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

[jazz4cash]

ALL depositors have access to their funds tomorrow.

https://www.washingtonpost.com/us-policy/2023/03/12/silicon-valley-bank-deposits/

 

[Chuckanut]

NYs Signature Bank is closed.

https://www.reuters.com/business/finance/new-york-state-regulators-close-signature-bank-2023-03-12/

Edit. Oops old news already

Just as long as this doesn’t affect Kirkland Signature at Costco.

On a more serious note, should we be glad we locked in some 5% money in the bond and CD markets?

 

[Gumby]

I’m skeptical. Why pay for insurance if you know you’ll get your money back?

You would if it were clear that would not get a bailout from the government.

 

[Car-Guy]

Just as long as this doesn’t affect Kirkland Signature at Costco.

On a more serious note, should we be glad we locked in some 5% money in the bond and CD markets?

We will know in a week or so. If Powell doesn't change course, 5% might be low. But that might be a big "if".

 

[padlock]

I remember cries of moral hazard in 2008.

But the alternative was the Dow plunging over 500 points for several days in a row as the House at first rejected the proposal from the Treasury Dept -- was that TARP?

I agree. I think those arguing against the Feds coming in and guaranteeing the deposits are making ideological arguments that are not at all pragmatic. I suspect that the actual cost would be much greater to all taxpayers if the economy were allowed to suffer a severe shock due to irrational panic, then what it will cost to provide the necessary stability.

Doing anything else would be like cutting off your nose to spite your face.

 

[pb4uski]

... The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress"....


So other banks can pledge treasuries or some other securities as collateral at par for loans up to 1 year in duration.

So they kicked the can down the road for up to a year to give themselves time to sort things out.

While I don't like giving loans for the par rather than the fair value of collateral, it probably isn't a bad idea.

 

[yhoomajor]

I suspect that the actual cost would be much greater to all taxpayers if the economy were allowed to suffer a severe shock due to irrational panic, then what it will cost to provide the necessary stability.

Doing anything else would be like cutting off your nose to spite your face.

Since the Government bail out of rich wall street elites in 2008-09, income inequality has exploded. Debt has exploded multiples of trillions and poor people can't afford rent. I'm not so sure we would be worse off if we had let the market take care of excesses in financial system then.

But rich billionaires thank foot soldiers for championing their bail-outs when their gamble doesn't pay out once in a while.

 

[MichealKnight]

Yep, the depositors with well over $250k are made whole.

 

[padlock]

Since the Government bail out of rich wall street elites in 2008-09, income inequality has exploded. Debt has exploded multiples of trillions and poor people can't afford rent. I'm not so sure we would be worse off if we had let the market take care of excesses in financial system then.

But rich billionaires thank foot soldiers for championing their bail-outs when their gamble doesn't pay out once in a while.

So you're saying that leaving everything to 'market forces' is the way we should address income inequality? Sure, what could possibly go wrong with that idea.

 

[pb4uski]

Another bank has gone belly up, though no explanation yet as to how/why. Signature Bank of New York.



Fed, Treasury, and FDIC statement (linked below) also stated that everyone (except shareholders & some debt holders) will be made whole.



https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

Boy, let's not jump the gun. "Belly up" suggests bankruptcy or liabilities in excess of assets. We don't know enough to know one way or the other. It wouldn't be unusual for a regulator to put a financial institution into receivership preemptively... in other words, the subject is weak and heading in the wrong direction so the regulator steps in to try to take actions to prevent the situation from getting worse.

 

[Montecfo]

Well, don't know about y'all, but last Friday, while all my covered call options expired worthless and I did not sell any shares, I had many OTM puts assigned due to the unexpected market drop. It's a low 6-figure total purchase of various stocks in different industries like mining, fertilizer, metal, energy, healthcare.

No banking stocks assigned on these puts, but on Friday I bought shares of JP Morgan outright. I remember that in the subprime fiasco of 2007-2009, JP Morgan did very well under Jamie Dimon. And Dimon as of late last year kept saying things could get really bad, but he was prepared for the worst. I believe him.

Anyway, the stock futures are up as I write this. Tomorrow, I will look to sell OTM covered calls on these new shares. Stock AA is inching up past 65%, and I said I wanted to keep it around 60% for a while.

I do wonder if this is the "economic hurricane" he referred to?

Makes a bit more sense.

 

[11522914]

But rich billionaires thank foot soldiers for championing their bail-outs when their gamble doesn't pay out once in a while.

You got that right!!!

 

[Montecfo]

Just as long as this doesn’t affect Kirkland Signature at Costco.

On a more serious note, should we be glad we locked in some 5% money in the bond and CD markets?

I think so.
Don't fight the tape.

 

[pb4uski]

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks"

In other words, losses at SVB (and other ones like it) will be socialized to depositors all over america. Most banks don't run charity. They pass the expenses over to their customers. Next time people complain why banks give them 0.1% interest on their deposits, and charge fees for this and that.. you know why.

Where did you think that the money to cover insured depositor losses comes from? It ain't the tooth fairy. We all pay for that insurance coverage.

 

[Montecfo]

So they kicked the can down the road for up to a year to give themselves time to sort things out.

While I don't like giving loans for the par rather than the fair value of collateral, it probably isn't a bad idea.

None of us likes it. But the alternative is worse.

Now will be interesting to see if the Fed continues apace now that things are breaking.

 

[Montecfo]

Since the Government bail out of rich wall street elites in 2008-09, income inequality has exploded. Debt has exploded multiples of trillions and poor people can't afford rent. I'm not so sure we would be worse off if we had let the market take care of excesses in financial system then.



But rich billionaires thank foot soldiers for championing their bail-outs when their gamble doesn't pay out once in a while.

The alternative to income inequality is income equality, which is of course far worse.

 

[Car-Guy]

Where did you think that the money to cover insured depositor losses comes from? It ain't the tooth fairy.

 

[pb4uski]

I understand why the Fed and the Treasury had to do this to prevent a spreading bank panic. But I still think there is moral hazard in enabling people to knowingly take risks that they shouldn't take, like exceeding the FDIC guarantee amount. It also has not escaped my attention that anyone with over $250K on deposit at the bank is already wealthier than most Americans. It seems that socialism is anathema until rich people need help.



In any event, it's done. Perhaps we can learn some lessons from this and make some necessary changes to prevent it from happening again.

+1. My hope would be that the idiots that had deposits in excess of the FDIC limits had a couple days to be panicked about losing their money and won't repeat that mistake, but these people are stoopid so that is too much to ask.

 

[Quattro73]

I agree. I think those arguing against the Feds coming in and guaranteeing the deposits are making ideological arguments that are not at all pragmatic. I suspect that the actual cost would be much greater to all taxpayers if the economy were allowed to suffer a severe shock due to irrational panic, then what it will cost to provide the necessary stability.

Doing anything else would be like cutting off your nose to spite your face.

S&P at 2000 appeal to you?

 

[pb4uski]

Your everyday business has more than 250 in the bank everyday.

Fine, but hopefully after this weekend they will recognize that they are putting money at risk by exceeding the FDIC limits.

 

[Quattro73]

Yep, the depositors with well over $250k are made whole.

Mainly because the bank had the asset to do so. They just needed time.

 

[padlock]

S&P at 2000 appeal to you?

Just so I understand, are you saying you think the stock market is going to be worse off than it would have been if they didn't guaranty the deposits? Are you thinking long term vs short term? I'd like to understand your reasoning.

 

[pb4uski]

I’m skeptical. Why pay for insurance if you know you’ll get your money back?

The cost of insurance is taken out of crediting rates, so depositors would get a little less interest.

 

[11522914]

I agree. I think those arguing against the Feds coming in and guaranteeing the deposits are making ideological arguments that are not at all pragmatic. I suspect that the actual cost would be much greater to all taxpayers if the economy were allowed to suffer a severe shock due to irrational panic, then what it will cost to provide the necessary stability.



Doing anything else would be like cutting off your nose to spite your face.

Based on what you're saying we'll certainly never find out.

Plus we had regulations that in all likelihood would have prevented this particular crisis but they were gutted.

I understand where you're coming from but what is your solution to prevent this in the future.

More regulations? [emoji23][emoji23][emoji23]

 

[padlock]

Based on what you're saying we'll certainly never find out.

Plus we had regulations that in all likelihood would have prevented this particular crisis but they were gutted.

I understand where you're coming from but what is your solution to prevent this in the future.

More regulations? [emoji23][emoji23][emoji23]

Well, yes actually. I think that's exactly what is needed. Though I suspect that, in this regard, I'm in the definite minority on this forum.