2023 bank failures

[Parliament 14239]

The "Woah markets are falling" thread is getting full up.  How about a thread dedicated to this banking goat rodeo? I think we're gonna need one.

 

https://amp.cnn.com/cnn/2023/03/11/business/svb-bank-collapse-explainer-timeline/index.html

Scary that so many people had deposits >$250k, but it makes total sense.  There are a lot of small businesses with cash going in and out who regularly go over $250k.  Or retired ladies with their life's savings in CD's at the local bank.  It adds up.

[AUS-97HORN 11756]

So this happened on Thursday, multiple companies have already announced thst they had several billion in assets at this bank, which is heavily populated by VC startups.

 

This may end up really fucking over a lot of Austin companies if a large percent of their company funds were in the bank.... which many VC funded companies would be because thats the bank that invested in them

 

https://www.cnbctv18.com/startup/silicon-valley-bank-collapse-indian-startups-y-combinator-garry-tan-16143571.htm

Edited March 11, 2023 by AUS-97HORN

[SL Xpress 7513]

That’s a really short article. I have questions I don’t expect answers to, but that article doesn’t do it for me. 

Why weren’t the feds more heavily involved prior to the shutdown? Why wasn’t a potential suitor found with financial  incentives to take on the assets of the bank? 

Maybe it ends up being a ripple and not a catastrophe, but given the importance of startups and the Silicon Valley in general on the overall growth in the economy, on the surface this seems poorly thought out. 

If anyone knows more, I’d love to hear your takes. 

[Chopper 17230]

I have two thoughts on the matter.

Bwahahahahaha.

Rolling back Dodd-Frank bank regulation instituted after the Bush II financial meltdown was asinine but expected considering who was running the previous administration.

 

Edited March 11, 2023 by Chopper

[SL Xpress 7513]

1 minute ago, Chopper said:

I have two thoughts on the matter.

Bwahahahahaha.

Rolling back Dodd-Frank bank bank regulation was asinine but expected considering who was running the previous administration.

 

That’s a hilarious tweet/response by the Doug J Balloon guy. 

[chainsaw 9857]

[Chopper 17230]

Obviously Beverly didn't attend the most recent Board meeting.

[Chopper 17230]

Here's the argument for Team "it's the governments fault."

[Al Bundy's Napoleon Hand 13570]

6 minutes ago, Chopper said:

Obviously Beverly didn't attend the most recent Board meeting.

 

[SL Xpress 7513]

8 minutes ago, Chopper said:

Here's the argument for Team "it's the governments fault."

I guess I’m the baddie in the thread because I agree with the tenor of his arguments. Not necessarily the conclusion it’s the government’s fault when the bank fails, but there are unintended consequences for the depositors not being made whole, and it’s unclear what those unintended consequences will be. 

It sounds like we’ll find out. 

[atomheartbevo 89626]

Surprised Roku lost around %25 of their cash in this bank, nearly half a billion, and not insured.  

[4th and 5 4914]

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

[washparkhorn 9939]

The FDIC will ensure an orderly sale of assets and pay non-FDIC insured depositors. Once the FDIC establishes the value of SVB’s assets (this weekend) depositors will have access to funds for business needs. The FDIC knows what it is doing.

Thiel triggered this bank run. SVB officers and directors ham-handily rolled out a rescue plan that caused Thiel to panic.  The bank made some shitty bets in a rising interest rate environment.

Tech prospered in the free money regime; that regime is dead. Time to break the old mindset and catch-up with the new boss. And ffs, diversify and hedge. SVB was living in a fantasy world that crashes with the New Fed. 

Edited March 11, 2023 by washparkhorn

[Dahobbs 17525]

4 minutes ago, 4th and 5 said:

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

If it isn't SVB, then probably not. 

[4th and 5 4914]

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

[Royalfan5 2353]

Seems to me that the VC folk should figure out a way to bounce back from their industry being disrupted. Maybe put your heads together and get a recapitalization plan going. 

[Guest]

14 minutes ago, 4th and 5 said:

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

I wouldn’t have it in Prosperity. 

[ChickenSandwich 9826]

3/6/23

 

[Neonmoon 38129]

5 minutes ago, 4th and 5 said:

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

Was this major Texas bank lending money to SVB? Or making bad financial decisions with your money? 

[Nivek 16918]

So we should bail out a bank and financial/business leaders of companies who stupidly put too much money in a single account because they were too lazy or too cheap to get a DIF insurance, open a CDARS account (IntraFi), or one of the other alternatives?  

FUCK THAT.  I am tired of the US Taxpayer bailing out idiots who are not equipped to do their fucking job.  I am so going to miss that new app feature that puts a mustache on every cat.  Boo fucking hoo.  

[Bateshorn 9927]

But wait, I was told the Tech Bros knew better than us, average peons who properly diversify our holdings, step carefully when taking on debt, and just seek to earn reasonable long term gains. 

[pantone159 719]

1 minute ago, longhornmatt said:

When 5% treasury rates, or really anything higher than free credit, is enough to destroy your entire industry, then good riddance. 

It is like nobody in the industry is over 40 and so has no memory of interest rates being other than zero. Interest rates now are not 'high'. They are about 'normal' now. The past 15 years have been the abnormal ones.

[Nivek 16918]

Maybe hire people with a modicum of financial sense to manage the assets. Also how fucking stupid are the VC’s who gave out money to these yahoos? Did they just borrow a massive amount of money from the same bank and then claim they were a VC?

Sorry for not caring about morons who made bad decisions. I would rather bail out lottery winners or NFL/Boxers who lost their ass. At least they didnt pretend to be brilliant.

[DalTxHornFan 3097]

I don't disagree with the take that FDIC/OCC was asleep at the switch, but so was bank management.  Bond portfolios were bound to be severely impacted by this rapid increase in interests rates.  Perhaps they listened too much to those that said it was "transitory"  -- but that many basis points just cannot be transitory.

[DalTxHornFan 3097]

I have it on reliable authority that many VC funds and start-ups are making capital calls this weekend due to the SVB situation. 

[52-80 19147]

1 hour ago, SL Xpress said:

That’s a really short article. I have questions I don’t expect answers to, but that article doesn’t do it for me. 

Why weren’t the feds more heavily involved prior to the shutdown? Why wasn’t a potential suitor found with financial  incentives to take on the assets of the bank? 

It happened pretty much overnight. Not time to properly “react” - though the fed are acting with light speed and everything is handled correctly so far.  Possibly some suitor might take over the bank from fed’s administration. 

The bank wasn’t ‘large’ enough to be subject to stress test. 

Ultimately, the bank is solvent. They’re simply not liquid. Just takes a bit of time and hassle to unwind but customers aren’t likely losing their shirts over this.

[Neonmoon 38129]

On 3/11/2023 at 11:59 AM, SL Xpress said:

I guess I’m the baddie in the thread because I agree with the tenor of his arguments. Not necessarily the conclusion it’s the government’s fault when the bank fails, but there are unintended consequences for the depositors not being made whole, and it’s unclear what those unintended consequences will be. 

It sounds like we’ll find out. 

The consequences are they might lose their money. If you have more than 250K in an account, there is a risk you lose that money. It is known 

Ackman wants public money to bail out bad private financial management. It’s idiotic 

 

Edited March 12, 2023 by Neonmoon

[52-80 19147]

1 hour ago, Parliament said:

Scary that so many people had deposits >$250k, but it makes total sense.  There are a lot of small businesses with cash going in and out who regularly go over $250k.  Or retired ladies with their life's savings in CD's at the local bank.  It adds up.

Its not a main street retail bank people go to deposit their wage and borrow money for a garage remodel. They were friendly to the bay area tech crowd, so served to corporations and hnwi. Average account size was in the millions. 
 

Bank mismanaged their assets - bought treasuries at historical lows - and subjected themselves to interest rate risk. This is not the same tenor as buying wildly exotic investments - getting UST with yields in the 1% was the most conservative thing they could have done, but it bit them in the ass.
 

Negligent, not fraudulent. 

[Nivek 16918]

Again, it is not like there are not options to insure your money if you are going to exceed that amount.

Dumb fucks.

[deadshank 24652]

1 hour ago, Porterhouse said:

I wouldn’t have it in Prosperity. 

No drive-by commentary.   Why Prosperity?   I know they do a lot of SFH construction loans.   
 

Say what you want to say. 

[Nivek 16918]

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

Of you have a joint account, you are insured for $500k.
It isn’t a cause for concern but you should consider being a bit wiser about keeping your money in one place. Or making sure you are insured for the value you really have in there.

[SL Xpress 7513]

According to this Reuters article 89% of the $175m in deposits were uninsured. 

The article also makes the case this is likely similar to IndyMac in 2008 where the assets were sold to another bank after a few weeks,

“This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor.”

https://www.reuters.com/markets/us/after-silicon-valley-banks-shutdown-uninsured-depositors-face-tense-wait-2023-03-10/

Spoiler

After Silicon Valley Bank's shutdown, uninsured depositors face tense wait

By Pete Schroeder

People gather outside of the Silicon Valley Bank (SVB) headquarters in Santa Clara, California, U.S. March 10, 2023. REUTERS/Nathan Frandino

WASHINGTON, March 10 (Reuters) - Silicon Valley Bank's high level of uninsured deposits helped kick off the run that led to the bank's closing down, and now any of those depositors will need to hold their breath to see if bank regulators can recover enough to make them whole.

Friday’s announcement by the Federal Deposit Insurance Corporation that the bank was closed came with few specifics on what will happen to bank customers who held more than the $250,000 per account that is guaranteed by the government.

Advertisement · Scroll to continue

 

In prior large bank failures like IndyMac and Washington Mutual, the FDIC found other firms to take on the assets and keep deposits intact. But failing that, uninsured depositors will be left with a portion of whatever funds the FDIC can raise selling off the bank's assets.

Register for free to Reuters and know the full story

Register now

SVB Financial Group's (SIVB.O) Silicon Valley Bank had a relatively high amount of uninsured deposits as it courted tech workers and venture capital firms. The FDIC said on Friday the amount of uninsured deposits at the bank was “undetermined,” likely complicated by the rush of bank customers to remove uninsured funds. But data submitted to the FDIC by the bank at the end of 2022 showed that 89% of its $175 billion in deposits were uninsured.

Latest Updates

• UK finance minister and Bank of England work to contain SVB fallout
• Brazil fiscal framework to include rule to track spending, says Haddad
• Wall St Week Ahead: Inflation data on deck for markets hit by worries about Fed, banks
• CEO of failed Silicon Valley Bank no longer a director at San Francisco Fed
• Wall Street 'fear gauge' options volume jumps to 4-year high as bank stocks sell off

All insured deposits will be accessible in full no later than Monday morning, but the FDIC said uninsured depositors will get a “receivership certificate,” and that future dividend payments “may be made” to pay off uninsured funds as the bank’s assets are sold. Customers with uninsured deposits were told to call the FDIC.

An SVB spokeswoman referred questions to the FDIC. An FDIC spokeswoman did not respond to a request for comment.

Advertisement · Scroll to continue

 

Regulatory experts say account holders with uninsured funds are not typically individuals. Usually, accounts with such high funds are companies that need cash on hand for payroll and other expenses. But Silicon Valley Bank’s relatively well-off clientele could be the exception, and the push for full repayment was already coming from some corners.

“We must make sure all deposits exceeding the FDIC $250k limit are honored," tweeted U.S. Representative Eric Swalwell, a California Democrat. "Banking is about confidence. If depositors lose confidence on the safety of their deposits over 250k then we are in trouble.”

Beyond selling off the assets piecemeal, another possible move by the FDIC would be to find another firm to take on all or a portion of the assets. This move is typically preferred by the regulator as a smoother process that ensures depositors are minimally disrupted and usually kept whole. But that process can be lengthy, leaving uninsured depositors in the dark.

“This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor.”

“The FDIC is likely negotiating a similar arrangement as we speak, with the result that virtually all assets and liabilities of Silicon Valley Bank will be transferred to the assuming bank in a short period of time.”

 

I realize there's a current of "fuck the rich" that goes on, and it represents a legitimate point of view in some ways with the level of wealth inequality we have. At the same time I do feel like while shareholders should lose their shirts, depositors are a different animal. I'd like to see them made whole if at all possible. There's a certain amount of liquidity necessary for a functioning economy, and that liquidity isn't necessarily provided by everyone putting their portfolio in treasury bills. In fact, ironically, it's putting their money in treasury bills that caused SVB to have their issues in the first place, because the bonds it purchased had their value plummet as interest rates rose. 

[NeverMarryAStripper 21872]

1 hour ago, Royalfan5 said:

Seems to me that the VC folk should figure out a way to bounce back from their industry being disrupted. Maybe put your heads together and get a recapitalization plan going. 

This is the solution.  How about an industry solve it's own problems for once.

[Guest]

6 minutes ago, deadshank said:

No drive-by commentary.   Why Prosperity?   I know they do a lot of SFH construction loans.   
 

Say what you want to say. 

Multitude of reasons. Their management team is bad bad bad. They have a similar bond portfolio. Look at this graphic:

[Rimbo 25911]

1 hour ago, ChickenSandwich said:

3/6/23

 

Well that aged like fish.

[pantone159 719]

11 minutes ago, SL Xpress said:

At the same time I do feel like while shareholders should lose their shirts, depositors are a different animal. I'd like to see them made whole if at all possible. There's a certain amount of liquidity necessary for a functioning economy, and that liquidity isn't necessarily provided by everyone putting their portfolio in treasury bills. In fact, ironically, it's putting their money in treasury bills that caused SVB to have their issues in the first place, because the bonds it purchased had their value plummet as interest rates rose. 

Actually SVB would probably be fine now if they had invested in Treasury BILLS which are short duration, have not lost value, and are now having their best investment performance in 15 years (finally!). These are the possible replacements for bank deposits as cash-equivalents. Instead they bought long duration Treasury BONDS and apparently quite long term which gave them the most possible exposure to interest rate increases, and made these investments at a time when interest rates were at the lowest level in generations. Oops.

But yes the banking industry does provide very important liquidity to the economy and it is important that it keeps operating. It is also a good idea to diversify the banks used so you don't have an entire industry going to one single bank for their financial needs in a mad rush to follow the herd. Oops.

[SL Xpress 7513]

2 minutes ago, pantone159 said:

Actually SVB would probably be fine now if they had invested in Treasury BILLS which are short duration, have not lost value, and are now having their best investment performance in 15 years (finally!). These are the possible replacements for bank deposits as cash-equivalents. Instead they bought long duration Treasury BONDS and apparently quite long term which gave them the most possible exposure to interest rate increases, and made these investments at a time when interest rates were at the lowest level in generations. Oops.

But yes the banking industry does provide very important liquidity to the economy and it is important that it keeps operating. It is also a good idea to diversify the banks used so you don't have an entire industry going to one single bank for their financial needs in a mad rush to follow the herd. Oops.

Right, but not making depositors whole incentivizes the system to go to one of the big three banks that the government has already indicated they will not allow to fail. So it incentivizes the opposite of what you think would be best for the economy. 

We'll see what happens. I've already read enough to feel like the depositors are going to be made whole eventually. I'm sure there will be some hue and cry about it, but to me this is the right move. 

[pantone159 719]

1 hour ago, 4th and 5 said:

Say a person had well in excess of $250K in a major Texas bank. Cause for concern?

If you have enough eggs in one basket, you either need to a) really watch that basket, or b) think about spreading the risk. I doubt that you can audit your bank enough yourself to be really sure of them, so maybe having an account at another bank as well is not a bad idea. Banks can and do fail sometimes. You should have already thought about this but SVB is a reminder that yes this does really happen sometimes. It would be no cause at all for panic or even fear though.

[52-80 19147]

6 minutes ago, pantone159 said:

Actually SVB would probably be fine now if they had invested in Treasury BILLS which are short duration, have not lost value, and are now having their best investment performance in 15 years (finally!).

They did the bulk of their purchases during the large inflow in 2020-2022. 

Back then, T bills yielded virtually nothing. (Though atleast they wouldve gotten the capital back and rolled into incremenrally better yields). 
 

Would be interesting to scroll back on the earnings calls and see how many analysts prodded them on the composition of their balance sheet. 

[pantone159 719]

1 minute ago, SL Xpress said:

I've already read enough to feel like the depositors are going to be made whole eventually.

They will be made (mostly, at least) whole, because the assets of SVB are (presumably) not garbage and will be sold for their market value which will mostly or even entirely cover the depositors. But these deposits are no longer the liquid cash they thought they were.

[Guest]

2 hours ago, SL Xpress said:

I guess I’m the baddie in the thread because I agree with the tenor of his arguments. Not necessarily the conclusion it’s the government’s fault when the bank fails, but there are unintended consequences for the depositors not being made whole, and it’s unclear what those unintended consequences will be. 

It sounds like we’ll find out. 

Ackman is a smug penis, but he’s right. This is going to have significantly adverse repercussions for any non money center bank. 

1 hour ago, pantone159 said:

It is like nobody in the industry is over 40 and so has no memory of interest rates being other than zero. Interest rates now are not 'high'. They are about 'normal' now. The past 15 years have been the abnormal ones.

You’re unfamiliar with human behavior. While normal in the context of history, we’ve had a the steepest series of increases I can ever remember. It’s like saying $30 oil is normal. It’s not now. However, I do agree with the rate increases. The problem is, we did virtually nothing between 2010 and 2016/2017. 

1 hour ago, DalTxHornFan said:

I don't disagree with the take that FDIC/OCC was asleep at the switch, but so was bank management.  Bond portfolios were bound to be severely impacted by this rapid increase in interests rates.  Perhaps they listened too much to those that said it was "transitory"  -- but that many basis points just cannot be transitory.

Absolutely. This is a combination of dereliction of duty by both management and the OCC, national banks’ primary regulators. FDIC had little to nothing to do with this. 

54 minutes ago, Neonmoon said:

The consequences are they might lose their money. If you have more than 250K in an account, there is a risk you lose that money. It is known 

Akerman wants public money to bail out bad private financial management. It’s idiotic 

 

There is very very little risk you’re gonna ever lose money in a bank these days. Even here. Ackman is right because the perception you have is what most people have. Yes, most people are simple, like you. If the government doesn’t find a suitor and close a deal this weekend, there will be a massive flight from communities and regionals to money centers. When in reality I’d be mildly surprised if any $ are lost by SVB depositors. 

42 minutes ago, longhornmatt said:

I understand bailing out the airlines or JP Morgan, Bank of America, etc., even if in theory I am against the idea of government bailouts for failed businesses.  “Too big to fail” is a reality in some cases where the pain of unwinding and the difficulty for competitors / replacements to emerge and pick up the slack would be too disruptive and costly to too many people.  We’re not going to grind transportation or finance to a halt.

SVB isn’t too big to fail, though, and their affected clientele is not going receive broad sympathy. It’s unfortunate  for the people who are going to lose out, but when you exceed FDIC limits at a bank that caters to speculative VC and vapor ware startups … well, it’s not a great fact pattern for you to seek a bailout.

Agree with most of this but if a buyer can be arranged, a lot less pain will be seen. Also, JPM and the majority of banks that received TARP did NOT need those “bailouts”. 

[pantone159 719]

3 minutes ago, 52-80 said:

Back then, T bills yielded virtually nothing. (Though atleast they wouldve gotten the capital back and rolled into incremenrally better yields).

Yes, T bills would have been a lot less profitable for SVB. To be fair to SVB being a bank has to be hard in ways in a zero interest rate environment, you need to earn something on the money, and there were probably no easy answers for them. The actual easy answer is that the whole VC industry should not have all piled all this capital into the same medium sized bank and assumed that everything would just magically work out (like it always has seemed to for them) and that is a mistake made by SVB's customers and maybe not even so much by SVB.

 

[Grade of D as in David 13253]

If they only would have listened to Wu-Tang financial

 

[Parliament 14239]

So help me understand how this all works.  Some bank (or banks) buys up all the loans SVB has out, and takes on the liabilities for rhe deposits.  Let's also presume there's enough shareholder equity to cover SVP's depositor/outstanding loans gap.

In that case I presume the FDIC doesn't pay out the insurance?  They don't do that unless there isn't enough shareholder equity to cover the gap?

[Dahobbs 17525]

8 minutes ago, pantone159 said:

Yes, T bills would have been a lot less profitable for SVB. To be fair to SVB being a bank has to be hard in ways in a zero interest rate environment, you need to earn something on the money, and there were probably no easy answers for them. The actual easy answer is that the whole VC industry should not have all piled all this capital into the same medium sized bank and assumed that everything would just magically work out (like it always has seemed to for them) and that is a mistake made by SVB's customers and maybe not even so much by SVB.

 

Yeah, SVB chose an investment with a singular stress point (rising interest rates), AND it knew that stress point would also stress its preferred clientele (entities that live off of low interest loans), AND it did so in an environment when it should have been obvious that the ridiculously low interest rates would eventually rise. Fuck bailing anyone out here. 

[52-80 19147]

12 minutes ago, pantone159 said:

Yes, T bills would have been a lot less profitable for SVB. To be fair to SVB being a bank has to be hard in ways in a zero interest rate environment, you need to earn something on the money, and there were probably no easy answers for them.

 

30Y averaged in the high 1s, which matches their blended yield, which is maybe what drove the decision. 

However they needed to hedge the rate whether with futures, options, or swaps…which I dont think they did. 
 

they chose…poorly.gif

[4th and 5 4914]

47 minutes ago, Nivek said:

Of you have a joint account, you are insured for $500k.
It isn’t a cause for concern but you should consider being a bit wiser about keeping your money in one place. Or making sure you are insured for the value you really have in there.

 

41 minutes ago, Porterhouse said:

Multitude of reasons. Their management team is bad bad bad. They have a similar bond portfolio. Look at this graphic:

 

21 minutes ago, pantone159 said:

If you have enough eggs in one basket, you either need to a) really watch that basket, or b) think about spreading the risk. I doubt that you can audit your bank enough yourself to be really sure of them, so maybe having an account at another bank as well is not a bad idea. Banks can and do fail sometimes. You should have already thought about this but SVB is a reminder that yes this does really happen sometimes. It would be no cause at all for panic or even fear though.

OK so #5 on that list is my bank Frost. I’m not a bank auditor. Cause for concern? I’m out of the market. What’s the best way to spread the risk? A dozen different bank accounts? Higher interest rates in MMAs if deposits are higher. Spreading it out costs quite a bit in interest. CDARS, but that limits me to CDs. Maybe just a number of 90 or 180 day CDs? Any way to get additional insurance?

[Nivek 16918]

31 minutes ago, SL Xpress said:

According to this Reuters article 89% of the $175m in deposits were uninsured. 

The article also makes the case this is likely similar to IndyMac in 2008 where the assets were sold to another bank after a few weeks,

“This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor.”

https://www.reuters.com/markets/us/after-silicon-valley-banks-shutdown-uninsured-depositors-face-tense-wait-2023-03-10/

  Reveal hidden contents

After Silicon Valley Bank's shutdown, uninsured depositors face tense wait

By Pete Schroeder

People gather outside of the Silicon Valley Bank (SVB) headquarters in Santa Clara, California, U.S. March 10, 2023. REUTERS/Nathan Frandino

WASHINGTON, March 10 (Reuters) - Silicon Valley Bank's high level of uninsured deposits helped kick off the run that led to the bank's closing down, and now any of those depositors will need to hold their breath to see if bank regulators can recover enough to make them whole.

Friday’s announcement by the Federal Deposit Insurance Corporation that the bank was closed came with few specifics on what will happen to bank customers who held more than the $250,000 per account that is guaranteed by the government.

Advertisement · Scroll to continue

 

In prior large bank failures like IndyMac and Washington Mutual, the FDIC found other firms to take on the assets and keep deposits intact. But failing that, uninsured depositors will be left with a portion of whatever funds the FDIC can raise selling off the bank's assets.

Register for free to Reuters and know the full story

Register now

SVB Financial Group's (SIVB.O) Silicon Valley Bank had a relatively high amount of uninsured deposits as it courted tech workers and venture capital firms. The FDIC said on Friday the amount of uninsured deposits at the bank was “undetermined,” likely complicated by the rush of bank customers to remove uninsured funds. But data submitted to the FDIC by the bank at the end of 2022 showed that 89% of its $175 billion in deposits were uninsured.

Latest Updates

• UK finance minister and Bank of England work to contain SVB fallout
• Brazil fiscal framework to include rule to track spending, says Haddad
• Wall St Week Ahead: Inflation data on deck for markets hit by worries about Fed, banks
• CEO of failed Silicon Valley Bank no longer a director at San Francisco Fed
• Wall Street 'fear gauge' options volume jumps to 4-year high as bank stocks sell off

All insured deposits will be accessible in full no later than Monday morning, but the FDIC said uninsured depositors will get a “receivership certificate,” and that future dividend payments “may be made” to pay off uninsured funds as the bank’s assets are sold. Customers with uninsured deposits were told to call the FDIC.

An SVB spokeswoman referred questions to the FDIC. An FDIC spokeswoman did not respond to a request for comment.

Advertisement · Scroll to continue

 

Regulatory experts say account holders with uninsured funds are not typically individuals. Usually, accounts with such high funds are companies that need cash on hand for payroll and other expenses. But Silicon Valley Bank’s relatively well-off clientele could be the exception, and the push for full repayment was already coming from some corners.

“We must make sure all deposits exceeding the FDIC $250k limit are honored," tweeted U.S. Representative Eric Swalwell, a California Democrat. "Banking is about confidence. If depositors lose confidence on the safety of their deposits over 250k then we are in trouble.”

Beyond selling off the assets piecemeal, another possible move by the FDIC would be to find another firm to take on all or a portion of the assets. This move is typically preferred by the regulator as a smoother process that ensures depositors are minimally disrupted and usually kept whole. But that process can be lengthy, leaving uninsured depositors in the dark.

“This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor.”

“The FDIC is likely negotiating a similar arrangement as we speak, with the result that virtually all assets and liabilities of Silicon Valley Bank will be transferred to the assuming bank in a short period of time.”

 

I realize there's a current of "fuck the rich" that goes on, and it represents a legitimate point of view in some ways with the level of wealth inequality we have. At the same time I do feel like while shareholders should lose their shirts, depositors are a different animal. I'd like to see them made whole if at all possible. There's a certain amount of liquidity necessary for a functioning economy, and that liquidity isn't necessarily provided by everyone putting their portfolio in treasury bills. In fact, ironically, it's putting their money in treasury bills that caused SVB to have their issues in the first place, because the bonds it purchased had their value plummet as interest rates rose. 

• Sorry, fuck the rich. 
• The bottom 90% have nothing left to give to the elite 0.25% of the nation who can fund our entire government for 5.5 year (including state) based on their wealth.   
• The only way we can help them is to print more money, drive inflation up more and further devalue our own assets all because they didn't act responsibly. 
• What fucking group of morons bought bonds that devalued with rising interest rates after the government just printed money to get us through Covid and while interest rates were on the rise?  

Can I get made whole for when market changes fucked me and my plans and changed the course of my (and my family's) life first?  My event occurred in 2015.  

 

 

[Sawbonz 27535]

7 minutes ago, 4th and 5 said:

 

 

OK so #5 on that list is my bank Frost. I’m not a bank auditor. Cause for concern? I’m out of the market. What’s the best way to spread the risk? A dozen different bank accounts? Higher interest rates in MMAs if deposits are higher. Spreading it out costs quite a bit in interest. CDARS, but that limits me to CDs. Maybe just a number of 90 or 180 day CDs? Any way to get additional insurance?

[Chopper 17230]

1 hour ago, SL Xpress said:

According to this Reuters article 89% of the $175m in deposits were uninsured. 

The article also makes the case this is likely similar to IndyMac in 2008 where the assets were sold to another bank after a few weeks,

“This will likely be similar to the failure of IndyMac Bank in 2008," said Joseph Lynyak, a partner with Dorsey & Whitney who specializes in bank failures. "The FDIC closed that bank but had not already lined up an assuming bank. It took several weeks to find an investor.”

https://www.reuters.com/markets/us/after-silicon-valley-banks-shutdown-uninsured-depositors-face-tense-wait-2023-03-10/

I realize there's a current of "fuck the rich" that goes on, and it represents a legitimate point of view in some ways with the level of wealth inequality we have. At the same time I do feel like while shareholders should lose their shirts, depositors are a different animal. I'd like to see them made whole if at all possible. There's a certain amount of liquidity necessary for a functioning economy, and that liquidity isn't necessarily provided by everyone putting their portfolio in treasury bills. In fact, ironically, it's putting their money in treasury bills that caused SVB to have their issues in the first place, because the bonds it purchased had their value plummet as interest rates rose. 

 

50 minutes ago, SL Xpress said:

Right, but not making depositors whole incentivizes the system to go to one of the big three banks that the government has already indicated they will not allow to fail. So it incentivizes the opposite of what you think would be best for the economy. 

We'll see what happens. I've already read enough to feel like the depositors are going to be made whole eventually. I'm sure there will be some hue and cry about it, but to me this is the right move. 

 

Whatever's going down with SVB, the results were dictated by an industry rebelling against regulation, and some of the most sophisticated businesses in the US (just ask 'em!) not paying attention to where and how they deposit their money.

Edited March 11, 2023 by Chopper