This is the main reason why tapers are effective for strength athletes. In the first few days after our final strength training workout, we can often experience a small increase in maximum strength, because muscle damage is repaired and any associated central nervous system fatigue dissipates. However, the speed at which we lose maximum strength changes over time. When we stop lifting weights (which researchers call detraining), we do experience losses in both maximum strength and muscle size. Lots of people will be hoping that it does, and that he is right.What happens when we stop lifting weights? Larry Summers, a former treasury secretary, has said that so long as the state steps in, there is no reason to worry that svb will harm other parts of the financial system. But short of stiffing depositors it may be the only option, since svb clearly did not hold enough to cover the losses it was being forced to take on assets. Whether that means that it should be acquired by another company…or get assistance from or even a statement from the Treasury department so that the depositors feel secure-I will leave that to the experts.” svb “is the lifeblood of the tech ecosystem,” notes Ro Khanna, a congressman from California’s 17th district, which includes some of the valley. The question now is whether there will be a bail-out and, if so, how big it would need to be to make depositors whole. And with rates rising, they are earning more. Thankfully, loan books make up a much larger share of assets at most other institutions. Janet Yellen, the treasury secretary, says she is monitoring several banks in light of the events in Silicon Valley. If svb is the bank most likely to have been put in the position of having to stock up on bonds at their peak price, it is probably not the only one struggling with the whiplash in prices. That said, nearly all banks are sitting on unrealised losses in their bond portfolios. Its customers, unlike those at most banks, had a real incentive to run-and they responded to it. svb is a bank not just for companies, but a narrow subsection of them that have suffered tougher times than most. But it is unlikely to cover the funds a company would keep. This protects all the cash that most individuals would stash in a bank account. Federal insurance, put in place after a series of panics that felled the American economy in the 1930s, covers deposits up to $250,000. Were svb’s troubles an anomaly? The bank appears to have been uniquely susceptible to a run. When it went under the bank held some $91bn of investments, valued at their cost at the end of last year. The losses it took on these sales, some $1.8bn, left a hole it tried to plug with the capital raise. svb was forced to sell off its entire liquid bond portfolio at lower prices than it paid. As venture-capital fundraising dried up, svb’s clients ran down their deposits: they fell from $189bn at the end of 2021 to $173bn at the end of 2022. Since the bank made investments during this time, it purchased bonds at their peak price. Its deposits had swollen when interest rates were low and its clients were flush with cash. This killed off the bonanza in venture capital and caused bond prices to plummet, leaving svb uniquely exposed. Interest rates soared as inflation became entrenched. By the end of 2021, the bank had made $128bn of investments, mostly into mortgage bonds and Treasuries. svb needed to acquire other interest-bearing assets. Since banks make money on the spread between the interest rate they pay on deposits (often nothing) and the rate they are paid by borrowers, having a far larger deposit base than loan book is a problem. Thus svb’s deposits more than quadrupled-from $44bn at the end of 2017 to $189bn at the end of 2021-while its loan book grew only from $23bn to $66bn. They needed to store money more than to borrow. As Silicon Valley boomed over the past five years, so did svb. It also lent to them, which other banks are reluctant to do because few startups have assets for collateral. It opened accounts for them, often before larger lenders would bother. The second is whether its troubles are simply an anomaly, or a harbinger of doom for financial institutions writ large. The first is how svb got into this position. Then came the announcement from the regulators. cnbc, a television network, reported that svb’s capital-raising efforts had failed and that the bank was seeking to sell itself to a larger institution. By the morning of March 10th its shares had slid another 70% or so in pre-market trading, before a halt was called. Bill Ackman, a hedge-fund manager, suggested that the government should bail out the bank. Unpersuaded, some venture capitalists told portfolio companies to run. Greg Becker, its chief executive, urged clients to “support us as we have supported you”. Svb’s share price plunged by 60% after the capital raise was revealed.
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