FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#371

Post by Animats » Fri, Mar 10, 2023, 6:00 PM UTC

mikece wrote: post #194

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-...

When the FDIC takes over a bank, they usually have some local cops around, to deal with crowd control and calm down upset depositors. See the 60 minutes video. There's a police car parked in front of the bank, but the cops are not doing much.

Re: FDIC Takes over Silicon Valley Bank

#372

Post by sailingparrot » Fri, Mar 10, 2023, 6:00 PM UTC

stephenhuey wrote: post #225

testfoobar wrote: post #43

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731...

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... :)

> Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better!

SVB was an old stodgy banks that companies went to instead of the new kids like Mercury, specifically because of the trust. They have terrible UX and mobile app but at least they were solid and had a 40 year track record.

Re: FDIC Takes over Silicon Valley Bank

#373

Post by fairity » Fri, Mar 10, 2023, 6:00 PM UTC

The bigger story here will probably be the follow-on effects, assuming it takes a long time for uninsured deposits to be recouped.

I wonder how many businesses will be forced into a fire sale due to inability to raise cash to cover short-term liabilities. I'm sure some private equity firms' mouths are watering right now.

Re: FDIC Takes over Silicon Valley Bank

#374

Post by purpleblue » Fri, Mar 10, 2023, 6:01 PM UTC

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…

No, I think you're wrong.

The reason why depositors are going to lose money I think is because the fire-sale valuation of the assets Their money was not sitting around in cash. It was in bonds which lost a lot of value in the last several months. They also have more exotic investments in the startups they work with, which depending on how it works, could get a really bad valuation as well.

Re: FDIC Takes over Silicon Valley Bank

#375

Post by ummonk » Fri, Mar 10, 2023, 6:01 PM UTC

kmod wrote: post #348

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…

These statements seem pretty contradictory: - "it had reserves in excess of its liabilities" - "They can't unwind that position and cover all possible demands" I'm guessing that you're thinking of some sort of valuation of their assets that says something like "well they're really worth more than they're currently valued at", which is a common claim on this story but it's a pretty bold one?

They're just saying that many of the assets are insufficiently liquid to be instantly sold off to cover all the withdrawals during a bank run.

Re: FDIC Takes over Silicon Valley Bank

#376

Post by diimdeep » Fri, Mar 10, 2023, 6:01 PM UTC

It's 17 largest bank in US that is $0.25 trillion assets that is basically collapsed. It is a big sign of possible hyper inflation and much larger banking system problems for the entire world, that is still relying on USD.

Re: FDIC Takes over Silicon Valley Bank

#377

Post by davidw » Fri, Mar 10, 2023, 6:02 PM UTC

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…

Interesting, thanks. What with the bad bet being some fairly boring bonds... that should mean their investment didn't, say, lose 90% of its value or something. Just that the 10% (or whatever it was) it dropped was enough to put them over the edge. But if they sell off those bonds that's still a fair amount of money that can be recovered... right?

Re: FDIC Takes over Silicon Valley Bank

#378

Post by dehrmann » Fri, Mar 10, 2023, 6:02 PM UTC

plonk wrote: post #303

mangosteenjuice wrote: post #93

Earlier quoted context omitted.

A good lesson for everyone who forgot the last cycle. Slowly, then all at once.

SVB isn't Lehman Brothers.

It won't take out the broader economy, but it could really damage a lot of small companies in the tech sector.

Re: FDIC Takes over Silicon Valley Bank

#379

Post by bombcar » Fri, Mar 10, 2023, 6:02 PM UTC

mywittyname wrote: post #352

yeahsure22 wrote: post #32

Earlier quoted context omitted.

It’s not interesting because of its name, it’s the 18th largest bank in the US. A domino that big usually doesn’t fall alone. Also, FDIC hasn’t taken over a bank since 2020. This isn’t exactly a common occurrence.

"Since 2020" is not a great metric, since a lot happened in 2020. Here is a chart that shows the number of bank failures over the past decade [0]. As you can see, having a year with 0 failures is actually the outlier. The average annual bank failure over the past 20 years is roughly 20 per year and the median number is 8 per year. [0] https://www.fdic.gov/bank/historical/bank/

Note that FDIC has a precise meaning for a "bank failure" - many more "failures" occur but FDIC gets there early enough and arranges for another bank to "take over" - more or less quietly. These are usually tiny community banks.

Re: FDIC Takes over Silicon Valley Bank

#380

Post by dylan604 » Fri, Mar 10, 2023, 6:02 PM UTC

Edmond wrote: post #238

Please reboot Silly-con Valley...I mean the show. With everything that has happened with crypto and the current mayhem I think two solid additional seasons can be made.

It would have to be with new players, as they pretty solidly tied a bow around that cast.