Silicon Valley Bank has failed
- Thread starter twenty02
- Start date
Sexual? That certainly won’t wash with his vow of celibacy.
In her real younger days, but she never did it for me. Boagie was hitting that hard.Best sexy-face-without-legs-or-chest from those years = Lauren Bacall, right?
Yes b/c the FDIC insures the first $250K per.
It's a fair question and I believe you are implying that depositors with smaller institutions deserve to be made whole in the same fashion SVB's depositors did.
Obviously nobody in America has a fkn clue how banks work. The stupidity of America has no end.
What the FTX Collapse Tells Us About Regulators and ESG - Competitive Enterprise Institute
First, regulators often can’t stop investors from fraud. Second, companies that work closely with regulators often do so for their own benefit. Third, and perhaps most importantly, the current fad for “ESG” (environmental, social and governance) investing obscures much of what we need to know...
cei.org
Another solid ESG score.
DeSantis forms alliance with 18 governors to combat Biden's ESG push: 'Direct threat to the American economy' | Fox News
Gov. Ron DeSantis is leading 18 states in combating the Biden administration's push on ESG investments, which they say could harm American retirement funds.
That’s correct. The US has way more banks than any other country. Since we have banks now that are too big to fail, I wonder if we should lean into that and have far fewer banks.
I’ll admit I have no idea how banks work relative to the limits of FDIC protection.
But, if the limit is 250k and, whether it’s the FDIC overruling themselves or providing relief beyond they amount for some technical reason I don’t understand, will they do the same thing for a smaller regional bank without the cachet of SVB? Maybe a local bank in Grand Rapids that nobody outside of western Michigan gives a shit about.
Perhaps your are correct that most Americans understanding of the banking system is woefully inadequate. Be that as it may, decisions like these should be explained to the general public and questions such as mine should be answered in plain English.
In the case of Yellen, I understand she can’t answer as to specifics around a hypothetical situation. But failure to adequately respond to those concerns from Congressional inquiry isn’t going to put peoples minds at ease. Following this thread, and assuming the bigger the bank the more likely your deposits are to be covered beyond 250k, what stops every big fish in these small ponds from pulling their deposits from the small bank and putting them in the larger one? What stops us from ending up with 20 banks which are now all too big to fail?
My comment wasn't directed at you. Just a lot of the comments I've seen here and elsewhere in the last week.
As to FDIC, it's an insurance org...and they don't want to pay out anything, if at all possible. So by implictly guaranteeing every deposit at every bank in the country, they more or less stop the risk of any other bank runs, and thereby ending up saving a lot of money.
As I said days ago, no depositer has ever lost money in a US bank since 1933... with one exception, IndyMac in 2008. And that was such an ugly situation that the position now is "never again".
Interesting thought, but isn't having that many banks, particularly for SMEs, part of what differentiates the U.S. when it comes to businesscompetitiveness?
No problems
I guess I'm just trying to understand how we don't see a shift towards fewer and fewer banks? If Yellen's comments (and it's entirely possibly I and others have misconstrued same) that she cannot guarantee all deposits above 250k in a hypothetical bank failure some time in the future, why would people with $1 million in the Pikeville Podunk Bank of Pike County not move his money to Chase or BOA?
Luckily (?), I have no such concerns.
Americans are more stupid in some sense, but do SME business owners in Europe understand banking? Maybe they do and I'm just naive.
Could be. Regional and local banks certainly do make loans to regional and local businesses.
Could it be that almost all banks are too big to fail? I wonder where the Fed would draw the line and let a bank fail and depositors lose.
Just bailed a bunch of these dudes out in 2008 and here we are again. They "understand" how to make money in an era of free money. There are many of them that don't understand how to run a fiscally responsible bank that is prepared for good times and bad.
My guess is that perhaps in cases where there is no contagion risk because the failure isn't as much caused by market dynamics, but by bank-specific negligence or liquidity issues.
The problem is, with regulations and reporting requirements, I'm not sure banks can have those issues as often as they did in the 80s and before.
I don't recall if any of the failures in 2019 or 2020 were situations where depositors lost money. My assumption is that they were made whole through court or agency-appointed sale processes.
FDIC: Bank Failures in Brief
www.fdic.gov
Yikes, the TWO banks here in 2023 have nearly the combined assets of the 25 in 2008 although I'm assuming this isn't adjusted for inflation?My guess is that perhaps in cases where there is no contagion risk because the failure isn't as much caused by market dynamics, but by bank-specific negligence or liquidity issues.
The problem is, with regulations and reporting requirements, I'm not sure banks can have those issues as often as they did in the 80s and before.
I don't recall if any of the failures in 2019 or 2020 were situations where depositors lost money. My assumption is that they were made whole through court or agency-appointed sale processes.
FDIC: Bank Failures in Brief
www.fdic.gov
A
anon_6hv78pr714xta
Guest
I heard this guy interviewed on a podcast yesterday. Here is his simple explanation:
As reported so far by media, the collapse was breathtakingly simple. SVB paid a bit higher interest rates than the measly 0.01% (yes) that Chase offers. It attracted large deposits from venture capital backed firms in the valley. Crucially, only the first $250,000 are insured, so most of those deposits are uninsured. The deposits are financially savvy customers who know they have to get in line first should anything go wrong. SVB put much of that money into long-maturity bonds, hoping to reap the difference between slightly higher long-term interest rates and what it pays on deposits. But as we've known for hundreds of years, if interest rates rise, then the market value of those long-term bonds fall. Now if everyone comes asking for their money back, the assets are not worth enough to pay everyone back.
In sum, you have "duration mismatch" plus run-prone uninsured depositors. We teach this in the first week of an MBA or undergraduate banking class. This isn't crypto or derivatives or special purpose vehicles or anything fancy.
Where were the regulators? The Dodd Frank act added hundreds of thousands of pages of regulations, and an army of hundreds of regulators. The Fed enacts "stress tests" in case regular regulation fails. How can this massive architecture fail to spot basic duration mismatch and a massive run-prone deposit base? It's not hard to fix, either. Banks can quickly enter swap contracts to cheaply alter their exposure to interest rate risk without selling the whole asset portfolio.
Michael Cembalist assembled numbers. This wasn't hard to see.
Here is his blog:
johnhcochrane.blogspot.com
As reported so far by media, the collapse was breathtakingly simple. SVB paid a bit higher interest rates than the measly 0.01% (yes) that Chase offers. It attracted large deposits from venture capital backed firms in the valley. Crucially, only the first $250,000 are insured, so most of those deposits are uninsured. The deposits are financially savvy customers who know they have to get in line first should anything go wrong. SVB put much of that money into long-maturity bonds, hoping to reap the difference between slightly higher long-term interest rates and what it pays on deposits. But as we've known for hundreds of years, if interest rates rise, then the market value of those long-term bonds fall. Now if everyone comes asking for their money back, the assets are not worth enough to pay everyone back.
In sum, you have "duration mismatch" plus run-prone uninsured depositors. We teach this in the first week of an MBA or undergraduate banking class. This isn't crypto or derivatives or special purpose vehicles or anything fancy.
Where were the regulators? The Dodd Frank act added hundreds of thousands of pages of regulations, and an army of hundreds of regulators. The Fed enacts "stress tests" in case regular regulation fails. How can this massive architecture fail to spot basic duration mismatch and a massive run-prone deposit base? It's not hard to fix, either. Banks can quickly enter swap contracts to cheaply alter their exposure to interest rate risk without selling the whole asset portfolio.
Michael Cembalist assembled numbers. This wasn't hard to see.
Here is his blog:
Silicon Valley Bank Blinders
johnhcochrane.blogspot.com
I heard this guy interviewed on a podcast yesterday. Here is his simple explanation:
As reported so far by media, the collapse was breathtakingly simple. SVB paid a bit higher interest rates than the measly 0.01% (yes) that Chase offers. It attracted large deposits from venture capital backed firms in the valley. Crucially, only the first $250,000 are insured, so most of those deposits are uninsured. The deposits are financially savvy customers who know they have to get in line first should anything go wrong. SVB put much of that money into long-maturity bonds, hoping to reap the difference between slightly higher long-term interest rates and what it pays on deposits. But as we've known for hundreds of years, if interest rates rise, then the market value of those long-term bonds fall. Now if everyone comes asking for their money back, the assets are not worth enough to pay everyone back.
In sum, you have "duration mismatch" plus run-prone uninsured depositors. We teach this in the first week of an MBA or undergraduate banking class. This isn't crypto or derivatives or special purpose vehicles or anything fancy.
Where were the regulators? The Dodd Frank act added hundreds of thousands of pages of regulations, and an army of hundreds of regulators. The Fed enacts "stress tests" in case regular regulation fails. How can this massive architecture fail to spot basic duration mismatch and a massive run-prone deposit base? It's not hard to fix, either. Banks can quickly enter swap contracts to cheaply alter their exposure to interest rate risk without selling the whole asset portfolio.
Michael Cembalist assembled numbers. This wasn't hard to see.
Here is his blog:
Silicon Valley Bank Blinders
As mentioned earlier ITT, some of those Dodd Frank limitations were revised to only apply to banks with $250B+ assets. SVB fell underneath that threshold.
The biggest surprise is that it didn't hedge interest rate risk (banking 101). Perhaps that wouldn't have saved it, but it certainly would have helped during rate increases.
As of 2021 there were only 13 banks over 250b in assets according to this joker that I found on the internet, though it appears he is quoting the FDIC.
SVB was 29th in 2021 at just over 113b.
So those DF limitations only apply to (adjusting for whatever) about 15-20 banks in the US?
Largest Banks in the U.S.A. by Asset Size (2023)
A list of the 250 largest American Banks ranked by asset size according to data from the FDIC as of December 31, 2022.
www.mx.com
As of 2021 there were only 13 banks over 250b in assets according to this joker that I found on the internet, though it appears he is quoting the FDIC.
SVB was 29th in 2021 at just over 113b.
So those DF limitations only apply to (adjusting for whatever) about 15-20 banks in the US?
Largest Banks in the U.S.A. by Asset Size (2023)
A list of the 250 largest American Banks ranked by asset size according to data from the FDIC as of December 31, 2022.
As Sope pointed out...
The bill, called the Secure Viable Banking Act, would put banks with at least $50 billion in assets back under strict Federal Reserve oversight and Dodd-Frank Act stress tests. A bipartisan 2018 bill to loosen Dodd-Frank raised that threshold to $250 billion, which exempted Silicon Valley Bank and dozens of other banks from the strictest federal oversight.
Warren, Porter unveil bill to undo Trump-era Dodd-Frank rollback after Silicon Valley Bank collapse
Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) have introduced a bill to repeal part of a Trump-era bank regulation rollback law in the wake of the collapse of Silicon Valley Bank…
thehill.com
Here's the Top 20. notice #15 and #16
20 Largest Banks in the U.S.
Looking for a list of the largest in the U.S.? We've compiled the biggest banks by assets along with other key metrics.
I am not even getting into all of who should get what. I am just merely stating the fact that the banking and finance industries, while full of smart people, don't always completely understand what is going on either because it is a complex system and many of them are motivated by current wealth generation without adequately assessing risk.
Dunno.
We have. Had a few small, laddered CDs with IndyMac prior to the Great Recession.
In your estimation was 50b too low? Or is the whole way regulators look at that threshold kind of stupid?As Sope pointed out...
The bill, called the Secure Viable Banking Act, would put banks with at least $50 billion in assets back under strict Federal Reserve oversight and Dodd-Frank Act stress tests. A bipartisan 2018 bill to loosen Dodd-Frank raised that threshold to $250 billion, which exempted Silicon Valley Bank and dozens of other banks from the strictest federal oversight.
Warren, Porter unveil bill to undo Trump-era Dodd-Frank rollback after Silicon Valley Bank collapse
Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) have introduced a bill to repeal part of a Trump-era bank regulation rollback law in the wake of the collapse of Silicon Valley Bank…
Here's the Top 20. notice #15 and #16
20 Largest Banks in the U.S.
Looking for a list of the largest in the U.S.? We've compiled the biggest banks by assets along with other key metrics.www.moneycrashers.com
I would say 250b is way too high of a threshold, clearly.
That has historical roots. Used to be that banks were limited to one county in size . . . until North Carolina got rid of that requirement and allowed NationsBank to become the precursor to the current Bank of America.
Alan Greenspan's stated goal was to reduce the US' banks to a three major bank "backbone" (my word) and a whole bunch of tiny retail banks as outlets. Three was considered the most "efficient" while maintaining a nod toward competition. So there's a bit of method to your madness . . .
. . . I still believe that competition is an effective governor on excesses. I don't buy Greenspan's goal.
I personally hope it doesn’t end up that way. The issue I have is it concentrates way too much capital into the hands of the few. I don’t want 4 CEO’s and the Federal government deciding where most of the capital goes. Also, if one fails you automatically have contagion and huge bailouts.
if you ask most SME owners, they generally have much better things to say about community and regional banks vs. large banks' commercial or business banking divisions
How could they? It’s impossible. The entire system runs on debt and it’s gets harder and hard as the debt grows. The end game is always more centralized power and inflation. It’s a sh#t system.
SVB was a bit of a different animal. First Republic is also. Both are SF-based, tech-heavy.
I'm thinking more the Regions, Huntington, Keybank, M&T type groups
I don't think that was his point (though I don't want to speak for Mark). The point is that an investor is taking risk. A depositor has an implicit guarantee that their money will be safe. We can debate whether or not that is good or bad, but when an individual or business deposits their money with a bank, they expect it to be there.
Yeah, totally agree with that. I was more speaking to the fact I think SVB was reckless and I don't think they are the only ones. And honestly there is little disincentive to be reckless on their end.
As mentioned by Brad's post above.... duration mismatch is not a complex issue whatsoever. SVP was certainly wildly careless with the interest rate sensitivity of their portfolio.
But bank failures are not exactly uncommon. Just like bankruptcies in every industry. We've always had them, they are just usually smaller scale and don't make headlines....FDIC puts them in receivership and sells off the assets to another bank. Equity holders get wiped out, bondholders too, or at least take a haircut.
Right. It's a liquidity crisis - not really crazy lending, which caused 2008.I heard this guy interviewed on a podcast yesterday. Here is his simple explanation:
As reported so far by media, the collapse was breathtakingly simple. SVB paid a bit higher interest rates than the measly 0.01% (yes) that Chase offers. It attracted large deposits from venture capital backed firms in the valley. Crucially, only the first $250,000 are insured, so most of those deposits are uninsured. The deposits are financially savvy customers who know they have to get in line first should anything go wrong. SVB put much of that money into long-maturity bonds, hoping to reap the difference between slightly higher long-term interest rates and what it pays on deposits. But as we've known for hundreds of years, if interest rates rise, then the market value of those long-term bonds fall. Now if everyone comes asking for their money back, the assets are not worth enough to pay everyone back.
In sum, you have "duration mismatch" plus run-prone uninsured depositors. We teach this in the first week of an MBA or undergraduate banking class. This isn't crypto or derivatives or special purpose vehicles or anything fancy.
Where were the regulators? The Dodd Frank act added hundreds of thousands of pages of regulations, and an army of hundreds of regulators. The Fed enacts "stress tests" in case regular regulation fails. How can this massive architecture fail to spot basic duration mismatch and a massive run-prone deposit base? It's not hard to fix, either. Banks can quickly enter swap contracts to cheaply alter their exposure to interest rate risk without selling the whole asset portfolio.
Michael Cembalist assembled numbers. This wasn't hard to see.
Here is his blog:
Silicon Valley Bank Blinders
Just bad bank management and reliance on too much of one market segment.
My understanding is the asset side was in pretty good shape.
Last edited:
Similar threads
Latest posts
-
-
-
How do transgender women (biological men) live with themselves . . .
- Latest: BadWakeboarder
-
-
