Just like a 'Brady Violation' in Law Enforcement is essentially career ending, this guy should NEVER be employed in Banking/Finance EVER Again!

My brief research on SVB seems to lead me to believe it is a pretty high-end bank with a top tier client list. It does not seem likely your average citizen has a checking account through SVB.

Why would one bank with SVB? Are they giving higher than normal interest rates on accounts? I feel this is borderline more like a stock investment than a saving/checking account.

I still don't understand what the federal govt did to solve the problem.

https://www.cnbc.com/2023/03/1...om-svb-collapse.html

"The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions in a way that it said “fully protects all depositors.” The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits.

Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.

The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities."


So with 95% of SVB depositors being uninsured, is this new Bank Term Funding Program providing the needed money to depositers?

SVB's remaining assets are reportedly enough to cover around 98% of the bank's deposits.

So it appears that the government is going to be putting up the remainder (around 2%, or roughly ~$3 billion) from the FDIC's deposit insurance fund, which is effectively the FDIC's "emergency savings account" funded by insurance premiums paid by all FDIC-insured banks plus the interest earned from investing those premiums.

Thus, 98%+2%=100%, and all of SVB's deposits can be honored.

They doing the same thing with Signature Bank too, putting up however many billions of dollars in deposits Signature's remaining assets won't cover.

The FDIC isn't obligated to cover that remainder, since their only guarantee is the first $250k per account, but they chose to go beyond that limit in order to avert a larger economic/banking meltdown.

Which is probably smart, from a financial standpoint. If additional banks were to continue to fail as a result, it would likely require the FDIC to cover more than $3+ billion in insured deposits in the long run as the number of failed banks ballooned. So believe it or not, covering several billion in SVB's/Signature's uninsured deposits was the cheaper option. (Provided, of course, this actually did avert a larger bank failure domino effect. Which remains to be seen.)

https://www.businesstoday.in/s...re-373067-2023-03-12

Pushing the woke agenda. Now Brandon says, ‘fire them’.

^^^ Meet Jay Ersapah:

It didn’t take long to begin finding the diversity hires involved in the toppling of the first domino at Silicon Valley Bank, which pitched over faster than Mitch McConnell going down stairs at a swanky fund raiser. Meet Jay Ersapah, SVB’s queer diversity hire in charge of “Financial Risk Management.”

It looks like Ms. Ersapah was possibly more focused on sharing her queer sexual experiences than managing risk, but what do I know?

I know what you’re thinking. Ms. Ersapah might not have been qualified to manage risk for the bank, she had dark melanin, atypical sexual pursuits, and DIVERSITY EQUITY AND INCLUSION. Don’t be racist.

https://www.coffeeandcovid.com...ack&utm_medium=email

thanks Rogue,

I did find this:

https://www.cnn.com/business/l...784d90289002004ff537

Banks, not taxpayers, are funding the government's efforts to shore up depositors of the failed Silicon Valley Bank and Signature Bank.

The Biden administration will draw from the Deposit Insurance Fund to backfill customers' deposits, President Joe Biden said Monday, reiterating comments from the heads of Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation that this relief plan would not be funded by American taxpayers.

The FDIC's Deposit Insurance Fund (DIF) is used to help pay for operating costs as well as to resolve failed banks. It's funded by quarterly fees collected from FDIC-insured banks as well as interest earned from its investments in Treasury securities.

As of December 31, 2022, the DIF's fund balance was $128.2 billion, according to the FDIC.

Under requirements put in place by the Dodd-Frank Act, the FDIC has to have enough in the DIF coffers to cover 1.35% of insured deposits.


so FDIC has to have enough to cover 1.35 % of the insured deposits. The insured would be the deposits with less than $250k. And FDIC has to have enough to only cover 1.35% of the insured. seems like this approach doesn't have much capacity to cover cases where 95% of the deposits are unsecured. so this isn't a tactic that can be used often or if there is wide spread bank failures ?

Yes, it's theoretically possible that if a large enough percentage of banks were to fail simultaneously, the FDIC's Deposit Insurance Fund may not have enough funds to cover everyone's insured deposits.

But also keep in mind that the FDIC isn't intending to cover 100% of the insured deposits on its own from its insurance fund. Even a failed bank like SVB apparently still retains sufficient assets to cover 98% of its deposits, both insured and uninsured, so it almost certainly could have covered 100% of its insured sub-$250k deposits through its assets alone, without requiring additional FDIC funds to cover any insured deposits.

So it's not that only 1.35% of all insured deposits will be covered. It's that the FDIC has $128 Billion available to help cover insured deposits beyond what are able to be covered by the failed bank's remaining assets.

That $128B can go a long way, since it's only supplementing coverage for any insured deposits that can't be made whole by the bank's remaining assets. Which should be a very small amount if any, even at failed banks. The uninsured accounts with amounts over $250k would be the ones absorbing the deficit in the bank's assets, and the FDIC isn't obligated to cover any of those.

(Though they can on a case by case basis, like they chose to do with SVB and Signature, but they wouldn't be doing so in the face of a widespread Great Depression-style bank cascade seeing thousands of banks collapsing. They'd instead focus on their obligation for the $250k insured deposits.)

FDIC is insurance funded by the banks. It is a cost to the financial industry. Businesses pass on their costs to consumers, which in this case are people and businesses using the financial sector. That is all of us.

We pay more to borrow money and get less interest from our deposits because of FDIC. Which is ok if priced rationally as an insurance.

When the fund is raided like this, the cost goes up and gets spread out to all of us. Luckily for Harry and Meghan as they get their millions back.

For me the issue is bait and switch. The rules are changed after the fact, which benefits those who made bad decisions but we get stuck paying the bill while being lied to that it won't cost us.

quote:

Originally posted by sdy:

https://www.cnbc.com/2023/03/1...om-svb-collapse.html

Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.

The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities."

This smells fishy. The government is taking government bonds as collateral against loans to the banks. The US Treasury borrowed from the banks in the first place by issuing the bonds, and now will accept their own promissory notes (bonds) as security against loans to the banks.

The government money being loaned to the banks will be generated by ... issuing new government bonds which are debt the taxpayer is on the hook for if the banks default on their loan.

It's a big circular system transferring debt and risk ultimately to the taxpayer.

quote:

Originally posted by sdy:
I still don't understand what the federal govt did to solve the problem.

https://www.cnbc.com/2023/03/1...om-svb-collapse.html

"The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions in a way that it said “fully protects all depositors.” The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits.

Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.

The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities."


So with 95% of SVB depositors being uninsured, is this new Bank Term Funding Program providing the needed money to depositers?

In labeling SVB and Signature Bank as “systemic risks,” Treasury is in effect saying, “All banks are ‘systemic risks’.” I’ve come to understand that there is a system in place for failures like this that likely would have made depositors 90% whole—without this bailout, which will have long term repercussions. Banks are paying into the FDIC for $250k worth of asset protection, if now the federal government is going to back 100% of depositors accounts; that will have to change. At least one Silicon Valley business had almost half-a-billion dollars in a checking account.

Privatize the gains
Socialize the losses

That’s banking in 2023

Recommend listening to Krystal and Saagar’s discussion.

NYSE suspended trading shares of Charles Schwab.

quote:

Originally posted by Sig2340:
NYSE suspended trading shares of Charles Schwab.

Ruh rho...

quote:

Originally posted by Sig2340:
NYSE suspended trading shares of Charles Schwab.

It was temporarily halted mid-morning, along with many other bank stocks, but it's back trading now. Schwab had dropped -23%, but has rebounded a bit to just -8.5% currently.


First Republic Bank seems to be getting the worst of it. It's down nearly -50% so far today.

Serious questions:
If you had to put 250k(ish) somewhere besides your mattress, metaphorically speaking, where would that be?

Is this an environment where all bets are off and it's too late?

That depends on a number of factors, including your goals and risk tolerance.


But if it were me, and my goal was wanting the best return possible while still being 100% risk free (or as close as possible short of a zombie uprising or a Chinese takeover of the entire country), I'd buy my $10k limit in Series I Savings Bonds and put the remaining $240k in two of the the highest-yield FDIC-insured savings account I could find. Two accounts with $120k apiece, so that as you accumulate interest your total remains under $250k in each for a while to come.

Or, if you're married, $20k in I-Bonds ($10k apiece for you and spouse) and then $230k split between two high yield savings accounts.

High yield savings paying 4%+ is easy to find these days. I use Bask Bank, which is currently paying 4.35%. And importantly, they raise their interest rate for existing customers every time rates go up, which not all banks do.

You could find 1 year CDs with slightly higher rates than high yield savings (a few tenths of a percent, say 4.5% to 4.9%), but that comes at the cost of losing accessibility. I'd rather have a few tenths of a percent lower return in exchange for the liquidity of a savings account.

And I definitely wouldn't want to lock my money up in longer term CDs currently, since there are likely further interest rate hikes coming in the near future, so your long term CD may end up with a lower return than even shorter term CD or savings rate in 6-12 months.

quote:

Originally posted by apprentice:
Serious questions:
If you had to put 250k(ish) somewhere besides your mattress, metaphorically speaking, where would that be?

Is this an environment where all bets are off and it's too late?

Situations are different but I'm thinking land or gold. Already have the land so I'm systematically converting cash positions to gold. Not today though. Gold got a little pricey overnight. Depends on when/if you're going to need the funds.

quote:

Is this an environment where all bets are off and it's too late?

^^^^^^^^^^^^^
It is never too late. These things create opportunity. Suggestions above make sense. {Rogue suggestions to be specific.

So savings accounts, even the online variety, are still among the safest options?

Just making sure since that would be good news.