4 ms·

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's

by gpm 4y ago

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

deleted 4y ago
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mdorazio 4y ago
Those assets cannot plausibly be sold for their currently stated value in the near-term. That's the whole reason SVB got into this mess...
- twblalock 4y ago
  Right but that's why loans make sense. We know the assets are good quality but it will take time to liquidate them. Companies that can't wait for that to happen will benefit from taking a loan to buy themselves time.
  - readthenotes1 4y ago
    Yes it's a good quality but have they been marked to market recently? Mortgages at 3% aren't worth near as much as they used to be. Ditto treasuries at 1%. If they bought them near the peak value what they can actually sell the income streams for is going to be a lot less than what they paid.
    - twblalock 4y ago
      Yeah but they will get some money for them. Plus there might be some other options. The FDIC is going to try whatever they can, and it's only been a day. In the meantime, impacted account holders can get their IOUs and borrow money to make payroll.
eek2121 4y ago
Uh, no? Do you know how they got into this mess to begin with? They were over-exposed to US treasuries. Let's talk about that for a moment: 1) When yields go up, treasury prices fall. 2) When yields go down, treasury prices rise. 3) The only way you get the basis cost for a treasury back is if you hold to maturity. When a bank run happens, you (if you are bank) need cash. Lots of it. If you own assets, you have to sell those assets to come up with that cash. SVB had to sell ALL of their notes for less than they bought them for. See #3. The losses by SVB were realized well before today. This has been going on for a while now. Outside of $250,000 per account type per person, the only additional money folks will get back is whatever a bank sale comes up with, which won't be as much as most folks think, since the core assets were already sold off. If I had to make an educated guess, most startups/investors will lose more than 50% of what they started with. Remember, high interest rates. SVB will NOT be sold at a good price. This is not a market for sellers, it is a market for buyers. Again, sky high interest rates and many of the very investors that could make that sale possible had money at this bank. That means a lower sale price.
- gpm 4y ago
  Assume your guesstimate of 50% is right. If I lend you 25% of your SVB deposit secured against your SVB deposit, I should still be fine (as long as my claim comes early enough in any ensuing bankruptcy).
- anonu 4y ago
  Over exposed to US treasuries? I don't think anyone has put those words together before. It's like saying they were over exposed to cash. You're saying a bank run occurred because they had a duration mismatch on US government debt where maturities were less than 1 year. I don't buy that explanation at all...
  - nostromo 4y ago
    Treasuries can and do lose value. They are not like cash which does not lose face value. Long term treasuries have declined 40% in value since they peaked in 2020. https://www.google.com/finance/quote/TLT:NASDAQ https://www.google.com/finance/quote/TLT:NASDAQ Banks hold a lot of treasuries as part of their capital requirements. So long as they intend to hold them to maturity, they don't have to mark them to market. Banks collectively hold about $620 billion in loses in held-to-maturity securities right now since they have declined rapidly in value during the Fed's interest rate hikes. https://www.aol.com/finance/why-silicon-valley-banks-crisis-121159758.html https://www.aol.com/finance/why-silicon-valley-banks-crisis-... If you can hold them to maturity, you're fine. If you need to sell them to raise cash (to cover other losses or during a bank run) those losses become real. And if your startup had $10m in cash in SVB, but now you find out you're only getting back, say, $7m, that's very bad news for your business.
JumpCrisscross 4y ago
> the assets of the balance sheet exceed the liabilities by a reasonable percentage Until the FDIC pores over their books, nobody can say anything sensible about what they own, what they sold, what they sent out and what is secured as collateral.
- gpm 4y ago
  I mean, I'm just going off the FDIC's assertion that > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. And I'm not trying to claim that the balance sheet necessarily entirely reflects reality
  - JumpCrisscross 4y ago
    > as of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits December 31st, or even March 1st, are virtually irrelevant to a bank collapse today. Assets were sold at a deep discount, presumably some were pledged, and deposits fled.
  - deleted 4y ago
    [deleted]

by gpm 4y ago

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

deleted 4y ago

[deleted]

mdorazio 4y ago

Those assets cannot plausibly be sold for their currently stated value in the near-term. That's the whole reason SVB got into this mess...

twblalock 4y ago
Right but that's why loans make sense. We know the assets are good quality but it will take time to liquidate them. Companies that can't wait for that to happen will benefit from taking a loan to buy themselves time.
- readthenotes1 4y ago
  Yes it's a good quality but have they been marked to market recently? Mortgages at 3% aren't worth near as much as they used to be. Ditto treasuries at 1%. If they bought them near the peak value what they can actually sell the income streams for is going to be a lot less than what they paid.
  - twblalock 4y ago
    Yeah but they will get some money for them. Plus there might be some other options. The FDIC is going to try whatever they can, and it's only been a day. In the meantime, impacted account holders can get their IOUs and borrow money to make payroll.

eek2121 4y ago

Uh, no? Do you know how they got into this mess to begin with? They were over-exposed to US treasuries. Let's talk about that for a moment: 1) When yields go up, treasury prices fall. 2) When yields go down, treasury prices rise. 3) The only way you get the basis cost for a treasury back is if you hold to maturity. When a bank run happens, you (if you are bank) need cash. Lots of it. If you own assets, you have to sell those assets to come up with that cash. SVB had to sell ALL of their notes for less than they bought them for. See #3. The losses by SVB were realized well before today. This has been going on for a while now. Outside of $250,000 per account type per person, the only additional money folks will get back is whatever a bank sale comes up with, which won't be as much as most folks think, since the core assets were already sold off. If I had to make an educated guess, most startups/investors will lose more than 50% of what they started with. Remember, high interest rates. SVB will NOT be sold at a good price. This is not a market for sellers, it is a market for buyers. Again, sky high interest rates and many of the very investors that could make that sale possible had money at this bank. That means a lower sale price.

gpm 4y ago
Assume your guesstimate of 50% is right. If I lend you 25% of your SVB deposit secured against your SVB deposit, I should still be fine (as long as my claim comes early enough in any ensuing bankruptcy).
anonu 4y ago
Over exposed to US treasuries? I don't think anyone has put those words together before. It's like saying they were over exposed to cash. You're saying a bank run occurred because they had a duration mismatch on US government debt where maturities were less than 1 year. I don't buy that explanation at all...
- nostromo 4y ago
  Treasuries can and do lose value. They are not like cash which does not lose face value. Long term treasuries have declined 40% in value since they peaked in 2020. https://www.google.com/finance/quote/TLT:NASDAQ https://www.google.com/finance/quote/TLT:NASDAQ Banks hold a lot of treasuries as part of their capital requirements. So long as they intend to hold them to maturity, they don't have to mark them to market. Banks collectively hold about $620 billion in loses in held-to-maturity securities right now since they have declined rapidly in value during the Fed's interest rate hikes. https://www.aol.com/finance/why-silicon-valley-banks-crisis-121159758.html https://www.aol.com/finance/why-silicon-valley-banks-crisis-... If you can hold them to maturity, you're fine. If you need to sell them to raise cash (to cover other losses or during a bank run) those losses become real. And if your startup had $10m in cash in SVB, but now you find out you're only getting back, say, $7m, that's very bad news for your business.

JumpCrisscross 4y ago

> the assets of the balance sheet exceed the liabilities by a reasonable percentage Until the FDIC pores over their books, nobody can say anything sensible about what they own, what they sold, what they sent out and what is secured as collateral.

gpm 4y ago
I mean, I'm just going off the FDIC's assertion that > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. And I'm not trying to claim that the balance sheet necessarily entirely reflects reality
- JumpCrisscross 4y ago
  > as of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits December 31st, or even March 1st, are virtually irrelevant to a bank collapse today. Assets were sold at a deep discount, presumably some were pledged, and deposits fled.
- deleted 4y ago
  [deleted]