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

[Quattro73]

There is not a bank in the country, most likely the world that could withstand 25% of their depositors trying to withdraw in 2 days. Even the vaunted Canadian banks.

This bank made critical mistakes, no doubt. But the regulators also did, and look at the interests of the person that very publicly yelled FIRE. This is not 2007/2008 yet. This is very similar yet very very different, at least based on the story presented thus far..

I reserve to right to be wrong…lol

 

[Quattro73]

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.

I am saying had they just let the bank fail and let it spread, we would be screwed.

 

[luckydude]

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 hope not. I hope JP sticks to his gun and keeps doing the right thing (i.e., raise rate) to crush inflation. Unfortunately, with the demise of SVB, there's going to be a lot on pressure for him to ease up on rate hikes.

 

[padlock]

I am saying had they just let the bank fail and let it spread, we would be screwed.

Perhaps I didn't express myself properly, because I believe the same thing.

 

[ownyourfuture]

I hope not. I hope JP sticks to his gun and keeps doing the right thing (i.e., raise rate) to crush inflation. Unfortunately, with the demise of SVB, there's going to be a lot on pressure for him to ease up on rate hikes.

A+

 

[Quattro73]

I am saying had they just let the bank fail and let it spread, we would be screwed.

I also saying based on the story I now at the moment, and I reserve the right to switch my opinion, this was completely unnecessary. Normal course of business, they are still operating. Maybe stressed with runoff, but with time to attract long tiers capital to keep operating.

Not saying I like or approve of their business model, and I believe examiners should have stepped in earlier but it sure does not seem like they were insolvent like banks with old fashioned loan losses in the past.

 

[Quattro73]

Perhaps I didn't express myself properly, because I believe the same thing.

Probably me.

I have had a bottle of wine stressing about this from many angles.

 

[Montecfo]

I hope not. I hope JP sticks to his gun and keeps doing the right thing (i.e., raise rate) to crush inflation. Unfortunately, with the demise of SVB, there's going to be a lot on pressure for him to ease up on rate hikes.

Collapsing the banks will crush inflation fast.

 

[audreyh1]

I know this is serious but the stressed out posters on this thread are stressing me out! And it seems like the most vocal are several newer posters who have spent a large number of posts on this topic and public gnashing of teeth.

 

[JoeWras]

I know this is serious but the stressed out posters on this thread are stressing me out! And it seems like the most vocal are several new posters who joined just for this topic and public gnashing of teeth?

Saw that happen during COVID too.

Sometimes ignorance is bliss. Put down the social media. It's gonna kill us all.

Speaking of ignorance, when my Dad's bank failed, he never knew it happened. He just thought the name changed.

 

[ownyourfuture]

Collapsing the banks will crush inflation fast.

Just those that are incredibly mismanaged.

 

[11522914]

Probably me.



I have had a bottle of wine stressing about this from many angles.

Do you have an extra bottle? I'm all out. [emoji16]

 

[luckydude]

Collapsing the banks will crush inflation fast.

Well, that would be one way to crush inflation, but hopefully it won't come to that.

 

[NW-Bound]

I know this is serious but the stressed out posters on this thread are stressing me out! And it seems like the most vocal are several newer posters who have spent a large number of posts on this topic and public gnashing of teeth.

Having been through the dotcom implosion then the subprime fiasco, how could anyone older than 50 get stressed out?

But it's good that people get stressed out. They spend less. Businesses too. That will reduce inflation, and the Fed will not have to raise rate much more. I like it. Heh heh heh...

 

[Gumby]

S&P at 2000 appeal to you?

I'll take it, as long as I get to hang a few of the malefactors.

 

[yhoomajor]

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

Actually no. PNC did reach out to FDIC over the weekend to see if they could buy SVB's assets. FDIC said - go ahead and take a look. PNC looked at assets on SVB's books and quickly ran out the door.

https://www.cnbc.com/2023/03/12/pnc...egulators-struggle-to-find-rescue-buyers.html

I have posted couple of times in this thread. What was easily sell-able (Treasuries etc), SVB sold that for $18B (& took a $2B loss on that sale). What is left on the books is not highly desirable. Think of Loans to VCs, CMBS, exotic investments in fine wineries etc. Sprinkled with some decent assets. But you don't get to par by selling these assets. No one is buying these kind of assets in this market.

 

[pb4uski]

...Unfortunately, with the demise of SVB, there's going to be a lot on pressure for him to ease up on rate hikes.

SVB is this week's story. Will probably be ancient history by the next FOMC meeting.

 

[pb4uski]

I also saying based on the story I now at the moment, and I reserve the right to switch my opinion, this was completely unnecessary. Normal course of business, they are still operating. Maybe stressed with runoff, but with time to attract long tiers capital to keep operating.



Not saying I like or approve of their business model, and I believe examiners should have stepped in earlier but it sure does not seem like they were insolvent like banks with old fashioned loan losses in the past.

They are not still operating. The FDIC took over and is running things now. SVB no longer exists, or if it does it is a shell of itself because assets and deposit liabilities have been transferred to a new bank.

 

[pb4uski]

... Speaking of ignorance, when my Dad's bank failed, he never knew it happened. He just thought the name changed.

And that's the way it often works.

 

[jurgs01]

Because w/o someone screaming FIRE, the system is now pretty dang safe?

You should be able to scream fire if the theater is on fire...

 

[Brat]

Silicon Valley Bank has been in business for 40 years. I just learned that my DD's BIL was their CFO abt 15 years ago. He is now a professor of accounting. Comment passed along in the family is that this is a 'shitshow' (aka, a stinky mess).

DD is a CFO of a VC and has/had real personal $ on the table.

The 'valley' has known of a problem from at least Wednesday of last week. The grapevine in the 'valley' is something to behold. Depositors made a run for it, SVB couldn't meet the demand for depositors' cash.

Basically, SVB purchased Fed long bonds two years or so ago, then the Fed started increasing interest rates. Now those bonds cannot be sold for face value. I am sure that they are not the only bank in this pickle.

Few depositor accounts are under $250,000, it is basically a merchant bank. If depositors can't access their $ there will be a cascade of business failures. Friday my DD was worried that many businesses wouldn't meet payroll Monday.

The total assets of SVB equal or exceed deposits but many of the assets aren't liquid enough to respond to depositor demand for their money. If the FDIC had not assured depositors that they will be able to access their money there would have been cascading business failures and contagion in the banking and business community would accelerate.

 

[Markola]

And next on the chopping block, Signature Bank.

 

[jazz4cash]

I wondered why depositors failed to diversify by using other banks. It seems SVB had exclusivity deals.

SVB signed exclusive banking deals with some clients, leaving them unable to diversify https://www.cnbc.com/2023/03/12/sil...are|com.apple.UIKit.activity.CopyToPasteboard

 

[Sunset]

If I were looking to short, I might look at Ally. As of their December 31, 2022 10K (https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb4064-f7ec-4ee1-962f-fe4b69d8a58d.pdf), their unrealized losses on "available for sale" securities appear to be about 20% of their Tier 1 capital (compare the AFS delta 2021 to 2022 on page 117 to Tier 1 capital on page 101. (- $4 billion/$19.2 billion)

That is worse than SIVB, where unrealized AFS losses were about 10% of Tier 1 capital (https://d18rn0p25nwr6d.cloudfront.net/CIK-0000719739/f36fc4d7-9459-41d7-9e3d-2c468971b386.pdf) (compare Footnote 3 on page 49 to Tier 1 capital on p.84 (-$1.7 billion/$17.5 billion)

The depositor profile between the two may be sufficiently different that it is not a problem, but it could drive the market on Monday.

Or I could be all wet in my interpretation of the numbers.

Just for safety, DW transferred $50K out of Ally.

After all, I was a customer of Washington Mutual... until it died

 

[Montecfo]

I wondered why depositors failed to diversify by using other banks. It seems SVB had exclusivity deals.

SVB signed exclusive banking deals with some clients, leaving them unable to diversify https://www.cnbc.com/2023/03/12/sil...are|com.apple.UIKit.activity.CopyToPasteboard

This is a standard provision of venture bank financing. They want to charge you fees on your banking activity.

Every venture bank I have experience with includes this provision. But it is only if they finance you.