Silicon Valley Bank fails

[skuthorp]

Sixteenth biggest bank in America.
https://www.cnbc.com/2023/03/10/sili...-deposits.html

[birlinn]

Ooops.
Not any more.

[Too Little Time]

That tends to happen when interest rates rise.

[Andrew Craig-Bennett]

That took two days.

According to the FT, the problem was lending long. $91Bn in mortgages and long dated T-bills, which sank as interest rates rose. Note that 96% of its deposits were not covered by federal deposit insurance. This is a high figure.

Possibly related to the failure of Silvergate two days earlier, which was crypto related.

Half the tech industry and about the same proportion of private capital funds are reckoned to be involved with SVB.

Looks orderly… so far.

[Ted Hoppe]

^ Yep. SVB was in a lot of deals for the tech world. They also issued favorable mortgages to those who cut big tech deals. Lets hope they were in order.

[Paul Pless]

Sixteenth biggest bank in America.

sixteenth sounds large, but they didn't even have enough assets to qualify to be stress tested by the fed in fourth qtr 2022

[J.Madison]

We've been waiting for this haven't we? Wouldn't be surprised if it's the beginning. I'm not going to sell, but hopefully I don't regret that in a few weeks.

[willmarsh3]

FDIC covers deposits to $250K so those will be available on Monday. But what about the big depositors? What do they have to hedge against bank failure?

https://www.washingtonpost.com/us-po...cial-industry/

[Gerarddm]

This does not feel like 2008 redux. Thankfully.

[Ted Hoppe]

Lots of startups and other companies here did not make payroll yesterday because of the lockup of funds. Friends at Roku are being told it may be a week or more.

[Too Little Time]

Lots of startups and other companies here did not make payroll yesterday because of the lockup of funds. Friends at Roku are being told it may be a week or more.

My kid says the payroll service that handles a lot of the payrolls had just made a payroll deposit at SVB and then the bank closed up. That payroll service expects to have payroll handled and out on Monday.

In California the penalties for not paying payroll on time are more than substantial.

[Ted Hoppe]

My kid says the payroll service that handles a lot of the payrolls had just made a payroll deposit at SVB and then the bank closed up. That payroll service expects to have payroll handled and out on Monday.

In California the penalties for not paying payroll on time are more than substantial.

Thanks for that. That will be a relief to many. I know a few young folks live pay check to pay check for these start up so running thin hurts even if they have to wait a few days.

[David G]

sixteenth sounds large, but they didn't even have enough assets to qualify to be stress tested by the fed in fourth qtr 2022

I haven't looked, but what odds will you lay that they would have qualified... but for tRump's 2018 rollback of some of the Dodd-Frank regulations?

[Paul Pless]

I haven't looked, but what odds will you lay that they would have qualified... but for tRump's 2018 rollback of some of the Dodd-Frank regulations?

not only would they have qualified they were one of the primary firms lobbying republicans in congress and trump to rollback the law in favor of reduced regulation

[StevenBauer]

The CEO, Gary Becker, sold $3.6 million of his own shares in the bank on Thursday. The day before it crashed.

A00E7018-9B0B-4354-93D8-0D637C04A6A9.jpg

[Paul Pless]

gary becker should go to jail

[ahp]

How big? One way is to spread the risk around.

[sandtown]

The CEO, Gary Becker, sold $3.6 million of his own shares in the bank on Thursday. The day before it crashed.

Some of you have a way to go before you grasp proper corporate overlord type thinking . . .

Larry insists that all losses at SVB be covered , , , but ....

[David G]

gary becker should go to jail

Maybe he'd like to be transferred to Floor-Ida to do some beta-testing of the proposed 'firing squad' option?

[Paul Pless]

Maybe he'd like to be transferred to Floor-Ida to do some beta-testing of the proposed 'firing squad' option?

the evening after he exercised his options the stock price fell $161 per share

[StevenBauer]

Is it true that Peter Thiel started the run on the bank?

https://www.businessinsider.com/pete...ort-2023-3?amp

[Nicholas Carey]

Is it true that Peter Thiel started the run on the bank?

https://www.businessinsider.com/pete...ort-2023-3?amp

Probably just a hunch on his part. A stable genius he is, I'm sure.

[David G]

Anyone who appears to have engaged in insider trading should be investigated. If warranted, they should be charged. If guilty, I hope they are found guilty, fined heavily, and maybe sent to Florida for that beta-testing I mentioned.

[Tom Hunter]

It's likely that the larger deposits will be made whole. SVB has assets greater than it's deposits the problem was they are long assets and this was a classic bank run.

Theil's email to his companies certainly accelerated things. Usually the FDIC takes banks over on the weekend this time they moved in on Friday morning. (sometimes the truth is funny)

If a startup has a payroll under $250k it's likely fine. If it is over $250k things will be painful for a bit but come right in the end. I'm also confident that a small number of badly run companies will go under because of the added stress, but they were likely to go sooner or later anyway.

[Too Little Time]

It's likely that the larger deposits will be made whole. SVB has assets greater than it's deposits the problem was they are long assets and this was a classic bank run.

Valuing assets is tricky. The bank had sufficient assets when their bond holdings were marked as hold until maturity. But that changed when they were marked to market. They will almost certainly liquidated at market prices.

[Tom Hunter]

@Too Little Time Of course you are correct about asset values. Having looked into this in some detail the market price does seem to be greater than the total value of the deposits. Also when a bank collapses the assets are often sold to another bank by the FDIC with the FDIC negotiating to get a longer term value than the mark to market price. SVB was profitable, their assets and customers have substantial value to a more stable and better run bank. Part of the reason they failed was being over concentrated in a specific market. A buyer would not have that problem.

This is not like 2008 when the assets banks were holding were not worth anything. A lot of SVBs money is in treasuries and other stable bonds that are paying regular interest. SVB failing is bad, but not the kind of systemic disaster we had 15 years ago.

[Dan McCosh]

If a startup has a payroll under $250k it's likely fine.

You mean two employees or less.

[birlinn]

The ripples extend to this side of the pond:
https://www.bbc.co.uk/news/business-64930944

[Tom Hunter]

@Dan Sorry, I was not specific enough. $250k a month. I am directly affected by the bank closure, we have 3 employees and some contractors, and also some revenue generated by the contractors. We will be fine. A company double our size could also be fine. Beyond that there will be some pain but not total disaster.

The system is pretty well set up to handle bank failures of this type.

[Stiletto]

The fallout has spread. Some NZ companies are exposed to the extent of millions of dollars.

[sp_clark]

The fallout has spread. Some NZ companies are exposed to the extent of millions of dollars.

"Domino Effect"?

https://www.bloomberg.com/news/artic...tors-fdic-says

[Too Little Time]

as reported a short time ago

Silicon Valley Bank depositors will get ‘all of their money,’ regulators say

[CWSmith]

"Domino Effect"?

https://www.bloomberg.com/news/artic...tors-fdic-says

Yeah. Two banks in a few days. It makes me wonder if I should stuff my mattress.

[The Q]

The UK arm of SVB, has been taken over by SVB, after heavy pressure by the UK government..

[birlinn]

I think it's HSBC that have taken over the UK side.