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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#451

Post by davidw »

mikeyouse wrote: post #444
davidw wrote: post #415

Earlier quoted context omitted.

> 10+ year duration, with a weighted average yield of 1.56%. > the value of SVB’s MBS plummeted. How much 'plummeting' did they do in numerical terms? Something with those kinds of yields doesn't sound like it ought to be a super risky asset. The mortgage lending market tightened up a lot after the great recession...right?

They're very safe assets, they just have a long duration which makes them really risky if you could need them to cover deposits. To make things more straightforward, let's just compress it to a 1-year time frame vs a 30-day bond. So a $100 MBS at 1.5% would pay you $101.50 if you held it for 1 year. If you have $100 in deposits and a $100 MBS bond, you're "solvent". But what happens if after 30 days, your depositor a…

I get how it'd put them in bankruptcy or whatever the precise term is for a bank. I'm just curious what it means in terms of people getting their money back. If their assets lost 10% of their value, I could see that being enough, combined with the bank run, to put them under. But if everything else gets sold off at 90 cents to the dollar, that's not awesome but it's not like "poof it's gone entirely" either.

Re: FDIC Takes over Silicon Valley Bank

#453

Post by themitigating »

kuczmama wrote: post #361

What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…

Then how would a bank provide loans for cars and houses? They might also have to charge a very high fee to hold your money and not provide interest

Re: FDIC Takes over Silicon Valley Bank

#454

Post by alex_young »

banku_brougham wrote: post #204
version_five wrote: post #40

Earlier quoted context omitted.

Re Bear Sterns, there were lots of political reasons it was allowed to fail while others were protected. If I remember right something about them not helping with the Long Term Capital Management collapse for example. There will have been people who had the opportunity to help SVB and collectively decided it was better to let it fail. It will be interesting to understand the decisions that were made when the dust set…

great callback. revenge on Jimmy Cayne for when genius failed. Dont forget it was Lehman that failed first, Bear got special treatment amongst the Citi, AIG, et al bailouts.

Bear was sold at a %90 discount (so not a complete loss) 1 week before Lehman failed.

Re: FDIC Takes over Silicon Valley Bank

#455

Post by mixdup »

tialaramex wrote: post #347
tchalla wrote: post #289

Earlier quoted context omitted.

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

FDIC means you get paid immediately regardless, but the bank will almost invariably turn out to be good for the rest, just not quickly.

No, FDIC means you get paid up to $250,000 per insured account immediately Any amount over that you are not guaranteed to be able to withdraw. These people are a long way from regardless

Re: FDIC Takes over Silicon Valley Bank

#456

Post by gnopgnip »

FormerBandmate wrote: post #66
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...

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

Have there been any cases in modern times, in the last 25 year or so where depositors lost money because they had more than the fdic covered ?

Re: FDIC Takes over Silicon Valley Bank

#457

Post by voisin »

willmadden wrote: post #356
ajhurliman wrote: post #314

Earlier quoted context omitted.

Fixes what? An insolvent bank got was taken over by a national authority, all of the deposits were insured, account holders don’t even notice anything happened unless they’re following the news, the banking system doesn’t even skip a beat. This sounds like everything went according to the highly regulated plan.

FDIC insurance only covers accounts up to 250k. It's really only suitable for protecting middle class individuals, not corporations. 97% of the 175 billion on deposit was not covered by FDIC insurance. Those companies are going to be wiped out unless the government steps in and exceeds the requirements of the insurance.

> 97% of the 175 billion on deposit was not covered by FDIC insurance.

Source?

Re: FDIC Takes over Silicon Valley Bank

#458

Post by reducesuffering »

khazhoux wrote: post #75
idlewords wrote: post #38

Now we just need an "incredible journey" blog post from SVB spinning this acquisition as a great win for both customers and investors.

Or a cute 404 page when you login to your account: "Oops, looks like Santa misplaced his bag with all your money! Don't worry, his elves are busy looking for it all over the North Pole."

South Park nailed this https://www.youtube.com/watch?v=-DT7bX-B1Mg

Re: FDIC Takes over Silicon Valley Bank

#459

Post by purpleblue »

gumby wrote: post #414
purpleblue wrote: post #374

Earlier quoted context omitted.

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.

See my reply to kmod in regards to this. It's the FDIC's current balance sheet we're talking about, not SVB's. In a liquidity crisis you don't have access to your capital. So FDIC spends theirs, and takes control of SVB's balance sheet. Also SVB is a small bank.

The only way things are okay is if FDIC makes SVB whole on all its assets, which doesn't make sense. They are only on the hook for the 250k, everything above and beyond will get paid out by selling assets, much of which might be considerably impaired, because of accounting differences. You're telling me that if SVC had $1 billion in 0.1% 10 year bonds, they would pay them face value for that now? That's not how it works at all.

SVB was the 15th largest bank in the US. That's not a small bank.

Re: FDIC Takes over Silicon Valley Bank

#460

Post by 650REDHAIR »

neom wrote: post #326

If you're struggling, email is in the bio, happy to chat. I've heard a few folk are really in trouble right now and we don't need anyone doing anything permanent, this too shall pass. Happy to talk! There is a way forward! :) :) If you need to talk to someone immediately: 800-273-8255

You’re a good egg.
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