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FDIC Takes over Silicon Valley Bank

fdic.gov

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Re: FDIC Takes over Silicon Valley Bank

#161

Post by gumby »

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities.

Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest rate) fell. They can't unwind that position and cover all possible demands.

FDIC will transfer the accounts to another bank, guaranteeing the 250K at least (I believe SVBs own liquid assets could cover that) and may use its own asset base to cover the balance, siezing SVB's other assets and stuffing them into FDIC's piggy bank. It's not like those government bonds won't pay out...eventually.

Re: FDIC Takes over Silicon Valley Bank

#162

Post by jollyllama »

hef19898 wrote: post #86
colpabar wrote: post #65

Earlier quoted context omitted.

Bonus points if they mention effective altruism, and how great it is, but how also it can be bad sometimes.

A pitty FTX went under before, just imagine SBF announcing he is bailing out SVB!

If you bail him out of jail, he'll bail out your bank, and then he'll bail out of the country.

Re: FDIC Takes over Silicon Valley Bank

#165

Post by omgomgomgomg »

woeirua wrote: post #52

LMAO. Can't even believe how many people were confidently asserting that nothing was wrong yesterday. If you had more than $250k in SVB yesterday you probably just took a huge haircut. Hundreds of startups will become illiquid as a result of SVB's collapse, and there will be major layoffs here in the next 90 days as founders realize that they lost their funds and cannot raise in the current VC environment.

But why would the startups become illiquid?

Do they get the investments from the banks or do they park the investment money in this bank?

And why this bank, when there are many more risk averse institutions out there?

Re: FDIC Takes over Silicon Valley Bank

#166

Post by mynameisjonny_ »

tlb wrote: post #109

The regulations that allow a bank to hold long-term fixed-rate bonds backing variable-rate liabilities (since deposit rates float) seems broken. It's straightforward to reckon their exposure to interest rates: they had $90B in 10-year fixed rate bonds, so they lose $9 billion per % of interest increase. They must have known that a 4% increase in interest rates would put them underwater, but they did it (and were allo…

There's nothing wrong with your first sentence really. Banks can (and should) hedge these risks using swaps and other products. Someone really messed up here.

Re: FDIC Takes over Silicon Valley Bank

#167

Post by SkyMarshal »

chollida1 wrote: post #30

some note i've been taking > To protect insured depositors, the FDIC created a new entity called the Deposit Insurance National Bank of Santa Clara, or DINB. DINB will maintain Silicon Valley Bank’s normal business hours, with banking activities resuming no later than Monday, including online banking and other services, the FDIC said. Customers with accounts in excess of $250,000 are being told to contact FDIC direcl…

> Svb Is First FDIC-Insured Institution to Fail This Year

Was Silvergate bank not FDIC-Insured?

Re: FDIC Takes over Silicon Valley Bank

#168

Post by bagacrap »

tlb wrote: post #109

The regulations that allow a bank to hold long-term fixed-rate bonds backing variable-rate liabilities (since deposit rates float) seems broken. It's straightforward to reckon their exposure to interest rates: they had $90B in 10-year fixed rate bonds, so they lose $9 billion per % of interest increase. They must have known that a 4% increase in interest rates would put them underwater, but they did it (and were allo…

they don't lose anything if they're not forced to liquidate those bonds but can hold them to maturity. It seems like the real problem here is a lack of diversity in liabilities (all tech/biotech startups).

Re: FDIC Takes over Silicon Valley Bank

#169

Post by mynameishere »

berkle4455 wrote: post #88

That’s a whole lot of startups not making payroll or their SaaS payments

Anyone know what the fire drill is on this? I imagine SV CFOs on the phone with Goldman Sachs trying to get a 5 million dollar credit line by COB today. Or shutting down operations.
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