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Correct. They were doing the same thing every other bank was doing, and an unnecessary panic run did them in. Depositors will get their money back because my be
by borski 4y ago
Correct. They were doing the same thing every other bank was doing, and an unnecessary panic run did them in. Depositors will get their money back because my bet is SVB gets acquired, as their balance sheet was actually fairly healthy (relative to other banks) pre-panic, but it's gonna have ripple effects for sure.
We shall see.
- yeahsure22 4y agoThey won’t get acquired, they no longer exist. The dream is done.
- jldugger 4y agoThey've been acquired by a newly formed bank from the FDIC. I'm not sure that bank will be around much longer than it takes to mark their assets to market, since the press release said they didn't know: > At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers. No bank is gonna buy another bank until that is cleared up.
- yeahsure22 4y agoAssets - 100b Liabilities - 130b Who is going to buy this bank? I wouldn’t take it if you gave me 40b. That’s why they had to make a new bank.
- makestuff 4y agoProbably the good old federal government. Something something too big to fail.
- toomuchtodo 4y agoI love the optics of remnants of Silicon Valley bank being owned by the gov alongside Fannie and Freddie. Behold the graveyard of poor risk management.
- strbean 4y ago> my bet is SVB gets acquired By a Thiel-backed company, after he initiated the bank run?
- borski 4y agoYou may not be wrong, lol
- eurasiantiger 4y agoGotta get those black budgets somehow.
- recursive 4y agoThe market has demonstrated a demand for run initiators. Who are we to doubt?
- makestuff 4y agoDoes he back Brex? I saw they had billions of inflows yesterday.
- koolba 4y agoThey had massive asset / liability duration mismatch. That’s gambling on low rates for an extended period of time. It’d be like a traditional bank not reselling mortgages to Fannie Mae. You can’t have $1B of demand deposit liability and $1B of 10-year treasuries because a rate hike will wipe you out immediately if you need liquidity.
- onlyrealcuzzo 4y agoWhy can't a bank borrow for liquidity so it doesn't need to sell at a discount?
- lisper 4y agoIt can, and when rates are low, many do. But interest rates are rising, so borrowing is getting expensive.
- borski 4y agoEvery bank had this, especially during the last two years. They were not the only one. The difference was bad PR and a panic run.
- hd95489 4y agoIf that’s your theory then buy some puts because anyone that did this will absolutely get ripped a new one
- nostrebored 4y agoThey won’t in the short term. Even the GFC had a multi year slow roll. Markets can remain irrational longer than you can stay solvent and all that
- dahdum 4y agoDFPI specifically called them insolvent and illiquid, took them over and handed them to the FDIC. I don't think they were all that healthy after all. https://dfpi.ca.gov/2023/03/10/california-financial-regulator-takes-possession-of-silicon-valley-bank/ https://dfpi.ca.gov/2023/03/10/california-financial-regulato...
- borski 4y agoNo bank is healthy once all its depositors pull their cash out. What their balance sheet looked like before the panic is what I'm talking about. Every bank dies from a bank run, period.
- slowmovintarget 4y agoUnless they get bailed out by taxpayers because "they're too big."
- kgwgk 4y agoAnd how many banks are acquired after that happens because of how healthy their balance sheet used to look?
- charrondev 4y agoYou can see a list of failed banks and who acquired them here. https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ Every one in the past few years looks like it was acquired.
- nostrebored 4y agoThe cost of money is very different now though.
- kgwgk 4y agoThis one is largest than the 100 previous ones combined. And the point is that there may be many reasons why a bank may want to acquire a smaller failed one to integrate it in its operations but "the previous owners used to have a well-capitalized business until they somehow lost it all" is not a strong reason on its own.
- gr1zzlybe4r 4y agoHow is the panic "unnecessary"? Are you saying that if your personal bank told you that you could get your money back, but just not right now, that you'd be ok with that? Liquidity is a key feature of banks and it relies on trust. Without it, they have nothing. Trust isn't some ancillary thing for a bank. It is almost everything.
- anamexis 4y agoDoes that means panics are necessary at every other bank, seeing as how their liquidity is similar (or worse)?
- JumpCrisscross 4y ago> every other bank, seeing as how their liquidity is similar Source? SVB had an unusual amount of long-duration assets. Most banks maintain a buffer of low-yielding, highly-liquid on-the-run Treasuries.
- nostrebored 4y agoI would not find it surprising if bank liquidity was actually historically low, especially considering that many banks do maintain buffers _of the same covaried assets_ and that banks _induce covariance when they choose to use an asset class for liquidity_. Maybe ZFRB was just a really, really bad idea.
- borski 4y agoNot anymore. Very few maintain this, JPM being the notable exception. The only difference is that panic set in and there was a bank run, largely led by VCs telling startups to pull their money.
- ghshephard 4y ago"unnecessary panic run". Say you are a Small Company with $5mm in a recent fund raise that you have at SVB. You use that $5mm to make payroll, pay amazon, your office, AT&T for your fiber, buy macbook airs for your employees, etc... Now - you are listening to the recent news, and it looks like SVB is going to be taken over by the FDIC. If that happens, you will be insured up to $250K, but the rest of your $5mm, all $4.75mm is now frozen. You will be given a certificate for the uninsured funds, and you will be in line to be paid back, but (A) Not immediately, and (B) you may lose part of your funds. You, as a rational CEO, would probably want to put your money in, say, Wells Fargo, where it wouldn't be frozen, and you wouldn't lose any of it. That was the basis of the liquidity event that just happened.