SVB failure

[Anonymous]

I’m on page 5 of this thread and 80% of the people in this thread have no clue what they’re talking about.

In fact, the ones who are claiming “omg you’re wrong about this” are the ones who are themselves, completely aloof to what happened.


Remind me to not come to DCUM for anything financial. Yikes.

[Anonymous]

+1 to the yikes. I think some of the "financial system going to fail" screamers are political actors, perhaps Russian perhaps not.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is bad. For those of you that are going to say “this is a west coast big tech problem” it’s going to be felt nationwide, especially given the remote work environment.

How does remote work relate to this?

This was not about remote work. It was about SVB who handed out loans like crazy during the 2020-21 tech boom. Then when tech started falling apart the last year, they took the money out the bank. Combined with bonds falling and rising interest rates, more investors pulled out. The writing was on the wall 2 years ago. Basically; the Freddie/Fannie/Lehman 2007 situation all over again except instead of housing, it was tech startups.

Virtually every word you wrote is wrong.

DP. Here is an article that summarizes what happened, I don’t think you have an understanding of events of what happened but PP on largely correct. The trouble at the bank has a very tangential relation to mortgages. You can switch out MBS with treasuries and same story. They got bonds that at super low rates and had to sell at a loss to raise funds because their depositors are pulling out more money and depositing less due to headwinds in the startup space.

https://www.netinterest.co/p/the-demise-of-silicon-valley-bank

[Anonymous]

Anonymous wrote:+1 to the yikes. I think some of the "financial system going to fail" screamers are political actors, perhaps Russian perhaps not.

Claims then to be “political”, then proceeds to use the worse “political” talk of all time with the fake “everything I don’t like is a Russian” nonsense.

Your Alex Jones tinfoil hat is showing.

[Anonymous]

Why the hell were they not hedging interest rate risks? That’s what is galling. They pretty much violated some of the most basic tenets of bank risk mgmt….and this was a huge bank! Even rinky-dink ag banks that deal with ag futures buy hedge protection. This isn’t sophisticated stuff for a bank of this size.

[Anonymous]

this is sad. a lot of people are not going to get their paychecks.

[Anonymous]

A lot of winery staff

[Anonymous]

Anonymous wrote:Why the hell were they not hedging interest rate risks? That’s what is galling. They pretty much violated some of the most basic tenets of bank risk mgmt….and this was a huge bank! Even rinky-dink ag banks that deal with ag futures buy hedge protection. This isn’t sophisticated stuff for a bank of this size.

You have to admit it is a pretty dramatic swing in rates lately, short rates going from zero 0 to 5, mortgages from 3 to 7. If you wanted a bit of a yield on your fixed rate investment a year ago you would have to take interest rate risk.

I don’t think the interest rate risk by itself killed the bank. I’d guess a lot more banks are in a similar situation in terms of unrealized losses due to rising rates. But SVB ballooned 3x with new uninsured deposits in the last couple of years and failed to recognize how much that added to run on bank risk

[Anonymous]

Anonymous wrote:I think some of you should read more books.

1. SVB had a liquidity problem, not an asset problem. Failure had nothing to do with “bad loans” to Tech or Crypto. (If anything they were locked into “bad loans” to the US Govt in low rate Treasuries, which all banks hold at ridiculous levels because the law says USG debt is infallible and safe so banks must hold a lot… hmmm.)
2. Depositors insured and uninsured will recoup all of the money. Insured by Monday. Uninsured 50%+ next week, the remainder to follow.
3. 97% uninsured deposits is a lot. But it has nothing to do with brokered deposits. Tech, VC, etc kept their cash there because SVB catered to those sectors and until the last few weeks SVB was adored for doing so.
4. Systemic risk is minimal. This ain’t Lehman. There will be some ripples, but that’s it. No need to panic.

why do you assume the uninsured deposits will be returned next week? can the FDIC solve the liquidity problem? and then what happens when fhe startups default on their loans?

you sound like a finance bro. so sure of yourself.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think some of you should read more books.

1. SVB had a liquidity problem, not an asset problem. Failure had nothing to do with “bad loans” to Tech or Crypto. (If anything they were locked into “bad loans” to the US Govt in low rate Treasuries, which all banks hold at ridiculous levels because the law says USG debt is infallible and safe so banks must hold a lot… hmmm.)
2. Depositors insured and uninsured will recoup all of the money. Insured by Monday. Uninsured 50%+ next week, the remainder to follow.
3. 97% uninsured deposits is a lot. But it has nothing to do with brokered deposits. Tech, VC, etc kept their cash there because SVB catered to those sectors and until the last few weeks SVB was adored for doing so.
4. Systemic risk is minimal. This ain’t Lehman. There will be some ripples, but that’s it. No need to panic.

why do you assume the uninsured deposits will be returned next week? can the FDIC solve the liquidity problem? and then what happens when fhe startups default on their loans?

you sound like a finance bro. so sure of yourself.

You are very clueless about start ups. Without access to deposits, payroll will quickly be missed and these places will fold fast. That will hit the VCs that funded them. It’s a house of cards. Missing payroll for a small business is the end.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think some of you should read more books.

1. SVB had a liquidity problem, not an asset problem. Failure had nothing to do with “bad loans” to Tech or Crypto. (If anything they were locked into “bad loans” to the US Govt in low rate Treasuries, which all banks hold at ridiculous levels because the law says USG debt is infallible and safe so banks must hold a lot… hmmm.)
2. Depositors insured and uninsured will recoup all of the money. Insured by Monday. Uninsured 50%+ next week, the remainder to follow.
3. 97% uninsured deposits is a lot. But it has nothing to do with brokered deposits. Tech, VC, etc kept their cash there because SVB catered to those sectors and until the last few weeks SVB was adored for doing so.
4. Systemic risk is minimal. This ain’t Lehman. There will be some ripples, but that’s it. No need to panic.

why do you assume the uninsured deposits will be returned next week? can the FDIC solve the liquidity problem? and then what happens when fhe startups default on their loans?

you sound like a finance bro. so sure of yourself.

You are very clueless about start ups. Without access to deposits, payroll will quickly be missed and these places will fold fast. That will hit the VCs that funded them. It’s a house of cards. Missing payroll for a small business is the end.

There is no reason to pour so much money in these SV start ups. FDIC shouldn’t blindly bail out these venture capitalists.

[Anonymous]

Anonymous wrote:Why the hell were they not hedging interest rate risks? That’s what is galling. They pretty much violated some of the most basic tenets of bank risk mgmt….and this was a huge bank! Even rinky-dink ag banks that deal with ag futures buy hedge protection. This isn’t sophisticated stuff for a bank of this size.

Isn’t this what a stress test would be designed to indicate??

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think some of you should read more books.

1. SVB had a liquidity problem, not an asset problem. Failure had nothing to do with “bad loans” to Tech or Crypto. (If anything they were locked into “bad loans” to the US Govt in low rate Treasuries, which all banks hold at ridiculous levels because the law says USG debt is infallible and safe so banks must hold a lot… hmmm.)
2. Depositors insured and uninsured will recoup all of the money. Insured by Monday. Uninsured 50%+ next week, the remainder to follow.
3. 97% uninsured deposits is a lot. But it has nothing to do with brokered deposits. Tech, VC, etc kept their cash there because SVB catered to those sectors and until the last few weeks SVB was adored for doing so.
4. Systemic risk is minimal. This ain’t Lehman. There will be some ripples, but that’s it. No need to panic.

why do you assume the uninsured deposits will be returned next week? can the FDIC solve the liquidity problem? and then what happens when fhe startups default on their loans?

you sound like a finance bro. so sure of yourself.

You are very clueless about start ups. Without access to deposits, payroll will quickly be missed and these places will fold fast. That will hit the VCs that funded them. It’s a house of cards. Missing payroll for a small business is the end.

yeah that has nothing to do with what I said (except to confirm that the startups will default en masse on their SVB loans)

[Anonymous]

People better be checking their 401Ks, IRAs and brokerage accounts. SVB is included in many ETFs. You don't need to have a bank account with SVB to be effected.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why the hell were they not hedging interest rate risks? That’s what is galling. They pretty much violated some of the most basic tenets of bank risk mgmt….and this was a huge bank! Even rinky-dink ag banks that deal with ag futures buy hedge protection. This isn’t sophisticated stuff for a bank of this size.

Isn’t this what a stress test would be designed to indicate??

Yes. But SVB was below the stress testing threshold ($100B in assets) in 2020 and then they get a couple years to build out their ST’ing apparatus. Plus, they are subject to an every two years ST’ing requirement.

I think their first ST was scheduled for 2024.

It used to be that there was ST’ing starting at the $50B threshold. But the Trump administration and GOP Congress changed it in 2018 to a $100B threshold and reduced the frequency of stress tests.