2023 bank failures

[Guest]

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/

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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.

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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.

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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.

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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.

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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. 

That 89% is highly misleading. There is a significant amount of corporate deposits with SVB from entities who have significant outstanding loans. That debt will be offset by deposits. The amount of uninsured deposits is much, much smaller and will very likely be made whole because SVB’s assets (its loans) are high quality. 

13 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?

No. Frost is a solid bank and you need to investigate the composition of their securities. Also, they won’t have the tech bro trigger that SVB had. 

[Nivek 16918]

46 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. 

That again is wrong.  What will happen is that companies will have to forego some of their budgets and hire people/consultants to help them better manage their cash instead of winging it.   The average depositor will be insured.  The above-average depositor will learn a harsh lesson.  

[Chopper 17230]

and I can't emphasize this enough, fuck the tech bros.

 

[Rimbo 25911]

I've spent most of my career on the left-hand side of the map working for tech startups. I got bored of Unicorn companies a long, long time ago. My last several jobs have basically been, "Show me the fucking money, and I don't mean your investments." I want to see revenue. I want a company that is either in the black, or is working towards being in the black with a real plan. Every time I hear from a recruiter saying, "They just secured seven gazillion simoleons in their seventh round Series Q funding" I'm all like:

So there is a wee tiny bit of schadenfreude.

On the other hand, I definitely feel for people who thought their money was safe and put it in the wrong place. It's like finding out your cat was using your condom pack as a play toy after you pull out. "Whoops, wrong hole." "Felt like the right hole to me!" "I mean in the rubber, dear." "Oh FUUU--"

I'm staunchly against a bailout. Has nothing to do with politics; after decades of being in it, the tech industry needs this correction. Desperately. Biden is throwing funding into getting our silicon industry going again; the jobs will be there. But having banks fund these non-silicon unicorn "We have this great idea and we need 5 years of funding before we figure out how to make money from it" bullshit startups has got to end, and nothing like SVB serving as a cruel example to do so.

My fellow tech workers that are good enough will have no trouble getting other jobs.

Edited March 11, 2023 by Rimbo

[SL Xpress 7513]

13 minutes ago, Nivek said:

That again is wrong.  What will happen is that companies will have to forego some of their budgets and hire people/consultants to help them better manage their cash instead of winging it.   The average depositor will be insured.  The above-average depositor will learn a harsh lesson.  

Well, that could very well happen anyway, because of the fear of losing their liquidity.

It's like the police force saying, "You can beat the time, but you can't beat the ride." Not advocating for that mentality, but simply going through what they're about to go through creates its own lessons.

In any case, like I've already stated, I'm convinced depositors are going to be made whole, so whatever lesson they learn, it won't be from losing their money. 

[SL Xpress 7513]

16 minutes ago, Porterhouse said:

That 89% is highly misleading. There is a significant amount of corporate deposits with SVB from entities who have significant outstanding loans. That debt will be offset by deposits. The amount of uninsured deposits is much, much smaller and will very likely be made whole because SVB’s assets (its loans) are high quality. 

No. Frost is a solid bank and you need to investigate the composition of their securities. Also, they won’t have the tech bro trigger that SVB had. 

I didn't mean to state the 89% as fact. Just quoting the article. Thank you for the clarification. In any case, I'm with you 100% they're going to be made whole regardless of the process involved.

[Guest]

15 minutes ago, Chopper said:

and I can't emphasize this enough, fuck the tech bros.

 

Meh. Thiel no doubt exacerbated the run, and accelerated their demise. But SVB’s fate was sealed already. It was sealed when they disclosed their $1.8B bond sale loss that they had to effectuate/recognize/disclose/discuss because they were not as liquid as, say, a normal bank. And then the coffin nail was the knowledge of Goldman’s failed capital raise. Thiel was looking out for his portfolio companies. Maybe he shorted SVIB and profited from their demise. And if so, I don’t care. 

Edited March 11, 2023 by Porterhouse

[SL Xpress 7513]

19 minutes ago, Chopper said:

 

 

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.

 

Well, I'm of a mind that the Dodd-Frank Act went pretty easy on financial institutions after bringing the global economy to its knees in what could have easily been much much worse than it was. So I wasn't a fan of easing anything. I feel like when really bad things happen you should expect the government to step in with a heavy hand. Whether they should or shouldn't becomes immaterial at some point. They're going to. 

But I still don't think having depositors lose the money they have in deposits is a good signal to send. Others are disagreeing, and that's okay. We can agree to disagree. What I will say is that whatever we think about it, it looks pretty certain to me they're going to be made whole eventually, so whatever lesson people want those depositors to learn, I don't think it will happen because they lose all their money over $250,000.

[SL Xpress 7513]

30 minutes ago, Nivek said:

• 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.  

 

 

I'm sorry for your loss? I don't know anything about you or your family's situation. 

I don't believe shareholders should be made whole. I do believe depositors should be made whole, and will be. I don't think the failure of SVB has to be the touchstone of one of the internal wars our society is engaged in. It can be, and might be, but I don't think it has to be. 

[Neonmoon 38129]

3 minutes ago, SL Xpress said:

But I still don't think having depositors lose the money they have in deposits is a good signal to send.

People are talking past each other with extremes. One side is saying if we don’t make depositors whole, then people will stop using banks. That is completely idiotic. Just because pintos blow up, doesn’t mean people stopped driving cars. They will stop buying shitty cars. Same principle. SVB made bad financial decisions. Depositors also did if they consolidated their money at SVB. I am completely aware it sucks. But, 250K is insured, and most likely most depositors will be made whole from sale of assets. Yes, some will lose money. It sucks, but that’s the risk. I actually think it sends a good signal. Banks and investments firms should actually pay attention to risk and not just hire the one guy to check the box. 

[52-80 19147]

50 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?

In modern, heavily-regulated US banking, losing your capital from a chartered bank is virtually unheard of. 

Capital. Not stocks, corporate bonds,buttcoins,  or other “speculative” investment. Losing actual cash, above the insured amount, is practically impossible.

People with SVB will have their money stuck for a while, but they’ll eventually be made whole. 

[Guest]

1 minute ago, Neonmoon said:

People are talking past each other with extremes. One side is saying if we don’t make depositors whole, then people will stop using banks. That is completely idiotic. Just because pintos blow up, doesn’t mean people stopped driving cars. They will stop buying shitty cars. Same principle. SVB made bad financial decisions. Depositors also did if they consolidated their money at SVB. I am completely aware it sucks. But, 250K is insured, and most likely most depositors will be made whole from sale of assets. Yes, some will lose money. It sucks, but that’s the risk. I actually think it sends a good signal. Banks and investments firms should actually pay attention to risk and not just hire the one guy to check the box. 

I doubt any will lose money. I doubt their risk management team allowed one guy to invest in bonds to check some sort of box as a primary source of liquidity. I strongly suspect a bank that size had hundreds of people dedicated to the liquidity side of their bank. This was a collective failure by those people, and the OCC and other regulatory bodies are definitely culpability. In hindsight, it is an astounding level of failure. 

[Rimbo 25911]

8 minutes ago, Neonmoon said:

But, 250K is insured, and most likely most depositors will be made whole from sale of assets.

I mean, this right here. If you have more than $250k in a bank, you're an idiot.

You gotta spread that shit around. Invest it. Put the money where it should be.

[SL Xpress 7513]

4 minutes ago, Neonmoon said:

People are talking past each other with extremes. One side is saying if we don’t make depositors whole, then people will stop using banks. That is completely idiotic. Just because pintos blow up, doesn’t mean people stopped driving cars. They will stop buying shitty cars. Same principle. SVB made bad financial decisions. Depositors also did if they consolidated their money at SVB. I am completely aware it sucks. But, 250K is insured, and most likely most depositors will be made whole from sale of assets. Yes, some will lose money. It sucks, but that’s the risk. I actually think it sends a good signal. Banks and investments firms should actually pay attention to risk and not just hire the one guy to check the box. 

I don't think any depositors are going to lose money. Might take some time to get access to it, though.

I don't think people will stop using banks. They'll stop using regional banks. Or at least, they'd use regional banks less for deposits over $250,000. In all honesty, they will already even if the depositors are made whole like I believe they will be. Simply not having this liquidity is going to put a scare into people to change their behavior. At least in the short run. You can see it on this thread with people asking about different banks. Fear and pain changes behavior. 

Oh, and no lesson is learned forever anyway. On a long enough time line, the same mistakes will be made again. I simply don't see having depositors lose their money over this being the great righteous act of justice others seem to view it as. 

Also, I see people blaming Thiel for this, and they're probably right. At least as a contributing factor. But if I was associated with him in some way and his warning allowed me to pull my money out in time, I'm almost certainly more grateful at the head's up than I am suspicious about his potential underhanded dealings. Unless they're able to pin some kind of fraud charge on him and make it stick, he's likely elevated his profile. That's how I would see it if I was in that world, in any case. 

[DalTxHornFan 3097]

I've been out of this game for a while, but I used to have an insurance industry client that had an arrangement to spread it's 100's of millions of $ all around the country in CD's at the insured limit.  Another client had a requirement for collateral against their uninsured deposit balances.  I assume those options are still available, but way too complicated for the VC/Tech guys?

[52-80 19147]

9 minutes ago, Porterhouse said:

I doubt any will lose money. I doubt their risk management team allowed one guy to invest in bonds to check some sort of box as a primary source of liquidity. I strongly suspect a bank that size had hundreds of people dedicated to the liquidity side of their bank. This was a collective failure by those people, and the OCC and other regulatory bodies are definitely culpability. In hindsight, it is an astounding level of failure. 

Crazy thing is they *just* skirted under the size required to have a liquidity stress test. The regulTory threshold is $250B and their assets were a touch above $200B. 
 

Not “too big too fail” but…big enough to fail!!

[Guest]

https://s201.q4cdn.com/589201576/files/doc_financials/2022/q4/4Q22-SIVB-Earnings-Release-Final.pdf
 

Look at the graphic at the top of page 15. This is an insanely idiotic balance sheet composition for a bank. I have no idea why they’d want to have this in a rising interest rate environment, and why the OCC permitted such a composition. Prosperity is structured similarly and combined with their joke of a management team why I’d be interested to short them Monday. I don’t think they will fail ultimately, because here in Texas they won’t face the same triggers. 

9 minutes ago, Rimbo said:

I mean, this right here. If you have more than $250k in a bank, you're an idiot.

You gotta spread that shit around. Invest it. Put the money where it should be.

You’re at risk of having it tied up for a period of time. That’s all, really. 

[wackawacka 177]

7 minutes ago, DalTxHornFan said:

I've been out of this game for a while, but I used to have an insurance industry client that had an arrangement to spread it's 100's of millions of $ all around the country in CD's at the insured limit.  Another client had a requirement for collateral against their uninsured deposit balances.  I assume those options are still available, but way too complicated for the VC/Tech guys?

they are still available

Part of SVB requirements for their lending and debt facilities is placing majority of your deposits with them. While it was "cheap" money if you had VC backing, it required you to mostly bank solely with them.

[Guest]

8 minutes ago, SL Xpress said:

Also, I see people blaming Thiel for this, and they're probably right. At least as a contributing factor. But if I was associated with him in some way and his warning allowed me to pull my money out in time, I'm almost certainly more grateful at the head's up than I am suspicious about his potential underhanded dealings. Unless they're able to pin some kind of fraud charge on him and make it stick, he's likely elevated his profile. That's how I would see it if I was in that world, in any case. 

No doubt. But anyone blaming Thiel is foolish. He hastened their demise because of his name and power, but he also saved the companies in which he invests from brain damage of trying to extract deposits out of a failed institution. 

[DalTxHornFan 3097]

3 minutes ago, Porterhouse said:

https://s201.q4cdn.com/589201576/files/doc_financials/2022/q4/4Q22-SIVB-Earnings-Release-Final.pdf
 

Look at the graphic at the top of page 15. This is an insanely idiotic balance sheet composition for a bank. I have no idea why they’d want to have this in a rising interest rate environment, and why the OCC permitted such a composition. Prosperity is structured similarly and combined with their joke of a management team why I’d be interested to short them Monday. I don’t think they will fail ultimately, because here in Texas they won’t face the same triggers. 

SVB is saying there that they have an embedded $15B loss!

[52-80 19147]

4 minutes ago, DalTxHornFan said:

I've been out of this game for a while, but I used to have an insurance industry client that had an arrangement to spread it's 100's of millions of $ all around the country in CD's at the insured limit.  Another client had a requirement for collateral against their uninsured deposit balances.  I assume those options are still available, but way too complicated for the VC/Tech guys?

the bank itself wasn't started by the "tech bros" (derided here).  its decades old and services just about everybody in the industry. 

so you're a 20-something indian immigrant stanford grad and investors throw a 7 figures at you to employ 20 coders to develop a "hotdog or not" app, you're not gonna have the sophistication to spread that across 40 banks to stay under the fdic insurance limit.  thats not a realistic expectation or operation

[Guest]

5 minutes ago, 52-80 said:

Crazy thing is they *just* skirted under the size required to have a liquidity stress test. The regulTory threshold is $250B and their assets were a touch above $200B. 
 

Not “too big too fail” but…big enough to fail!!

Meh, I don’t have a great deal of confidence a bank regulator -  not the brightest bunch generally speaking - would’ve unearthed this bank killing risk with a cookie cutter stress test. Again, SVB’s asset composition was not at all normal for a bank. 

[SL Xpress 7513]

Anyone seeing that the CEO of SVB, Greg Becker, sold $3.6m worth of stock a couple of weeks ago?

[DalTxHornFan 3097]

1 minute ago, 52-80 said:

the bank itself wasn't started by the "tech bros" (derided here).  its decades old and services just about everybody in the industry. 

so you're a 20-something indian immigrant stanford grad and investors throw a 7 figures at you to employ 20 coders to develop a "hotdog or not" app, you're not gonna have the sophistication to spread that across 40 banks to stay under the fdic insurance limit.  thats not a realistic expectation or operation

Even "hotdog or not" startups can/do hire virtual CFOs that are aware of risk issues.  This is pretty basic stuff.

[DalTxHornFan 3097]

Just now, SL Xpress said:

Anyone seeing that the CEO of SVB, Greg Becker, sold $3.6m worth of stock a couple of weeks ago?

Don't have it handy, but I do believe it was part of a planned/scheduled series of sales.

[wackawacka 177]

2 minutes ago, DalTxHornFan said:

Even "hotdog or not" startups can/do hire virtual CFOs that are aware of risk issues.  This is pretty basic stuff.

a lot of start-up CFO or head of finance (my peer group) have no business being in that role. SF / bay area over indexes on right school and background vs who should be in the role. not enough gray hairs in the c-suite of many of these companies.

[SL Xpress 7513]

Just now, DalTxHornFan said:

Don't have it handy, but I do believe it was part of a planned/scheduled series of sales.

So I can put my torches and pitchforks away?

I'm going to have them ready just in case. 

[Rimbo 25911]

4 minutes ago, 52-80 said:

the bank itself wasn't started by the "tech bros" (derided here).  its decades old and services just about everybody in the industry. 

so you're a 20-something indian immigrant stanford grad and investors throw a 7 figures at you to employ 20 coders to develop a "hotdog or not" app, you're not gonna have the sophistication to spread that across 40 banks to stay under the fdic insurance limit.  thats not a realistic expectation or operation

That's... you're conflating two things. The insurance on my personal account and the money for my business account are not treated the same. One pays my rent; the other pays my employees.

[Guest]

2 minutes ago, DalTxHornFan said:

SVB is saying there that they have an embedded $15B loss!

I didn’t see that. That is probably IF they had been required to mark their securities to market. Which banks aren’t; in normal circumstances they would’ve held their $91B securities portfolio to maturity and recouped the whole thing with return. The issue is, their securities book had dropped considerably in value since it was heavily weighted in bonds (with rising rates, bonds fall in value) and they HAD to liquidate those bonds because first the tech industry needed their cash and withdrew deposits from SVB, and then there was a classic bank run that occurred within, literally, 24 hours that nuked the bank. No other bank in America has all these dynamics. 

Books will be written, and quickly, on this debacle and I can’t wait to read more. 

[52-80 19147]

2 minutes ago, SL Xpress said:

Anyone seeing that the CEO of SVB, Greg Becker, sold $3.6m worth of stock a couple of weeks ago?

hes awarded primarily in equity and sell them constantly.  that in itself is not an indictment. 

marc benioff of salesforce sells a million worth every single week since the beginning of time.. so picking a single time frame as signal of some known impropriety is not correct

[Guest]

4 minutes ago, SL Xpress said:

Anyone seeing that the CEO of SVB, Greg Becker, sold $3.6m worth of stock a couple of weeks ago?

I hope he sold a lot more because he ain’t gonna be working for a bank or any institution of import ever again. 

[Chopper 17230]

3 minutes ago, 52-80 said:

In modern, heavily-regulated US banking, losing your capital from a chartered bank is virtually unheard of.

Capital. Not stocks, corporate bonds,buttcoins,  or other “speculative” investment. Losing actual cash, above the insured amount, is practically impossible.

People with SVB will have their money stuck for a while, but they’ll eventually be made whole. 

In the case of SVB their market niche left them open to manipulation by someone who wanted to cause a run on the bank and/or a short seller. Their niche however was exploited and unless Congress passes new regs, the excess risk will remain. 95% of their deposit accounts are above the $250k insurance threshold. That's far above normal and it's the reason why all the SV VC firms are crying for a gov't bailout - they know there's no way an acquiring bank would cover all the losses in deposited funds. This situation and the random failure by an Indianapolis Bank aren't remotely comparable. 

All the depositors being made whole absent the government stepping in to bail out an industry and a bank that fought regulation tooth and nail: pipedream.

[Hefeweizen 5310]

3 hours ago, 4th and 5 said:

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

Yes.  Use someone like fidelity who spreads it over institutions to keep it insured.  This is a basic tenet of cash management and the government bookkeepers that I deal with take care of it for political subdivisions.

[Guest]

1 minute ago, 52-80 said:

hes awarded primarily in equity and sell them constantly.  that in itself is not an indictment. 

marc benioff of salesforce sells a million worth every single week since the beginning of time.. so picking a single time frame as signal of some known impropriety is not correct

Also this

[52-80 19147]

5 minutes ago, DalTxHornFan said:

Even "hotdog or not" startups can/do hire virtual CFOs that are aware of risk issues.  This is pretty basic stuff.

my point is this is not tim cook stashing apple's $50 billion dollar warchest into a single institution.  its mostly a bunch of small companies putting their relatively meager corporate account with the same business that all of their Y Combinator peers did. 

the ire some directed at them for being dumb techbros is misguided.  they didnt cause this, and its not a normal expectation for someone of that scale to perform forensic analysis of their banks' books.

[Nivek 16918]

53 minutes ago, SL Xpress said:

Well, that could very well happen anyway, because of the fear of losing their liquidity.

It's like the police force saying, "You can beat the time, but you can't beat the ride." Not advocating for that mentality, but simply going through what they're about to go through creates its own lessons.

In any case, like I've already stated, I'm convinced depositors are going to be made whole, so whatever lesson they learn, it won't be from losing their money. 

I really hope not.  The only lesson they will learn is that socializing risk now extends to cutting corners and privatizing profits is all that really matters.  In our current gilded age, the bottom 90% have no interest in insuring the risk-taking or foolish behaviors of the elite anymore.  

[Chopper 17230]

Dodd-Frank was a stopgap regulation and part of a massive government bailout, in lieu of allowing certain banks to fail and paying depositors back their insured funds. The latter is what should have happened IMO.

9 minutes ago, 52-80 said:

the bank itself wasn't started by the "tech bros" (derided here).  its decades old and services just about everybody in the industry.

They're the leading bank for VC firms and where their invested companies are directed to deposit funds.

4 minutes ago, SL Xpress said:

So I can put my torches and pitchforks away?

I'm going to have them ready just in case. 

Scheduled on January 31 when undoubtedly he could see the writing on the wall.

[DalTxHornFan 3097]

13 minutes ago, Porterhouse said:

I didn’t see that. That is probably IF they had been required to mark their securities to market. Which banks aren’t; in normal circumstances they would’ve held their $91B securities portfolio to maturity and recouped the whole thing with return. The issue is, their securities book had dropped considerably in value since it was heavily weighted in bonds (with rising rates, bonds fall in value) and they HAD to liquidate those bonds because first the tech industry needed their cash and withdrew deposits from SVB, and then there was a classic bank run that occurred within, literally, 24 hours that nuked the bank. No other bank in America has all these dynamics. 

Books will be written, and quickly, on this debacle and I can’t wait to read more. 

Per page 15, their HTM securities were on their books at $91.321 Billion,  Fair Value was reported as $76.169 Billion.  That is a delta of $15.152 Billion.  Does anybody think that the current interest rate environment is "transitory"?

I think that there are lots of bankers, lawyers and accountants working this weekend.  Monday will likely be a bloodbath.

Edited March 11, 2023 by DalTxHornFan

[52-80 19147]

this discussion was mildly fun until the radical class-warfarists reminiscent of freshman year of college leaked into the chat

[Nivek 16918]

41 minutes ago, SL Xpress said:

I'm sorry for your loss? I don't know anything about you or your family's situation. 

I don't believe shareholders should be made whole. I do believe depositors should be made whole, and will be. I don't think the failure of SVB has to be the touchstone of one of the internal wars our society is engaged in. It can be, and might be, but I don't think it has to be. 

The shareholder is one of the last to pick at the corporate carcass, but they already knew this and they will likely end up as the biggest losers.    The debts of the company will include those with accounts, those who lost will first get their $250k insured, but the debt beyond that should not put them ahead of the shareholder at that point, though it likely will.  Assuming there are assets that can be liquidated (which should first go to funding the $250k first instead of the federal government having to fund it first).  But I do not know the law here.   

 

 

[pantone159 719]

6 minutes ago, DalTxHornFan said:

Per page 15, their HTM securities were on their books at $91,321 Billion,  Fair Value was reported as $76,169 Billion.  That is a delta of $15,152 Billion.  Does anybody think that the current interest rate environment is "transitory"?

But if they do indeed hold them to maturity then they will in fact get paid in full, and the market price does not matter, or whether the interest rate changes or not. Works until a bank run forces you to sell.

 

[Chopper 17230]

7 minutes ago, 52-80 said:

this discussion was mildly fun until the radical class-warfarists reminiscent of freshman year of college leaked into the chat

I guess in freshman year you could spout bullshit and convince people you knew what you're talking about. I can see why you're longing for those days. But anyway, apropos of nothing, welcome to senior year, motherfucker.

edit: and let's be clear. There's no class warfare going on here. The law is what the law is primarily because of the people who are screaming the loudest this weekend about the unfairness of the law. I believe in justice.

Edited March 11, 2023 by Chopper

[pantone159 719]

1 minute ago, Nivek said:

The debts of the company will include those with accounts, those who lost will first get their $250k insured, but the debt beyond that should not put them ahead of the shareholder at that point, though it likely will.

Huh? The debtors, especially the depositors should absolutely be in front of the shareholders. The shareholders get squat until the depositors get ALL their money back.

[Dahobbs 17524]

Just now, pantone159 said:

Huh? The debtors, especially the depositors should absolutely be in front of the shareholders. The shareholders get squat until the depositors get ALL their money back.

Yeah, and that is the general rule. 

[DalTxHornFan 3097]

9 minutes ago, pantone159 said:

But if they do indeed hold them to maturity then they will in fact get paid in full, and the market price does not matter, or whether the interest rate changes or not. Works until a bank run forces you to sell.

 

Understood. But HTM classification is inherently subjective.  That much difference between book and fair value relative to their reported equity is pretty squishy IMHO.

You have to evaluate the ability of the company to actually achieve the HTM.  I would love to see their plan for that.

Edited March 11, 2023 by DalTxHornFan

[DalTxHornFan 3097]

I've been talking to lots of people in the last 24 hours, so I apologize if I am repeating myself, but to the SVB Asset/Liability Committee, I ask:

[Guest]

12 minutes ago, pantone159 said:

Huh? The debtors, especially the depositors should absolutely be in front of the shareholders. The shareholders get squat until the depositors get ALL their money back.

I liked this post because you’re as confused as I am. This is obvious. It’s akin to saying, in a bankruptcy, equity owners should get paid before creditors. Yeah, no. Not at all. Totally backwards thinking.  

[chainsaw 9857]

1 hour ago, 52-80 said:

In modern, heavily-regulated US banking, losing your capital from a chartered bank is virtually unheard of. 

Capital. Not stocks, corporate bonds,buttcoins,  or other “speculative” investment. Losing actual cash, above the insured amount, is practically impossible.

People with SVB will have their money stuck for a while, but they’ll eventually be made whole. 

Clearly it's not impossible.

[Nivek 16918]

6 minutes ago, pantone159 said:

Huh? The debtors, especially the depositors should absolutely be in front of the shareholders. The shareholders get squat until the depositors get ALL their money back.

I know.  The shareholder invested in a company where the management failed (I know, it's their responsibility) and the debtor also chose poorly.  Once they are paid the $250K, the rest beyond that is kind of like a gamble, from a certain point of view.   

Debts get paid before equity is kind of fundamental though.  

[SL Xpress 7513]

9 minutes ago, 52-80 said:

this discussion was mildly fun until the radical class-warfarists reminiscent of freshman year of college leaked into the chat

I don't think that's fair or helpful. Although I do tend to side with your point of view.

People are really really angry in this country. This is just another flashpoint to get even angrier. 

I am way more in fear of the demonization I see that occurs on each side than I am about a bank failure, as important as this may be. 

When Nivek talks about his righteous anger, what occurred to him and his family in 2015, and the whole 90% of the country being slave earners for the wealthiest in this country, he's not some kind of isolated example. 

People seem to think we're immune to really bad things happening in this country, and I think that's foolish. Our brains haven't essentially changed in over a 100,000 years. Both history and pre recorded history tells us how bad things can get. I'm not quite sure why people don't talk about it more, because I don't see anything slowing down the train wreck we're heading for eventually. 

In any case, to me it just seems completely and utterly obvious you want to incentivize people to keep their money in banks rather than encourage them to withdraw their deposits as soon as possible as soon as there is some kind of trouble. That's what the FDIC insurance was set up for in the first place. Not making people whole simply encourages behaviors that are not healthy for our economy. I simply don't see the depositors as the bad guys here. 

But that's not how everyone feels about it, no matter how obvious it seems to me. It's the Robespierrian attitudes of parties on all sides that gets me scared.