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Same was true for SVB, except their customers got freaked and SVB couldn't raise enough liquidity in time -- I've heard they could have, had the Fed not closed

Same was true for SVB, except their customers got freaked and SVB couldn't raise enough liquidity in time -- I've heard they could have, had the Fed not closed for the day or something. So likely the Fed wouldn't let something similar happen to BoA.

paxys 3y ago
If you are implying that BoA is in trouble if there is a bank run then yes, that applies to every bank in existence regardless of the circumstances. Considering their size, AUM and customer diversification (none of which worked in SVB's favor), there is a very low risk of that happening in this case.
- chrisgd 3y ago
  Also, SVB filed to raise equity capital thereby saying to the market they needed to raise money and we’re trying to do so. They could have been selling some of those liquid bonds at a discount and taking gaap losses.
- rich_sasha 3y ago
  Most BoA deposits are likely guaranteed since they come from private persons and are below the limit. So a run is far less likely even if they are / get in trouble.
  - jarym 3y ago
    This is true. The shock effect would be large across markets however.
- notfromhere 3y ago
  BoA is a GSIB, meaning it’s deposits are essentially explicitly guaranteed as it’s not allowed to fail due to its systemic importance to a functional financial system.
  - jarym 3y ago
    That’s a small but dangerous jump. Deposits will be protected as much as possible but that doesn’t mean in a worst case event there can’t be a bail-in. Happened to Cypriot banks. Just because it’s a GSIB doesn’t guarantee that the US tax payer would pick up the tab on all deposits if push came to shove.
    - rich_sasha 3y ago
      I believe FDIC guarantees private deposits up to $250k. And FDIC itself is guaranteed by the US government so it's basically backed by a dollar printing machine. Excluding deposits over 250k and non-personal deposits but I believe these are a minority for a bank like BoA, which is mostly retail.
      - dmoy 3y ago
        I don't know about post pandemic, but pre pandemic >50% of BoA deposits were uninsured. Anyways this is kind of a nonsequitur because GSIB goes quite a bit beyond just FDIC coverage.
        keep_reading 3y ago
        GSIB is just a list made after analyzing the global markets in the wake of the 2008 crisis and those on the list have some additional reporting requirements, nothing more nothing less.
        dmoy 3y ago
        and additional reserve requirements, and the implicit backing of governments due to their status as "too big to fail" It may not be written down explicitly in the definition of gsib, but it definitely goes beyond just fdic
    - Yeul 3y ago
      I think we can all agree there's a tiny difference between Cyprus and America. Besides in Cyprus case the reliable Northern Europeans managed to keep the financial system stable. To paraphrase Kissinger: "if Europe has a financial crisis who do I call?". The answer is Berlin.
- deleted 3y ago
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- hnfong 3y ago
  > that applies to every bank in existence In practice this might be true, but I'm not sure every bank would have a multibillion dollar hole in its balance sheet if all customers withdrew their deposits. There's probably a point to be made that banks with large unrealized losses would lead to customers losing deposits, while banks with a positive net asset would not.
bachmeier 3y ago
I don't see anything to suggest this is the same. SVB ran into trouble because they took uninsured deposits (85% of deposits were not insured). I'm not going to be withdrawing anything from BoA because all of my deposits are insured.
- fredgrott 3y ago
  You do not understand how business customers are served in the banking system. Most business deposits are 85% uninsured because they are about the $400K limits.
  - JumpCrisscross 3y ago
    > Most business deposits are 85% uninsured because they are about the $400K limits We have already set the precedent of full deposit insurance.
  - bachmeier 3y ago
    I don't claim to understand anything. But I can read numbers. This report says 47% of BoA's deposits are uninsured: https://www.crowdfundinsider.com/2023/03/203681-sp-outlines-banks-by-percentage-of-uninsured-deposits/ https://www.crowdfundinsider.com/2023/03/203681-sp-outlines-... You may also find this page from the FDIC worth reading: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley-faq.html https://www.fdic.gov/resources/resolutions/bank-failures/fai...
choppaface 3y ago
SVB had loads of venture debt that is completely worthless. They were doomed from their own mistakes well before “the Fed closed for the day.”
- georgeecollins 3y ago
  I didn't know that, I thought the issue was that they were holding too many long term bonds at a low interest rate. What is your source for that information?
  - choppaface 3y ago
    Wow some pretty pointed responses that ignore important context around the collapse. SVB had about $7b venture debt, and the total venture debt market ballooned during the pandemic. VCs and banks like SVB were hyper-inflating start-ups with venture debt (which is totally worthless unless it can be flipped) and they continued doing this into 2022 and 2023 despite inflation and rising rates. 10 years ago venture debt was a fraction of what it became because it’s stupid-risky, especially for a bank. But with crypto and especially the rampant fraud within crypto, VCs found a few friendly banks and created a bubble. That $7b might as well have been a hole in the balance sheet, just like what FTX did. The banks and VCs had 12-16 months to de-risk and all they did was cut deal volume. Blaming the collapse in any way on the Fed is as specious as Musk trying to walk out on Twitter because of “bots.” Here’s e.g. one article on the SVB loanbook https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-valley-banks-demise-tightens-spigot-on-30-billion-of-venture-lending/?ssp=1&setlang=en-US&safesearch=moderate&sh=2a9ac8f42b99 https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-v...
  - mrosett 3y ago
    The comment you're responding to is incorrect. SBV was blown up by 10 year US bonds (ironically the quintessential safe investment): https://www.npr.org/2023/03/19/1164531413/bank-fail-how-government-bonds-turned-toxic-for-silicon-valley-bank https://www.npr.org/2023/03/19/1164531413/bank-fail-how-gove...
  - hnfong 3y ago
deleted 3y ago
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paxys 3y ago

If you are implying that BoA is in trouble if there is a bank run then yes, that applies to every bank in existence regardless of the circumstances. Considering their size, AUM and customer diversification (none of which worked in SVB's favor), there is a very low risk of that happening in this case.

chrisgd 3y ago
Also, SVB filed to raise equity capital thereby saying to the market they needed to raise money and we’re trying to do so. They could have been selling some of those liquid bonds at a discount and taking gaap losses.
rich_sasha 3y ago
Most BoA deposits are likely guaranteed since they come from private persons and are below the limit. So a run is far less likely even if they are / get in trouble.
- jarym 3y ago
  This is true. The shock effect would be large across markets however.
notfromhere 3y ago
BoA is a GSIB, meaning it’s deposits are essentially explicitly guaranteed as it’s not allowed to fail due to its systemic importance to a functional financial system.
- jarym 3y ago
  That’s a small but dangerous jump. Deposits will be protected as much as possible but that doesn’t mean in a worst case event there can’t be a bail-in. Happened to Cypriot banks. Just because it’s a GSIB doesn’t guarantee that the US tax payer would pick up the tab on all deposits if push came to shove.
  - rich_sasha 3y ago
    I believe FDIC guarantees private deposits up to $250k. And FDIC itself is guaranteed by the US government so it's basically backed by a dollar printing machine. Excluding deposits over 250k and non-personal deposits but I believe these are a minority for a bank like BoA, which is mostly retail.
    - dmoy 3y ago
      I don't know about post pandemic, but pre pandemic >50% of BoA deposits were uninsured. Anyways this is kind of a nonsequitur because GSIB goes quite a bit beyond just FDIC coverage.
      - keep_reading 3y ago
        GSIB is just a list made after analyzing the global markets in the wake of the 2008 crisis and those on the list have some additional reporting requirements, nothing more nothing less.
        dmoy 3y ago
        and additional reserve requirements, and the implicit backing of governments due to their status as "too big to fail" It may not be written down explicitly in the definition of gsib, but it definitely goes beyond just fdic
  - Yeul 3y ago
    I think we can all agree there's a tiny difference between Cyprus and America. Besides in Cyprus case the reliable Northern Europeans managed to keep the financial system stable. To paraphrase Kissinger: "if Europe has a financial crisis who do I call?". The answer is Berlin.
deleted 3y ago
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hnfong 3y ago
> that applies to every bank in existence In practice this might be true, but I'm not sure every bank would have a multibillion dollar hole in its balance sheet if all customers withdrew their deposits. There's probably a point to be made that banks with large unrealized losses would lead to customers losing deposits, while banks with a positive net asset would not.

bachmeier 3y ago

I don't see anything to suggest this is the same. SVB ran into trouble because they took uninsured deposits (85% of deposits were not insured). I'm not going to be withdrawing anything from BoA because all of my deposits are insured.

fredgrott 3y ago
You do not understand how business customers are served in the banking system. Most business deposits are 85% uninsured because they are about the $400K limits.
- JumpCrisscross 3y ago
  > Most business deposits are 85% uninsured because they are about the $400K limits We have already set the precedent of full deposit insurance.
- bachmeier 3y ago
  I don't claim to understand anything. But I can read numbers. This report says 47% of BoA's deposits are uninsured: https://www.crowdfundinsider.com/2023/03/203681-sp-outlines-banks-by-percentage-of-uninsured-deposits/ https://www.crowdfundinsider.com/2023/03/203681-sp-outlines-... You may also find this page from the FDIC worth reading: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley-faq.html https://www.fdic.gov/resources/resolutions/bank-failures/fai...

choppaface 3y ago

SVB had loads of venture debt that is completely worthless. They were doomed from their own mistakes well before “the Fed closed for the day.”

georgeecollins 3y ago
I didn't know that, I thought the issue was that they were holding too many long term bonds at a low interest rate. What is your source for that information?
- choppaface 3y ago
  Wow some pretty pointed responses that ignore important context around the collapse. SVB had about $7b venture debt, and the total venture debt market ballooned during the pandemic. VCs and banks like SVB were hyper-inflating start-ups with venture debt (which is totally worthless unless it can be flipped) and they continued doing this into 2022 and 2023 despite inflation and rising rates. 10 years ago venture debt was a fraction of what it became because it’s stupid-risky, especially for a bank. But with crypto and especially the rampant fraud within crypto, VCs found a few friendly banks and created a bubble. That $7b might as well have been a hole in the balance sheet, just like what FTX did. The banks and VCs had 12-16 months to de-risk and all they did was cut deal volume. Blaming the collapse in any way on the Fed is as specious as Musk trying to walk out on Twitter because of “bots.” Here’s e.g. one article on the SVB loanbook https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-valley-banks-demise-tightens-spigot-on-30-billion-of-venture-lending/?ssp=1&setlang=en-US&safesearch=moderate&sh=2a9ac8f42b99 https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-v...
- mrosett 3y ago
  The comment you're responding to is incorrect. SBV was blown up by 10 year US bonds (ironically the quintessential safe investment): https://www.npr.org/2023/03/19/1164531413/bank-fail-how-government-bonds-turned-toxic-for-silicon-valley-bank https://www.npr.org/2023/03/19/1164531413/bank-fail-how-gove...
- hnfong 3y ago

deleted 3y ago

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