Fiz > I don't think that is how things work in accounting - nor in rational investing. HIDING losses for any of these PUBLIC institutions is, I'm sure, a felony
I'll agree that hiding losses by public institutions ought to be a felony (if it isn't).
But, I have some stock in a power company ticker BKH. My BKH is currently worth about 12% less than what I paid for it. Is it really a loss?
If it was in a 'margin account' and the brokerage called me on it and I had to sell it at current prices it would be a loss. Realized on the sale.
But it is not. I plan on keeping it and continuing to collect the dividend checks.
If I had bought a bond at 3% . . . and interest rates went up to 6% . . . My bond would be worth less than I paid for it. If I hold the bond to maturity, won't I get my money back plus the 3% dividend? I'm pretty sure that is how things work. Unless the bond issuer defaults on the bonds . . .
If the bond issuer defaults on the bond then the bond is worthless paper. (And the holder screwed.)
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A problem for SVB was that when companies began withdrawing large amounts of money to fund their businesses, it had to sell its longer-term Treasuries and securities at a loss to cover
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Why SVB failed: The bank ignored one of the fundamentals of finance
http://www.fastcompany.com/90864027/why-svb-failed-silicon-valley-bank-collapse
All of the recent bank failures at SVB, Silvergate, and Signature Bank, have one glaring thing in common.
If you’re looking for reasons for the failure of Silicon Valley Bank, which was taken over by the FDIC last Friday after one of the biggest bank runs in U.S. history, one obvious culprit is the fact that the bank violated one of the elementary rules of finance: Always diversify. SVB became the 16th-largest bank in the country by turning itself into the financial institution of choice for Silicon Valley venture capitalists and the companies they funded. But in doing so, it also made itself exceptionally dependent on the health of the tech industry and on the choices of a relatively small number of VCs and company founders. That dependence is what made the bank so successful. It’s also what helped destroy it.
It’s hard to overstate what an unusual bank SVB was. At its peak, it had more than $200 billion in assets, but it had few individual customers and fewer than 38,000 corporate accounts. And its customer base was highly undiversified: Most of its deposits came from VC funds and tech and life-science companies, and most of its loans went to those companies too. This was a conscious choice by SVB: In fact, it often required companies to bank with it exclusively as a condition of getting funding.
This was great for SVB during the boom years of 2020 and 2021: Its total deposits more than tripled in two years. But when the tech boom turned to bust at the end of 2022, SVB’s customers—many of whom were startups that were not making money but spending it—started to withdraw money rather than deposit it, burning cash in order to stay afloat.
This would not have been a problem, except for one thing: SVB had taken a lot of those deposits in 2020 and 2021 and bought long-term treasuries and mortgage-backed securities that carried very low interest rates. This wasn’t a totally reckless decision: None of the assets it bought were at risk of defaulting. But it did expose SVB to a lot of risk if interest rates spiked because when interest rates rise, bond prices fall.
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Zim: Article does continue.
SVB was NOT in trouble because the bonds were worth less than they paid for them . . . They were in trouble because folks started pulling their money out and they HAD to sell those bonds (long term treasury notes?) . . . at losses and then more depositors got worried they might not get their money out and they ALL tried to get their money out . . .
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