Silicon Valley Bank collapses after failing to raise capital

[efstop]

Never mind, You likely wouldn't get what I mean.

 

[MikeyTheCat]

Never mind, You likely wouldn't get what I mean.

I think he would! Give him a shot, don't give up on him. C'mon man, it's Friday after all.

 

[TheX]

I think he would! Give him a shot, don't give up on him. C'mon man, it's Friday after all.

Do It!

 

[slug_maine]

186 US Banks Are in Trouble and at Risk of Insolvency – May Collapse Like Silicon Valley Bank​

From the Wall Street Journal – Economists are now estimating that 186 US banks may be prone to the same risks as Silicon Valley Bank. This number is likely higher as the pressures that regional banks are facing are ramping up.

 

[disaffected]

UBS is working with Swiss regulators to buy Credit Suisse. There is rumored to be an $8B diff in what regulators are willing to give and what assurances UBS wants. Regulators are also concerned about UBS's estimate of 10000 job losses as a result of the merger. This is getting complicated. Probably resolved somehow

Coalition of mid sized banks asked FDIC to guarantee all deposits for the next 2 yrs. Fdic has not responded

Buffet rumored to be working with bank CEOs to provide capital the way he has done with Goldman, Bank of America and the old Salomon Bros. His fund Bershire Hathaway has close to $130B in cash which can be deployed

This is getting crazy

Update 9 AM Eastern
Financial Times is reporting the UBS offers $1b for CS....Well below the $7-8B closing value of CS on Fri. CS is balking. Hopefully things get worked out

 

[pnuggett]

How ironic. Barney Frank of the Dodd-Frank Act was on the board of directors of Signature Bank.

More regulation? How about responsibility and accountability by the execs. If they get careless or greedy and crash a bank strip them of everything they own. Everything. Nothing even left for the family unlike that sleazeball Kenneth Lay from Enron who didn't kill himself before officially found guilty so his family got to keep all of the ill-gotten wealth.

 

[KSG_Standard]

I think some of this is mess has to do with stupidity, or willful ignorance or hubris or some mix of character and behavior that won’t rise to the level of criminal activity.

If I’m understanding the first domino to fall, Silicon Valley, they had too many investments in long term US treasury notes…bought when interest rates were nearer zero. A safe place to park money during a period of low fed borrowing rates. These bonds were considered the safest bet, even if inflation chipped away slowly at them. They were described by some economists as, “the least dirty shirt in the hamper”.

There’s nothing criminal or, on its face, stupid there. The people in charge at the bank, got caught with their pants down by the quick rise and sustained effects of inflation and then hammered by the Fed’s rate hike policy.

You might be able to argue that the banksters should have started selling their bonds earlier, but if they had they might have triggered the same sort of run, as investors keep an eye on that sort of behavior.

I think there is all sorts of civil liability in this mess, but I’m not sure about criminality.

 

[Zungle]

I think some of this is mess has to do with stupidity, or willful ignorance or hubris or some mix of character and behavior that won’t rise to the level of criminal activity.

If I’m understanding the first domino to fall, Silicon Valley, they had too many investments in long term US treasury notes…bought when interest rates were nearer zero. A safe place to park money during a period of low fed borrowing rates. These bonds were considered the safest bet, even if inflation chipped away slowly at them. They were described by some economists as, “the least dirty shirt in the hamper”.

There’s nothing criminal or, on its face, stupid there. The people in charge at the bank, got caught with their pants down by the quick rise and sustained effects of inflation and then hammered by the Fed’s rate hike policy.

You might be able to argue that the banksters should have started selling their bonds earlier, but if they had they might have triggered the same sort of run, as investors keep an eye on that sort of behavior.

I think there is all sorts of civil liability in this mess, but I’m not sure about criminality.

The criminality lies in the bail out........

 

[slug_maine]

I think some of this is mess has to do with stupidity, or willful ignorance or hubris or some mix of character and behavior that won’t rise to the level of criminal activity.

If I’m understanding the first domino to fall, Silicon Valley, they had too many investments in long term US treasury notes…bought when interest rates were nearer zero. A safe place to park money during a period of low fed borrowing rates. These bonds were considered the safest bet, even if inflation chipped away slowly at them. They were described by some economists as, “the least dirty shirt in the hamper”.

There’s nothing criminal or, on its face, stupid there. The people in charge at the bank, got caught with their pants down by the quick rise and sustained effects of inflation and then hammered by the Fed’s rate hike policy.

You might be able to argue that the banksters should have started selling their bonds earlier, but if they had they might have triggered the same sort of run, as investors keep an eye on that sort of behavior.

I think there is all sorts of civil liability in this mess, but I’m not sure about criminality.

It all stems from the Federal Reserve. They control the economic throttle and the problem is, they got so much useless data in their heads they can't se the obvious and blunder one way, then blunder the other. It's like a geezer at the wheel of a car, speed up, slow down, speed up, slow down. Socalled "experts" fucking up everything.

 

[SteveGangi]

How ironic. Barney Frank of the Dodd-Frank Act was on the board of directors of Signature Bank.

More regulation? How about responsibility and accountability by the execs. If they get careless or greedy and crash a bank strip them of everything they own. Everything. Nothing even left for the family unlike that sleazeball Kenneth Lay from Enron who didn't kill himself before officially found guilty so his family got to keep all of the ill-gotten wealth.

Yes. Without regulation and punishment of some sort, the execs will never be responsible OR accountable. Why should they be? Being crooked and or stupid brings rewards with no risk and no punishment.

Iceland had the right idea. Bail out the little guys, the ones WE leave holding the bag and paying the cost. Shit ALL over the big shits who caused the shit storm.

But it will never happen here, because the whole system is rotten.

 

[Zungle]

The mistake here is not currently raising rates....

It was lowering them so low, then leaving then in the toilet for way to long.......

This wasn't just a Fed Reserve issue....politicians, lobbyist/corporations all had their hands in it.

After the decline/ crash of 2008'sh consumers.....ie '..us ...were reluctant to invest in the stock market ....a system which needs new $$ to thrive.

The lower rates forced avg Americans back into the market as there was no place to make any $$ in common bank deposits ......this was all by design........

It worked , but also stripped non union and pensioned employees of their non market based retirements, and began another cycle of residential home inflation ......both events advanced erosion of the middle class....to our leaders and experts this was acceptable collateral damage...

But they underestimated 2 things while fvking our own people....

And they got a curve ball....

China.....the plague...and....

A radical shift in social ideology .

Now our eye's are off the ball and we're in the perfect storm......

A storm in which hadn't even partially navigated .....wait until China moves on Taiwan.....
We in the USA are in pivotal and historic age......

We have painted ourselves into a corner on almost every front.....

History has shown this generally leads to collapse of that society....

 

[pnuggett]

Yep it's rotten to the core. The fukkin' CEO of SVB sat on the Feds Board of Directors right up to the crash. WTF??? Fuk the Fed and fuk the moronic depositors. 97% percent of the depositors had deposits over the insured $250,000 but were made whole some fucking how.

SVB’s collapse exposes the Fed’s massive failure to see the bank’s warning signs​

Aaron Klein Thursday, March 16, 2023

The failure of Silicon Valley Bank (SVB) is a failure of supervision as well as regulation. The two terms are used interchangeably but are different concepts: Regulation is about creating rules, supervision enforcing them. Ignoring the fundamental question of whether the rules that existed were being properly enforced. The answer is that they weren’t and that the Federal Reserve failed as a bank supervisor.

The Fed supervised SVB from head to toe, with the San Francisco Federal Reserve Bank in charge of both the bank and its larger parent holding company. SVB was the largest bank the SF Fed supervised. SVB’s CEO even sat on the SF Fed’s Board of Directors up until the day the bank failed. I count at least four classic red flags of the bank’s conduct that should have sent the alarm bells ringing, which the Fed appears to have slept through.

SVB’s collapse exposes the Fed’s massive failure to see the bank’s warning signs

Aaron Klein discusses how the failure of Silicon Valley Bank has exposed regulatory and supervision failures at the Federal Reserve.

www.brookings.edu

 

[disaffected]

Before we all go to 10 guage blame shotgunning let's look at some of the factors at work here. This is not an attempt to divert or direct blame as I am sure there is plenty to go around. But it is an attempt to look at historical context

1. Banks make money on the spread between what they pay you the depositor and what they lend for.Either lending to govt in form of buying bonds or lending to customers
2. As a result of covid lockdowns the economy and economic activity went far south
3. The fed reduced short term interest rates to close to 0% as a result and kept them there for 2 years.
4. In order to make spread income, the bank bought longer dated gov't(the safest) bonds to get the spread income.
5. Bank portfolios are divided into available for sale(AFS) and not available. AFS portfolios must be marked to market. I do not know all the rules here concerning timing of mark downs
6. The bank eventually had to take a $1.8B writedown due to marking the AFS portfolio to market. They had enough capital at that point to still qualify as having adequate reg capital. But still said they would sell stock to shore up capital.
7. Within 24 hrs Several VCs told their portfolio companies to pull their $$ from SVB in the event of a problem. Well that created a $42B bank run in 24hrs on SVB.
8. At that point they did have a capital insufficiency and regulators stepped in.

Was SVB wrong in creating the portfolio it did---probably not at the point of creation but maybe should have restructured earlier

Was there any default risk in the portfolio? No these were fed govt issued bonds...first time in history a bank run/capital insufficiency happened due to gov't bonds.

Are the VCs responsible for the bank run-- I say to some extent which is a violation of Fed law but I am no atty and I* probably do not understand all the nuances

Was the govt wrong in shutting down the economy due to covid thereby leading to the eventual % moves- lordy I do not wanna touch that

Was the Fed wrong in going to 0% for as long as they did? The inflation we have now says yes but this stuff is complicated and takes a while to figure out....

Was SVB run tight and buttoned up? prob not Some stupidity there

 

[CB91710]

Yep... plenty of blame to go around.
As with any negative event, "the system" can tolerate a certain level of mistakes/incompetence/theft.
Start stacking, and "the system" can no longer cover itself.

Yes, these issues began long ago, and the Fed policies since 2008 have contributed to what will ultimately be our next crash.
Slug put it perfectly... The Fed makes moves in reaction to current situations, but they overcorrect, causing "pilot induced oscillation"
Credit being effectively "free" for the last 15 years set the stage... rates should have moved up after the recovery in 2012 and been maintained at a reasonable level.

The 2008 fiasco was the result of similar regulatory incompetence... cheap interest rates AND free-wheeling sub-prime lending on adjustable and interest-only loans to people who had no ability to moderate future market fluctuations.

But we always repeat history.

 

[rxbandit]

America has too many ‘I’ll protect your billions if you just give me one thousand’ type people.

 

[SteveC]

Before we all go to 10 guage blame shotgunning let's look at some of the factors at work here. This is not an attempt to divert or direct blame as I am sure there is plenty to go around. But it is an attempt to look at historical context

1. Banks make money on the spread between what they pay you the depositor and what they lend for.Either lending to govt in form of buying bonds or lending to customers
2. As a result of covid lockdowns the economy and economic activity went far south
3. The fed reduced short term interest rates to close to 0% as a result and kept them there for 2 years.
4. In order to make spread income, the bank bought longer dated gov't(the safest) bonds to get the spread income.
5. Bank portfolios are divided into available for sale(AFS) and not available. AFS portfolios must be marked to market. I do not know all the rules here concerning timing of mark downs
6. The bank eventually had to take a $1.8B writedown due to marking the AFS portfolio to market. They had enough capital at that point to still qualify as having adequate reg capital. But still said they would sell stock to shore up capital.
7. Within 24 hrs Several VCs told their portfolio companies to pull their $$ from SVB in the event of a problem. Well that created a $42B bank run in 24hrs on SVB.
8. At that point they did have a capital insufficiency and regulators stepped in.

Was SVB wrong in creating the portfolio it did---probably not at the point of creation but maybe should have restructured earlier

Was there any default risk in the portfolio? No these were fed govt issued bonds...first time in history a bank run/capital insufficiency happened due to gov't bonds.

Are the VCs responsible for the bank run-- I say to some extent which is a violation of Fed law but I am no atty and I* probably do not understand all the nuances

Was the govt wrong in shutting down the economy due to covid thereby leading to the eventual % moves- lordy I do not wanna touch that

Was the Fed wrong in going to 0% for as long as they did? The inflation we have now says yes but this stuff is complicated and takes a while to figure out....

Was SVB run tight and buttoned up? prob not Some stupidity there

 

[slug_maine]

The mistake here is not currently raising rates....

It was lowering them so low, then leaving then in the toilet for way to long.......

This wasn't just a Fed Reserve issue....politicians, lobbyist/corporations all had their hands in it.

After the decline/ crash of 2008'sh consumers.....ie '..us ...were reluctant to invest in the stock market ....a system which needs new $$ to thrive.

The lower rates forced avg Americans back into the market as there was no place to make any $$ in common bank deposits ......this was all by design........

It worked , but also stripped non union and pensioned employees of their non market based retirements, and began another cycle of residential home inflation ......both events advanced erosion of the middle class....to our leaders and experts this was acceptable collateral damage...

But they underestimated 2 things while fvking our own people....

And they got a curve ball....

China.....the plague...and....

A radical shift in social ideology .

Now our eye's are off the ball and we're in the perfect storm......

A storm in which hadn't even partially navigated .....wait until China moves on Taiwan.....
We in the USA are in pivotal and historic age......

We have painted ourselves into a corner on almost every front.....

History has shown this generally leads to collapse of that society....

I couldn't agree more. Not normalizing interest rates coming out of the 2008 debacle told me the economy was sick, it required life support. Those last two lines in particular are chilling...

 

[Olds442]

 

[slug_maine]

Before we all go to 10 guage blame shotgunning let's look at some of the factors at work here. This is not an attempt to divert or direct blame as I am sure there is plenty to go around. But it is an attempt to look at historical context

1. Banks make money on the spread between what they pay you the depositor and what they lend for.Either lending to govt in form of buying bonds or lending to customers
2. As a result of covid lockdowns the economy and economic activity went far south
3. The fed reduced short term interest rates to close to 0% as a result and kept them there for 2 years.
4. In order to make spread income, the bank bought longer dated gov't(the safest) bonds to get the spread income.
5. Bank portfolios are divided into available for sale(AFS) and not available. AFS portfolios must be marked to market. I do not know all the rules here concerning timing of mark downs
6. The bank eventually had to take a $1.8B writedown due to marking the AFS portfolio to market. They had enough capital at that point to still qualify as having adequate reg capital. But still said they would sell stock to shore up capital.
7. Within 24 hrs Several VCs told their portfolio companies to pull their $$ from SVB in the event of a problem. Well that created a $42B bank run in 24hrs on SVB.
8. At that point they did have a capital insufficiency and regulators stepped in.

Was SVB wrong in creating the portfolio it did---probably not at the point of creation but maybe should have restructured earlier

Was there any default risk in the portfolio? No these were fed govt issued bonds...first time in history a bank run/capital insufficiency happened due to gov't bonds.

Are the VCs responsible for the bank run-- I say to some extent which is a violation of Fed law but I am no atty and I* probably do not understand all the nuances

Was the govt wrong in shutting down the economy due to covid thereby leading to the eventual % moves- lordy I do not wanna touch that

Was the Fed wrong in going to 0% for as long as they did? The inflation we have now says yes but this stuff is complicated and takes a while to figure out....

Was SVB run tight and buttoned up? prob not Some stupidity there

I think the Fed should be allowed to go to zero% ...never. Am I understanding this right? Banks can borrow from the Fed at 0%, turn around and buy Treasuries with that money, and make the spread for doing pretty much nothing.

 

[Zungle]

I think the Fed should be allowed to go to zero% ...never. Am I understanding this right? Banks can borrow from the Fed at 0%, turn around and buy Treasuries with that money, and make the spread for doing pretty much nothing.

Literally doing nothing....as at that point a consumer servicing bank has license to pay customers zero on deposits......

And while only competing with other banks for personal,auto,equity and credit card rates......in someways its a 1 way cash flow.....and the banks still fvk it up.