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Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis

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March 12, 2023, 04:44 PM
2PAK
Silicon Valley Bank is shut down by regulators in biggest bank failure since global financial crisis
Lets see who owns the bank tomorrow morning. I'll be interested to see if one of the larger banks have effectively purchased it (or whatever mechanism including merging with it) over the weekend. Short of that, I'm happy there is not going to be a federal bailout of SVB.
March 12, 2023, 04:47 PM
Pipe Smoker
I’m guessing ol’ Bill figures to loose a lot of skin if the government doesn’t obey him.

Bill Ackman says Gov has 48 hours to fix SVB 'irreversible mistake'

“Billionaire hedge fund manager Bill Ackman is forecasting 'economic meltdown' within hours of the banks opening up on Monday morning following the failure of Silicon Valley Bank.

Ackman is urging for the U.S. government to finally step in and protect all of the bank's depositors, warning inaction could lead to a ripple effect across other smaller banks within the industry. …”

DailyMail article:
https://mol.im/a/11849813



Serious about crackers
March 12, 2023, 05:18 PM
Dakor
If I were to wager, I would bet no single entity is going to step up and purchase SVB's assets outright.

Rather, pieces of it will be auctioned off with some entities wanting the high-net worth individual accounts, while others will purchase the bonds slightly higher than their current value as long as they get some share of the start-up accounts. Not sure if the government will let the bidders cherry pick the venture portfolio or not, but they can certainly try. Acquiring large corporate accounts might be accomplished on a syndicated basis to spread the bidders' risk.

We'll see what news tonight or tomorrow brings.
March 12, 2023, 05:19 PM
oddball
quote:
Originally posted by konata88:

Why would they do this?


Most of the deposits at SVB were from tech and medical startup companies; since they have little revenue (they are just starting business), they get startup cash from venture capitalists and since SVB seemed to be THE bank to deal with in Silicon Valley (they provided a lot of financial services to these same companies), the companies deposit their operating cash in SVB. The FDIC only insures accounts up to $250K, so if you and your wife each had an account of that amount, the feds will pay you back the $500K if the bank fails. But it is reported that the total deposits at SVB, less than 10% of it was FDIC insured. So the majority of accounts held by startup companies had far more than the $250K limit. Millions.

Why SVB decided to invest the deposits into long term bonds is a mystery to me, I have no idea. But it seems the insolvency of the bank started to get certain people worried, it is reported that early last week Peter Thiel advised his portfolio companies in his VC firm to pull out of SVB, thus starting a bank run of other depositors. Also before the bleed-out on Thurs, SVB announced a stock sale to raise capital, triggering fear in Silicon Valley.

Tens of billions of dollars was yanked out of the bank last week, but billions more did not. Not only does the FDIC have to pay back each account of $250k, but must somehow figure out a way to compensate the cash above the $250k. Maybe an outright sale of the bank, or selling off assets to come up with cash. I just read that RNC Bank and PNC have cooled off their interest in buying SVB. Hopefully we will not see bank runs at small regional banks. We'll see tomorrow....



"I’m not going to read Time Magazine, I’m not going to read Newsweek, I’m not going to read any of these magazines; I mean, because they have too much to lose by printing the truth"- Bob Dylan, 1965
March 12, 2023, 05:26 PM
Rick Lee
I bank with the credit union most US House members and their staffers use. I'm pretty sure that one will be protected, though maybe not the non-connected account holders.
March 12, 2023, 05:42 PM
Balzé Halzé
U.S. government guarantees all Silicon Valley Bank deposits, money available Monday

Financial regulators said Sunday night depositors of the failed Silicon Valley Bank will have access to all of their money starting Monday, March 13.

In a joint statement, the heads of the Federal Reserve, Treasury Department, and FDIC said: "After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."

The Federal Reserve also said it will offer funding to banks through a new facility to help ensure banks can meet all depositor withdrawals.

The Fed's financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year to banks, savings associations, and credit unions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.

According to the Fed, the BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.

The Fed said it is carefully monitoring developments in financial markets.

"The Federal Reserve is prepared to address any liquidity pressures that may arise," the central bank said in a release. "This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy."

In their joint statement, regulators also announced a similar systemic risk exception for Signature Bank (SBNY), which was closed on Sunday by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

On Friday, Silicon Valley Bank became the largest bank to fail since Seattle's Washington Mutual during the height of the 2008 financial crisis and, behind Washington Mutual, the second-largest bank failure in U.S. history. It is also the first bank to fail since 2020.

California state regulators seized the Santa Clara-based institution and appointed the Federal Deposit Insurance Corporation as receiver, meaning the FDIC will be able to sell off assets and return money to insured depositors.

https://finance.yahoo.com/news...onday-223546372.html


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March 12, 2023, 06:01 PM
Dakor
That released statement is very confusing and it appears to be a smoke & mirror attempt to bailout SVB and other banks, if ALL deposits are available to account holders come tomorrow. How can the Federal government provide capital against a collateral obligation that is already collateralized? WTF???
March 12, 2023, 06:02 PM
Fly-Sig
quote:
Originally posted by Balzé Halzé:
U.S. government guarantees all Silicon Valley Bank deposits, money available Monday

Financial regulators said Sunday night depositors of the failed Silicon Valley Bank will have access to all of their money starting Monday, March 13.

In a joint statement, the heads of the Federal Reserve, Treasury Department, and FDIC said: "After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."
.
.
.

https://finance.yahoo.com/news...onday-223546372.html


Fascinating turnaround from this morning. In one sense the fedgov has little choice in the matter. Bank runs are contagious, and there are going to be many other financial entities entangled in this bank (and in crypto) who could suffer more runs. By backstopping this bank it may prevent other failures.

I dislike the precedent, but they didn't ask me.

I don't see how the taxpayer won't somehow end up footing the bill. If not directly, then as consumers via increased cost of money throughout the economy resulting in higher priced goods and services.
March 12, 2023, 06:06 PM
oddball
quote:
Originally posted by Balzé Halzé:
The Federal Reserve also said it will offer funding to banks through a new facility to help ensure banks can meet all depositor withdrawals.






"I’m not going to read Time Magazine, I’m not going to read Newsweek, I’m not going to read any of these magazines; I mean, because they have too much to lose by printing the truth"- Bob Dylan, 1965
March 12, 2023, 06:14 PM
1flynDO
Sadly that is what will happen. They should have let it fail. We will be on the hook or our kids will. They should get hosed since they paid the price.

Should buy the stock since it is rock bottom and they will bail it out.
March 12, 2023, 06:37 PM
Sig2340
quote:
Twitter.com

BREAKING: Signature Bank, $SBNY, has been closed by State authorities.

— unusual_whales (@unusual_whales) March 12, 2023


Has “the other” shoe just dropped?

Or is that just another domino falling?





Nice is overrated

"It's every freedom-loving individual's duty to lie to the government."
Airsoftguy, June 29, 2018
March 12, 2023, 06:41 PM
lkdr1989
So the government is not going to bail out SVB but they're also bailing out SVB?
"...all Silicon Valley Bank clients will be protected and have access to their funds" if the majority of SVB customers' money is uninsured and SVB doesn't have enough assets, where is the money coming from?

On a related note, the president & CEO of First Republic Bank posted a message assuring their clients everything was fine.
https://www.barrons.com/articl...ket-worried-2e2f1394

quote:
NEW YORK (AP) — The U.S. government took extraordinary steps Sunday to stop a potential banking crisis after the historic failure of Silicon Valley Bank, assuring depositors at the failed financial institution that they would be able to access all of their money quickly.

The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread, and only hours before trading began in Asia. Regulators had worked all weekend to try and come up with a buyer for the bank, which was the second largest bank failure in history. Those efforts appeared to have failed as of Sunday.

In a sign of quickly the financial bleeding was occurring, regulators announced that New York-based Signature Bank had failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history.

The Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.

Regulators had to rush to close Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.

Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank.

Among the bank’s customers are a range of companies from California’s wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.

Sunrun, which sells and leases solar energy systems, had less than $80 million of cash deposits with Silicon Valley Bank as of Friday and expects to have more information on expected recovery in the coming week, the company said in a statement.

Stitchfix, the popular clothing retail website, disclosed in a recent quarterly report that it had a credit line of up to $100 million with Silicon Valley Bank and other lenders.

Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.

Yellen described rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.

Sheila Bair, who was chairwoman of the FDIC chair during the 2008 financial crisis, recalled that with almost all the bank failures during that time, “we sold a failed bank to a healthy bank. And usually, the healthy acquirer would also cover the uninsured because they wanted the franchise value of those large depositors so optimally, that’s the best outcome.”

But with Silicon Valley Bank, she told NBC’s “Meet the Press,” “this was a liquidity failure, it was a bank run, so they didn’t have time to prepare to market the bank. So they’re having to do that now, and playing catch-up.”



https://apnews.com/article/sil...1daf337c4691bbb9ec1e




...let him who has no sword sell his robe and buy one. Luke 22:35-36 NAV

"Behold, I send you out as sheep in the midst of wolves; so be shrewd as serpents and innocent as doves." Matthew 10:16 NASV
March 12, 2023, 06:44 PM
cyberiad
quote:
Originally posted by Fly-Sig:
quote:
Originally posted by Balzé Halzé:
U.S. government guarantees all Silicon Valley Bank deposits, money available Monday

Financial regulators said Sunday night depositors of the failed Silicon Valley Bank will have access to all of their money starting Monday, March 13.

In a joint statement, the heads of the Federal Reserve, Treasury Department, and FDIC said: "After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."
.
.
.

https://finance.yahoo.com/news...onday-223546372.html


Fascinating turnaround from this morning. In one sense the fedgov has little choice in the matter. Bank runs are contagious, and there are going to be many other financial entities entangled in this bank (and in crypto) who could suffer more runs. By backstopping this bank it may prevent other failures.

I dislike the precedent, but they didn't ask me.

I don't see how the taxpayer won't somehow end up footing the bill. If not directly, then as consumers via increased cost of money throughout the economy resulting in higher priced goods and services.


That's what all the VCs crying on Twitter want you to believe. We don't need regulators and banking regulation but when we fuck up, since we're big enough and know the right people, we get bailed out by the regulators. What a surprise. They can laugh all the way to the next bank and do it again.
March 12, 2023, 06:47 PM
lkdr1989
If SVB had been smarter, they would have gotten Zelenskyy to deposit some of our money into SVB so then Uncle Sugar would definitely bailout the bank so that the fight against the Russian nazis could continue... Roll Eyes




...let him who has no sword sell his robe and buy one. Luke 22:35-36 NAV

"Behold, I send you out as sheep in the midst of wolves; so be shrewd as serpents and innocent as doves." Matthew 10:16 NASV
March 12, 2023, 06:48 PM
229DAK
quote:
Not only does the FDIC have to pay back each account of $250k, but must somehow figure out a way to compensate the cash above the $250k.
So what's the purpose of the $250K insurance limit?


_________________________________________________________________________
“A man’s treatment of a dog is no indication of the man’s nature, but his treatment of a cat is. It is the crucial test. None but the humane treat a cat well.”
-- Mark Twain, 1902
March 12, 2023, 06:55 PM
Sig2340
quote:
Originally posted by 229DAK:
quote:
Not only does the FDIC have to pay back each account of $250k, but must somehow figure out a way to compensate the cash above the $250k.
So what's the purpose of the $250K insurance limit?


All depositors are assured of that much, or what you are actually due, being returned to you.

Got $3.87 you get $3.87.

If you have $3.87M, you get $250,000 plus any scraps tossed their way in the bankruptcy proceedings.





Nice is overrated

"It's every freedom-loving individual's duty to lie to the government."
Airsoftguy, June 29, 2018
March 12, 2023, 07:56 PM
konata88
Saving the finances of average joe banking customer is good. The bank doesn’t need to be saved though, does it? Bad banks who make bad decisions should be allowed to fail and be eliminated from the market. Otherwise, if gov saves every big biz that makes mistakes, what’s the penalty for these bad business men? Make bad decisions, gov saves you. Same as commit crimes, no prison time. What’s the risk?




"Wrong does not cease to be wrong because the majority share in it." L.Tolstoy
"A government is just a body of people, usually, notably, ungoverned." Shepherd Book
March 12, 2023, 08:04 PM
nhracecraft
quote:
The Fed said it is carefully monitoring developments in financial markets.

Well, I guess we should all be relieved with that statement... Roll Eyes


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March 12, 2023, 08:19 PM
Dakor
quote:
Originally posted by Sig2340:
quote:
Originally posted by 229DAK:
quote:
Not only does the FDIC have to pay back each account of $250k, but must somehow figure out a way to compensate the cash above the $250k.
So what's the purpose of the $250K insurance limit?

If you have $3.87M, you get $250,000 plus any scraps tossed their way in the bankruptcy proceedings.

Did you read the latest press release? Everything - all deposits are now covered so Biden & his cronies bailed out the SVB customers 100%. It would be bad enough but the it's truly sickening b/c the tax payer pays DOUBLE for this, if you understand economics.

Where the fuck are the Republicans in Congress??? Per the Constitution they control the purse strings.
March 12, 2023, 08:30 PM
BBMW
The stockholders of the bank are going to be wiped out. Eventually the employees will be laid off (they need to stay in place until to carcass of the bank is either sold off or liquidated.) But the depositors will be made whole. This should stop the runs on other banks. The assets of the bank will be sold off which will cover most of the cost of covering the deposits.

quote:
Originally posted by konata88:
Saving the finances of average joe banking customer is good. The bank doesn’t need to be saved though, does it? Bad banks who make bad decisions should be allowed to fail and be eliminated from the market. Otherwise, if gov saves every big biz that makes mistakes, what’s the penalty for these bad business men? Make bad decisions, gov saves you. Same as commit crimes, no prison time. What’s the risk?