This refers to the CRO or investment team that initiated the positions, not her.
So despite 1000s of underemployed Econ PhD, "this" was SVBs CRO:
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Banking mod/els are ridiculously doomb. You are just spouting nonsense out of your a/s/s.
TBF I know a couple macro guys at BIS with Phds and industry experience and they would have handled it by not letting it get to this point but… there was no stopping this at the point she got the job
I'm happy to grant that there are PhDs who would have done the job properly, maybe even better than the CRO herself. Those PhDs would have been few in number.
What I'm not going to do is pretend that having a PhD or publishing papers qualifies someone for anything in industry. 90% of the guys dragging the CRO on here would fail an entry level interview at a bank. -
What does fail mean in this context?
I don't think anyone could possibly do worse than sign off on $80b of mortgage debt invested at 1.59%, for a bank funded by deposits.Only an academic would ask what a commonly used word means. "Fail" means that anyone else put in the CRO's position would not be able to produce a better outcome. I define "better outcome" as "avoid bank collapse."
No CRO ever signs off on anything without being influenced by other ranking executives. The most important question is: what were the realistic alternatives based on the information she had at the time? Until we have the facts about what the CRO knew, what she had to decide, what pressures she faced, and what the bank's risk appetite was, there's no point dragging her.
Despite the whining title of this thread, nobody has given us a reason to think that an econ PhD would have done better. Replay all the imaginary scenarios you want in your head but the real world doesn't work like a fake academic model.
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Banking mod/els are ridiculously doomb. You are just spouting nonsense out of your a/s/s.
TBF I know a couple macro guys at BIS with Phds and industry experience and they would have handled it by not letting it get to this point but… there was no stopping this at the point she got the job
I'm happy to grant that there are PhDs who would have done the job properly, maybe even better than the CRO herself. Those PhDs would have been few in number.
What I'm not going to do is pretend that having a PhD or publishing papers qualifies someone for anything in industry. 90% of the guys dragging the CRO on here would fail an entry level interview at a bank.Economists are in no position to criticize. When profs teach something as doomb as the Solow model and pretend that it tells us anything about capital allocation, bankers laugh.
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any economist would have hedged interest rate risk
What does fail mean in this context?
I don't think anyone could possibly do worse than sign off on $80b of mortgage debt invested at 1.59%, for a bank funded by deposits.Only an academic would ask what a commonly used word means. "Fail" means that anyone else put in the CRO's position would not be able to produce a better outcome. I define "better outcome" as "avoid bank collapse."
No CRO ever signs off on anything without being influenced by other ranking executives. The most important question is: what were the realistic alternatives based on the information she had at the time? Until we have the facts about what the CRO knew, what she had to decide, what pressures she faced, and what the bank's risk appetite was, there's no point dragging her.
Despite the whining title of this thread, nobody has given us a reason to think that an econ PhD would have done better. Replay all the imaginary scenarios you want in your head but the real world doesn't work like a fake academic model. -
any economist would have hedged interest rate risk
What does fail mean in this context?
I don't think anyone could possibly do worse than sign off on $80b of mortgage debt invested at 1.59%, for a bank funded by deposits.Only an academic would ask what a commonly used word means. "Fail" means that anyone else put in the CRO's position would not be able to produce a better outcome. I define "better outcome" as "avoid bank collapse."
No CRO ever signs off on anything without being influenced by other ranking executives. The most important question is: what were the realistic alternatives based on the information she had at the time? Until we have the facts about what the CRO knew, what she had to decide, what pressures she faced, and what the bank's risk appetite was, there's no point dragging her.
Despite the whining title of this thread, nobody has given us a reason to think that an econ PhD would have done better. Replay all the imaginary scenarios you want in your head but the real world doesn't work like a fake academic model.
Why should we assume that? History is full of economists making basic mistakes.
And then why should we assume that the bank would have accepted the economist's instructions to hedge? CROs get overruled all the time - it could have happened here too.
Real banks don't work like model banks. Real banks are staffed by people who misunderstand things, make mistakes, miss deadlines, and worse. These mistakes compound to the point where the bank becomes dysfunctional and cannot be saved.
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And stop pretending that economists would have done better. Nobel economists with expertise in asset pricing had to be bailed out by the Fed because they screwed up pricing, remember?
Economists excel at predicting recessions after they happen.
Economists can spot a failed bank from 10 miles away, after it has gone under.
I'm sure the big brains posting on this thread would have done so well at SVB.