FDIC shuts down Silicon Valley Bank, crash incoming? Update: 2nd bank, Signature Bank in NY closed
- Thread starter Paper Boi
- Start date
The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing
@SVB_Financial
to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent
@jpmorgan
@citi
or
@BankofAmerica
acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the
@federalreserve
’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank. The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk. For those who make the case that depositors be damned as it would create moral hazard to save them, consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with. I am a pretty sophisticated financial analyst and I find most banks to be a black box despite the 1,000s of pages of
@SECGov
filings available on each bank. SVB’s senior management made a basic mistake. They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs. The
@FDICgov
and OCC also screwed up. It is their job to monitor our banking system for risk and SVB should have been high on their watch list with more than $200B of assets and $170B of deposits from business borrowers in effectively the same industry. The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits. This administration is particularly opposed to concentrations of power. Ironically, its approach to SVB’s failure guarantees duopolistic banking risk concentration in a handful of SIBs. My back-of-the envelope review of SVB’s balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits, but eventually is too long when you have payroll to meet next week. So even without assigning any franchise value to SVB, the cost of a gov’t guarantee of SVB deposits would be minimal. On the other hand, the unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday. Otherwise, watch out below.
9:38 AM · Mar 11, 2023
·
7.4M
Views
@SVB_Financial
to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent
@jpmorgan
@citi
or
@BankofAmerica
acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the
@federalreserve
’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank. The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk. For those who make the case that depositors be damned as it would create moral hazard to save them, consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with. I am a pretty sophisticated financial analyst and I find most banks to be a black box despite the 1,000s of pages of
@SECGov
filings available on each bank. SVB’s senior management made a basic mistake. They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs. The
@FDICgov
and OCC also screwed up. It is their job to monitor our banking system for risk and SVB should have been high on their watch list with more than $200B of assets and $170B of deposits from business borrowers in effectively the same industry. The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits. This administration is particularly opposed to concentrations of power. Ironically, its approach to SVB’s failure guarantees duopolistic banking risk concentration in a handful of SIBs. My back-of-the envelope review of SVB’s balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits, but eventually is too long when you have payroll to meet next week. So even without assigning any franchise value to SVB, the cost of a gov’t guarantee of SVB deposits would be minimal. On the other hand, the unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday. Otherwise, watch out below.
9:38 AM · Mar 11, 2023
·
7.4M
Views
dude was advocating for a bailout before the FDIC even seized the bank.
funny seeing all these crypto bros calling out for regulators and regulations now as their and their friends are affected. ironic this was triggered by the very same shyt they were shilling for years.
The FEDS should tell them tough shyt and kick rocks.
Last edited:
Shark Tank fans in shambles. 
In reality, the thing about a bank like that crashing and making international news is that people are likely to get shook and panic. And of course, the fact that a bank crashed like that is never a good look for the economy.
Oh well. Gotta let it play out, I guess.
In reality, the thing about a bank like that crashing and making international news is that people are likely to get shook and panic. And of course, the fact that a bank crashed like that is never a good look for the economy.
Oh well. Gotta let it play out, I guess.
Cobalt Sire
All Star
Boy that housing bout to be cheap. I've been licking my chops for years trying to get in, nikka. fukk you, I'm bout to get mine. Did you get yours? This is the moment we were waiting for. We needed a crash. Housing needs to come way down, hoe. Whole bunch of people stuck on the outside waiting to get in.
gonnagetit
Banned
Facts and Crypto too
Dipsey Doo
Superstar
Worthless Loser
Blackpilled
The partial rollback of the law may or may not have had an effect, but the optics don't look good. It almost feels common that every time regulations designed to protect people get rolled back, people end up getting hurt.
this thread has turned into a cesspool of conspiracy theories and nonsense post from Twitter financial gurus
Definitely. One thing I done learned from this place and social media is that no one knows anything about money, and if they claim to, it's probably to make money off of your stupid ass since you believed that they knew about money. Same with fitness.
the bossman
Superstar
tech salaries have absolutely nothing to do with the SVB situationand what is wrong with people getting their worth in salary?
I read the comments in the tweet from the op and some dude who pays for some premium service through his broker, can’t even see the transaction.
Has anyone here who knows about the market see the transaction?
Right there is why we wont see another 2008 . Maybe a dip but not a full collapse