Mlle. Zabzie

I think there is something going on that is systemic but it may be industry specific. I'm not sure. Not enough of a clear picture yet, to your point about hindsight.

Just as an aside, I've heard the compensation gap is one of the reasons why EY's Everest is on life support. The audit folks want a lot more value to give up their share of the consulting.

Well I am definitely not getting the promotion. I know who is. I also have been told that part of the narrative around me is "they don't know what the value add would be." So, you know, I'm pretty pissed. Not at not getting the promotion - it was being set up for this other guy and I really like him and think he'll be great. But rather that they put me on the short list as window dressing and then dismissed me as non-value add. Eff that noise. Oh well, I have a large client I'm trying to keep out of bankruptcy this evening. So I'll go back to that. and Isk - you definitely did the right thing.

Bonus cut is worse. I’m just whinging.

Ugh. That is AWFUL. I keep hearing about the global shortage of accountants. Something about supply and demand? I am told that I'm on a short list for a pretty massive promotion. I am also relatively certain (based on some really good intel) that there is literally a snowball's chance in the furnace of Mt. Doom that I actually get it, so am more or less on the short list for window dressing. I wish I weren't on the short list. Now I'm going to be disappointed and there was no reason to list me if there is no intention to actually promote me.

To be fair, the opinion also should flag going concern risk and insufficiencies of internal controls. But yes, to all of this.

Well, it isn't exactly that any one of us idly talking about it is the problem, it is when the collective starts talking about it that is the problem. The psychology of this kind of thing is weird.

Unclear on First Republic. They have a lot of backing from JPM/Chase because of a synergistic relationship between the two banks. The Fed's expansion of emergency lending helps as well. But agree, it could go. The more people chatter about it, the more likely it is to happen. So, we should stop chattering about it.

Based on the pain and suffering that auditors cause me on the regular, yes. Also, I sit on some boards and am on the audit committee for every one (and chair an audit committee). I will say, I take it pretty seriously with that hat on. I think the gap (or GAAP?) is that a lot of auditors are pretty good at individual processes and procedures but some are better than other at identifying big picture systemic risk. We need @Chataya de Fleury really, but the audit is only as good as what is being reviewed/requested and the auditor in question.

Hang on, I spent my weekend on this. It's not just startups, and it isn't just the super wealthy executive types that were going to be hit. Most of the payroll situations I was anecdotally aware of the company was going to allocate payroll dollars that were available from the bottom up. And what was guaranteed was deposits. Bondholders and equityholders are going to be wiped as best I can tell. And, to be clear, this was having ripple effects to these entities' customers, suppliers, etc., many of whom did not bank with SVB. SVB's internal controls sucked based on the reporting I have seen. (And this might take down KPMG (not a Good Thing, actually) because they audited SVB and Signature.) But its short sighted to say this was just millionair tech bros. Fed intervened for good reasons, not to bail out the wealthy as best I can tell. Real answer is to tighten banking regulations.

Yes but also sounds like they might be doing something for depositors…We shall see. Honestly my weekend has been very, very lively. Payroll deadlines are a real issue.

Well, yes. The bank is in receivership. I would be SHOCKED if there is enough recovery to get to the bank holding company. That's how this works. However, there is an asterisk because, wait for it, tax. It is very, very likely that the bank holding company (where the shareholders have equity) has a substantial and very valuable net operating loss balance. If you take WaMu (or Lehman) as examples, those NOLs ended up being a pretty interesting asset and created a lot of value for the shell (there was also a lot of litigation about refunds from NOL carrybacks but since there are no longer carrybacks, this is not applicable to SVB). While there will be a tax sharing agreement between the bank and its bank holding company that will be litigated, there is pretty good law (Supreme Court case) that the starting place is that a tax asset of a consolidated group belongs to the parent. The Wamu/Lehman situation is all very publicly available information at this point. Also, I bet either a hedge fund with a credit arm or another bank acquires the assets pretty quickly.

So I despise the Section 4501 stock buyback excise tax (it’s incredibly misguided policy on a number of levels). But one particular thing that will be very important if banks continue to be pressured is that Treasury did not take the invitation in the statute to propose special rules for fixed yield preferred equity that has a maturity. That is a very common instrument that banks/bank holding companies issue to obtain capital. That tax has caused that capital to be 1% more expensive (on the gross, not in terms of yield). Wowee.

Silvergate wasn’t exactly “major”. It was brought down by its crypto exposure. Btw there will be more pain in the crypto sector because at least one significant stablecoin banked with SVB. That said, people have sounded warnings about First Republic and a couple of other mid-tier banks with unique exposure profiles. While I agree bank failures are a sign of a big crack in the economy, what is going on is different than 2007/8. What is going on here is a combination of rising interest rates devaluing bank capital investments/poor hedging decisions by those banks, deposit flight as a result of higher yield products being available outside the bank account context (I.e., for like a decade, a lot of CDs were not attractive investments because the transaction cost was like equal to the yield -no longer true). In 2007/08 there were a lot of non-performing investments in the bank capital (so, e.g., bad mortgages/loans). SVB’s money was in Treasuries. Stupidly unhedged Treasuries, but nonetheless. The ripple effects are going to be different too. That’s not to say that this will be GOOD long term, just that it will be DIFFERENT. I’m wondering how the fed reacts in June, candidly.

Don't forget the Intel Fab in Arizona. But that's another story. You are exactly correct on all of this. There are going to be a lot of knock on effects here that we haven't really internalized. All is not well in the US economy...