2nd largest bank collapse in US history

[Legend]

Silicon Valley Bank collapse: How it happened

[BananaKing]

What does this mean? Are we iced?

[Dr. Pezus]

Lol this was so stupid. Self-fulfilling

[kitler53]

What does this mean? Are we iced?

probably not.  not yet anyways.

overall this was a good old fashion bank run.  basically two things lead to it

1. jpow is raising interest rates.  this bank, as it should, kept capitol in reserves to ensure fluidity.  this capitol was held in safe investments like bonds.  as chance would have it they invested a lot of capitol just before the interest rates raised meaning they tied a lot of money in low yield bonds just before yield rates went much higher.  this caused a "paper loss".

this would have been fine except...

2. SVB positioned itself as a bank for SV tech start-ups.   I read that makes up 93% of their account (by capitol).  the entire SV start-up area is having a hard time right now so SVB entire cliental started pulling out money because they needed it to pay their bills.

on Thursday panic somehow took hold and in one day clients pulled out something like 53 billion in $ all worried if they didn't they'd lose their money.
A. that's called a bank run
B. these accounts are not FDIC insured for a majority of their capital.  FDIC only covers 250k and these accounts had tens of millions stored.

at the end of Thursday SVB was insolvent.  clients requested more money than SVB had.


so will this happen elsewhere?   probably not.

1. big banks have a more diverse clientele

2. in 2018 republicans past a law under trump lowering regulations on small banks like SVB.  those lowered standards directly lead to SVB's collapse as it reduced reserved capitol requirements and eliminated stress testing.


what we need to be worried about today is a bit different than in 2008.  the big banks are strong.  we won't have black swan caused by a single big bank collapse.   

it's the little banks that could be a problem.  if 100 small banks collapse it would be as bad as a big bank like Wells Fargo. 

Lol this was so stupid. Self-fulfilling

I'm not sure who you are making fun of in that but in case you are negative on the Feds policy...

financial conditions are restricting by design. SVB should have been better positioned than it was but probably just didn't anticipate #2.  still, they got too risky with their capital and that's on them..

runaway inflation would be far worse for everyone.  to have done nothing would have guaranteed global financial collapse. 

[kitler53]

Second, it's possible that Silicon Valley Bank's extremely online clientele may have contributed to its downfall.

At most normal, midsize regional banks, what happened at S.V.B. probably wouldn't have led to a panic. Banks sell assets all the time. They run into liquidity problems and raise short-term capital to solve them. Most of the time, customers never notice or care.

But S.V.B.'s depositors are not normal customers. They're start-up founders and investors, the kinds of people who scrutinize banks' securities filings, who pay close attention to risk and volatility and who (most importantly) talk to each other on the internet all day. Once a few people in tech raised questions about the firm's solvency, Slack channels and Twitter feeds lit up with dire warnings from venture capitalists, and soon many people were panicking

The third lesson we can draw from S.V.B.'s collapse is that bank regulation works. As soon as it was clear on Friday that S.V.B. was going under, the Federal Deposit Insurance Corporation did what it always does when a bank fails -- it swooped in, took over and started trying to make the bank's customers whole. As a result, S.V.B. customers who had $250,000 or less deposited in insured accounts will be able to access those funds quickly. With any luck, a big bank will subsume the old S.V.B. seamlessly, make its larger depositors whole, and there will be no domino effect -- no taxpayer bailouts, no mass start-up failures, just a simple and orderly bank failure.

In recent years, a certain set of tech leaders disparaged regulators and government officials as slow, corrupt and a drag on innovation. (Some of these same leaders begged for government bailouts on Friday.)

But because Silicon Valley Bank was mostly an ordinary bank -- not some unregulated crypto casino or risky fintech start-up, where investors and deposits might have no recourse if their money disappeared -- its failure will, in all likelihood, be more of an inconvenience than a long-term crisis.

If that happens, Silicon Valley will have regulation to thank for its survival.

3 Lessons From Silicon Valley Bank's Failure https://nyti.ms/3mAWQqo

[kitler53]

oi.

this is related to the ongoing crypto collapse but the timing sucks.

https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

U.S. regulators said Sunday it shut down New York-based Signature Bank, a second financial institution they shuttered after Silicon Valley Bank's collapse.


"We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority," Treasury, Federal Reserve, and FDIC said in a joined statement Sunday evening.

The banking regulators said depositors at Signature Bank will have full access to their deposits.


"All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer," the regulators said.

[Legend]

oi.

this is related to the ongoing crypto collapse but the timing sucks.

https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

That is horrible timing. 3rd largest bank collapse in US history just a couple days after the 2nd largest bank collapse in US history.

[kitler53]

technically it didn't collapse.  it was such down before it had a chance to collapse.  

[kitler53]

also crypto and futures are mooning.  who new that bank failure and preemptive bank closure due to the elevated risk of systematic collapse was a good thing...

 

[kitler53]

we'll, I know must of you don't closely follow the markets like I do but this could be an interesting week.  

huge volitivity in the futures last night, biden addressing the nation this morning over the bank closures, and to be frank I'm seeing a lot of misinformation and fear in the places I look.  

I know I said above that SVB wasn't likely to affect other places.   ..but that wasn't SVB doing anything particularly bad but rather just a panicked bank run.   I'm kind of worried now that the panic itself it catching on.  

at this point I don't know what to expect.  going to be wild though. 

[kitler53]

oh good, we're all clear now.  the president said everything is going to be okay.

https://www.nytimes.com/live/2023/03/13/business/silicon-valley-bank

"Americans can rest assured that our banking system is safe. Your deposits are safe," the president said. "Let me also assure you we will not stop at this; we'll do whatever is needed."

[kitler53]

oh boy, the fear is real and seems to be getting bigger:

https://finance.yahoo.com/news/credit-suisse-shares-drop-fresh-093204454.html

Credit Suisse crashing simply because of this statement:

Credit Suisse lost almost a quarter of its value on Wednesday, dropping to a new record low after its largest investor said it could not provide the Swiss bank with more financial assistance.

"We cannot, because we would go above 10%. It's a regulatory issue," Saudi National Bank chairman Ammar Al Khudairy said on Wednesday.

i hope you guys have nostalgia for 2008/9...

[Legend]

oh boy, the fear is real and seems to be getting bigger:

https://finance.yahoo.com/news/credit-suisse-shares-drop-fresh-093204454.html

Credit Suisse crashing simply because of this statement:

i hope you guys have nostalgia for 2008/9...

Avatar back, banking collapse, it really is 2009!

[kitler53]

there is nothing specific to point at and say "this is bad" but there seems to be a lot of closed door activity this weekend.  it's hard to believe this kind of activity would be happening if everything was fine. 

[the-pi-guy]

there is nothing specific to point at and say "this is bad" but there seems to be a lot of closed door activity this weekend.  it's hard to believe this kind of activity would be happening if everything was fine.

What I do after I close the door is my business!