SVB failure

[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??

`net Interest link above said the required Feds worst case scenario maximum rate change was way too low for what's actually happened in the last year. That the stress tests design addressed the last war...

[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.

Guess we will have to do without a few crypto exchanges and photo apps.

[Anonymous]

Anonymous wrote:

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)

Sorry I was responding to the same person you were responding to.

[Anonymous]

Anonymous wrote: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.

Also funds with holdings in stocks like Roku for example. There have to be so many. My growth funds are probably not going to be doing too well. Sigh.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

1. Agree. Disagree with parenthetical--no law required them to hold all those Treasuries. And SVB was not subject to liquidity rules which more or less cause banks to hold a lot of governments.
2. Agree with insured, but have no idea why you think uninsured will get 50% by next week. What they will get has not been determined yet and is pending FDIC estimates of recovery value of assets.
3. Uninsured was probably more like 90 to 93%. But just a quibble, either hay the percentage is extraordinarily high.
4. Agree with respect to systemic financial risk. Agree with a previous PP that the more apt comparison is likely the 2000 bursting of the tech bubble.

The FDIC already announced they will pay an advance dividend to uninsured depositors next week.

The ratio of uninsured deposits is public. It was 97.3% on what I read, though that could have been 12/31. Either way it’s in that range.

They did, but no where have I seen the amount of the dividend. I think it is TBD.

Correct. FDIC paid an advanced dividend of 50% at Indymac (maybe PP assumed a similar amount) but the amount for SVB is TBD and will be declared next week.

https://closedbanks.fdic.gov/dividends/bankfind/Dividendindex?fin=10007

SVB’s assets massively exceeded (and still exceed) liabilities. Depositors will all be made whole. Historically, advance dividends issued in the 7-10 days after receivership have covered 50%-80% of outstanding uninsured deposits. So yes, FDIC will set the number based on specific estimates of what they expect to recover on the assets, discounted by a substantial haircut. But it’s going to be at least 50% and in all likelihood more like 75%.

[Anonymous]

“Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.”

[Anonymous]

Anonymous wrote:

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.

S.2155 passed with bipartisan support.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

S.2155 passed with bipartisan support.

yeah I was gonna say. anyone who has been in DC for a while knows that the “small banks” and credit unions have a lot of ability for bipartisan lobbying on the Hill.

[Anonymous]

Anonymous wrote:

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

This is a good article.

I do disagree with a paragraph towards the end that SVB would have been better off if it had been subject to the standard liquidity requirement (liquidity coverage ratio or LCR) that applies to larger banks and has helped Credit Suisse to stay in the game.

The ratio treats held to maturity (HTM) government securities as liquid assets when in fact if a bank sells even one of those securities to raise cash it has to realize the losses on the entire HTM portfolio. SVB had nearly $75 billion of HTM securities, most in governments, and, thus, would have met the LCR handily. However, if SVB sold even one of these securities it would have become instantly insolvent because it would have had to realize the embedded unrealized mark to market losses in its entire HTM portfolio. These losses were about the size of its tangible equity and would have wiped out all or nearly all the bank's equity.

A bank can borrow against its HTM government securities to raise cash without having to realize the embedded losses. But it is expensive and there are limits as SVB found with its Federal Home Loan Bank borrowings.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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

This is a good article.

I do disagree with a paragraph towards the end that SVB would have been better off if it had been subject to the standard liquidity requirement (liquidity coverage ratio or LCR) that applies to larger banks and has helped Credit Suisse to stay in the game.

The ratio treats held to maturity (HTM) government securities as liquid assets when in fact if a bank sells even one of those securities to raise cash it has to realize the losses on the entire HTM portfolio. SVB had nearly $75 billion of HTM securities, most in governments, and, thus, would have met the LCR handily. However, if SVB sold even one of these securities it would have become instantly insolvent because it would have had to realize the embedded unrealized mark to market losses in its entire HTM portfolio. These losses were about the size of its tangible equity and would have wiped out all or nearly all the bank's equity.

A bank can borrow against its HTM government securities to raise cash without having to realize the embedded losses. But it is expensive and there are limits as SVB found with its Federal Home Loan Bank borrowings.

Can we talk about how there is no reason the FHLB should have SVB as a member? Their purpose is supposed to be supporting the housing market.

I know that FHLB advances have a super priority. I wonder if that’s gonna mess up the certificates to the uninsured depositors.

FHFA is an incompetent sh* show anyway.

[Anonymous]

Anonymous wrote:“Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.”

$7m over the last month. Scumbag

[Anonymous]

Anonymous wrote:Wonder how many VC partners got out in time because they have insider knowledge?

Peter Thiel did. Every penny out with his Founder’s Fund. Evil grifter

[Anonymous]

Anonymous wrote:“Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.”

Why don’t thieves like this ever end up in jail?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

This is a good article.

I do disagree with a paragraph towards the end that SVB would have been better off if it had been subject to the standard liquidity requirement (liquidity coverage ratio or LCR) that applies to larger banks and has helped Credit Suisse to stay in the game.

The ratio treats held to maturity (HTM) government securities as liquid assets when in fact if a bank sells even one of those securities to raise cash it has to realize the losses on the entire HTM portfolio. SVB had nearly $75 billion of HTM securities, most in governments, and, thus, would have met the LCR handily. However, if SVB sold even one of these securities it would have become instantly insolvent because it would have had to realize the embedded unrealized mark to market losses in its entire HTM portfolio. These losses were about the size of its tangible equity and would have wiped out all or nearly all the bank's equity.

A bank can borrow against its HTM government securities to raise cash without having to realize the embedded losses. But it is expensive and there are limits as SVB found with its Federal Home Loan Bank borrowings.

Can we talk about how there is no reason the FHLB should have SVB as a member? Their purpose is supposed to be supporting the housing market.

I know that FHLB advances have a super priority. I wonder if that’s gonna mess up the certificates to the uninsured depositors.

FHFA is an incompetent sh* show anyway.

Agree FHLB has strayed very far from its original mission. Even as one can admire the ingenuity in reshaping its mission to have a reason for being.

[Anonymous]

Anonymous wrote:

Anonymous wrote:“Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.”

Why don’t thieves like this ever end up in jail?

He hung around and bribed high ranking politicians over the years. He’ll be fine. Allowed to retire on his private beachfront home somewhere.