Silicon Valley Bank collapses after failing to raise capital

[eisfeld]

45 minutes ago, John Drake said:

There goes the dollar. And here comes inflation again.

 

 

Completely misleading, that $2T number is the total par value of all bonds held by all banks apart from the top five which said they wont need it.

 

The Federal Bank initiated a limited time (1 year) loan in case other banks run into liquidity issues due to long term bonds.

 

You made it sound like the Fed is printing $2T and throwing it into the economy which obviously is not the case.

 

Edited March 16, 2023 by eisfeld

[nigelforbes]

Some posters seem to be trying to build a case to prove anything and everything, apart from what actually exists. The bail out wasn't done on behalf of connected friends, wokeism wasn't a factor, the FDIC didn't drop the ball, taxpayers won't be in hock for a thousand years and the moon landing wasn't filmed in a studio, and so on and so on. Plain and simple, it was a good old fashioned screw up, a couple of folks didn't do the job they were supposed to do and it highlighted a couple of weaknesses in the banking system, resulting from frequent rapid interest rate rises. These things happen from time to time, they are part of the development process. It's time to move on.

[placeholder]

25 minutes ago, nigelforbes said:

Some posters seem to be trying to build a case to prove anything and everything, apart from what actually exists. The bail out wasn't done on behalf of connected friends, wokeism wasn't a factor, the FDIC didn't drop the ball, taxpayers won't be in hock for a thousand years and the moon landing wasn't filmed in a studio, and so on and so on. Plain and simple, it was a good old fashioned screw up, a couple of folks didn't do the job they were supposed to do and it highlighted a couple of weaknesses in the banking system, resulting from frequent rapid interest rate rises. These things happen from time to time, they are part of the development process. It's time to move on.

But the one thing is the bank had not paif insurance on deposits greater than $250,000. So that's where moral hazard lies. Deposits should be insured up to their full amount.

[nigelforbes]

9 hours ago, placeholder said:

But the one thing is the bank had not paif insurance on deposits greater than $250,000. So that's where moral hazard lies. Deposits should be insured up to their full amount.

I think this is a private consideration and not the banks concern, depositors assume the risk when they deposit large amounts and if they don't they do something about it. Plus I don't know who offers this type of insurance any more, Swiss Re used to be the go to company for this but I thought they got out of the business. 

[nigelforbes]

Interesting to note that US banks have the lowest capital adequacy ratio (CAR) of any country (14%), apart from Morocco, Russia and Bolivia. The UK is 21%, most European banks are over 20% whilst countries such as Argentina are closer to 30%. Basel III CAR is now 10.5% for Teir 1 and 2 capital. I'm not clear what the argument is that warrants the US to be substantially lower and requires Europe to be higher, even Thailand is close to 20%. I suppose it might indicate a greater willingness on the part of the US Fed to ride to the rescue in times of distress, perhaps this is a trade off they make. 

 

https://www.ceicdata.com/en/indicator/united-states/capital-adequacy-ratio#:~:text=in Jun 2022%3F-,United States Capital Adequacy Ratio was measured at 14.7 % in,table below for more data.

Edited March 16, 2023 by nigelforbes

[placeholder]

4 hours ago, nigelforbes said:

I think this is a private consideration and not the banks concern, depositors assume the risk when they deposit large amounts and if they don't they do something about it. Plus I don't know who offers this type of insurance any more, Swiss Re used to be the go to company for this but I thought they got out of the business. 

It ought to be a private consideration, but clearly it's not. Large depositors got bailed out even though their deposits weren't covered by FDIC insurance. That means ultimately it's the taxpayers who are liable instead of large depositors  or the banks. If companies need to store large amounts of easily accessible funds, that's what short term T-bills are for.

And it's irrelevant, that in this case most likely the Feds won't end up subsidizing the collapse. The Feds intervened because of the threat to the system. Not because they knew that they were most likely going to be fully reimbursed.

[Credo]

It seems they are filing for bankruptcy:

 

SVB Financial Group files for Chapter 11

Silicon Valley Bank's holding company on Friday filed for Chapter 11 bankruptcy protection, a week after the U.S. government took over its commercial bank that teetered from a run on deposits.

 

Why it matters: It's an effort to preserve value for the remaining businesses that sit within the holding company. The filing doesn't include the bank itself, which was taken over by the FDIC.

Our thought bubble: Chapter 11 is often used to implement a sale process if the expected proceeds won't be enough to repay all the debt.

https://www.axios.com/2023/03/17/sbv-chapter-11

 

[John Drake]

So, do I read this correctly? SVB gave out last minute loans to "insiders" for $219 million. Per SVB requirements, those loans were put into SVB deposit accounts. Then, these accounts were "bailed out" with full coverage when the insiders and celebrities went complaining to the US government. These people just got millions created out of thin air.

  https://ca.finance.yahoo.com/news/svb-loans-insiders-tripled-219-192013102.html

[eisfeld]

46 minutes ago, John Drake said:

So, do I read this correctly? SVB gave out last minute loans to "insiders" for $219 million. Per SVB requirements, those loans were put into SVB deposit accounts. Then, these accounts were "bailed out" with full coverage when the insiders and celebrities went complaining to the US government. These people just got millions created out of thin air.

  https://ca.finance.yahoo.com/news/svb-loans-insiders-tripled-219-192013102.html

It says nowhere that these funds were sitting in SVB deposit accounts which wouldn't make any sense. Who takes out a loan on which interest is due and lets it sit in their account? Furthermore it wouldn't even be an issue if the asset was sitting with SVB to whom it is owed...

 

Also, you do realize that the loans have to be paid back? They are not bonuses. It's not free money someone gets. In fact they have to pay the interest.

 

You continue to mislead. Why? I also note you have not replied to the last comments posted regarding your previous misleading posts.

[John Drake]

5 minutes ago, eisfeld said:

Also, you do realize that the loans have to be paid back?

The loans will be sold to collectors who will end up charging pennies on the dollar for them.

[John Drake]

7 minutes ago, eisfeld said:

It says nowhere that these funds were sitting in SVB deposit accounts which wouldn't make any sense. Who takes out a loan on which interest is due and lets it sit in their account? Furthermore it wouldn't even be an issue if the asset was sitting with SVB to whom it is owed...

 

Also, you do realize that the loans have to be paid back? They are not bonuses. It's not free money someone gets. In fact they have to pay the interest.

 

You continue to mislead. Why? I also note you have not replied to the last comments posted regarding your previous misleading posts.

Not misleading anybody. The only people upset are the ones who are out shilling for this boutique bank, which had 93 percent of its deposits over the FDIC limit. SVB made low standard loans especially to VCs and in return required them to open up deposit accounts at SVB. Now, a pile of last minute loans to insiders before going belly up and again you see no problem. 

[eisfeld]

10 minutes ago, John Drake said:

The loans will be sold to collectors who will end up charging pennies on the dollar for them.

What makes you think so? Do you have any basis for this claim whatsoever? The collector is the FDIC through their receiver bank.

 

8 minutes ago, John Drake said:

Now, a pile of last minute loans to insiders before going belly up and again you see no problem. 

I am not saying the loans were not a problem or that SVB was a good bank. Just not for the reasons you stated. And that's why I say you are misleading people with your posts. They read like a Fox News report. There is plenty bad to say about SVB but let's keep it to the facts.

[Credo]

5 hours ago, eisfeld said:

What makes you think so? Do you have any basis for this claim whatsoever? The collector is the FDIC through their receiver bank.

 

I am not saying the loans were not a problem or that SVB was a good bank. Just not for the reasons you stated. And that's why I say you are misleading people with your posts. They read like a Fox News report. There is plenty bad to say about SVB but let's keep it to the facts.

I am not sure what is misleading.  There is a link to the original article.   It sounds like a lot of people got loans that they wouldn't ordinarily get.   

[eisfeld]

1 minute ago, Credo said:

I am not sure what is misleading.  There is a link to the original article.   It sounds like a lot of people got loans that they wouldn't ordinarily get.   

Because he is claiming things that are not in the article. Like for example that the loans will be sold to collectors for pennies. Or that the funds from the loans were sitting in SVB accounts that "got bailed out" and insinuating that they got money out of thin air. None of this is in the article and factually not true. You also are making up for example "lot of people got loans". Or the fact they they ordinarily would not have gotten the loans. Again, none of that is in the article. You know what? Go read the government report and tell me how many people got loans. I challenge you, I have read the report and the exact number is in it.

[placeholder]

28 minutes ago, eisfeld said:

Because he is claiming things that are not in the article. Like for example that the loans will be sold to collectors for pennies. Or that the funds from the loans were sitting in SVB accounts that "got bailed out" and insinuating that they got money out of thin air. None of this is in the article and factually not true. You also are making up for example "lot of people got loans". Or the fact they they ordinarily would not have gotten the loans. Again, none of that is in the article. You know what? Go read the government report and tell me how many people got loans. I challenge you, I have read the report and the exact number is in it.

True. The only times loans get sold for pennies on the dollar is when the loans are considered near worthless. The government wants to make sure it can get back as much as it can. Why would it countenance selling loans for less than what can be gotten for them.

[eisfeld]

3 minutes ago, placeholder said:

True. The only times loans get sold for pennies on the dollar is when the loans are considered near worthless. The government wants to make sure it can get back as much as it can. Why would it countenance selling loans for less than what can be gotten for them.

Yea the whole premise doesn't make any sense whatsoever if one thinks about it for a few seconds.

 

So I'm a CXO of SVB, take a triple digit million dollar loan from the bank, then park that money in a SVB account. Somehow the funds that are there need to then be "bailed out". Oh and the loan will be sold for pennies on the dollar to some collector by the FDIC who will then go to... uhm the FDIC to recover the funds because they are in the account? For the privilege of whitnessing that circlejerk I'll pay millions in interest because it's funny. Damn those evil VCs and celebrities!

[placeholder]

Bankers applaud as GOP senator dismisses calls for regulations after SVB collapse

Republican Sen. Steve Daines of Montana garnered applause from a room full of bankers on Tuesday after he dismissed calls for tougher regulations following the collapse of Silicon Valley Bank and Signature Bank.

"There are a lot of talking heads out there who are saying that the solution is more regulation, and I strongly disagree," Daines said in remarks to the American Bankers Association's Washington Summit, an annual gathering of bank CEOs and other top executives.

The Montana Republican went on to defend a 2018 law that progressive lawmakers and experts have said is at least partly responsible for the recent bank failures. 

https://www.salon.com/2023/03/22/bankers-applaud-as-senator-dismisses-calls-for-regulations-after-svb-collapse_partner/

And the Titanic cruises on.