Good chance some promising tech doesn’t get funded if VCs are shy, which they now seem to be.
That’s one possibility. Another is the more promising technology will get new funding and while the “iffier” ventures will disappear.
Good chance some promising tech doesn’t get funded if VCs are shy, which they now seem to be.
That’s one possibility. Another is the more promising technology will get new funding and while the “iffier” ventures will disappear.
I’m of the opinion now that the government or FDIC should backstop all deposits in all banks over 250k.
First that would avoid the contagion that will occur Monday if every small biz is trying to get out of the small banks cos their payroll etc is in those banks. Just the announcement that the backstop is there wouldn’t cost any money and would stop contagion.
Then we need to figure out some way to FDIC insure all deposits. If it’s a deposit in a bank, and it’s not an investment, then insure it. The banks need to pay for this insurance of course and that will be passed on to those keeping those large deposits.
The weird thing is that we have known about this risk forever and seemingly it’s just being ignored, but I don’t see the point in punishing those businesses that allows themselves to be sucked in. It’s not like they were getting any reward for their deposits, just somewhere to park their payroll etc.
I don’t consider this a bailout since bond holders and equity holders will get nothing.
10 bucks says we discover Thiel and his cronies had big short positions in the stock.
Well that may help ease some of the labor tightness.Possibly, but the impression I get is that given the massive rise in interest rates the VCs now have a much larger hurdle to jump over to fund a company. Usually they only consider an investment that returns many times the cost of risk free capital. In zero interest days that wasn’t a big hurdle. With 4-5% interest rates that a much tougher proposition. So I think that the triage that you refer to started some time back.
It is a bailout. Somebody has to print the $ to make uninsured depositors whole. At some point, stupidity/greed has to hurt or there is no incentive not to be stupid/greedy. FDIC limits were already doubled with the last crisis and moral hazard of "privatize the profits but socialize the losses" has got to stop. Otherwise its "just print more $ to bandaid this".
Give the regulators time to liquidate the assets and then see how big the hole is. There is already talk of giving uninsured depositors some sort of partial payment early next week. Startups are on a glide-path burning up their savings hoping to IPO before savings = 0. They don't need access to 100% of their funds first thing Monday morning (and some of them are going to implode even if made whole).
I will not be surprised if the Fed comes up with some sort of "TARP"-like special program to (print money and) buy the underwater bonds just to keep them out of the market... but why should the Fed (I don't even say "we the tax payer" any more) pay par vs. market value?
One of the GFC reforms codified "bail-ins" where your uninsured deposits buys you a shiny new stock certificate in the new bank. That concept is creeping into legislation world wide. I don't see TPTB giving up on that clause quickly... but then politically run economies are fickle.
Any bailout of SVB (especially above FDIC insurance limit) will be a slap on the face of average Americans working their butts off for $18/hour.
10 bucks says we discover Thiel and his cronies had big short positions in the stock.
Out of all the banks in the US, JP Morgan is the best managed. I would only start to worry about JP Morgan, when Jamie Dimon retires.
JP Morgan reached a $645M settlement with the FDIC and DB for the illegal mortgages.
https://www.reuters.com/article/us-...ith-fdic-to-receive-645-million-idUSKCN10U28M
They acquired all those branches and deposits from WAMU for pennies on the dollar. Out of all the banks in the US, JP Morgan is the best managed. I would only start to worry about JP Morgan, when Jamie Dimon retires.
And they go on to detail their capitalization/reserves.A message from Greg Mitchell: First Tech remains strong and secure
I am writing today in response to the sudden closure of Silicon Valley Bank (“SVB”) and to provide you with an added level of assurance regarding the strength of our credit union and our capacity to preserve and protect your funds at First Tech. We have close friends and associates at SVB, and at firms served by SVB, and we are proud to stand shoulder-to-shoulder in support of them and those SVB customers that may experience a short-term disruption in their banking services.
I don't think the government should bail out SVB or any regional bank that fails. They gamed the system and lifted threshold for oversight imposed by the Dodd-Frank act which in effect repealed the act for banks with $250 billion in assets and lower threshold from the original $50 billion. The repeal in 2018 left only about 12 banks in this country subject to strict oversight and minimum capital ratios. Only 34 banks in 2022 were required to complete their stress testing. SVB was not one of them. The net effect over the coming weeks may be a flight of deposits from these regional banks to the large money center banks. If that happens, the regional banks got the deregulation they asked for. It's a free market and customers are free to choose where to leave their deposits.
On another note, Bloomberg reported that the investment banking arm of SVB is speaking to regulators regarding a management buyout of SVB Financial. They also reported that none of the large money center banks are interested in acquiring the accounts and loan portfolio of SVB thus far.
+1... a bailout only encourages future recklessness... what needs to be implemented is some type of accountability clawback for the executives who lead the company into the implosion.
SVB is a victim of an unprecedented fast changing macroeconomic environment more than anything else.
... They were unlucky but hardly reckless.
I’m of the opinion now that the government or FDIC should backstop all deposits in all banks over 250k.
I totally disagree. SVB is a victim of their own flawed asset-liability management practices... borrowing short and investing long... it's that simple. It was about duration mismatching and interest rate risk, not credit quality. They were both reckless and unlucky.
I agree, and when Chairman Powell calls me to ask if they should bail out the depositors, my answer will be “no”.