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FDIC auction for SVB said to be underway, final bids due Sunday
- latchkey 4y agoI really wish they'd televise this. I'd love to watch the bidding process.
- htag 4y agoIt's probably closer to making an offer on a house than a live auction event.
- mixdup 4y agoyeah, this would not be excited in the least. watching a dozen emails come in would be quite boring
- thechao 4y agoExcept the previous owner gets a Snickers bar instead of, say, the cash equivalent of the house.
- weard_beard 4y agoHeath bar at best. Definitely not 100 grand or a payday.
- deleted 4y ago[deleted]
- rtp4me 4y agoNo kidding. It would be fascinating to see who joins the bidding process and what kind of leverage/collateral they use.
- RC_ITR 4y agoThe PiP of men doing excel. The angry call from a boss about an unclear footnote. The suspense!
- deleted 4y ago[deleted]
- paxys 4y agoIt's probably a lot less exciting than you imagine. Wait for the movie in a few years.
- moomoo11 4y agoWho would you cast for what roles?
- paxys 4y agoJust reuse the entire cast of Silicon Valley. About the same level of competence in this situation.
- zamnos 4y agoScene: Erlich Bachman's house in Palo Alto. The team is sitting in the den around their computers. We see Jin-yang on the TV with a chyron saying he's the new owner of SVB, now DINB, and that depositors now own equivalent to their deposits in PiperCoin. Erlich Bachman storms into the room, bellows: Jay Powww!
- deleted 4y ago[deleted]
- ejb999 4y agoJim Cramer could play the CEO.
- echelon 4y agoWith AI, he doesn't even need to show up to set.
- bloodyplonker22 4y agoCathie Wood would play the chief risk officer.
- fbdab103 4y agoAre you imagining something like the Microsoft Excel Stream[0]? [0]: https://www.youtube.com/watch?v=xubbVvKbUfY https://www.youtube.com/watch?v=xubbVvKbUfY
- JacobDotVI 4y agoNot an FDIC auction, but if you’re interested in what this sort of bidding looks like the book Barbarians at the Gate details the LBO auction of RJR Nabisco. That auction was a lot of bankers squired away in conference rooms on separate floors of an office building while the auctioneers walked bids between the various groups.
- formercoder 4y agoSadly it doesn’t work this way anymore. You just send a heavily lawyered pdf bid letter by email.
- notmindthegap 4y agolet’s start a DAO to buy it
- jedberg 4y agoWhy in the world would you want to own the bank? Whoever is buying it is doing so to get the customer list. The assets aren't really worthwhile given that they will all need to be sold to cover the depositors, given that if they opened as DAOBank on Monday everyone would pull their money out. The only case I see of not having a run on the remaining balances is if someone like Chase buys them.
- notmindthegap 4y agoit was a joke, reference to the DAO that tried and failed to buy the constitution at auction
- furyofantares 4y ago> Whoever is buying it is doing so to get the customer list. And to prevent contagion, I'd guess? Or do you not see it that way?
- jedberg 4y agoYes, to an extent it's in the big bank's best interests to restore faith in the banking system. But mostly that's up to the government. If Treasury comes in and says "we will make all depositors whole", that pretty much ends the contagion right there.
- fbdab103 4y ago>Whoever is buying it is doing so to get the customer list. Not a bank or in the financial sector, but this makes no sense to me. It is likely fairly easy to get the list of VCs who used SVB. If nothing else, startup businesses which SVB catered to are significantly less appealing than they were one to two years ago. What fraction of those clients required low interest rates to keep the business viable?
- chrisacky 4y agoAre a book of assets that easily accessed to be able to even create a portfolio of interest?
- voisin 4y agoAbsolutely. They would have a digital record of everything available in real time. If they didn’t then they were never a real bank.
- fbdab103 4y agoThe comparison would be FTX where they handed the auditor a pile of Excel spreadsheets and some vague, "I thought they were in last week's email" kind of accounting. Real banks have real controls and want to know where every fractional cent (blast, my Superman 3 scheme is foiled in the crib) is at any moment. Edit: minor English goof
- compiler-guy 4y agoUpvote for Superman 3 reference. For those who don’t get it: https://youtu.be/N7JBXGkBoFc https://youtu.be/N7JBXGkBoFc
- loeg 4y agoYes? Of course they know what the assets are.
- bostik 4y agoYes. Every big bank[x] has to submit daily risk reports. If those reports are late by more than (IIRC) 48h, they feel the consequences. Then there are end-of-week, end-of-month, and end-of-quarter reports too. The daily reports may take a couple of hours to run. Spread across a compute grid of few thousand cores. I work for a company that provides a quant analysis and computation platform for financial institutions. We tend to skip our weekly client-facing code promotion at the end of quarter, to make it absolutely sure that there are no unexpected changes that could mess up their gargantuan report runs. [x]: Let's omit the nuance for once, ok?
- linusg789 4y agohttps://ghostarchive.org/archive/jlYao https://ghostarchive.org/archive/jlYao
- neonate 4y agohttps://archive.ph/XYuBe https://archive.ph/XYuBe
- sigmar 4y agoFor banks that are bidding, how do they know how many assets SVB had? Are they working off of data from past fillings?
- WJW 4y agoSVB itself knows which assets it has, and therefore the FDIC knows. They then send out invitations to bid to banks with the list of assets as an attachment. EDIT: It's not only the assets that are being bid on, the curator could just sell those themselves. But SVB has (even now) some amount of intangible value in terms of relations with customers, built up expertise in serving startups, etc etc. A bank looking to diversify into providing banking services for startups might be willing to bid more for such expertise and customer lists than a bank which is happy with the customer base it has. So I'd expect it would be mostly the intangibles which drive the potential differences in bids, with the market price of the assets merely serving as floor.
- seanhunter 4y agoYou get an excel sheet with all the assets and their current mark. Then you typically have until late sunday to put the bid in so they can resolve the bank before market opens on Monday. Source: was part of a team doing this valuation analysis over a very fun weekend in 2008 for one of the famous bank failures
- MonkeyMalarky 4y agoAre bidders expected to forget or "un-see" such knowledge afterwards? Or is the information not that detailed / anonymized in some way?
- drexlspivey 4y agoWhy would they need to un-see it?
- bunabhucan 4y agoCompetitive advantage. If bigTechA and bigTechB discuss merging there will come a point in the due diligence where certain employees are asked to review competitive secret sauce of the other company with the understanding that if the merger unravels for some reason they will have to take a package and stop working for their current employer. I can't imagine the mbs/loan portfolio is that proprietary though.
- gutdcnow 4y ago[dead]
- halfjoking 4y ago[flagged]
- paxys 4y agoIs the latest Joe Rogan podcast out already?
- voisin 4y agoMaybe (hopefully) his username is a clue?
- halfjoking 4y agoJoe Rogan isn’t creative enough to come up with this theory before it happens. I don’t see what’s wrong with prediction/speculation. If the US gov had their way they’d jail people for misinformation. So I’m just making my predictions while I still can.
- seydor 4y agoQ why didn't SVB limit withdrawals and transfers after this started. Could they?
- bradleyjg 4y agoNo. A bank that refuses a demand on a demand deposit account is by definition in default.
- seydor 4y agoUnless it's capital controls
- tills13 4y agoI'm sure a bank limiting withdraws would have made matters even worse.
- mikepurvis 4y agoTo be fair, though, that's kind of what's ended up happening for everyone anyway— at least the customers with >$250k on deposit.
- fbdab103 4y agoThis is not a Bitcoin Exchange where the founders have the freedom to do whatever they want.
- seydor 4y agoIt crashes like a crypto exchange though
- JumpCrisscross 4y ago> crashes like a crypto exchange Where depositors get up to $250k the next business day and, possibly, up to 50% of the rest within a week?
- rvnx 4y agoInstead of paying with cash, couldn't they pay using shares of SVB ? SVB becomes Silicon Valley Bank, a bank for startups, owned by startups.
- zacharyvoase 4y agoBecause shares in an entity that owes more than it owns are worth zero.
- rvnx 4y agoIf they find a way to agree with the creditor to exchange the cash against shares, they won't owe anything. These shares are backed by long-maturity treasuries, MBS and future business of the bank. Then the new owners of this bank, can decide whether to liquidate long-maturity treasuries at a loss, or raise new capital, or just wait it out.
- dragontamer 4y agoDepositors and bondholders get the money first. The reason SVB collapsed is because there's not enough treasuries to possibly even pay depositors, let alone bondholders or shareholders. If there were enough treasuries to pay shareholders, then the bank run wouldn't have happened in the first place. (The bank run on Thursday was caused by the sudden realization that there might not be enough money at the bank). A buyout / successful auction is the best case scenario. If some bank out there is willing to buy SVB and make all their depositors whole again, then win/win for everybody.
- rvnx 4y agoThe problem is that they invested in 10 years duration bonds, instead of 0-3 months or 1 year duration. This essentially means, that if interest rates raise, then temporarily (the time of the duration of the bond) the bond may be worth less because there are new bonds which are more attractive to the investor. Once the bond matures, then the full sum is returned to the holder of the bond.
- tills13 4y agoI read that the FDIC is brutally efficient and, if this is true and SVB opens Monday under a different owner as if nothing happened, this statement will certainly be an understatement.
- mertd 4y agoIt would be quite funny if JPM ends up being the owner and the startups who rushed to transfer their accounts presumably to JPM just login on Monday and click the cancel button.
- fbdab103 4y agoI imagine many businesses are going to diversify banks in the near future so they can always make next month's rent.
- cm2187 4y agoPresumably they don't transfer the deposits, only the assets. Otherwise JPM would bid a negative amount.
- curiousllama 4y agoI thought they were bidding negative amounts - ie the bidding is to find the lowest $ amount the FDIC needs to put in to make folks whole
- Denvercoder9 4y agoThere's no indication at the moment that FDIC will put in money to make depositors whole beyond the $250K insurance limit.
- gnicholas 4y agoYellen said: > “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and the reforms that have been put in place means that we’re not going to do that again,” Yellen told CBS’ “Face the Nation.” “But we are concerned about depositors and are focused on trying to meet their needs.” Senator Mark Warren said: > “The shareholders in the bank are going to lose their money, let’s be clear about that. But the depositors can be taken care of,” he told ABC’s “This Week.” These statements tend to indicate that the government is not going to bail out the bank owners (shareholders of the bank). But they are concerned about the depositors, presumably because they realize that there's a risk that if a fairly large (top 20) bank is allowed to go under, many smaller banks could be at risk of a run. Source: https://www.cnbc.com/2023/03/12/treasury-secretary-janet-yellen-says-us-government-wont-bail-out-silicon-valley-bank.html https://www.cnbc.com/2023/03/12/treasury-secretary-janet-yel...
- blackoil 4y agoGiven it is fairly common for FDIC. What is the history in such cases? Do depositors always get all money back or they have to take some haircut?
- Denvercoder9 4y agoThey publish all historic payouts for closed banks on their website: https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/ From a quick look at a random sample, it seems most end up with about ~70% paid out, but there is quite some variance.
- paxys 4y agoWorth noting though that this list covers everything from cases of incompetence and mismanagement to outright fraud. It's relatively easy to recover money if it is tied up in T-bills. Not so if the bank owner decided to go buy a yacht with customer funds.
- kasey_junk 4y agoThat’s the list for all creditors, not depositors. Almost all deposits get transferred to another financial institution. It will be listed on the failed bank report.
- sql-spy 4y agoIn most cases depositors recover 90% or higher. Insured deposits are paid on first day the bank opens. More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. Haircut is guaranteed in this political climate since there is no appetite for a bailout. At least not for SVB. The later ones could be bailed out but SVB is a goner.
- Denvercoder9 4y ago> More than 50% of uninsured deposits are paid within a week. Another 20% or so gets paid within a year or sooner in quarterly installments. Remaining amount gets paid in yearly installments and in all cases was paid within 3 years. The data does not support these statements. E.g. for a random bank I selected on the FDIC site [1], "American National Bank", uninsured depositors got paid 77.8% in three installments: the first 57% two weeks after bank closure, 7.4% after three years and the last 13.3% after five-and-a-half years. [1] https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/
- sql-spy 4y ago[flagged]
- dylan604 4y agoi don't think it takes a doctorate or any degree to understand the FDIC needs this to be done ASAP. so, hopefully, it didn't hurt reaching around patting yourself on the back with that non-sense
- debacle 4y agoSomewhat completely off topic, but with interest rates "skyrocketing" compared to recent history, would it be feasible to "buy back" one's fixed rate debt? Or sensible?
- rvnx 4y agoYou can do it with mortgage, go from fixed-rate to floating rate and vice-versa, and you pay the cost of hedging for the duration of the mortgage.
- mghfreud 4y agoPlease ELI5.
- gopalv 4y agoSo the reason SVB had trouble with their assets is that they had to reprice the mortgage based securities they had to sell off. If I wanted to buy back my house's mortgage from the bank, they'd ask me to pay the full principal. But if JP Morgan buys it off SVB, they'd discount the mortgage and pay either 80 cents to the dollar or 50 cents (!), while they get to collect the whole principal & interest back from me as I repay. What if I could buy it off SVB at fire sale prices, instead of some other financial firm? This is probably most relevant when you think of medical debt, for example John Oliver's medical debt give away where he bought 14.9 millon dollars in debt for 60k & just forgave it through a non-profit (because debt forgiveness is a taxable event, which is just a tax loophole otherwise). If you owe a hospital a million dollars and they are willing to sell it for 100k, why should you keep owing a million after its been sold for that price?
- lamontcg 4y agoYou mean you want to pay off 90% of the remaining principle today in order to "buy" the paper at the same haircut that another bank would be able to buy it for? Nope.
- cowsandmilk 4y agoFor companies with publicly traded debt, it is definitely possible. Whether it is advisable is a different question.
- simonebrunozzi 4y agoDoes anyone know if this includes SVB UK as well? Or, given it's run by FDIC, it only relates to the (much bigger) US business?
- 700000thMistake 4y agoJust read the UK SVB was just taken over too by UK gov.
- shagymoe 4y agoI've read that SVB UK is a totally separate entity and not affected. I have no evidence of that though.
- WJW 4y agoSVB UK was just placed into an insolvency procedure by the Bank of England, so I guess they were not as separate as they thought. (https://www.bankofengland.co.uk/news/2023/march/boe-statement-silicon-valley-bank-uk https://www.bankofengland.co.uk/news/2023/march/boe-statemen...)
- PeterisP 4y agoNo, as the article states, it intends to place SVB UK into an insolvency procedure but has not placed it yet. It makes a conservative assumption that this procedure might be needed "absent any meaningful further information", but if SVB UK provides such information and shows that it is separate and solvent, then it can avoid this procedure, in which case it would probably get sold to someone to pay the parent company's liabilities.
- WJW 4y agoThey've been acquired by HSBC for a single pound, so it was probably not very solvent.
- fredoralive 4y agoIt seems that SVB UK is being handled separately by the UK authorities, with a separate attempt to find a buyer for that business.
- wand3r 4y agowonder if stripe is capable of bidding. Would be strategic for them if they could make this work i bet
- moffkalast 4y agoWhy would Stripe need to buy a bank, they already have a license to print money.
- azinman2 4y agoHow so?
- moffkalast 4y agoThey get to charge 3% and 30 cents for a fifth of all web purchases made on the entire damn planet?
- azinman2 4y agoI doubt it’s 1/5 of all web total purchases on the planet, but either way they’re not the ultimate exchange provider so most of that 3% + 30 cents goes likely to JP Morgan (and then split up amongst others), and they’re always looking for ways to expand their core competencies. Nothing about that is a “license to print money,” which when we’re talking about banking, sounds like making fiat currency.
- moffkalast 4y agoWell it's a ballpark estimate, most sources I've seen put them at around 19-21%, with Paypal at around 30-40% and various other small ones at a few percent each. If Visa and Mastercard manage to run their entire business on less than 1% from every transaction then I would expect Stripe to have at least 1% of pure profit from what they charge. I assume that's what JPM gets if they're the stockholder. I mean printing money in the colloquial way of making tons of cash without any effort (which this frankly ought to be if the system is set up right), not with JPow's xerox.
- edgoode 4y agoCould Microsoft, Apple, Google, or Amazon place a bid Strategically, a consumer or cloud co w/ a banking arm might make a great strategic position. And the new relationships with the customer base of SVB could accelerate the acquirer Not to mention all the bundling..
- drdec 4y agoI doubt it. Part of the point of the exercise is to calm the rest of the banking market. Letting an inexperienced (re banking) company take over will increase the uncertainty.
- chiph 4y agoApple had $51bn in cash at the end of 2022. They could easily raise whatever additional funds needed to submit a winning bid. But I don't see them wanting to own a bank. They already have financing options for people to buy their hardware, and Apple Cash is working fine with whatever level of regulation it has.
- xyst 4y agoI think they need to be a member of the FDIC to even make a bid. But even if they did not, I doubt these companies would want to be regulated under banking laws or setup the infrastructure to do so. There's a reason why these companies establish "partnerships" with well known banks (ie, Apple x Goldman Sachs). They are simply not setup to deal with the regulation. It's better to farm it out to a well established bank and let them take the hits from violating banking laws at all levels (ie, state vs federal vs international).
- h2odragon 4y agoSBF presumably wasn't allowed to bid.