yall want me to be that mod?That a good idea but what Mod on here that has a background in Economics and finance to do all that
FDIC shuts down Silicon Valley Bank, crash incoming? Update: 2nd bank, Signature Bank in NY closed
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Blackrogue
Superstar
The six figures, six certs and six feet brehs are now at three figures six certs and are 5 10' now
Neo. The Only. The One.
THE ONE
One thing I love about stuff like this, as a future tech founder, you get insight into a lot of things if you're paying attention.
What are your credentials to be a Mod on this topic? You’re too conspiracist like to meyall want me to be that mod?
shyt about to get real out here
If someone makes it I will very swiftly provide only quality sourced info and synopsis I trust, and make it clear if I'm adding opinion...
Been working in this industry since 2006, for banks mentioned in this thread, and rode thru the last economic cycle.
I'm calling on SVB clients right now
I’d vote for Ed! I’ve been in banking since 2011, so I’m pretty sure your knowledge is deeper than mine.If someone makes it I will very swiftly provide only quality sourced info and synopsis I trust, and make it clear if I'm adding opinion...
Been working in this industry since 2006, for banks mentioned in this thread, and rode thru the last economic cycle.
I'm calling on SVB clients right now
time to mod @I Really Mean ItThat a good idea but what Mod on here that has a background in Economics and finance to do all that
If someone makes it I will very swiftly provide only quality sourced info and synopsis I trust, and make it clear if I'm adding opinion...
Been working in this industry since 2006, for banks mentioned in this thread, and rode thru the last economic cycle.
I'm calling on SVB clients right now
Given everything I’ve read, I think this is a decent high level wrap up. What y’all think?
What Happened With Silicon Valley Bank?
Some questions and answers to explain what is happening after the government took action.
www.wsj.com
It’s behind a paywall. Can’t read the full article.Given everything I’ve read, I think this is a decent high level wrap up. What y’all think?
What Happened With Silicon Valley Bank?
Some questions and answers to explain what is happening after the government took action.
What are your thoughts on Thomas Sowell?yall want me to be that mod?
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.
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
Big Silicon Valley bank (like REALLY big bank) that is mainly used by tech companies and tech startups to hold their large amounts of money (think hundreds of millions or higher) did what all banks do, which is... When folks (companies) deposited their money in the bank, the bank then turned around and invested that money in other things (all banks do this, and it's basically how banks make their money).
Only problem is, this big Silicon Valley bank made a bad investment (they're saying the investment went bad due to the Fed hiking interest rates because of inflation, but there's an argument to be made that it's not the Fed fault that they made a "stupid" investment) and lost a lot of money. So they started looking for ways to get the money back, such as selling shares and other things... and they were honest about what was happening (I'm assuming this is legally required, them being honest, that is).
Once they said they were losing money, tech companies that had their money in that bank hit the
and said, "Wait a min... I know you ain't telling me what I think you're telling me."
(which is, that they don't have all of the deposit money that their customers, which are tech companies, deposited there.)
Immediately, this started a run on the bank (a run is basically everybody coming at one time to pull their money out). Of course, Silicon Bank didn't have that money on hand (probably only the first few companies to come were able to get all their money, and after that, they weren't able to fulfill everybody else's withdraw requests).
In Silicon Valley bank's defense, from what I understand, most banks can't survive a bank run, because no bank has ALL the money that was deposited in their bank on hand.
But in Silicon Valley Bank's situation, not only did they not have the money on hand, but they didn't have it ANYWHERE - because they actually lost the money (the bad investments).
So they start crashing HARD, and immediately Biden's administration looks over there like"the hell going on, yo??"
Because this is going to have immediate repercussions on the US (and probably the world) economy. And if you're wondering how, these tech companies have thousands of employees, and they were holding a large percentage of their money in Silicon Valley bank. But if that money is gone, then they can't make payroll and pay those employees. They also can't pay their bills. They can't pay their rent, their light bills, whatever other expenses a company has... which starts a domino effect.
If employees aren't getting paid, then they can't pay THEIR bills. And most folks are living paycheck to paycheck outchea.
So that's the direct domino effect. But then it creates a wider ripple effect, because the greater American public is looking at this like
And that's what Biden is trying to avoid, which is why his administration immediately put the clamps on Silicon Valley bank and rushed out to reassure the American people. Cause if the American people lose confidence in the banking system, it's over.
So that's what we're seeing. Currently the Biden administration is doing a good job (it hurts me to say this since I'm MAGA now). There have been no wider ripple effects across the banking industry YET but it could still happen. Which is why they're doing everything they can to avert it.
But the bank in NY crashing isn't a good sign. It could be nothing, maybe it will be limited to these two banks. But maybe not.
We have to wait and see.
And just to let brehs know, I'm not holding myself out here as an expert. I was curious about everything that was happening so I stayed up until 4 am last night digging into it cause the more I learned, the more interesting it got.
Basically I stayed up all night studying
And now I'm over here at work tired as hell
But I needed to know what was happening because I work at a tech company and I needed to know if I'm going to be affected by this.
Neo. The Only. The One.
THE ONE
Big Silicon Valley bank (like REALLY big bank) that is mainly used by tech companies and tech startups to hold their large amounts of money (think hundreds of millions or higher) did what all banks do, which is... When folks (companies) deposited their money in the bank, the bank then turned around and invested that money in other things (all banks do this, and it's basically how banks make their money).
Only problem is, this big Silicon Valley bank made a bad investment (they're saying the investment went bad due to the Fed hiking interest rates because of inflation, but there's an argument to be made that it's not the Fed fault that they made a "stupid" investment) and lost a lot of money. So they started looking for ways to get the money back, such as selling shares and other things... and they were honest about what was happening (I'm assuming this is legally required, them being honest, that is).
Once they said they were losing money, tech companies that had their money in that bank hit the
(which is, that they don't have all of the deposit money that their customers, which are tech companies, deposited there.)
Immediately, this started a run on the bank (a run is basically everybody coming at one time to pull their money out). Of course, Silicon Bank didn't have that money on hand (probably only the first few companies to come were able to get all their money, and after that, they weren't able to fulfill everybody else's withdraw requests).
In Silicon Valley bank's defense, from what I understand, most banks can't survive a bank run, because no bank has ALL the money that was deposited in their bank on hand.
But in Silicon Valley Bank's situation, not only did they not have the money on hand, but they didn't have it ANYWHERE - because they actually lost the money (the bad investments).
So they start crashing HARD, and immediately Biden's administration looks over there like
Because this is going to have immediate repercussions on the US (and probably the world) economy. And if you're wondering how, these tech companies have thousands of employees, and they were holding a large percentage of their money in Silicon Valley bank. But if that money is gone, then they can't make payroll and pay those employees. They also can't pay their bills. They can't pay their rent, their light bills, whatever other expenses a company has... which starts a domino effect.
If employees aren't getting paid, then they can't pay THEIR bills. And most folks are living paycheck to paycheck outchea.
So that's the direct domino effect. But then it creates a wider ripple effect, because the greater American public is looking at this like
And that's what Biden is trying to avoid, which is why his administration immediately put the clamps on Silicon Valley bank and rushed out to reassure the American people. Cause if the American people lose confidence in the banking system, it's over.
So that's what we're seeing. Currently the Biden administration is doing a good job (it hurts me to say this since I'm MAGA now). There have been no wider ripple effects across the banking industry YET but it could still happen. Which is why they're doing everything they can to avert it.
But the bank in NY crashing isn't a good sign. It could be nothing, maybe it will be limited to these two banks. But maybe not.
We have to wait and see.
And just to let brehs know, I'm not holding myself out here as an expert. I was curious about everything that was happening so I stayed up until 4 am last night digging into it cause the more I learned, the more interesting it got.
Basically I stayed up all night studying
And now I'm over here at work tired as hell
But I needed to know what was happening because I work at a tech company and I needed to know if I'm going to be affected by this.