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This probably sealed the deal: > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its

This probably sealed the deal: > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. Two closures in three days is a sign that you have to take this very seriously.

radicaldreamer 4y ago
This is going to put every regional bank on the map for short sellers as equity holders are being wiped out in these cases without depositors being affected. Why would anyone invest in any regional bank with the risk of a equity wipeout day to day?
- swatcoder 4y ago
  > Why would anyone invest in any regional bank with the risk of a equity wipeout day to day? Because some have better books and management than others and will be underpriced because of reactionary selloffs like you describe?
  - bagels 4y ago
    Huge opportunity tomorrow to buy if you are able to actually find them.
- tedivm 4y ago
  They're also taking action to prevent this kind of thing from happening again- > The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities. > “This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.” https://www.cnbc.com/2023/03/12/regulators-unveil-plan-to-stem-damage-from-svb-collapse.html https://www.cnbc.com/2023/03/12/regulators-unveil-plan-to-st...
  - radicaldreamer 4y ago
    Yet signature bank was shut overnight? Not sure a new $25 billion facility matters when outflows can hit that much in a couple of hours.
  - bradleyjg 4y ago
    A larger bailout
  - cavisne 4y ago
    Doesnt this just push the can down the road? Interest rates will likely be higher not lower in 1 year so their bond portfolio will be even more underwater.
    - Tuna-Fish 4y ago
      No, so long as the average maturity is not too long. The long-term bonds would have paid back enough money for SVB to pay back every depositor if there had not been a run that forced them to pay them all back at the same time. Knowing that everyone can get 12 months of runway will do much to allay fears and so reduce risk of further runs.
      - pishpash 4y ago
        Weren't these 10-year bonds and negative-convexity MBS? 12 months doesn't improve the position at all, but maybe you can keep applying for these loans in which case it's just another QE.
      - pseudo0 4y ago
        What interest rate does that assume for depositors? Sure, the face value of the bonds in 2032 dollars might have been enough to pay back the 2022 obligations to their depositors, but banks are routinely offering 2-4% interest in high interest savings accounts now. So either depositors will leave for better options, or SVB would have had to offer competitive rates (digging the insolvency hole deeper).
        4y ago
- FormerBandmate 4y ago
  At the same time, why would the bank runs continue? AFAIK, this was sparked by Silvergate’s slow motion collapse climaxing on Wednesday, and the infinite FDIC threshold makes more bank runs pointless and self defeating
  - astrange 4y ago
    It was sparked by Founders Fund telling everyone to get money out of SVB, which didn't have any crypto exposure. They're invested in another startup bank (Mercury) so I think prosecuting a few VCs would encourage the others.
    - MaxGabriel 4y ago
      Founders Fund hasn’t invested in Mercury List of investors here: https://mercury.com/about https://mercury.com/about
- 0xB31B1B 4y ago
  people aren't going to pull their money out now that the deposits are essentially guaranteed, that is the point. Business can go on as usual.
- dehrmann 4y ago
  Reminds me of a knee-jerk post someone made here promoting credit unions. They didn't intend for this reaction, but credit unions actually have the same risks as SVB because their member pools aren't diversified. The ironic lesson was that you should bank with JP Morgan, Citi, or BofA.
  - deleted 4y ago
    [deleted]
- dragonwriter 4y ago
  > This is going to put every regional bank on the map for short sellers as equity holders are being wiped out in these cases without depositors being affected. Why would anyone invest in any regional bank with the risk of a equity wipeout day to day? Why would anyone invest in any business when the risk of bankruptcy exists (FDIC bank takeovers and their resolutions, with or without application of systemic risk exception, are in effect a specialized form of bankruptcy, with a different set of priorities for who gets a haircut, but equity holders are always low on the list for either these or conventional bankruptcies.)
- lmm 4y ago
  Every business has the risk of an equity wipeout if it goes bankrupt. SVB was always going to have its equity zeroed, the only question was whether depositors were also going to lose out.
cavisne 4y ago
Curious there was nothing about silvergate?
- hn_throwaway_99 4y ago
  Silvergate was already getting wound down, and unlike SVB and Signature didn't need a fed backstop.
  - cavisne 4y ago
    so silvergate assets exceeded/matched its deposits? I know it was a pretty niche bank just curious as I thought it was in a way worse position.
- blihp 4y ago
  Silvergate is tiny (assets-wise) compared to SVB and Signature and not worth a mention as it poses no systemic risk.
greenyoda 4y ago
> > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York Signature was another bank whose business was primarily in a volatile and risky market: "Signature is one of the main banks to the cryptocurrency industry, the biggest one next to Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday after a 40% sell-off this year..." https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-s...
markus_zhang 4y ago
Now I want to see hedge funds and bankers call the bluff and continue to run other smaller regional bank.
icedistilled 4y ago
I'm pretty sure there would have been a run some other large banks had they not taken these measures. I've gotten several emails from a major regional bank basically saying "WERE FINE TRUST US" over the last few days and I don't even have an account which means they're spamming all their email lists. I did apply for a position at them a while ago so that's my best guess why they are spamming me their unreassuring message. The several banks I actually use have not done that.

radicaldreamer 4y ago

This is going to put every regional bank on the map for short sellers as equity holders are being wiped out in these cases without depositors being affected. Why would anyone invest in any regional bank with the risk of a equity wipeout day to day?

swatcoder 4y ago
> Why would anyone invest in any regional bank with the risk of a equity wipeout day to day? Because some have better books and management than others and will be underpriced because of reactionary selloffs like you describe?
- bagels 4y ago
  Huge opportunity tomorrow to buy if you are able to actually find them.
tedivm 4y ago
They're also taking action to prevent this kind of thing from happening again- > The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities. > “This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.” https://www.cnbc.com/2023/03/12/regulators-unveil-plan-to-stem-damage-from-svb-collapse.html https://www.cnbc.com/2023/03/12/regulators-unveil-plan-to-st...
- radicaldreamer 4y ago
  Yet signature bank was shut overnight? Not sure a new $25 billion facility matters when outflows can hit that much in a couple of hours.
- bradleyjg 4y ago
  A larger bailout
- cavisne 4y ago
  Doesnt this just push the can down the road? Interest rates will likely be higher not lower in 1 year so their bond portfolio will be even more underwater.
  - Tuna-Fish 4y ago
    No, so long as the average maturity is not too long. The long-term bonds would have paid back enough money for SVB to pay back every depositor if there had not been a run that forced them to pay them all back at the same time. Knowing that everyone can get 12 months of runway will do much to allay fears and so reduce risk of further runs.
    - pishpash 4y ago
      Weren't these 10-year bonds and negative-convexity MBS? 12 months doesn't improve the position at all, but maybe you can keep applying for these loans in which case it's just another QE.
    - pseudo0 4y ago
      What interest rate does that assume for depositors? Sure, the face value of the bonds in 2032 dollars might have been enough to pay back the 2022 obligations to their depositors, but banks are routinely offering 2-4% interest in high interest savings accounts now. So either depositors will leave for better options, or SVB would have had to offer competitive rates (digging the insolvency hole deeper).
      - 4y ago
FormerBandmate 4y ago
At the same time, why would the bank runs continue? AFAIK, this was sparked by Silvergate’s slow motion collapse climaxing on Wednesday, and the infinite FDIC threshold makes more bank runs pointless and self defeating
- astrange 4y ago
  It was sparked by Founders Fund telling everyone to get money out of SVB, which didn't have any crypto exposure. They're invested in another startup bank (Mercury) so I think prosecuting a few VCs would encourage the others.
  - MaxGabriel 4y ago
    Founders Fund hasn’t invested in Mercury List of investors here: https://mercury.com/about https://mercury.com/about
0xB31B1B 4y ago
people aren't going to pull their money out now that the deposits are essentially guaranteed, that is the point. Business can go on as usual.
dehrmann 4y ago
Reminds me of a knee-jerk post someone made here promoting credit unions. They didn't intend for this reaction, but credit unions actually have the same risks as SVB because their member pools aren't diversified. The ironic lesson was that you should bank with JP Morgan, Citi, or BofA.
- deleted 4y ago
  [deleted]
dragonwriter 4y ago
> This is going to put every regional bank on the map for short sellers as equity holders are being wiped out in these cases without depositors being affected. Why would anyone invest in any regional bank with the risk of a equity wipeout day to day? Why would anyone invest in any business when the risk of bankruptcy exists (FDIC bank takeovers and their resolutions, with or without application of systemic risk exception, are in effect a specialized form of bankruptcy, with a different set of priorities for who gets a haircut, but equity holders are always low on the list for either these or conventional bankruptcies.)
lmm 4y ago
Every business has the risk of an equity wipeout if it goes bankrupt. SVB was always going to have its equity zeroed, the only question was whether depositors were also going to lose out.

cavisne 4y ago

Curious there was nothing about silvergate?

hn_throwaway_99 4y ago
Silvergate was already getting wound down, and unlike SVB and Signature didn't need a fed backstop.
- cavisne 4y ago
  so silvergate assets exceeded/matched its deposits? I know it was a pretty niche bank just curious as I thought it was in a way worse position.
blihp 4y ago
Silvergate is tiny (assets-wise) compared to SVB and Signature and not worth a mention as it poses no systemic risk.

greenyoda 4y ago

> > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York Signature was another bank whose business was primarily in a volatile and risky market: "Signature is one of the main banks to the cryptocurrency industry, the biggest one next to Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday after a 40% sell-off this year..." https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-s...

markus_zhang 4y ago

Now I want to see hedge funds and bankers call the bluff and continue to run other smaller regional bank.

icedistilled 4y ago

I'm pretty sure there would have been a run some other large banks had they not taken these measures. I've gotten several emails from a major regional bank basically saying "WERE FINE TRUST US" over the last few days and I don't even have an account which means they're spamming all their email lists. I did apply for a position at them a while ago so that's my best guess why they are spamming me their unreassuring message. The several banks I actually use have not done that.