The Blubber

Per CNN

After the collapse of Silicon Valley Bank, questions have started to arise regarding how much actual debt certain banks have. The FDIC revealed that US banks had a total of $620 billion in unrealized losses by the end of 2022.

Unrealized losses refer to assets that have lost their value and decreased in price but have not yet been sold. The losses become actualized when sold unless they go above the purchase price, in which case results in a profit.

The FDIC Chairman Martin Gruenberg shared a statement regarding how interest rates have affected profitability and risk. With the increase of interest rates, new bonds are starting to pay higher interest rates compared to older bonds with lower rates.

Gruenberg: “The current interest rate environment has had dramatic effects on the profitability and risk profile of banks’ funding and investment strategies... Unrealized losses weaken a bank’s future ability to meet unexpected liquidity needs,”

A King's College London finance professor, Jens Hagendorff, gave another statement regarding central and commercial banks and pension funds sitting on assets worth less than they bought into. Hagendorff shared how this was concerning.

The senior portfolio manager of a Dutch wealth management firm called Van Lanschot Kempen, Luc Plouvier, gave shared how this would result in selloffs of assets that wouldn't normally be sold.

Plouvier: “[Falling bond prices are] only really a problem in a situation where your balance sheet is sinking quite quickly… [and you] have to sell assets that you wouldn’t ordinarily have to sell,”

Before the collapse, Silicon Valley Bank CEO Greg Becker sold $3.57 million worth of stock in the last two weeks. Congressman Ro Khanna said that the CEO should return any gains Becker received from the recent stock sale.

Silicon Valley Bank has deleted its Twitter account, and its official website is now officially down.

See flow at unusualwhales.com/flow.

Other News:

• Congressman Ro Khanna has said that Silicon Balley Bank CEO Greg Becker should return gains from a recent stock sale
• Silicon Valley Bank has deleted their Twitter account

Resources:

CNN