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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#281

Post by ethbr0 »

capableweb wrote: post #244
stephenhuey wrote: post #225

Earlier quoted context omitted.

Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)

Thing is, it's probably true for 1% of the cases, that things are slow for no good reason. Trick is how to identify that 1% of times when you can truly make something better. But 99% of the times, it's all shit and ends up like this, or similarly.

The irony is that, as near as I can tell, they cratered their balance sheet because they were heavily into long maturity bonds (i.e. super conservative).

https://www.cnbc.com/2023/03/09/svb-financial-falls-more-tha...

That seems an odd position to allow to build given the current macro. Post-Fed changing their mind on inflation, the course was charted.

I'm guessing they held to avoid taking losses, and at some point it became untenable?

Re: FDIC Takes over Silicon Valley Bank

#282

Post by fairity »

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…

> I suspect all depositors will be made whole.

Agreed. The FDIC report shows $209b in assets and $175b in deposits.

Even if they took the full $15b estimated loss to liquidate their HTM bond portfolio, they'd have $20b to spare before not being able to cover deposits.

Am I misunderstanding?

Re: FDIC Takes over Silicon Valley Bank

#283

Post by gumby »

czbond wrote: post #267
bombcar wrote: post #176

Earlier quoted context omitted.

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.

Most of the good staff were poached by First Republic over the past few years. That caused me to bank my current startup at FR after more than 25 years of SVB.

So I don’t think there was much for Chase to buy. SVB has been in decline for a while

Re: FDIC Takes over Silicon Valley Bank

#288

Post by engineeringwoke »

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…

There's a $40 billion hole in their balance sheet...

Re: FDIC Takes over Silicon Valley Bank

#289

Post by tchalla »

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…

93% of deposits are uninsured according to a recent regulatory filing. So, I doubt it will be “all depositors” that would be made whole.

https://twitter.com/business/status/1634211584657571843?s=20

Re: FDIC Takes over Silicon Valley Bank

#290

Post by aobdev »

om42 wrote: post #147
borski wrote: post #84

Earlier quoted context omitted.

> And any accounts over $250K, poof. That's not quite true; the FDIC will pay uninsured depositors an advance dividend within the next week.

My finance-foo is quite weak, what does advance dividend mean in this context?

Management at the now FDIC-controlled bank will estimate the value of SVB’s assets, such as loans and bonds, and give depositors a fraction of that value to be paid in advance of the sale of those assets. They do this to prevent the collapse of all those companies who were SVB clients, which would be bad for the economy.
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