There is not enough rope in this world, not enough stout tree limbs. Eventually, the proletariat will have its say.

If, as Bill Ackman claims in his tweet, SVB still has the funds to (eventually) cover 98% of their deposits, then I could see why someone like Elon Musk would find the idea of taking over SVB attractive. 2% is around $3 billion, so he may need to put up some millions of dollars to cover SVB's outstanding debts if people are still rushing to pull their deposits even after the takeover, but then he stands to make more than that back over the coming years, and doing so prevents numerous tech companies from imploding in the process with all the various nasty ripple effects of that on the national and global economy, which potentially could cost a company like Tesla a lot more.

quote:

Originally posted by oddball:
Treasury Sec. Janet Yellen says no federal bailout for SVB.

https://www.breitbart.com/news...silicon-valley-bank/

This is good news. I hope this decision holds. As the old saying goes, even a broken clock is right twice a day.

One of the things I find quite interesting about the Ackman tweet- if you scroll down the page, you'll see people saying "I'm not reading that. It's too long."

My God

Too many folks have become spoiled with "short form", and now they expect everything these days to be condensed down to sub-160-character Tweets and sub-2 minute TikToks. Anything more than a paragraph or a couple minutes of video is not worth their "valuable" time.

^^^Many (Most?) do not have the requisite attention span (or mental discipline!) to comprehend anything longer than that!

The tweet is 649 words. It took me 76 seconds to read it, but it's too long.

quote:

Originally posted by Balzé Halzé:

quote:

Originally posted by cyberiad:

quote:

Originally posted by spunk639:
Building Back Better, great job Joe.

The people who ran the bank took a big gamble with bonds and the interest rate and lost. Nothing to do with Joe.

Oh horseshit. It had everything to do with him and his shitty economic policies which lead to record inflation and in turn a quick raising of interest rates to combat it.

Nope. "Economic policies" didn't cause a run on this bank. Rising interest rates were involved but they made specific decisions that caused the problem. There's plenty of analysis on the web. Here https://www.ft.com/content/b55...fa-b88e-6e7e0ca758b8 is a short one. They screwed up.

The wine industry is facing an unprecedented financial crisis amid the fallout of Silicon Valley Bank, the leading bank for California wineries.

For nearly 30 years, the bank has been the go-to financial institution for the California wine industry. But now, an estimated thousands of wineries are locked out of their Silicon Valley Bank accounts — and they don’t know if, or when, they’ll get access to their money.

Would someone please explain what started all this? What happened, and who is identifiable as being completely or partially responsible?

quote:

Originally posted by parabellum:
Would someone please explain what started all this? What happened, and who is identifiable as being completely or partially responsible?

From Reuters..

quote:

As higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly, some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. This culminated in Silicon Valley Bank looking for ways this week to meet its customers' withdrawals.

more here: https://www.reuters.com/busine...-failure-2023-03-10/

I think rising interest rates, lower VC funding in 2022 and the crypto collapse created liquidity issues and depositors started withdrawing beyond the normal rate as folks got nervous. An old fashioned run on the bank.

SVB workers were paid BONUSES just hours before bank collapsed
[for all their good work. ]

“ …
The announcement comes as it was revealed that employees at the Santa Clara-based bank received their annual bonuses just hours before the bank collapsed.

Those payments had been processed in the days before SVB collapsed, as the bank normally paid its employees bonuses on the second Friday of every month, CNBC reports.

It is unclear how much the more than 8,500 employees received for the work they did in 2022, but SVB bonuses can range from about $12,000 for associates to $140,000 for managing directors, according to Glassdoor. …”

DailyMail article:
https://mol.im/a/11850421

The Dodd-Frank act (passed in 2010 I believe) made it so banks cannot be bailed out by .gov. The new language now proposes for a bail in, which means your deposits are unsecured and your money is not really your money anymore once deposited, it is the banks.

FDIC insures up to $250k per bank. Anything over that is unsecured. The FDIC account that insures depositors up to the $250k is woefully underfunded. It is said that there is only enough to cover about 1.5 percent of the estimated 12 trillion in US bank deposits.

If there are huge bank runs in the US, as it stands now, only about 1.5 percent of those funds would be restored.

Would you want to trust our gov to make your bank deposits whole if your bank goes under?

This is my understanding of things, do your own research. I have been hearing some analysts calling for bank runs for over a year now. There is even footage from a FDIC meeting warning of bank failures in the near term.

Check out some youtube videos from Liberty and Finance for some alternative narrative.

(Bloomberg) -- The problems that triggered SVB Financial Group Inc.’s death spiral were hiding in plain sight in the firm’s earnings reports.

That’s according to short seller William C. Martin, who warned his Twitter followers about the balance-sheet issues for almost two months before the parent of Silicon Valley Bank blew up in the blink of an eye this week.

The tweets started on Jan. 18, the day before SVB reported earnings, when Martin’s account posted a prescient thread that began: “Investors have rightfully been fixated on $SIVB’s large exposure to the stressed venture world, with the stock down a lot. However, dig just a little deeper, and you will find a much bigger set of problems at $SIVB.”

The posts by Martin, the former manager of a now-closed hedge fund that peaked with about $1 billion in assets, went on to detail how SVB had ratcheted up its portfolio of securities by 700% near the “generational top in the bond market.”

When the bank experienced an increase in withdrawals from depositors this year, deep losses on sales of some securities created a hole in the balance sheet that triggered its spectacular failure in just two days this week, as a run on the bank erupted among its clientele of mostly young tech companies.

Martin said he initially started analyzing SVB out of suspicion that he’d find weakness in its book of loans to Silicon Valley startups. Instead, he realized how vulnerable the firm’s fixed-income investments had left it following a year of deep losses in the bond market.

“They had bought all these mortgages at the top of the market and were sitting on a massive unrealized loss,” he said in an interview. “And it was sitting there in plain sight. There were a number of other banks and insurance companies with similar issues, but I haven’t seen anyone anywhere near the scale of Silicon Valley Bank.”

Losses on the asset side of the bank’s balance sheet were more alarming in light of signs of trouble on the liabilities side: Its deposits were at risk of disappearing amid a cold snap in the once red-hot world of startups. Many of SVB’s customers were now burning cash rather than raising fresh funds thanks to the largess of the VC industry.

“When you layer on the fact that their primary depositors were venture- backed companies, so they were seeing outflows on deposits, it seemed from a short perspective, a pretty good setup,” Martin said.

https://finance.yahoo.com/news...-bomb-214259955.html

quote:

Originally posted by cyberiad:

Nope. "Economic policies" didn't cause a run on this bank. ...

They screwed up.

Both can be true at the same time.

To say that the policies of this administration didn't contribute to this bank's sudden collapse is just fanciful.

quote:

Originally posted by PGT:
In the start-up world, SVB was the engine that held and transacted Venture Capital (VC) funding and lines of credit. In order to smooth out funding rounds and lumpy revenue normal for a startup, SVB offered lines of credit.

Here's the catch, the LoC would only be established if the startup moved ALL their funds to SVB including corp credit cards. If a CEO or CFO moved funds out of SVB to remain liquid; they'd incur a 1% penalty on the amount drawn. So, moving $10M out cost them $100K. SVB did this to account for all assets when establishing and maintaining the LoC.

Now the rub...if you moved ALL your assets to SVB, would you maintain other accounts? Likely not. So, when it was apparent there might be a run on SVB last week, where would you move funds to? It takes 1-3 business days to establish a new corporate account at another institution and then there was the gamble of the 1% penalty.

What's your reference for this info? Having been in early-stage private venture capital as an investment principal, worked with SVB as both a VC & entrepreneur, directed the establishment of accounts and transferred funds into new external accounts in these roles - the info's gist and many of the expressed facts are woefully incorrect.

SVB Depositors, Investors Tried to Pull $42 Billion Thursday

(Bloomberg) -- Investors and depositors tried to pull $42 billion from Silicon Valley Bank on Thursday in one of the biggest US bank runs in more than a decade, according to a Friday regulatory filing.

At the close of business on March 9, the bank had a negative cash balance of $958 million, according to an order taking possession of the bank filed Friday by California’s bank regulator, the Department of Financial Protection and Innovation.

The order shines light on the scale of the bank run faced by the lender, which was placed into Federal Deposit Insurance Corp. receivership by the state regulator. The scale of attempted withdrawals was so large that the bank ran out of cash and ways to get it.

When the Federal Reserve sent its cash letter — a list of checks and other transactions for the bank to process - to SVB, it failed to pull together enough currency to meet it, according to the California regulator.

“Despite attempts from the bank, with the assistance of regulators, to transfer collateral from various sources, the bank did not meet its cash letter with the Federal Reserve,” the order from Commissioner Clothilde Hewlett said.

Venture withdrawals

The run was sparked by a letter that Silicon Valley Bank Chief Executive Officer Greg Becker sent to shareholders Wednesday. The bank had suffered a $1.8 billion loss on the sale of US treasuries and mortgage-backed securities and outlined a plan to raise $2.25 billion of capital to shore up its finances.

Customers immediately tried to pull their money, including many of the venture-capital firms the bank had cultivated over decades. Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures and Founder Collective all advised their startups to pull their cash from the bank, people familiar with the matter said.

The withdrawals initiated by depositors and investors amounted to $42 billion on Thursday alone, according to the regulator. Despite being in sound financial condition prior to Thursday, the California watchdog said the run “caused the bank to be incapable of paying its obligations as they come due,” and it was now insolvent.

The bank was then closed by the California DFPI and placed into FDIC receivership, marking the biggest failure of a US bank since the financial crisis.

https://www.yahoo.com/finance/...-pull-013220358.html

Every time I look it’s ‘25 billion’ to green energy, 5 billion to the Ukrainian war, billions that the bank lost, etc., etc..

Much of this $$ is borrowed, interest rates are still going up. It kinda feels like a ‘squeeze’ is coming?

BWTHDIK.

quote:

Originally posted by parabellum:
Would someone please explain what started all this? What happened, and who is identifiable as being completely or partially responsible?

From what I read and understand, SVB invested in long term, low interest bonds and got hit bad by rising interest rates pushed by inflation. SVB had no choice but to sell these bonds at a huge loss to cover the bank run generated by companies and individuals last week, losing billions before the feds shut them down.

quote:

Originally posted by oddball:
From what I read and understand, SVB invested in long term, low interest bonds and got hit bad by rising interest rates pushed by inflation. SVB had no choice but to sell these bonds at a huge loss to cover the bank run generated by companies and individuals last week, losing billions before the feds shut them down.

There seems like there might be a lesson here. For those of us that are financially undereducated:

1. Why would they do this? What assumptions were they making that would make this beneficial? What were they thinking would happen in short term / long term? Invested in long term, low interest bonds

2. I'm presuming that they didn't believe that inflation and interest rates would rise so high and/or so quickly. Was this a common belief or did they ignore the signs? When did the signs appear for the reasonable, financially savvy investor? Was this too late for SVB to act?

3. Why did they need to sell? Couldn't they hold onto the bonds? Sounds like not when huge unexpected withdrawals were made. But what triggered the huge withdrawals? Did they really lose money or just on paper (recoup when interest rates come down again?)?

Just wondering if there are lessons here for personal investing as well. I'm still trying to learn about bonds.

ETA: never mind. I think I get it now.