The BofA $136B Dynamite Stick
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The BofA $136B Dynamite Stick
Every great panic in modern finance has started the same way: too much borrowed money. In 1929, it was margin loans — everyone got swept up in buying equities with borrowed money, and they couldn’t fathom a downturn. In 2008, it was subprime mortgages. Millions of families around the country were underwater on their mortgage payments, and their... See more
archive.ph
“In the decade before 2022,” the Oaktree authors lead off, “many sponsor- backed companies financed leveraged buyouts by borrowing heavily in the broadly syndicated loan and private cred- it markets—and the majority of this debt had floating rates.” Naturally, the 500 basis-point jump in reference rates spells higher borrowing costs for the... See more
In effect, SVB didn’t have the technological infrastructure to handle the influx of deposits that came into it during the pandemic, nor the investment skill to manage all that new money. It took what appeared to be a safe route of investing in long-dated Treasuries but failed to recognize that in a rising interest rate environment they would lose... See more
Confessions of a Former SVB Executive
A recent article by Fillat et al. of the Boston Fed argues that bank lending to private credit funds might pose a systemic risk to the banking system:
... See moreThe meteoric rise of private credit presents important questions about the role of banks going forward and the implications for stability in the US financial system…Our analysis of Federal Reserve and
Noah Smith • Will Data Centers Crash the Economy?
The hallmark of a private-equity deal is the so-called leveraged buyout. Funds take on massive amounts of debt to buy companies, with the goal of reselling in a few years at a profit. If all of that debt becomes hard to pay back—because of, say, an economic downturn or rising interest rates—a wave of defaults could ripple through the financial
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