
Trillions of dollars… https://t.co/XNTAayJUAx https://t.co/HuT0UPawFp

You know who else has thoughts on Treasuries? Yellen.
And she just admitted that SVB's problem wasn't banking tech.
It was buying Treasuries.
https://t.co/0fav7Gq1T8 https://t.co/PwBfx5VRdh https://t.co/xXwUsfuLdN

Hey everyone! 

The guy who wants Silicon Valley to secede and wrote a book on starting a new country has some thoughts on US Treasuries 

Check it out. It’s all facts and no bias https://t.co/7cBVsTLK0A https://t.co/K9FyLIHYif

BuccoCapital Guy

Hey @buccocapital
Can you remind me what the party line is today?
Is it that America is an institutionally racist country?
Or is that all nonwhite people should trust it with all their money? https://t.co/ByJGaMQPnE

Also, the overhead of setting up and maintaining multiple bank accounts just for the FDIC insurance is insane.

Imagine setting up 10 mailing addresses to ensure the post office reliably delivers  beyond your first 250 mails.

Archaic laws treated as laws of nature. https://t.co/524WnCUtwm

It’s absolutely stupid that if you have $2.5M the government insures $250k of your money if you keep it at one bank, but insures all of it if you keep it at ten banks

I mostly tweet about SF, food, drink, startups, tech biz, sports, gambling, and lefty stuff

Deva Hazarika

In practice I guess the answer was “all business accounts must be at a too-big-to-fail or they could get wiped out overnight” but that sure doesn’t inspire confidence in the US banking system.

Anyway, we are now in a new era, of FedDIC insurance. The Fed will print to backstop. https://t.co/524WnCUtwm

It’s like SF. Failed state.

You pay for the police but they don’t prevent crime. You also need private security.

Similarly, you pay for the banking regulations but you have to evidently buy private insurance on top of that because your business account can vanish overnight. https://t.co/Nujsbueibd

It’s a tacit admission that all the onerous regulation somehow results in no real consumer protection.

Anarcho-tyranny, but for banks. https://t.co/I8nuJWe6sT

before yesterday, you'd have never known that everyone on the left

- splits all deposits over $250K across 20 different bank accounts

- regularly analyzes balance sheets of their banks

truly commendable levels of opsec just to not get rugged by US-regulated banks!

Last Contrarian

Due to compliance overhead it’s a pain to open a corporate bank account, more painful to manage a bank, and almost impossible to start a bank.

Yet all of that paperwork resulted in a system where a boring business checking account could simply vanish overnight.

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