Silicon Valley Bank collapses after failing to raise capital

[Misty]

48 minutes ago, candide said:

Bernie Sanders says Silicon Valley Bank's failure is the 'direct result' of a Trump-era bank regulation policy

"Signing the bill into law meant that Trump was exempting smaller banks from stringent regulations and loosening rules that big banks had to follow. The law raised the asset threshold for "systematically important financial institutions" from $50 billion to $250 billion.

This meant that the Silicon Valley Bank — which ended 2022 with $209 billion in assets — was no longer designated as a systematically important financial institution. 

https://news.yahoo.com/bernie-sanders-says-silicon-valley-045130094.html

Interesting Guardian story:

Silicon Valley Bank chief pressed Congress to weaken risk regulations

CEO Greg Becker personally led the bank’s half-million-dollar push to reduce scrutiny of his institution – and lawmakers obliged

https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb

[eisfeld]

10 minutes ago, John Drake said:

Nothing makes "Barbara" different. She is getting a bailout along with the others who shouldn't be, because FDIC plainly told every depositor when they opened their account that FDIC insurance only covered up to $250,000. Why change the rules after the fact? Because a lot of rich, connected people started complaining over the weekend and tried to start a panic.

It's not a bailout in the traditional sense. In bank bailouts of the past the banks were sitting on heavy losses and the tax payer stepped in to make the depositors and shareholders whole. This is not happening here. SVB had the assets, they were just locked up for a long duration. The depositors could have gotten their money back after X years. The problem is that thousands of small companies used SVB and if their funds are locked for long durations they would simply all go bankrupt if they could not find funding somehow. A huge number of people would suddenly be unemployed. And that's a bad outcome. That's why the government decided to step in and find a solution that helps all these people and the economy as a whole.

 

If Barbara is no different than others then why did you explicitly list a few celebrities plus VCs and tech firms? What made them special that you decided to list them instead of using neutral wording like depositors.

 

It baffles me how anyone can see this action as a bad thing. And no they did not change rules after the fact. It's a new, different situation and they found a solution. No rules have been changed.

 

Unfortunately you didn't answer regarding your made up allegation that I altered your post.

 

[placeholder]

7 minutes ago, John Drake said:

Bailing out the rich and connected. And now every bank in the US is guaranteed to bailout depositors to infinity.

 

But the important thing is they didn't bail out shareholders. And the consequences of not bailing out all depositors could have been severe.  And this probably wouldn't have happened had these banks still been liable to the far stricter rules of the origian Dodd-Frank. That these kinds of outcomes would occur was predictable. And now American politicians are complaining that Europe is going to steal away the Cryptocurrency sector because it's offering laxer regulations. 2 sets of fools: those who are complaining and those who are recruiting.

[John Drake]

5 minutes ago, eisfeld said:

It's not a bailout in the traditional sense. In bank bailouts of the past the banks were sitting on heavy losses and the tax payer stepped in to make the depositors and shareholders whole. This is not happening here. SVB had the assets, they were just locked up for a long duration. The depositors could have gotten their money back after X years. The problem is that thousands of small companies used SVB and if their funds are locked for long durations they would simply all go bankrupt if they could not find funding somehow. A huge number of people would suddenly be unemployed. And that's a bad outcome. That's why the government decided to step in and find a solution that helps all these people and the economy as a whole.

 

If Barbara is no different than others then why did you explicitly list a few celebrities plus VCs and tech firms? What made them special that you decided to list them?

 

It baffles me how anyone can see this action as a bad thing. And no they did not change rules after the fact. It's a new, different situation and they found a solution. No rules have been changed.

Utterly laughable. Of course, it's a bailout. It's coming from a "fund," created by charging fees to banks who then pass it on to their customers. Aren't banks and their customers taxpayers, too? I mention the celebrities, btw, because they were the ones out front demanding a bailout for depositors who breached the $250,000 FDIC insurance limit. Mark Cubans was especially loud about it. So was David Sacks and other big mouth libertarians who suddenly wanted government money to save their cash and not coincidentally stop QT, so they can go back to ZIRP and free money.

[Misty]

17 minutes ago, John Drake said:

Nothing makes "Barbara" different. She is getting a bailout along with the others who shouldn't be, because FDIC plainly told every depositor when they opened their account that FDIC insurance only covered up to $250,000. Why change the rules after the fact? Because a lot of rich, connected people started complaining over the weekend and tried to start a panic.

Definitely understand the outrage.  But I'm not sure I'd call this a bailout of rich, connected people. Make no mistake: contagion would have been really ugly for everyone. And it's not really a bailout:  taxpayer money isn't used to make depositors whole:  the banking sector will bear that cost through higher cost of FDIC insurance.

 

First to lose everything in a bankruptcy is shareholders (already done), then bondholders (my guess is also done).  Depositors would be last on that list to bear the costs.  If not enough left for depositors, FDIC insurance kicks in.  If not enough FDIC insurance, then a benefit-cost determination is made.  In this case the cost of freezing deposits until assets could be sold was determined to be too great.  It was better for everyone to make the cash readily available to depositors and avoid systemic contagion.

 

 

[John Drake]

6 minutes ago, placeholder said:

But the important thing is they didn't bail out shareholders. And the consequences of not bailing out all depositors could have been severe.  And this probably wouldn't have happened had these banks still been liable to the far stricter rules of the origian Dodd-Frank. That these kinds of outcomes would occur was predictable. And now American politicians are complaining that Europe is going to steal away the Cryptocurrency sector because it's offering laxer regulations. 2 sets of fools: those who are complaining and those who are recruiting.

So we have a string of idiots and con men. Of course, Trump has a huge responsibility, providing the barn door through which the banks could put themselves in a mess. But that doesn't let out the responsibility every individual has to realize that FDIC was supposed to be limited to $250,000. Now, Mark Cuban will see somewhere between $3 to $10 million returned to him he was uninsured for.

[Captain Monday]

On 3/12/2023 at 12:42 AM, AndyFoxy said:

By gold and silver. Get cash out of the bank.

My bug out bag has some physical gold. Not for investment, maybe to cross a "natural border".

[John Drake]

1 minute ago, Misty said:

the banking sector will bear that cost through higher cost of FDIC insurance.

Again, banks and their customers, to whom they will pass on the fee increase, also pay taxes. So "taxpayers" will pay. And we will all pay in terms of renewed inflation, if this causes Powell to turn back on the money spigot and pause or reduce rates.

[nigelforbes]

24 minutes ago, John Drake said:

Bailing out the rich and connected. And now every bank in the US is guaranteed to bailout depositors to infinity.

 

NO! The entire global banking system was just protected, if the solution had been any different or if there hadn't been one, the domino's would quickly begin to fall. Anyone with funds over the 250K insured limit would have withdrawn their funds from the smaller banks and put them on deposit with systemically important banks. The smaller banks would then have had liquidity problems and would have been pushed over the edge  into the hands of the FDIC. The contagion from that would spread globally, it could easily have been the start of the end of the financial world as you know it. You should be extremely thankfully that people have acted.

[John Drake]

1 minute ago, nigelforbes said:

NO! The entire global banking system was just protected, if the solution had been any different or if there hadn't been one, the domino's would quickly begin to fall. Anyone with funds over the 250K insured limit would have withdrawn their funds from the smaller banks and put them on deposit with systemically important banks. The smaller banks would then have had liquidity problems and would have been pushed over the edge  into the hands of the FDIC. The contagion from that would spread globally, it could easily have been the start of the end of the financial world as you know it. You should be extremely thankfully that people have acted.

That's the hysteria we heard all weekend of tech gamblers who spent the past 48 hours fearmongering about problems at one bank. There was a system in place to deal with this "crisis." Why wasn't it given a chance to work?

[nigelforbes]

6 minutes ago, John Drake said:

That's the hysteria we heard all weekend of tech gamblers who spent the past 48 hours fearmongering about problems at one bank. There was a system in place to deal with this "crisis." Why wasn't it given a chance to work?

If you think it's hysteria, go read the papers and understand what's happening there right now in the banking sector then come back and tell me again it's hysteria.

[John Drake]

3 minutes ago, nigelforbes said:

If you think it's hysteria, go read the papers and understand what's happening there right now in the banking sector then come back and tell me again it's hysteria.

Tell you what. Go ahead and give these guys their bailout. But when the sector gets back to making profits and their stock prices soar, how about most of that goes to the Treasury. Privatizing profits and socializing losses stops now.

[eisfeld]

20 minutes ago, John Drake said:

Utterly laughable. Of course, it's a bailout. It's coming from a "fund," created by charging fees to banks who then pass it on to their customers. Aren't banks and their customers taxpayers, too? I mention the celebrities, btw, because they were the ones out front demanding a bailout for depositors who breached the $250,000 FDIC insurance limit. Mark Cubans was especially loud about it. So was David Sacks and other big mouth libertarians who suddenly wanted government money to save their cash and not coincidentally stop QT, so they can go back to ZIRP and free money.

I'm sorry but laughable is just your spin on things. It's *not* a bailout as before. Clearly.

 

Your example would apply to any kind of insurance. If you have a car accident and the insurance has to pay your medical bills it comes from a fund (no scare quotes needed) created by charging fees to car holders. Aren't car holder taxpayers too? You are saying anyone who has a car accident with insurance covering it is getting bailed out by the taxpayers. Talk about laughable.

 

Of course you will hear celebrities be out front trying to demand help. They are celebrities. Being out front on the stage is what they do. What you didn't see is tens of thousands of normal people panicking and trying to figure out how they can navigate this <deleted>storm in the coming weeks. Doesn't mean they aren't there and that they vastly outnumber a few celebrities. You are just paying attention to the wrong thing.

[eisfeld]

24 minutes ago, John Drake said:

Now, Mark Cuban will see somewhere between $3 to $10 million returned to him he was uninsured for.

Money which he deposited in the bank and for which SVB had the assets, just locked up. Why are you bringing up celebrities as special cases again?

[John Drake]

1 minute ago, eisfeld said:

Your example would apply to any kind of insurance. If you have a car accident and the insurance has to pay your medical bills it comes from a fund (no scare quotes needed) created by charging fees to car holders. Aren't car holder taxpayers too? You are saying anyone who has a car accident with insurance covering it is getting bailed out by the taxpayers. Talk about laughable.

You had to have the car insurance before you had an accident. You don't have and accident and then go back and get insurance. Silly.

[eisfeld]

18 minutes ago, John Drake said:

That's the hysteria we heard all weekend of tech gamblers who spent the past 48 hours fearmongering about problems at one bank. There was a system in place to deal with this "crisis." Why wasn't it given a chance to work?

Funny you should speak about hysteria. Here we have a pretty good solution that keeps things stable and specifically was done to kill all the panicking and keep the economy working. And there you are, trying to use a lot of loaded terms, derogatorily calling startups and their investors which are what defines a big part of the silicon valley economy "tech gamblers". Who is trying to stir up hysteria now?

 

If you understood the situation you wouldn't suggest just letting it unfold and seeing how the system would deal with it.

[nigelforbes]

1 minute ago, John Drake said:

You had to have the car insurance before you had an accident. You don't have and accident and then go back and get insurance. Silly.

SVB is not just a bank that serves Start ups in Silicone Valley it's an international bank that serves tech start ups globally. HSBC just bought SVB UK for one Pound, that means the tech start up companies in the UK will be allowed to continue to employee the large numbers of people they employ and to continue developing their companies. The alternative to that is the bank is allowed to collapse and large numbers of people become unemployed and the entire tech start up sector disseminated. Banks are interconnected, Credit Suisse is already under attack from short sellers as a result of this, the other major banks also. CS has now delayed its AGM because their annual report will show they also are holding bonds with a lower than face value. This is no different from many of the other large banks except they are able to weather the storm because the capital adequacy and liquidity requirements are higher. If those banks are coming under pressure now, imagine what would have happened if the Treasury hadn't stepped in!

[nigelforbes]

3 minutes ago, eisfeld said:

If you understood the situation you wouldn't suggest just letting it unfold and seeing how the system would deal with it.

Isn't that the truth!

[eisfeld]

5 minutes ago, John Drake said:

You had to have the car insurance before you had an accident. You don't have and accident and then go back and get insurance. Silly.

May I remind you that it was you that wrongly claimed the depositors were getting bailed out by an insurance fund? Silly.

[onthedarkside]

Nonsense troll post removed, carry on and face a warning

[Misty]

1 hour ago, John Drake said:

Again, banks and their customers, to whom they will pass on the fee increase, also pay taxes. So "taxpayers" will pay. And we will all pay in terms of renewed inflation, if this causes Powell to turn back on the money spigot and pause or reduce rates.

Yes, we will all pay but much less than if this had snowballed into a contagion situation.  Most of us remember 2008 and Lehman. And I'll never forget 1997 Thailand.

[placeholder]

There's an article on MarketWatch that lists 20 banks that that are sitting on huge potential losses. Not one of them has more than 250 billion in debt. So not subject to tighter regulation.

If you want to access the article copy the headline and do a search in incognito mode (Chrome)  or in-private mode (Edge) or whatever similar mode your browser uses.

 

"Deep Dive: 20 banks that are sitting on huge potential securities losses—as was SVB"

[vandeventer]

Could this be the start of rolling bank failures or will another player come in and buy the SVB out. We will all know soon. It's a shame there wasn't much warning for the investors that had over 250,000 in their account.

[placeholder]

26 minutes ago, vandeventer said:

Could this be the start of rolling bank failures or will another player come in and buy the SVB out. We will all know soon. It's a shame there wasn't much warning for the investors that had over 250,000 in their account.

What's really a shame is that Trump and the Republicans gutted Dodd Frank. All the major banks that are in trouble, those with less than 250 billion in assets, would have been subject to much more severe scrutiny if Dodd Frank was left in its original form that specified banks with over 50 billion in assets were subject to its strictest rules.

[bamnutsak]

15 hours ago, candide said:

Bernie Sanders says Silicon Valley Bank's failure is the 'direct result' of a Trump-era bank regulation policy

"Signing the bill into law meant that Trump was exempting smaller banks from stringent regulations and loosening rules that big banks had to follow. The law raised the asset threshold for "systematically important financial institutions" from $50 billion to $250 billion.

S.2155

 

(Sec. 101) This bill amends the Truth in Lending Act (TILA) to allow a depository institution or credit union with assets below a specified threshold to forgo certain ability-to-pay requirements regarding residential mortgage loans. Specifically, those requirements are waived if a loan: (1) is originated by and retained by the institution, (2) complies with requirements regarding prepayment penalties and points and fees, and (3) does not have negative amortization or interest-only terms. Furthermore, for such requirements to be waived, the institution must consider and verify the debt, income, and financial resources of the consumer.

 

https://www.congress.gov/bill/115th-congress/senate-bill/2155

 

The Crapo Bill, named after its sponsor, Sen. Mike Crapo R Idaho.

 

 

 

 

[bamnutsak]

1 hour ago, bamnutsak said:

S.2155

 

 

Signing ceremony...

 

 

[placeholder]

16 hours ago, John Drake said:

Utterly laughable. Of course, it's a bailout. It's coming from a "fund," created by charging fees to banks who then pass it on to their customers. Aren't banks and their customers taxpayers, too? I mention the celebrities, btw, because they were the ones out front demanding a bailout for depositors who breached the $250,000 FDIC insurance limit. Mark Cubans was especially loud about it. So was David Sacks and other big mouth libertarians who suddenly wanted government money to save their cash and not coincidentally stop QT, so they can go back to ZIRP and free money.

The hypocrisy of libertarians is a valid point. A columnist for the Financial Times wrote "There are no libertarians in financial foxholes".

As for the rest, had the feds not intervened, this collapse could have proved contagious. The real culprit here are the parties who slashed back regulations on mid-sized banks ranging in size from 50 billion to 150 billion.

I think you know which President and which political party to thank for that.

[bamnutsak]

Privatize profits.

 

Socialize costs.

 

 

 

 

 

[Misty]

28 minutes ago, placeholder said:

The hypocrisy of libertarians is a valid point. A columnist for the Financial Times wrote "There are no libertarians in financial foxholes".

As for the rest, had the feds not intervened, this collapse could have proved contagious. The real culprit here are the parties who slashed back regulations on mid-sized banks ranging in size from 50 billion to 150 billion.

I think you know which President and which political party to thank for that.

Agreed on hypocrisy of libertarians, and that the parties (paid by lobbyists) who slashed regulations are real culprits.

 

Also, bank management is directly responsible.  Besides losing their jobs, let's see if management has their bonuses, paid on 10 March, clawed back.

[John Drake]

3 hours ago, placeholder said:

The hypocrisy of libertarians is a valid point. A columnist for the Financial Times wrote "There are no libertarians in financial foxholes".

As for the rest, had the feds not intervened, this collapse could have proved contagious. The real culprit here are the parties who slashed back regulations on mid-sized banks ranging in size from 50 billion to 150 billion.

I think you know which President and which political party to thank for that.

I have no problem assigning blame to the dumb brute, Trump. Just as I have no problem pointing out the hypocrisy of Barney Frank in becoming a champion of Trump's repeal of Dodd-Frank, to which you allude above, as it affected his crypto focused bank.

 https://www.wsj.com/articles/barney-frank-pushed-to-ease-financial-regulations-after-joining-signature-bank-board-e5c8819c