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

[Texas Proud]

Long-term Capital Management.

As immortalized in the book, "When Genius Failed: The Rise and Fall of Long-term Capital Management".

Are you thinking of Long Term Capital Management in 1998?

Yes... it was 'bailed out' by banks... but in the end it paid back all the loans... I can see something similar here, where there is no money from us citizens....



https://en.wikipedia.org/wiki/Long-Term_Capital_Management



By early 2000, the fund had been liquidated, and the consortium of banks that financed the bailout had been paid back,

 

[Texas Proud]

Think (simplistically) of it as: Assets (Loans & Bonds) - Depositors (Liability) = Equity. If Assets < Deposits, then Equity gets wiped. If that is the case, the federal government will make up the difference or depositors will lose their money. In this case, the fed announced that they will backstop it.

Not quite that simple... there are also other liabilities that might or might not get wiped out... they owe bills, I would assume some kind of bond or preferred stock (did not look)... deposits are a big part of liabilities, but at the top of the food chain...

 

[Texas Proud]

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

[MOD EDIT]. the bank DID fail.. shareholders wiped out... so if you had a $700 plus share a week or so ago you have a $0 share now...


The discussion that some are talking about is the deposits... and should there be any haircut on the ones over the $250K limit... well, it seems like there are enough assets to cover 100% of the deposits... there was just a run on the bank and there was no cash...


So, get a loan on the assets and have all deposits available to the customers... if this is true then no cost to the FDIC at all..


I will wait and see if there is any real loss to the fund... there could be and then I would be upset that they did cover all deposits..

 

[Texas Proud]

Just did a quick look and there was a holding company... the bank was closed but the holding company is still there... I am sure they will file for BK on Monday...


But it looks like banks are looking at it.. so maybe a fire sale for it...







https://www.axios.com/2023/03/13/jp-morgan-pnc-among-suitors-for-svb-holding-company

 

[Popeye]

https://www.ft.com/content/216b193d-62b3-4e5e-8f67-e8eb3d96ebf1

HSBC buys Silicon Valley Bank’s UK unit for £1 in rescue deal.

 

[pb4uski]

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



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

Sounds like you guys know how to pick 'em.

Could you please let us know what financial institutions you do business with so we can avoid them? [emoji6]

 

[pb4uski]

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.

So if a depositor requests a withdrawal like they did during the run, does the bank have the right to refuse or only pay the excess of deposits over the depositor's debt to the bank (right of offset)? And if so, how was there a run on the bank?

 

[bobbyr]

money market funds any concern? (that are not FDIC) - i have PCOXX

 

[pb4uski]

money market funds any concern? (that are not FDIC) - i have PCOXX

I would say that publicly traded money market funds are not of concern. They operate under separate rules which should preclude any problems.

 

[bobbyr]

I would say that publicly traded money market funds are not of concern. They operate under separate rules which should preclude any problems.

Thank you

 

[pb4uski]

[MOD EDIT].. the bank DID fail.. shareholders wiped out... so if you had a $700 plus share a week or so ago you have a $0 share now...


The discussion that some are talking about is the deposits... and should there be any haircut on the ones over the $250K limit... well, it seems like there are enough assets to cover 100% of the deposits... there was just a run on the bank and there was no cash...


So, get a loan on the assets and have all deposits available to the customers... if this is true then no cost to the FDIC at all..


I will wait and see if there is any real loss to the fund... there could be and then I would be upset that they did cover all deposits..

Yes, we don't have enough information to knoe whether an orderly liquidation of SVB's assets will be sufficient to pay off its depositor obligations... IOW, shareholders and bondholders will be wiped out but depositors will be made whole (even those with uninsured deposits).

 

[MichaelB]

Yes, we don't have enough information to knoe whether an orderly liquidation of SVB's assets will be sufficient to pay off its depositor obligations... IOW, shareholders and bondholders will be wiped out but depositors will be made whole (even those with uninsured deposits).

Unsecured bond holders will be wiped out. Secured bonds should still pay.

 

[Markola]

….and shareholders are wiped out and management has been dismissed and replaced. I’m going to assume no bonuses, either. Altogether, an improved and fairer response over 2008.

 

[jurgs01]

….and shareholders are wiped out and management has been dismissed and replaced. I’m going to assume no bonuses, either. Altogether, an improved and fairer response over 2008.

A bunch of rich Silicon valley depositors got bailed out. The cost will be born on increased FDIC that will be passed on through banks to customers.

Banks will now take more risk because the FDIC basically guaranteed all banking deposits, and will loan against garbage assets without mark to market.

We have basically removed all risk of capitalism for the rich and well connected so they can make money hand over fist during bull runs and be bailed out during the business cycle correction phase.

This is not you grandfather's America.

 

[marko]

We have basically removed all risk of capitalism for the rich and well connected so they can make money hand over fist during bull runs and be bailed out during the business cycle correction phase.

This is not you grandfather's America.

More like our great-grandfather's America. 1890's robber barons. The more things change.......

 

[11522914]

Meanwhile, at 8:22PM Sunday, Dow futures are up 337.

So much for buying a dip tomorrow. My personal jury is out on whether the bailout is better than the consequences, but ...whatever.

Looks like you're going to get your dip. Particularly if you like banks.

 

[frayne]

Looks like you're going to get your dip. Particularly if you like banks.

It's going to be like trying to catch a falling knife, no thanks. I'll sit on the sidelines and play my Monday round of golf with my phone off.

 

[Markola]

A bunch of rich Silicon valley depositors got bailed out. The cost will be born on increased FDIC that will be passed on through banks to customers.

Banks will now take more risk because the FDIC basically guaranteed all banking deposits, and will loan against garbage assets without mark to market.

We have basically removed all risk of capitalism for the rich and well connected so they can make money hand over fist during bull runs and be bailed out during the business cycle correction phase.

This is not you grandfather's America.

People and companies that employ a lot of innocent workers who need their paychecks are being made whole by aggressive government action, but I hear officials taking pains to say that taxpayers are not on the hook. The bailout dollars are coming from fees that all banks pay into a kind of insurance fund for such situations. Shareholders, unsecured bond holders and management teams are all gone. I think this is a superior, fairer regulatory response than 2008, so far. Now, if JP Morgan et al start wobbling, hold on to your wallet.

 

[MichaelB]

This is not you grandfather's America.

Thank goodness. My grandfather lived through a banking crisis which led to the great depression. Thousands of banks went under and millions suffered greatly.

Yes, some undeserved will benefit and profit from this action, but many more will avoid a disastrous outcome.

 

[pb4uski]

A bunch of rich Silicon valley depositors got bailed out. The cost will be born on increased FDIC that will be passed on through banks to customers.

Banks will now take more risk because the FDIC basically guaranteed all banking deposits, and will loan against garbage assets without mark to market.

We have basically removed all risk of capitalism for the rich and well connected so they can make money hand over fist during bull runs and be bailed out during the business cycle correction phase.

This is not you grandfather's America.

The cost may end up being negligible depending on the run-off of the assets. That is often the case where the cause of the stress is a liquidity crisis.

Are the "garbage assets" that you are referring to the long-term US government bonds that ended up being their undoing?

 

[Midpack]

People and companies that employ a lot of innocent workers who need their paychecks are being made whole by aggressive government action, but I hear officials taking pains to say that taxpayers are not on the hook. The bailout dollars are coming from fees that all banks pay into a kind of insurance fund for such situations. Shareholders, unsecured bond holders and management teams are all gone. I think this is a superior, fairer regulatory response than 2008, so far. Now, if JP Morgan et al start wobbling, hold on to your wallet.

Semantics. We still pay in the end. Customers will pay for the FDIC bank fees one way or another. “We” always pay…but lots of people are fooled every day.

 

[Midpack]

People and companies that employ a lot of innocent workers who need their paychecks are being made whole by aggressive government action, but I hear officials taking pains to say that taxpayers are not on the hook. The bailout dollars are coming from fees that all banks pay into a kind of insurance fund for such situations. Shareholders, unsecured bond holders and management teams are all gone. I think this is a superior, fairer regulatory response than 2008, so far. Now, if JP Morgan et al start wobbling, hold on to your wallet.

Semantics. We still pay in the end. After whatever SIVB assets are recovered, customers will pay for the FDIC bank fees one way or another. “We” always pay…but lots of people are fooled every day.

 

[pb4uski]

I have a feeling that when all is said and done that the impact of SVB and Signature will be negligible to the FDIC, so increases in the premiums that banks (and we) pay will also be negligible.

 

[Montecfo]

So if a depositor requests a withdrawal like they did during the run, does the bank have the right to refuse or only pay the excess of deposits over the depositor's debt to the bank (right of offset)? And if so, how was there a run on the bank?

Sure, they could pull out money as long as loan is in good standing.

 

[theo2]

The everyday working people will pay the piper,,,, thats the way it's been for many moons