techie81
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LOL at those who have confidence in the government in stopping this. If this reaches critical mass, it's going to be about survival. Start planning now.
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Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments
- Thread starter erek
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You got nothing
You clearly don’t understand finance. It’s money the government already owes them (the treasury bills - bonds). You saying the us government won’t pay its debts?
d3athf1sh
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well, where i live, in va beach, i know a couple places i can go during normal buisness hours and they'll give you cash for gold/silver
but listen to what you're saying. keeping money in cash or in the bank doesn't get adjusted for inflation.
i mean i'm not saying don't keep money in the bank it's pretty much a requirement in modern life. unless you're someone that got dealt a bad hand and ended up with judgments against you for $200,000+ in medical bills. then you can't have a bank account because anything you deposit disappears. sux. good thing they have things like blue bird from american express for people in that situation.
but when inflation hits gold's not gonna go down in value. just like if you would have stocked up in gold in 2008 before that last bad recession hit, it would be worth double right now.
Both on a planned schedule (in their 10k) and regulated.
I said "kind of a bailout", which it is as the depositors recive a refund to depositors will exceed the FDIC limit.
Never said it wasn't.
Don't talk down to me.
So are you complaining then? Or what? I'm not sure what point you're trying to make. If "preventing hundreds or thousands of companies from going bankrupt or out of business because a single bank fucked up" seems like a bad idea to you, I'm mighty curious what your solution would be instead.
And this time it could be even more profitable for the state than it was in 2008 (specially the banking sector bailout that ended up making significiant money for the tax payers)
Just stating facts, it's a depositor bailout - if you don't like it then tell us why. Wow read into things much? I think you're looking to argue over nothing.
I feel our collective brain went a bit quickly, from:
What a bad idea those banks so bigs and too big too fails, too much concentration, too much power, etc...
too:
Who in their right mind was doing business with a 30-40 years old top 20 banks that passed all regulars tests instead of one of the Top 4....
What a bad idea those banks so bigs and too big too fails, too much concentration, too much power, etc...
too:
Who in their right mind was doing business with a 30-40 years old top 20 banks that passed all regulars tests instead of one of the Top 4....
The word bailout implies that you’re either saving the bank from their own poor choices (they’re not- it’s toast) or saving the customers from poor choices (they don’t have an alternative, so… ).
Are they being rescued? Sure. But they didn’t do anything wrong. It’s like saying you’re bailing our cruise passengers because the captain hit a rock and sank the ship. You’re a passenger; you had nothing to do with it.
The word bailout has a specific connotation.
Blade-Runner
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4saken
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100% This is 1000x worse than 2008. Anyone pretending it isn't get back to us in 2-4 years. Gonna be a very slow roll by design of financial failures. CDBC incoming. By design. The SV company i work for gave us training to promote ESG etc to customers, seriously? I am not saying those acronyms these days in front of anyone. Such a no no "word" for many.
Not at the rate you see on the NYMEX
No it doesn't get adjusted, but you can put it in an interest-bearing account that'll generally keep up. If the idea is just protecting it, then a bank does well, particularly protecting the principal. Gold is not as good at protecting the principal because it is more volatile while it is easy to point to it now when it is high and shout about gains, had you bought in the 90s and sold in early 2000s, or bought in 2012 and sold in 2018 then you took a bath. Gold can, and does, lose at a rate over inflation, and also gain at a rate over inflation.
Now if you want to hold it as an investment, or more realistically as a hedge, that's 100% fine. But then you still probably just want to hold it on an exchange, and not in person. There's a reason that places like the New York Gold Depository exist, it is because most entities with a lot of gold don't want to hold and secure it themselves.
I just find this "Keep and secure your own money it is the safest," advice to be rather silly. No, it really isn't. For the average person, the amount you have is well under the limit of insurance, so a bank is basically as safe as it gets. If you regularly have more cash than that, well then you should have it more diversified than one bank or account and really shouldn't keep it all in your house. In part for security reasons but more because it could be doing work and earning for you.
Ummm... That image would very well apply to you. Boldy stating that this is 1000% worse than 2008 based on... what precisely? You are suddenly being an expert on banking on social media.
Contagion definitely not - but I do have a masters with a specialization in finance (that I don't use in the traditional way), so for better or worse, it's something I understand and know more about than I'd sometimes like to. I spent a LOT of time digging through 10k reports and SEC filings.
4saken
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wouldn't say boldly, but yeah its coming and its gonna be bad. Ignore if you want, fair, but carry on otherwise. Get to see where we were financially past years and years in profitability and what our outlook is now. It is NOT good and it is industry wide, outside of outliers that will be touted. Fortune 100 companies.
Eh. Exposure on the larger banks is limited - JPMC and etc have much smaller ratios when it comes to T-bill holdings vs deposit rates, and their clientele generally isn't burning cash the same way (except in the short term). None of them will get killed - they can get ~hit~ mind you, which would do a number on the markets in god-only-knows how many creative and fanciful ways that makes billionaires more billions somehow, but they won't get killed. The trick is the banks below, oh, say the 8th largest or so in the US - that's where they get into more diverse portfolios and compete by trying to maximize internal returns higher - and they're the ones that are more exposed overall. I've got a good link to a table I'll dig out tomorrow that shows the ratios - IIRC, JPMC was around 30% (vs SVB I ~think~ being in the 90s - finding the table now is a PITA as it was deep down a bloomberg thread).
The problem here really is that it will hit SMALLER shops this time around - which actually generate huge chunks of the GDP - if things go south. That's why they're being so very cautious right now - banks like SVB handle a lot of mid-sized business with HUGE cash flows that drive the economy. Without them, or with them in limbo, really ~weird~ things will happen.
Also have to remember - individuals != business. It makes sense for an individual to not have more than 250K in a single account - generally it's tied up in short-term investments/bonds/CDs/hookers that are far more liquid (or easily liquified), plus a giant pile of longer term stuff. That doesn't work the same way for a business that has to have cash on hand to meet certain requirements (and actually, you know, do business things). Actually do the math on how many bank accounts a Fortune 500 would have to have just to make payroll - it gets stupid fast. They have to concentrate to a point.
KazeoHin
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It's setting a bad precedent. No consequences = No risk.
The Execs who made poor choices, risky bets, and shady decisions will face nothing, and why should they? They'll get their bonuses, they'll get some amazing positions in the future: and most importantly: they'll KNOW that there are no consequences! not even a guilty conscience! their customers got their money back eventually!
The only consequence is that the piece of paper with an eagle-stamp that said this bank exists now says it doesn't.
A financial system that has literally ZERO CONSEQUENCES for fraud, extreme risk, and pure idocy is REALLY GOOD for encouraging a stable, healthy system that is in no-way prone to crashes, and will certainly have no ill-effects on the vast, vast majority of people in the working-class world.
erek
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Opinion on WeWorks original paperwork on the s1 / S-1?
I’d have to go dig into it. That company was so hilarious that I barely paid attention to their filings (talk about a “really only fits certain markets” product, with hellacious overhead hurdles); also don’t / didn’t fit the general scope of the kind of company I tend to be tasked to research (think Fortune 500 traditional).
If I have some spare time tomorrow I’ll give it a spin
I mean, we'll see. Silvergate was fucking around and found out, but is winding down without the help of the FDIC, maybe? Silicon Valley was investing in safe assets, but unsafe timelines, which is dumb, but not IndyMac no documentation, no problem mortgage lending dumb. Signature Bank looks like it was also fucking around with cryptocurrency and found out, and the FDIC had to step in. Sounds like FDIC is giving everybody one year to clean up their balance sheets, and maybe there won't be too much carnage. Maybe years and years of zero rate interest rates and then jumping to 4.5% in one year was a little fast?
crazycrave
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I still have all 4 cats on my 01 Mustang, 1 cat on my 84 Mustang, 1 cat on my Corolla.
Still, you are literally being that meme you are liking. You are suddenly a banking failure expert, despite offering no credentials or anything evidence other than "trust me bro."
Likewise with the pithy "ignore if you want." Well, what would you suggest people do? Scream about it on social media? Run around in circles?
Lots of armchair banking experts here. Let me add my 2 cents.
Silicon Valley Bank was a very large bank. This is not good for our economy. Whether the government does or does not bail them out (IMO, I hope they won't be bailed out), the ripples of this will be felt throughout the world. This is one of those times where I'm glad I stopped using banks 10 years ago and moved to credit unions. The returns are lower, but they are far more stable financial institutions.
In short, this is not good. Also, lose the insults people. They don't help you sound intelligent.
Silicon Valley Bank was a very large bank. This is not good for our economy. Whether the government does or does not bail them out (IMO, I hope they won't be bailed out), the ripples of this will be felt throughout the world. This is one of those times where I'm glad I stopped using banks 10 years ago and moved to credit unions. The returns are lower, but they are far more stable financial institutions.
In short, this is not good. Also, lose the insults people. They don't help you sound intelligent.
DoubleTap
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I don't like the idea of a bailout and would like to see the irresponsible suffer, but not if it means burning down half the country.
I have no idea what the collateral damage would be if we don't intervene, but it could be huge.
Literally catastrophic. Thats why this was handled before people went to bed sunday.
d3athf1sh
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it's the spot price or what not or close to it. i mean not all places will, some of them will try and rip you off, but i know this one place i took a chain in i had got as a kid in the 80's (felt bad about it) because i was going through some hard times and i don't wear gold anyway, and they gave me close to $500 for it and i know there's no way my grandma had spent that much money on a christmas present back then.
DukenukemX
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You're one of them.
No bank will take down the economy. When a bank fails like Silicon Valley Bank did, that's because they lent more money and bought more assets than they should. The government is now forcing them to liquidate their assets.
Who said it isn't good? Housing prices are high and a lot of homes are held by banks to sell at a higher price. When a bank fails then they're forced to lower prices and sell homes for less. The only people that lose are the bankers.
Let them burn. You fail nobody bails you out. Silicon Valley Bank only deals with wealthy clients, which means the impact is on the wealthy.
pututu
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S&P futures went up more than 100 handles earlier on and now stands around 85 handles because of the recent "good" news. Let see what the Fed will do the week after next (Mar 22) when the CPI for Feb is published on Mar 14. If it prints hot, my bet is that the Fed will have no choice but to stay on course to fight inflation where this impacts almost everyone. The Fed should also realizes that by guaranteeing all the depositors (via printed money) and if the depositors decide to use the returned uninsured money, this will add into the inflation. The money (created out of thin air) comes from the discount window rate provided by the Federal Reserve Bank of New York.
We have a winner. The reason you will see the feds do some form of bailout will be to increase the inflation. This is a great way to print even more money while the government can look "good" in the process and cause more inflation.
erek
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Bank-Rescue Doubts Persist as First Republic Shares Plummet
sirmonkey1985
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incorrect, the large portion of their customer base was start up's/small business.
erek
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First Republic Bank and PacWest Bancorp cratered
They're using the FDIC pool, not "new money."
Great breakdown by JPMC:
https://am.jpmorgan.com/content/dam...he-market/silicon-valley-bank-failure-amv.pdf
Bingo. They had MORE than enough capital to cover everything - as one person in the industry pointed out, they could have been loaned money by a bank-of-last resort, foreign investment funds, etc - they technically have the money they need (or did, I should say), just on an incompatible timeline to their current needs. And they waited too long on the BOLR.
Closest metaphor is having to declare bankruptcy because you have no cash to pay bills, but you own (outright) several homes in the LA Foothills - you have assets, you just don't have cash, and the assets can't convert to cash fast enough for your immediate need. Every cent depositors gave them is accounted for and will return - just not as fast as they needed it. This wasn't actual losses in MBS or bad investments - they're SAFE investments, just longer term than they can use.
I haven't checked SB yet. Expect regulatory changes for banks with deposit ratios and cash flow requirements to keep more liquid cash or stuff in ATM portfolios so the gains/losses aren't a surprise. Possibly also reporting timeline requirements too.
And yes, that rate increase is what killed them:
1. Killed VC funding (thus start ups need cash to burn)
2. Killed loans (we shot past the loan marks where cash is used for loans and easily repackaged instead to the point that no one takes out loans, and also it cut the redemption cash flow on the MBS to effectively zero since no one is refi/buying compared to usual)
3. Tanked the short term value of the T-bills because the coupon rate sucks compared to new bonds.
They're not getting bailed out. SVB is TOAST. Gone. Greg Bekker shouldn't ever hold this kind of position again. The depositors are being made whole - nothing more - and whoever fixes this (FDIC or a buyer in the final accounting) will be made whole when the T-bill and MBS mature.
Also - credit unions do effectively the same thing. Their investment ops are lower, but they're investing loans and deposits still too. Just differently.
Agreed.
This was not an outstanding loan issue. In fact, if anything - loans would have helped them as that's money often coming right back to the account as cash again (it's hilarious but true - fractional reserve banking is multiplying the power of money). They held tight to the reserve requirements set by the fed (in fact, they exceeded them - but no one has a 1:1 reserve to deposit ratio, even the biggest of the big), and had their capital requirements covered (they get audited constantly for this - they passed with flying colors). To put it simply - no one correlated (and REALLY should have) the cash flow rates of their clients to said reserve ratios and to asset type ratios. They parked the cash in the only place they could think of - bonds - and then sat back to wait for the return and operate like always. They didn't hedge when rates started to increase (mistake 1), they messaged it really poorly (mistake 2), and they didn't go find liquid capital quietly when it became clear they'd need it (mistake 3). Three strikes and you're out.
I suspect we'll see new regulation with an algorithm for "Client cash flow attaches to reserve requirements like "this" and to ATM/HTM ratios like "that" with some number higher than expected - every bank will end out moving assets around to cover based on the new algorithm, the markets will go nuts for 3-6 months while everyone adjusts, and then we move on.
Yup.
SVB is not in real estate in that sense. Maybe commercial / industrial, but they're not a home loan place. They're a business bank first and foremost. Also, selling homes for lest devalues MBS with under-rate redemptions and that's part of what made 2008 such a mess.
They deal with businesses. Personal wealth management for founders/etc is a small subset of their business overall - compared to the number of start ups / VC firms they serviced instead.
Bingo.
Both hold similar asset ratios to SVB. I haven't checked their primary clientele, but that may be unintended consequences, or it may be that they're also working with cash-flow heavy clients. Something else to look into today as I go.
I should have been a bit more clear, my post was partially intended to be funny, as I was referencing the MBS specifically because they had the former Lehman CFO in their C-suite.
In any case, yes, I understand the government backing, but there was duration risk, clearly. Bad timing to go heavy into these kinds of assets before the interest rates ripped (obviously , which is an indication that they underestimated the amount of tightening that would go on, although to be fair, they're not alone in that). Obviously, the present value of bonds drops as the interest rates increase, but despite the fact we know this, it's definitely weird to see a bank getting absolutely crushed partially due to having to take a write-down on Treasuries and MBS they had to sell at a loss to cover a short term cash-crunch. I don't think anyone had that on their bingo card for 2023, which is also probably why everyone's freaked out about the banking sector again.
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