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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#191

Post by rafaelero »

NordSteve wrote: post #126
davidw wrote: post #87

What's the best brief summary of what has happened so far?

During the last couple years, SVB got a ton of deposits, and they didn't have matching loan demand. So they invested the money in bonds. Unfortunately they make a bet that interest rates would stay low, and bought longer duration (~10 year) bonds. Interest rates have gone up, so the bonds they bought have lost value. They tried this week to fix that by selling part of the portfolio and raising capital, but did it in…

That's some terrible risk management. I can't believe they thought Fed' action during the covid crisis wouldn't cause inflation and prompt them to increase interest rates.

Re: FDIC Takes over Silicon Valley Bank

#192

Post by dmoy »

pclmulqdq wrote: post #178
katmannthree wrote: post #76

Earlier quoted context omitted.

Are clawbacks a thing in this case for the people who did get [some] of their money out in time?

Clawbacks are only poised to happen for big crypto failures (FTX) because the people who held money in those institutions aren't technically "depositors," and are considered a more generic type of creditor (which has a bankruptcy clawback). Bank deposits are special and there will be no clawback. However, depositors who lost money will be first in line at the bankruptcy court.

note there is no bankruptcy court here. SVB will go into fdic receivership and almost certainly be sold off to another bank. Depositors are still first in line to get stuff back, but it's not through bankruptcy court. There is no court involved.

Re: FDIC Takes over Silicon Valley Bank

#193

Post by bombcar »

SkyMarshal wrote: post #167
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?

Silvergate is apparently doing a controlled liquidation of itself, this is an FDIC-forced liquidation.

Re: FDIC Takes over Silicon Valley Bank

#194

Post by mikece »

mkmk wrote: post #2

Oldie but goodie on what actually happens when a bank is taken over. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

From the looks of the news stories, it looks like the FDIC isn't as efficient in taking over a bank as it used to be:

https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-...

Re: FDIC Takes over Silicon Valley Bank

#195

Post by NordSteve »

omgomgomgomg wrote: post #165
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?

For business banking, you want a bank that understands your business. SVB was in the first rank of banks that understood startups.

Many startups aren't particularly sophisticated financially and just kept their capital in cash in the bank.

Re: FDIC Takes over Silicon Valley Bank

#196

Post by kgwgk »

JumpCrisscross wrote: post #74
FormerBandmate wrote: post #66

Earlier quoted context omitted.

This case is unique because of the sheer volume of non-FDIC insured deposits. Substantial risk of depositors not being made whole for a while, they’ll probably get all their money but it will still be bad

> Substantial risk of depositors not being made whole for a while Emphasis on for a while. Stock and bond holders (man, did the latter miss the ball) will absorb losses.

As of Dec 31 the total liabilities were $195bn.

Given that they had only $5bn of long-term debt - and $173bn of deposits - it seems that bond holders cannot absorb much (even though it's not very likely that they receive anything).

Re: FDIC Takes over Silicon Valley Bank

#197

Post by hef19898 »

prasadjoglekar wrote: post #174
vineyardmike wrote: post #127

Earlier quoted context omitted.

> If you had more than $250k in SVB yesterday you probably just took a huge haircut. You may not lose money. The money isn’t gone yet. The restructuring may save the money. There’s a playbook for this sort of thing.

You most definitely will. SVB already fire-sold 21Bn in MBS and took a 1.8Bn loss on that. Someone is eating that loss.... Separately, this is going to cause a lot of finance vultures to look at other banks who also have MBS portfolios on their books. The show's only beginning.

MBS, as in Mortgage Backed Securities??? Those MBSs? Oh dear, I am having very serious flash backs now...

Re: FDIC Takes over Silicon Valley Bank

#200

Post by johnbellone »

hef19898 wrote: post #172
johnbellone wrote: post #91

Earlier quoted context omitted.

The same people that were saying that yesterday were removing their deposits. They just wanted to be there first.

There are three ways to succeed in this business: Be first, be smarter or cheat. And I don't cheat. Margin Call is such a timeless, great movie!

Indeed!
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