I just got around to reading Samuel Wilkes' Risk Magazine piece, dated 15 March. It has something interesting that I had not seen before.

You are probably aware that the BCBS defines a measure called "Economic Value of Equity (EVE)" which, roughly speaking, is the net present value of all cashflows on a bank's balance sheet under a prescribed discount function (there are some details about bucketing and netting.) There are Basel regulatory requirements tied to the change in EVE under prescribed changes in the discount function. One of these reporting scenarios is a 200bp rise in rates; banks whose EVE declines by more than 15% of Tier 1 capital are to be subject to enhanced scrutiny.

The interesting thing is the change in SVB's EVE sensitivity over time. It will not surprise you that in 2021, SVB's sensitivity to a 200bp rate rise was -27.7%, implying 35.3% of Tier 1 capital. But in 2015, SVB's EVE sensitivity to the same rate shock was over *plus* 40%! 2019 was the first year in which it had a (small) negative sensitivity. So the business model of SVB was moving pretty fast, and I guess it broke some things.

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Clemons: I which that Baden was able to signal his desire for a more progressive tax system w/o the no taxes on <$400,000. I precludes lost of good ideas like 1) switching from wage taxes to a VAT for financing the safety net 2) moving from "deductions" to partial tax credits for favoring certain kinds of expenditures, 3) Taxation of net emissions of CO2 even with rebate. And however flexible our mixture of tax policies, I doubt that we can reduce the deficit to zero (or even to the level of public investment) without collecting more revenue from people with incomes <$400,000.

Of course it is a lot better than a desire to _reduce_ taxes on those with incomes >$400,000 and >>$400,000. :)

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