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Markets still falling like whoa

Llano Estacado

By Llano Estacado
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Eastwood
Eastwood

That's why I'm out. There is no end game, IMO. This has to be fixed outside of the market and I got too nervous about what that entails for retail investors. They will always be last on the list, if o

Rusty Shackelford
Rusty Shackelford
Eastwood
Eastwood

I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the l

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Jackson P. Neighbors

Jackson P. Neighbors 136

Posted
Posted

FDIC: PR-16-2023 3/10/2023

For Immediate Release

WASHINGTON – Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

 

Also:

A bridge bank is a new national bank chartered by the Office of the Comptroller of the Currency (OCC) and controlled by the FDIC in accordance with section 11(n) of the Federal Deposit Insurance Act.

Creating a bridge bank permits parallel functions to continue. First, the bridge bank allows client banks to maintain their correspondent banking relationship with the least amount of disruption. Secondly, operating a bridge bank allows FDIC's preexisting efforts to market the bank to continue. Thirdly, operating the bridge bank allows time for the failed bank to be liquidated in an orderly fashion if marketing efforts are unsuccessful.

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Incredulity

Incredulity 11564

Posted
Posted (edited)

crazy that is not yet being reported.

Or that I can find via a google news search as of 10 min ago.

 

I guess its too in the weeds for a reporter?  

 

**correction**

finally found it is a Yahoo finance article

https://finance.yahoo.com/news/why-silicon-valley-banks-crisis-is-rattling-americas-biggest-banks-121159393.html?guccounter=1&guce_referrer=aHR0cHM6Ly9uZXdzLmdvb2dsZS5jb20v&guce_referrer_sig=AQAAAJMxjd3biDUYr8XVCAPViLm35uPDkIUvMlqSB7RPb4JdS6KlNyVVqpuwX3qlV6KN4igI0Nply6RIAHS1VNQN8JH5tBF28Mc49-ZgF8jMcc8mLOWn89Hb1juy6jPa-FRVZ7yFEZqywnR6Ox5BUfW9Cw8yvueP1jcKmz_faXoZ2lr7

Edited by Incredulity
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Jackson P. Neighbors

Jackson P. Neighbors 136

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Posted
4 minutes ago, wackawacka said:

Bigger issue now talking with fellow CFOs is payroll processing and vendors (e.g., Rippling) use SVB.

The FDIC, OCC, and some execs / key people will work through the weekend to ensure normal operations Monday morning under the temporary name. Unless there are a crazy number of essential personnel resigning today, the checks will still get cut, the bills get paid, etc. Nobody with an essential role will be fired, to be sure.

In this case, the shit hit the fan so quickly that a bridge bank had to be formed because the regulators had no real time to understand what was actually under the hood, much less market it for sale piecemeal or as a going concern.

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bernorange

bernorange 8348

Posted
Posted
2 minutes ago, FirstTimeCaller said:

...

Why exactly is SVB imploding? I know Thiel said to pull money out, but why did he say that?

This is what I read this morning:

Quote

...
If you’re just catching up, here’s what happened: Silicon Valley Bank lost $1.8 billion in the sale of U.S. treasuries and mortgage-backed securities that it had invested in, owing to rising interest rates. The bank is also contending with shrinking customer deposits, given that its customer base of largely startups has far less money right now to park at a financial institution.

Because it’s in this spot, it decided to raise a bunch of money to safeguard its business. The plan was to sell $1.25 billion of its common stock to investors, $500 million in convertible preferred shares, and $500 million of its common stock in a separate transaction to the private equity firm General Atlantic. The apparent goal was to project that the bank was being conservative and raising this money to stabilize itself.

Oh, though, how it backfired, and who can be surprised, given it issued its announcement about these plans just as the crypto bank Silvergate was announcing that it was winding down operations.

You might imagine that someone at Silicon Valley Bank would have paused to think: “Hmm, maybe today is not the right time to declare that we’re shoring up our balance sheet.” Evidently, they did not. Instead at the end of the market close yesterday, they put out a convoluted press release that was received so badly that it was almost comical. Except that Silicon Valley Bank is a trusted financial partner to many startups and venture firms that are now nervously scrambling to figure out what to do.
...

https://techcrunch.com/2023/03/09/silicon-valley-bank-shoots-self-in-foot/

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52-80

52-80 19086

Posted
Posted
18 minutes ago, Blotto said:

gjolf3latzma1.jpg?width=960&crop=smart&auto=webp&v=enabled&s=d19c5b66e7e67e981d741954c7a1b99e62027b54

So Northwest Bancshares is like the Cicis pizza of banks?


SVB services a very specific niche - silicon valley corporations and individuals, so its avg deposit size is bound to be high around the $millions.

Big in size but it is a bit localized and is ultimately solvent (more or less), so IMO shouldnt cause tremendous contagion 

 

 

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RollLeft

RollLeft 5040

Posted
Posted
18 hours ago, Keef said:

I'm a lawyer at one of the big tech law firms (think Goodwin, Cooley, Fenwick WSGR).  Have been getting calls all day from founders wanting to know if they can stick their SVB money in our client IOLTA trust account for safe keeping.  Truly wild times.

Popeyes meme kid' cashes in on viral video 10 YEARS later as he signs NIL deal | Daily Mail Online

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Francisco 2.0

Francisco 2.0 32323

Posted
Posted

https://www.thewrap.com/roku-had-487-million-in-silicon-valley-bank-whose-failure-is-rolling-the-tech-world/

 

 

Quote

In financial documents filed Friday, Roku disclosed that it had approximately $487 million held by Silicon Valley Bank, the Northern California financial powerhouse that failed this week, sending shockwaves throughout the region’s economy.

That number, Roku says, represents approximately 26% of its cash and cash equivalents, and the company will be able meet its pending financial obligations for at least “the next 12 months and beyond.”

Santa Clara-based Silicon Valley Bank was closed on Friday by the California Department of Financial Protection and Innovation, a spectacular and rapid end to what had for decades been one of the pillars of financing in the white hot tech industry economy.

 

Quote

It’s a complex and still developing story but what is known is that on Wednesday, the bank told investors it needed to raise just over $2 billionto offset $1.8 billion in losses it incurred from investments in mortgage-backed securities, which were devalued thanks to the Fed’s decision to raise interest rates.

Despite the somewhat routine nature of the announcement, the next day, in what one investor described as “a hysteria-induced bank run,” dozens of SVB’s venture capital clients — urged on by, among others, a venture capital fund founded by billionaire Peter Thiel — started pulling their assets from the bank.

 

Quote

These customers ultimately withdrew a staggering $42 billion by the end of the day, according to California regulatory filings, and as a result was left with a negative cash balance of $958 million. Regulators shut the bank down and seized its assets on Friday morning. In all, the bank’s journey from Silicon Valley institution to insolvency took less than 48 hours.

The bank and its assets are now held by the Federal Deposit Insurance Corporation; FDIC insures all bank deposits in the United States up to $250,000, and the agency said Friday that all insured customers should expect to regain access to their money by Monday, March 13.

But there’s a bigger problem for bank customers left holding the bag. S&P Global Market Intelligence estimates that only 2.7% of the bank’s deposits were at or below that $250,000 threshold. 

 

Quote

However, FDIC is likely to find a buyer for the bank and its assets, which may resolve the problems faced by customers who held much larger deposits. Despite being declared insolvent, Silicon Valley Bank still had hundreds of billions of dollars in other assets – $212 billion as of December 31, though likely somewhat less by now. 

But the FDIC is mandated to recover the maximum amount possible;Bloomberg notes that there’s a good chance the bank and its assets could sell for more than the total amount of uninsured deposits. 

In its filing Friday, Roku said as of March 10 it had “total cash and cash equivalents of approximately $1.9 billion,” and that “approximately $1.4 billion of the Company’s cash and cash equivalents is distributed across multiple large financial institutions.” As a result, the Roku said, “notwithstanding the closure of SVB, the Company continues to believe that its existing cash and cash equivalents balance and cash flow from operations will be sufficient to meet its working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond.”

 

 

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atomheartbevo

atomheartbevo 89416

Posted
Posted
26 minutes ago, Francisco 2.0 said:

https://www.thewrap.com/roku-had-487-million-in-silicon-valley-bank-whose-failure-is-rolling-the-tech-world/

Wow, so Roku had $487 million in SVB, most of it uninsured.

Nice that they still have $1.4 billion in cash and are covered going forward, but damn, losing a quarter of their cash.  That represents a helluva lot of R&D, new content, etc.

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Snake Diggity

Snake Diggity 4614

Posted
Posted (edited)

There are a shitload of companies in Austin that had their money in SVB and won’t make payroll next week if FDIC isn’t able to figure out a way to grant access to uninsured funds.  I personally know 3 heads of accounting/finance in that situation.  These are super healthy cash-flush companies, just has their money all in one place (the wrong place).  Could be really bad.  Really hoping the govt comes through.

Edited by Snake Diggity
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DalTxHornFan

DalTxHornFan 3085

Posted
Posted
20 hours ago, Keef said:

I'm a lawyer at one of the big tech law firms (think Goodwin, Cooley, Fenwick WSGR).  Have been getting calls all day from founders wanting to know if they can stick their SVB money in our client IOLTA trust account for safe keeping.  Truly wild times.

And they thought that your IOLTA trust account wasn't in SVB, as well?

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Brew

Brew 3045

Posted
Posted

We contract with a company for ACH/Credit card transactions. Looks like that company used an ACH processor that used SVB to clear those transactions. Details coming from them are limited, but it looks like we have a couple days ACH transactions held up in this at the moment. Lots of fun to be on the other side of the country reading about it and then realize you have XXXXXX amount of dollars in flux with them.

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bernorange

bernorange 8348

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Posted
Quote

As interest rates have risen, many banks have become more profitable because the spreads between what they earn on loans and investments and what they pay for funding has widened. But there are always exceptions.

Below is a screen of banks that are bucking the industry trend of expanding net interest margins, followed by another list of banks whose margins have widened the most over the past year.
...
So now the question is which other banks might face pressure because their net interest margins have contracted, or because their margins have only expanded slighlty?

Starting with a list of U.S. banks with total assets of at least $10 billion, and removing purer investment banks, such as Goldman Sachs Group Inc. GS, -4.22% and Morgan Stanley MS, -2.33%, we looked at 108 banks.

A uniform set of net interest margins for the past five quarters isn’t available from FactSet for the full group — it is only available for 56 of the banks. So instead, we screened for net interest income (total interest income less total interest expense) divided by average total assets.

By this screen, 102 of 108 banks showed expanding margins for the fourth quarter from a year earlier.

Here are the 10 showing contracting margins over the past year, or the smallest expansions of margins:

Customers Bancorp Inc.     CUBI
First Republic Bank     FRC
Sandy Spring Bancorp Inc.     SASR
New York Community Bancorp Inc.     NYCB
First Foundation Inc.     FFWM
Ally Financial Inc.     ALLY
Dime Community Bancshares Inc.     DCOM
Pacific Premier Bancorp Inc.     PPBI
Prosperity Bancshares Inc.     PB
Columbia Financial Inc.     CLBK
...

https://www.marketwatch.com/story/the-10-banks-that-may-face-trouble-in-the-wake-of-the-svb-financial-group-debacle-50d6e49e?rss=1&siteid=rss

^ Click link for list in a chart with full data

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52-80

52-80 19086

Posted
Posted
8 minutes ago, Neonmoon said:

Depository Banks being allowed to operate as investment banks is a problem, and the end results should be expected 

LMAO. This has what to do with the price of silk in Egypt?

“Depository bank” doesn’t mean a bank sitting on deposits, and buying securities doesn’t make one an “investment bank”  

SVB was a commercial bank, and the issue was the mismatch of duration - their treasuries were long-dated and didn’t match the liabilities that were short-term (ie customers pulling cash out rapidly). 

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Cheeseweasel

Cheeseweasel 26437

Posted
Posted
17 minutes ago, 52-80 said:

LMAO. This has what to do with the price of silk in Egypt?

“Depository bank” doesn’t mean a bank sitting on deposits, and buying securities doesn’t make one an “investment bank”  

SVB was a commercial bank, and the issue was the mismatch of duration - their treasuries were long-dated and didn’t match the liabilities that were short-term (ie customers pulling cash out rapidly). 

People read a few tweets and become banking experts. Peak Surly. 

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Mullet Free

Mullet Free 40

Posted
Posted
33 minutes ago, Incredulity said:

Not a shot at anyone here.  Just a funny

 

 

Ok, so for the non experts, could the mismatch have been better managed with some kind of hedging against interest rate risk?
 

Also let’s cut to the chase, estimates for how many cents on the dollar that large depositors will get back?

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Incredulity

Incredulity 11564

Posted
Posted
1 minute ago, Mullet Free said:

Also let’s cut to the chase, estimates for how many cents on the dollar that large depositors will get back?

I’ve seen estimates of high 90s %.  It appears the question is how long that takes.

I am sure Yellen is having some succinct conversations with the major banks about taking this in whole or pieces.

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