Silicon Valley Bank SIVB - $270 to $30 in 48 hours

[pb4uski]

So if the $209b of assets can be liquidated for $175.4b or more then the FDIC shouldn't be on the hook for anything I would think and all depositors should get their money back.

 

[Sunset]

Used to drive by SVB brnches when I lived out there. I even think I heard the name a few times in startups I worked at.

Im kinda curious...the VCs who seem to have made the bank run....what triggered them to do so all at the same time?

Wondering if they know something, or just got caught up in their polite soscety gossip over beers Thurs nite in Palo Alto.

Must drink beer with P. Thiel,
"SVB crisis: Peter Thiel’s Founders Fund advises companies to withdraw money from the bank"

https://economictimes.indiatimes.com/tech/technology/svb-crisis-peter-thiels-founders-fund-advises-companies-to-withdraw-money-from-the-bank/articleshow/98539972.cms

 

[jldavid47]

Exactly... they misjudged how sticky their demand deposits were and they invested assets that were inappropriate given their liabilities.... pretty elementary mistake that we see happen time and again when financial institutions get stupid and greedy.

Exactly. I'm sure they had MBAs from top schools working out the strategy too.

 

[Gumby]

Lend long and borrow short is not a recipe for success.

 

[NW-Bound]

Must drink beer with P. Thiel,
"SVB crisis: Peter Thiel’s Founders Fund advises companies to withdraw money from the bank"

https://economictimes.indiatimes.com/tech/technology/svb-crisis-peter-thiels-founders-fund-advises-companies-to-withdraw-money-from-the-bank/articleshow/98539972.cms

I wonder if Thiel shorted this bank.

 

[bmcgonig]

Saw a tweet that they had over $160 billion in deposits.

Of that total, only $4 billion were in accounts with balances under $250k, across like 107k accounts.

But the other $156 billion were in accounts with balances over $250, across just under 38k accounts.

CNBC was saying a lot of VCs had deposits there. Not sure why they'd choose a local or regional bank over bigger institutions. There are plenty of national bank branches all over the SCV.

But typically, the regional banks are offering more aggressive CD rates. I don't think these big balance accountholders were investing in CD accounts but maybe the bank offered aggressive interest rates?


Market has been up and down and now really down as it nears close. Can't believe it's only this one regional bank.

The “banking relationship” i.e., loans etc., with the depositors apparently was contractually incumbent on the depositors keeping their deposits at that bank.

 

[pb4uski]

The “banking relationship” i.e., loans etc., with the depositors apparently was contractually incumbent on the depositors keeping their deposits at that bank.

I wonder how that would work in real life. I can't imaging that the bank had the contractual right to call the loan if the depositor made withdrawals.

 

[bobandsherry]

The Fed requires banks to do stress testing. Based on this outcome not sure we can take comfort in the stress testing scenarios, parameters or results.

 

[slowsaver]

The investments I inherited from Dad in late 2021 included about $2,000 of Pac West Bankcorp. I held onto it. Oops. I imagine Dad bought it because a nephew worked there and he had a good impression of the company. (Yes, we are aware of the illegality of trading on inside information and are scrupulous about not communicating anything in that category.)

Glad I didn't buy more.

I just bought a 6 month CD from Pac West Bankcorp through my Vanguard brokerage. I hope that wasn't a mistake.

 

[pb4uski]

^^ Shouldn't be as long as you stayed within the FDIC limit.

 

[luckydude]

To be fair, this is nothing like the subprime fiasco. SIVB's trouble stems from the loss of value of its long bonds. Yeah, how can you go wrong holding US Treasuries? It's solid, like the rock of Gibraltar. Right!

The problem with institutional investors is that they cannot deny reality like individual investors and say "You don't lose until you sell". Nope, they have to sell to meet obligations.

And for individual investors, the unrealized loss does not go away. It sits there on your portfolio, even if you try not to look at it.

That's the mind game many of us play. When the market goes up, we happily count all the unrealized gains as if they are real (even though it's only real when they are sold). But when the market goes down, we put on a brave face and deceive ourselves that the losses are not real losses unless we sell. It's certainly a good way to cope with bear markets.

 

[Spock]

So if the $209b of assets can be liquidated for $175.4b or more then the FDIC shouldn't be on the hook for anything I would think and all depositors should get their money back.

Depends on the truth in the "$209B assets"... if a pile of that $209B was valued at hold-to-maturity prices and now will be sold at mark-to-market prices there is a lot less than $209B in assets.


What's sparking the fire is everybody is starting to ask "what about the value of the assets held at other banks".

$212 billion in assets of which $120 billion are securities (of which most or $57.7BN are Held to Maturity (HTM) Mortgage Backed Securities and another $10.5BN are CMO, while $26BN are Available for Sale

$21B of the $26B was already sold.
From everybody's most hated source:
https://www.zerohedge.com/markets/3...vb-contagion-spreading-broader-banking-system

 

[MichaelB]

Depends on the truth in the "$209B assets"... if a pile of that $209B was valued at hold-to-maturity prices and now will be sold at mark-to-market prices there is a lot less than $209B in assets.


What's sparking the fire is everybody is starting to ask "what about the value of the assets held at other banks".


$21B of the $26B was already sold.
From everybody's most hated source:
https://www.zerohedge.com/markets/3...vb-contagion-spreading-broader-banking-system

SIVB had around $120B in fixed income investments. Of that, $98B was in “hold to maturity” assets while only $24B was in “available for sale”. The “hold to maturity” fixed income had an average duration of 6.3 years, and over the past year they increased the duration. Talk about bad timing! Their problem was not so much the loss of mark to market, it’s they couldn’t raise the cash to meet withdrawals.

 

[pb4uski]

From their Sept press release they had $123b of investment securities with a fair value of $107b and $72b of loans so $178b in total, just a hair more than the $177b that they had in deposits and I'm sure that the increase in rates since Sept 30 caused further reductions in fair value of their debt securities that did them in.

 

[MichaelB]

From their Sept press release they had $123b of investment securities with a fair value of $107b and $72b of loans so $178b in total, just a hair more than the $177b that they had in deposits and I'm sure that the increase in rates since Sept 30 caused further reductions in fair value of their debt securities that did them in.

Fair enough, the loss in market value of the portfolio created too great an exposure. They were going to market today with a new equity offer to raise capital, but only around $2B, so there’s something else as well.

 

[Kork13]

I'm expecting Yellen to come out now and tell us again how well capitalized and healthy the banking sector is these days.

https://twitter.com/x/status/1634278882206425089

Treasury says Yellen "expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient

 

[bmcgonig]

SIVB - $270 to $30 in 48 hours

I wonder how that would work in real life. I can't imaging that the bank had the contractual right to call the loan if the depositor made withdrawals.

Dunno. Here’s the source of that. I assume he knows what he’s taking about, but he was overly optimistic on his particular take this morning,

https://twitter.com/x/status/1634263519171321882

 

[Midpack]

And Cramer was encouraging investors to buy SIVB on Feb 8th. Another reason to ignore CNBC and especially Cramer.

 

[explanade]

There were some insider stock sales in the past couple of weeks at SIVB, including the CEO.

 

[Spock]

The Treasury Department said in a statement that Yellen noted “the banking system remains resilient

Is "resilient" the new "subprime is contained"??

 

[Go-NoGo]

And Cramer was encouraging investors to buy SIVB on Feb 8th. Another reason to ignore CNBC and especially Cramer.

Interestingly enough now you can invest in (and against) Jim Cramer's picks.
Tuttle Capital Management has launched two new exchange-traded funds (ETFs) that allow investors to bet on the daily stock picks made by CNBC’s Jim Cramer on his show “Mad Money”

LJIM and SJIM are the ETF's, an astute reader can guess which one is which.

https://markets.businessinsider.com...-etf---getting-mad-with-your-money-1032148335


As of today SJIM is beating LJIM

https://g.co/finance/LJIM:BATS?window=6M&comparison=BATS:SJIM

 

[CardsFan]

It’s really a simple bank run issue. If the deposits stayed there the assets could theoretically mature and pay off the depositors.

Why did the first thing to come to my mind was "It's a Wonderful Life".

"Potter's not selling, he's buying"

 

[gromit]

Indirectly from Bloomberg: "Roku says its deposits with Silicon Valley Bank, totaling nearly $487 million or 26% of its cash and cash equivalents as of today, are "largely uninsured,"."

 

[disneysteve]

Indirectly from Bloomberg: "Roku says its deposits with Silicon Valley Bank, totaling nearly $487 million or 26% of its cash and cash equivalents as of today, are "largely uninsured,"."

But why? What possible benefit is there to a company keeping millions in a bank? We’ve only got $3 million but less than 70K of it is in a bank (plus a few brokered CDs at Vanguard).

I can’t imagine keeping millions in uninsured accounts like that.

 

[Freedom56]

There are over 4200 banks in this country. The regulators are focused on the "too big to fail banks". They obviously did not design their stress tests to cover banks with so few consumer level depositors below the $250K FDIC insurance threshold. Banks with large percentage of uninsured funds would be subject to bank runs. The Fed needs banks to run a high interest rate stress test which they have not done since the last rate hikes in 2018.