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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#261

Post by tinco »

UnpossibleJim wrote: post #53
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…

So, first off, I am not very literate when it comes to the comings and goings of banking procedures, so forgive me if this is a dumb question. Would an incident like this make other banks shore up their defenses about this sort of thing happening to them, or will more banks fall due to market conditions in general?

Well a defense might be to increase their liquidity by selling those treasury bills, which would drive their price even lower, making other banks also be illiquid on paper.

So yeah I imagine all the banks nervously looking at eachother. Who is going to pussy out the first and cause them all to tumble over.

Re: FDIC Takes over Silicon Valley Bank

#263

Post by tlb »

bagacrap wrote: post #168
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).

That's not true. When interest rates go up, they have to pay the higher rates on customer deposits, but they're not getting any more from their bonds. Perhaps they can spread the losses over 10 years, but the losses are the same.

Re: FDIC Takes over Silicon Valley Bank

#264

Post by civicsquid »

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.

Past losses aside, the press release says that there are about $180B in deposits with the bank holding about $210B in assets. Assuming the FDIC liquidates and restructures the bank, I don’t see why deposits could not be made whole.

If there were fewer assets then deposits, then yes the 250k+ accounts are probably out of luck.

Re: FDIC Takes over Silicon Valley Bank

#265

Post by telotortium »

antibasilisk wrote: post #253
mewse-hn wrote: post #237

Earlier quoted context omitted.

Yeah famously the feds step in and cover your deposits when a crypto exchange collapses

You're not supposed to keep your money in exchanges

What's the famous slogan? "You are your own bank!"

Re: FDIC Takes over Silicon Valley Bank

#267

Post by czbond »

bombcar wrote: post #176
gumby wrote: post #161

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…

The thing that's strange is FDIC took control and setup a receiving bank for liquidation. That's not normal; FDIC works quite hard to find a bank willing to take over - usually they can work out what the "cost" is to take over, and FDIC pays the receiving bank that amount to "eat" the dying one. If they don't announce they have a bank to assume SVP by Monday, it's quite abnormal.

Chase has wanted this bank for years. Either they are taking advantage (takeover) or helped accelerate it.

Re: FDIC Takes over Silicon Valley Bank

#268

Post by kube-system »

capableweb wrote: post #187
DLarsen wrote: post #140

I think I'm going to start asking potential employers where they do their banking.

I don't think it should be like this, but most surely your profile will be flagged as "suspicious" if you ask such questions.

There are some founders who are aware that their early employees are invested in the financial security of the company, and not only aren't scared of these questions, but openly discuss company finances.

Re: FDIC Takes over Silicon Valley Bank

#270

Post by borski »

morpheuskafka wrote: post #218
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.

> Hundreds of startups will become illiquid as a result of SVB's collapse, I know SVB was like a "high tech bank" that partnered with things like Stripe Atlas, but is there any reason that startups were using it for their regular operating funds? Other than the name, was there something that actually made this bank particularly suitable for them?

They 'understand' startups. That is, they were willing to work with founders of new ventures, didn't require insane proof of provenance of funds (because suddenly millions of dollars would appear overnight), and would support founders with mortgages, for example, that were running companies that weren't yet necessarily profitable but were well-funded nevertheless.
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