Silicon Valley Bank

I read that SVP employees were offered 45 days of work at 1.5x their pay, which is standard FDIC policy.

 

Hmm, my math must be off because they said, and I quote, "The DIF currently has over $100 billion in it, a sum the Treasury official said was “more than fully sufficient” to cover SVB and Signature depositors." My math says SVB has nearly $300B in depositor accounts yet the FDIC has just $135B. That's a third. The thing is, if they just stuck with the insured deposits, they actually would have had enough cash on hand to guarantee the insured deposits.

 

The federal reserve bank is not the “department of treasury”. Two separate entities. We have an independent central bank. Ironically after months of raising interest to fight inflation, the consensus now seems to be that the fed is “done” tightening. Whether they need to return to loose money (or starting to cutting rates) is anybody’s guess, they may want to hold rates steady to see what happens. But they have responded to this situation by giving special lending window to banks facing liquidity issues. That already signals monetary loosening of sorts.

 

You realize a balance sheet has assets, right? The issue when a bank “fails” via a bank run, is they don’t have the liquid assets to cover the pace of withdrawal. But they would still have their illiquid assets. I am operating under the assumption this is not a subprime Mortgage Backed Securities fiasco where the assets themselves are grossly misvalued. I could be wrong of course, but unless they were crypto leveraged or were doing something crazy it just sounds like the classic liquidity crunch. The Federal Reserve can inject short term liquidity and allow time for the long term assets to mature without being forced into a firesale. That seems to be better for everyone, except perhaps vulture capitalists who wanted to pick up good assets at a discount.

 

It is truly remarkable that THIS is what is causing the Fed to reverse the course on Hike City. Perhaps it’s because there is going to be a much more pronounced liquidity crunch now that investors are scrutinizing banks balance sheets in such a way, causing a massive devaluation of equities in the banking sector? This in of itself is a tightening without rate hikes. Interesting to watch it unfold in real time.

 

Fresh in from Amazon!

 

My blame items were not sequential or mutually exclusive of one another. They all played a part in this collapse. You are the one getting pissy and trying to justify your ridiculous position that Dodd Frank would have prevented this if “The Republicans” led by Orange Man bad hadn’t relaxed regulations.

And if by “the people who allowed this to happen” you are referring to those who supported the 2018 change then I have some news that will probably get you quite pissy once again; 33 democrats also voted to relax regulations despite heavy and public pressure from party leadership to not do so. Seems to reason that there were many more who wanted to do support relaxing but didn’t want to get on Pelosi’s bad side.

 

You are correct on this. The subprime mortgage backed securities were virtually worthless with the number of delinquencies and foreclosures. I. This case the Bonds they owned lost some value but we’re not worthless and I assume that many of the companies that they owned positions in have some value.

 

Weird day in the markets.
The overall market is up while financials are getting destroyed. As an ex banker and someone who has a few bucks in bank stocks this is not a good day, tho I am considering buying a few bank stocks considering current prices.

Blaming this on diversity or covid is just bizarre but I guess that is where the R's are now at. Greed and/or incompetence is the answer you are looking for.

 

Look at all this diversity on their management team.

Executive Team and Board of Directors | SVB

There’s 3 white women! How could this happen!!!??? Clearly this bank was out of control woke, caving to feminists and the frivolous demands of career women. They caved to the leftists, letting too much power get out of the hands of mediocre white males who have always shown they are genetically superior at banking. This was the inevitable result of that excessive diversity and wokeness. The non-woke quota of standards in banking is to allow for 2 white females or 1 black male. Now we all must pay for their mistakes.

 

And 2 banks didn't collapse, 3 did. The first to actually collapse was a small bank, Silvergate

That only works if you can stabilize the bank. More runs means you have to sell assets are firesale prices which bonds right now aren't looking pretty. As long as they can manage the sale at the same time allowing depositors to withdraw cash, the FDIC has to do little. The issue is it doesn't take much for a run. Silvergate failed last week but they didn't need FDIC to step in like SVB. What they did was sell off the majority of their assets at firesale prices and keep ahead of the run. Being that they are a crypto bank tied to FTX, depositors don't trust that they will be solvent.

What hurt SVB was that they bought bonds a few years back when bonds held value but then when inflation hit, it devalued all bonds. Usually, bonds are kept until maturity so you get everything you expected but when there's a run, you have no choice but sell them and that's what they did and coupled with a 66% drop in their stock price lead to a collapse.

The fact is, there's nothing the FDIC can do if enough depositors withdraw their money except to pay all of them. The hope is that these actions prevent further runs on the bank so the FDIC doesn't have to use any money. But what it does do is say the next bank to collapse will guarantee all deposits too. It's a slippery slope if assets aren't enough to cover the run.

So already many regional banks are in deep water this morning. 7 banks so far have seen their stocks drop 34 to 66%, including Charles Schwab, which actually is one of the most well diversified banks in the world.

 

Time's a-wasting. I don't know if my bank is woke or not. Whenever I've been in the lobby I've heard people talking, but I've never heard a word there about critical race theory. But it doesn't matter. I'm going to run to the bank, withdraw all my money, and hide it in my book collection. I'll put the dollar bills at certain page numbers in the books, then hope I don't lose the list of which books and page numbers so I can find those dollars when I need them. Even if I can't find them, at least the bank won't have them when it fails.

 

Barney Frank is on the SVB board. add that to things you learned today list. nice work if you can get it I guess

Signature Bank Could Have Stayed Open: Dodd-Frank Act's Barney Frank (businessinsider.com)

Frank told the Wall Street Journal that Signature suffered a bank run of billions of dollars on Friday and that customers' concerns over Signature's crypto exposure spiked after SVB's collapse.

That also followed the closure earlier this month of Silvergate Capital, another crypto-friendly bank. But Frank maintained Signature was different.

"We have a solid loan book, we're the biggest lender in New York City under the low-income housing tax credit," he told Bloomberg. "I think the bank could've been a going concern."

 

did the pub-controlled house and senate pass reforms to reduce the oversight of SVB and did DT sign said legislation?

the dems were voting for reduced oversight reporting responsibilities on local credit unions but the rules got loosened to include megabanks like SVB with no cap on the size. the intent was good but there was no cap on the size of the institution that could qualify for the reduced oversight.

to be clear, there were 33 dems from the house and the senate combined, voting on a bill where amendments and debate was controlled by the pubs

 

an argument about how removing the $250k cap on all deposits would have prevented a bank run and there would have been no problem other than a loss in their share price as they raised capital.

‘Boring’ Silicon Valley Bank Isn’t The Relevant Culprit - Extend Full FDIC Coverage To All Premium-Paying Banks (forbes.com)

Something must be wrong with me. Suspicious of large banking houses nearly since youth, I am now finding it difficult to fault Silicon Valley Bank’s (SVB’sVB -0.8%) management or depositors as relevant culprits in the second-largest bank failure in history yesterday. Worse yet, I am now wondering why we do not deposit-insure all bank deposits, in return for insurance premia and capital-regulatory compliance, of course – for their full amounts, not merely $250K per deposit, as we do now.
..........................................................................

SVB’s portfolio, for its part, appears also to have been precisely what we should want to see – prudently evaluated loans to this same tech clientele on the one hand, none of which were in trouble, imparting to SVB something of the flavor of a tech credit union – and US Treasurys – safest of safe assets – on the other hand. This portfolio (which largely replicates the Fed’s under QE), along with the bank’s deposit base, unsurprisingly took a hit as Jay Powell’s Fed, misdiagnosing the cause of our macro-economy’s recent CPI inflation (it is supply- and profiteering-driven this time, not wage- or salary-driven), began raising interest rates with greater abruptness than at any time in the last 45 years (an astounding 450 basis points in a year).

This was effectively force majeure where SVB was concerned, and the only errors that the bank seems to have committed were (a) not to have hedged against virtually unforeseeable interest rate risk, and (b) to have sold off some of its Treasurys and offered a new issuance of convertible bonds to the market in order to handle the squeeze between ultimately Fed-induced depositor losses and consequent withdrawal needs on the one hand and Fed-induced portfolio losses on the other hand.

That was like blood in the water for incompletely insured depositors and short-sellers alike, inducing a classic self-fulfilling-prophecy style bank run. But this feature of this bank run – its character as self-fulfilling prophecy, or what I long ago dubbed a recursive collective action problem – tells us precisely where we ought to focus our public response. SVB was not, and is not, fundamentally insolvent. Its crisis is literally none but a fear-induced liquidity crisis – a crisis that would not occur were all deposits fully insured, as FDR well understood when declaring our nation’s first ever ‘bank holiday’ in early 1933 till a then-brand-new system of federal deposit insurance could be fashioned post haste.