<story><title>SVB lobbied the government to relax some Dodd-Frank provisions</title><url>https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/</url></story><parent_chain><item><author>fwlr</author><text>The latter. Arguably, being exempt from Dodd-Frank may well have allowed SVB to be more resilient than otherwise.&lt;p&gt;The general thrust of Dodd-Frank was to push banks away from high-risk investments. The Volcker Rule that’s at the heart of Dodd-Frank is most explicit about this, it expressly forbids certain types of investment for being too high-risk. Treasury bonds are considered to be some of the lowest-risk investments possible, with correspondingly low returns (in fact, in researching this I discovered, horrifyingly, that it’s not uncommon for Treasury bonds to be described as literally risk-free). The Volcker Rule has a specific exemption to explicitly allow trading in U.S. Government securities, in recognition of their perceived low risk.&lt;p&gt;SVB held a &lt;i&gt;lot&lt;/i&gt; of Treasury bonds, percentage-wise more than most other banks. This is because they had a lot of startups depositing a lot of venture capital funding, they needed somewhere to invest it, and Treasury bonds were one of the few investment options that were in regulatory compliance and available in large amounts.&lt;p&gt;When the Federal Reserve started rapidly increasing interest rates, this tanked the value of Treasury bonds. And “tanked” is no exaggeration; there are grim charts from the beginning of this year like  &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.usbancorpassetmanagement.com&amp;#x2F;index&amp;#x2F;our-insights&amp;#x2F;quick-insights-blog&amp;#x2F;TheImpactofRisingRatesontheBankingSystem&amp;#x2F;_jcr_content&amp;#x2F;root&amp;#x2F;responsivegrid&amp;#x2F;image.coreimg.png&amp;#x2F;1672927656284&amp;#x2F;screen-shot-2023-01-05-at-9.07.23-am.png&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.usbancorpassetmanagement.com&amp;#x2F;index&amp;#x2F;our-insights&amp;#x2F;...&lt;/a&gt; and back in November 2022 we had the Chairman of the FDIC warning that these unrealized losses could very quickly become actual losses for a bank that needed to increase liquidity.&lt;p&gt;Which is precisely what happened to SVB, down to the letter.&lt;p&gt;The argument that “Dodd-Frank exemption is good actually” goes like so: if the regulations were applied more stringently to SVB, they would have bought &lt;i&gt;even more&lt;/i&gt; safe-bet Treasury bonds (and offered lower interest rates to depositors), and thus they would have been &lt;i&gt;even more&lt;/i&gt; blown out by Federal Reserve increasing rates.</text></item><item><author>gruez</author><text>Was there a piece of repealed regulation that would have prevented SVB&amp;#x27;s collapse? Or is this just generic airing out of all of SVB&amp;#x27;s dirty laundry now that they&amp;#x27;re pariahs?</text></item></parent_chain><comment><author>guerby</author><text>&amp;quot;Arguably, being exempt from Dodd-Frank may well have allowed SVB to be more resilient than otherwise.&amp;quot;&lt;p&gt;Wow, that&amp;#x27;s wrong wrong wrong.&lt;p&gt;Dodd-Frank would have forced SVB to do and report tests including the vanilla interest rate curve sensitivity values.&lt;p&gt;Look for &amp;quot;10-year Treasury yield&amp;quot; in this document (it&amp;#x27;s about everywhere as a parameter):&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.federalreserve.gov&amp;#x2F;publications&amp;#x2F;files&amp;#x2F;2019-march-supervisory-stress-test-methodology.pdf&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.federalreserve.gov&amp;#x2F;publications&amp;#x2F;files&amp;#x2F;2019-march...&lt;/a&gt;&lt;p&gt;Which would have alerted the authority that SVB management was heavily playing a dangerous game.</text></comment>
<story><title>SVB lobbied the government to relax some Dodd-Frank provisions</title><url>https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/</url></story><parent_chain><item><author>fwlr</author><text>The latter. Arguably, being exempt from Dodd-Frank may well have allowed SVB to be more resilient than otherwise.&lt;p&gt;The general thrust of Dodd-Frank was to push banks away from high-risk investments. The Volcker Rule that’s at the heart of Dodd-Frank is most explicit about this, it expressly forbids certain types of investment for being too high-risk. Treasury bonds are considered to be some of the lowest-risk investments possible, with correspondingly low returns (in fact, in researching this I discovered, horrifyingly, that it’s not uncommon for Treasury bonds to be described as literally risk-free). The Volcker Rule has a specific exemption to explicitly allow trading in U.S. Government securities, in recognition of their perceived low risk.&lt;p&gt;SVB held a &lt;i&gt;lot&lt;/i&gt; of Treasury bonds, percentage-wise more than most other banks. This is because they had a lot of startups depositing a lot of venture capital funding, they needed somewhere to invest it, and Treasury bonds were one of the few investment options that were in regulatory compliance and available in large amounts.&lt;p&gt;When the Federal Reserve started rapidly increasing interest rates, this tanked the value of Treasury bonds. And “tanked” is no exaggeration; there are grim charts from the beginning of this year like  &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.usbancorpassetmanagement.com&amp;#x2F;index&amp;#x2F;our-insights&amp;#x2F;quick-insights-blog&amp;#x2F;TheImpactofRisingRatesontheBankingSystem&amp;#x2F;_jcr_content&amp;#x2F;root&amp;#x2F;responsivegrid&amp;#x2F;image.coreimg.png&amp;#x2F;1672927656284&amp;#x2F;screen-shot-2023-01-05-at-9.07.23-am.png&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.usbancorpassetmanagement.com&amp;#x2F;index&amp;#x2F;our-insights&amp;#x2F;...&lt;/a&gt; and back in November 2022 we had the Chairman of the FDIC warning that these unrealized losses could very quickly become actual losses for a bank that needed to increase liquidity.&lt;p&gt;Which is precisely what happened to SVB, down to the letter.&lt;p&gt;The argument that “Dodd-Frank exemption is good actually” goes like so: if the regulations were applied more stringently to SVB, they would have bought &lt;i&gt;even more&lt;/i&gt; safe-bet Treasury bonds (and offered lower interest rates to depositors), and thus they would have been &lt;i&gt;even more&lt;/i&gt; blown out by Federal Reserve increasing rates.</text></item><item><author>gruez</author><text>Was there a piece of repealed regulation that would have prevented SVB&amp;#x27;s collapse? Or is this just generic airing out of all of SVB&amp;#x27;s dirty laundry now that they&amp;#x27;re pariahs?</text></item></parent_chain><comment><author>riffraff</author><text>Notice the risk free rate is based on &lt;i&gt;short term&lt;/i&gt; bonds.
Those are not as sensitive to rate changes as they regularly reach maturity and you roll them over.&lt;p&gt;If SVB had owner those they would not have had liquidity problems which lead to insolvency.</text></comment>