FDIC shuts down Silicon Valley Bank, crash incoming? Update: 2nd bank, Signature Bank in NY closed
- Thread starter Paper Boi
- Start date
Giannis Antetokounmpo Put His Money In 50 Banks Until His Team Owner Taught Him Investing
Giannis Antetokounmpo, 27, is extremely careful about preserving his hard-earned coins and has accounts at 50 different banks containing $250,000.
Come on bro you could’ve looked this up
Neo. The Only. The One.
THE ONE
Giannis Antetokounmpo Put His Money In 50 Banks Until His Team Owner Taught Him Investing
Giannis Antetokounmpo, 27, is extremely careful about preserving his hard-earned coins and has accounts at 50 different banks containing $250,000.www.yahoo.com
Come on bro you could’ve looked this up
You right, i could have
I was being lazy, I admit
*conspiratorialWhat are your credentials to be a Mod on this topic? You’re too conspiracist like to me
my credentials are my address in Harlem and not being a 2012 (WOAT year) user
Who??
what are your thoughts on T. Thomas Fortune
It’s a good summary of what happened indeed. The only thing is that it hasn’t been updated to reflect that the Feds will back all of the deposits (insured and uninsured). So depositors will be able to withdraw and make payroll and handle other business affairs. Shareholders and investors of SVB are taking the L though.How did we get here?
SVB Financial is the parent company of Silicon Valley Bank, which counts many startups and venture-capital firms as clients. During the pandemic, those clients generated a ton of cash that led to a surge in deposits. SVB ended the first quarter of 2020 with just over $60 billion in total deposits. That skyrocketed to just shy of $200 billion by the end of the first quarter of 2022.
What did the bank do?
SVB Financial bought tens of billions of dollars of seemingly safe assets, primarily longer-term U.S. Treasurys and government-backed mortgage securities. SVB’s securities portfoliorose from about $27 billion in the first quarter of 2020 to around $128 billion by the end of 2021.
Why is that a problem?
These securities are at virtually no risk of defaulting. But they pay fixed interest rates for many years. That isn’t necessarily a problem, unless the bank suddenly needs to sell the securities. Because market interest rates have moved so much higher, those securities are suddenly worth less on the open market than they are valued at on the bank’s books. As a result, they could only be sold at a loss.
SVB’s unrealized losses on its securities portfolio at the end of 2022—or the gap between the cost of the investments and their fair value—jumped to more than $17 billion.
What else went wrong?
At the same time, SVB’s deposit inflows turned to outflows as its clients burned cash and stopped getting new funds from public offerings or fundraisings. Attracting new deposits also became far more expensive, with the rates demanded by savers increasing along with the Fed’s hikes. Deposits fell from nearly $200 billion at the end of March 2022 to $173 billion at year-end 2022.
And that is accelerating this year: As of Jan. 19, SVB was forecasting its deposits would decline by a midsingle-digit percentage in 2023. But their expectation as of March 8 was for a low-double-digit percentage decline.
How did this come to a head?
On Wednesday SVB said it had sold a large chunk of its securities, worth $21 billion at the time of sale, at a loss of about $1.8 billion after tax. The bank’s aim was to help it reset its interest earnings at today’s higher yields, and provide it with the balance-sheet flexibility to meet potential outflows and still fund new lending. It also set out to raise about $2.25 billion in capital.
Why didn’t it work?
Following that announcement on Wednesday evening, things seemed to get even worse for the bank. The share-sale announcement led the stock to crater in price, making it harder to raise capital and leading the bank to scuttle its share-sale plans, The Wall Street Journal has reported. And venture-capital firms reportedly began advising their portfolio companies to withdraw deposits from SVB.
On Thursday, customers tried to withdraw $42 billion of deposits—about a quarter of the bank’s total—according to a filing by California regulators. It ran out of cash.
What will happen to customer deposits?
Many of the bank’s deposits are sizable enough that they don’t carry Federal Deposit Insurance Corp. protection. SVB said it estimates that at the end of 2022 the amount of deposits in its U.S. offices that exceed the FDIC insurance limit was $151.5 billion.
The FDIC said in a statement on Friday that customers will have full access to their insured deposits no later than Monday morning. The FDIC said it hadn’t yet determined the current amount of uninsured deposits. But it said that uninsured depositors will get an advance dividend within the next week. For the remaining amounts of uninsured funds, those depositors will get something called a “receivership certificate,” and as the FDIC sells off the assets of SVB, they may get future dividend payments.
Why are other bank stocks getting hit?
Already rattled by the failure of Silvergate Capital, whose own problems started with crypto but also reflected a portfolio of government debt whose value was depressed by higher rates, investors are selling bank stocksacross the board. Stocks of other midsize lenders such as First Republic Bank and Signature Bank were halted on Friday morning.
Silicon Valley Bank counts many startups and venture-capital firms as clients. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
The impact of higher rates on banks’ securities isn’t limited to SVB. Across all FDIC banks, there were about $620 billion worth of unrealized losses in securities portfolios as of the fourth quarter.
Neo. The Only. The One.
THE ONE
Giannis Antetokounmpo Put His Money In 50 Banks Until His Team Owner Taught Him Investing
Giannis Antetokounmpo, 27, is extremely careful about preserving his hard-earned coins and has accounts at 50 different banks containing $250,000.
Come on bro you could’ve looked this up
I wonder how he was managing his money like this. For instance if he wants to buy somethings that's 1.2 million, was he wiring the money between banks into one account to make a large payment? Or did he have another method?
humminbird
Veteran
He probably uses a credit card and pays the balance using multiple accountsI wonder how he was managing his money like this. For instance if he wants to buy somethings that's 1.2 million, was he wiring the money between banks into one account to make a large payment? Or did he have another method?
Neo. The Only. The One.
THE ONE
I don’t know who Mr Fortune is, I’ll look him up*conspiratorial
my credentials are my address in Harlem and not being a 2012 (WOAT year) user
Who??
what are your thoughts on T. Thomas Fortune
Sowell is a genius, one of my heroes
Did you study Econ in college?
Last edited:
Cakebatter
All Star
Sowell is a c00n of the highest order.
Opinion | Elizabeth Warren: Silicon Valley Bank Is Gone. We Know Who Is Responsible. (Published 2023)
The recent bank failures were entirely avoidable.
Elizabeth Warren: Silicon Valley Bank Is Gone. We Know Who Is Responsible.
March 13, 2023
Justin Sullivan/Getty Images
By Elizabeth Warren
Senator Warren is a Democrat from Massachusetts.
No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules.
In the aftermath of the 2008 financial crisis, Congress passed the Dodd-Frank Act to protect consumers and ensure that big banks could never again take down the economy and destroy millions of lives. Wall Street chief executives and their armies of lawyers and lobbyists hated this law. They spent millions trying to defeat it, and, when they lost, spent millions more trying to weaken it.
Greg Becker, the chief executive of Silicon Valley Bank, was one of the many high-powered executives who lobbied Congress to weaken the law. In 2018, the big banks won. With support from both parties, President Donald Trump signed a law to roll back critical parts of Dodd-Frank. Regulators, including the Federal Reserve chair Jerome Powell, then made a bad situation worse, letting financial institutions load up on risk.
Banks like S.V.B. — which had become the 16th largest bank in the country before regulators shut it down on Friday — got relief from stringent requirements, basing their claim on the laughable assertion that banks like them weren’t actually “big” and therefore didn’t need strong oversight.
I fought against these changes. On the eve of the Senate vote in 2018, I warned, “Washington is about to make it easier for the banks to run up risk, make it easier to put our constituents at risk, make it easier to put American families in danger, just so the C.E.O.s of these banks can get a new corporate jet and add another floor to their new corporate headquarters.”
I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying out congratulatory bonuses hours before the Federal Deposit Insurance Corporation rushed in to take over their failing institution — leaving countless businesses and nonprofits with accounts at the bank alarmed that they wouldn’t be able to pay their bills and employees.
S.V.B. suffered from a toxic mix of risky management and weak supervision. For one, the bank relied on a concentrated group of tech companies with big deposits, driving an abnormally large ratio of uninsured deposits. This meant that weakness in a single sector of the economy could threaten the bank’s stability.
Instead of managing that risk, S.V.B. funneled these deposits into long-term bonds, making it hard for the bank to respond to a drawdown. S.V.B. apparently failed to hedge against the obvious risk of rising interest rates. This business model was great for S.V.B.’s short-term profits, which shot up by nearly 40 percent over the last three years — but now we know its cost.
S.V.B.’s collapse set off looming contagion that regulators felt forced to stanch, leading to their decision to dissolve Signature Bank. Signature had touted its F.D.I.C. insurance as it whipped up a customer base tilted toward risky cryptocurrency firms.
Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.
On Sunday night, regulators announced they would ensure that all deposits at S.V.B. and Signature would be repaid 100 cents on the dollar. Not just small businesses and nonprofits, but also billion-dollar companies, crypto investors and the very venture capital firms that triggered the bank run on S.V.B. in the first place — all in the name of preventing further contagion.
Regulators have said that banks, rather than taxpayers, will bear the cost of the federal backstop required to protect deposits. We’ll see if that’s true. But it’s no wonder the American people are skeptical of a system that holds millions of struggling student loan borrowers in limbo but steps in overnight to ensure that billion-dollar crypto firms won’t lose a dime in deposits.
These threats never should have been allowed to materialize. We must act to prevent them from occurring again.
First, Congress, the White House and banking regulators should reverse the dangerous bank deregulation of the Trump era. Repealing the 2018 legislation that weakened the rules for banks like S.V.B. must be an immediate priority for Congress. Similarly, Mr. Powell’s disastrous “tailoring” of these rules has put our economy at risk, and it needs to end — now.
Bank regulators must also take a careful look under the hood at our financial institutions to see where other dangers may be lurking. Elected officials, including the Senate Republicans who, just days before S.V.B.’s collapse, pressed Mr. Powell to stave off higher capital standards, must now demand stronger — not weaker — oversight.
Second, regulators should reform deposit insurance so that both during this crisis and in the future, businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered — while ensuring the cost of protecting outsized depositors is borne by those financial institutions that pose the greatest risk. Never again should large companies with billions in unsecured deposits expect, or receive, free support from the government.
Finally, if we are to deter this kind of risky behavior from happening again, it’s critical that those responsible not be rewarded. S.V.B. and Signature shareholders will be wiped out, but their executives must also be held accountable. Mr. Becker of S.V.B. took home $9.9 million in compensation last year, including a $1.5 million bonus for boosting bank profitability — and its riskiness. Joseph DePaolo of Signature got $8.6 million. We should claw all of that back, along with bonuses for other executives at these banks. Where needed, Congress should empower regulators to recover pay and bonuses
Prosecutors and regulators should investigate whether any executives engaged in insider trading or broke other civil or criminal laws.
These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018. S.V.B. and Signature are gone, and now Washington must act quickly to prevent the next crisis.
My opinion:
This is an SVB and similar bank problem (First Republic Bank is having a crisis now...I got friends there
), but isn't an industry wide problem
This is an SVB and similar bank problem (First Republic Bank is having a crisis now...I got friends there
), but isn't an industry wide problemTHIS is an industry problem that any bank smaller than a big four or five has to be concerned about.
Deposit goals for middle market JPM bankers doubled recently. Many banks are no longer doing construction lending and looking to syndicate and sell off loans...if the fed and regulators do not loosen the loan/deposit ratio issue there could be real consequences....
I've spent fifteen minutes on the Strongsuit website and I still can't tell what it is.
This about sums up exactly why it's time to let these mfs fail. These little weak ass bullshyt businesses we're experiencing all this inflation for the sole purpose of them existing got to go. This goofy bytch is literally charging 6,000 a year for a calendar service for the elite crying for our tax money to save that horse shyt. This shouldn't even be a business that exists in the first place.
Last edited: