OPINION: The Fed’s bailout of SVB depositors will calm markets. But two experts say investors should stay alive to risks created by rising rates and incorrectly valued assets.
, just hours after US Treasury Secretary and former Fed chairman Janet Yellen appeared to suggest such a rescue was off the table, demonstrates both the extraordinary speed at which this event is moving, and the post-traumatic stress in the global financial system from the GFC.
“The market will celebrate today, and rightly so, that the depositors of a bank have been bailed out when we didn’t think that would happen. But there are questions we need to resolve behind the scenes,” Boey says. “And this shows you that when you’re raising interest rates, and you’re tightening liquidity, you will have liquidity events.
Gill uses an old Warren Buffett quote to sum up the current episode: “We only find out who is swimming naked when the tide goes out.” The treasurer’s team had a busy weekend monitoring the situation around SVB. But the regulatory settings, the accounting treatment of the sort of securities SVB had loaded up on and Australia’s globally unique and conservative stress-testing regime should give the local market comfort that the situation in the US is very, very different to that in Australia.
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