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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#621

Post by dragonwriter »

joosters wrote: post #480
duxup wrote: post #435

Earlier quoted context omitted.

I have some family who (with some other partners) founded a small community bank that has grown over the years. They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc). The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who wer…

At first glance, bank balance sheets are unintuitive and feel 'the wrong way round'. When someone deposits $1m at a bank, the bank doesn't have $1m more assets, it has $1m more liabilities. (Yes, this is a gross over-simplification)

A deposit of $x adds both $x in assets (cash) and $x in liabilities (account balances).

Re: FDIC Takes over Silicon Valley Bank

#622

Post by treis »

joosters wrote: post #480
duxup wrote: post #435

Earlier quoted context omitted.

I have some family who (with some other partners) founded a small community bank that has grown over the years. They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc). The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who wer…

At first glance, bank balance sheets are unintuitive and feel 'the wrong way round'. When someone deposits $1m at a bank, the bank doesn't have $1m more assets, it has $1m more liabilities. (Yes, this is a gross over-simplification)

This isn't an over simplification it's just wrong. The bank does have more assets (the 1 million in cash) that balances the liability (the 1 million they owe to their customer).

Re: FDIC Takes over Silicon Valley Bank

#623

Post by [deleted] »

tempsy wrote: post #591
somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

honestly disgusted by the blatant PR moves by YC and Founders Fund yesterday in leaking their “advice” to their founders to get out of SVB Very blatant weaponization of FUD to drum up deposits for their investments in Brex, Ramp, and Mercury.

[deleted]

Re: FDIC Takes over Silicon Valley Bank

#624

Post by rvnx »

lapcat wrote: post #608
somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

> An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): [1] - https://twitter.com/jamiequint/status/1633956163565002752 That tweet is unattributed verbatim from https://www.livemint.com/news/world/explainer-silicon-valley... [EDIT:] See the thread, it seems that the story may have stolen from the tweet! Pretty shocking for one of India's biggest business pu…

He is correct, but he is blaming the FED raising interest rates. The responsible is not the FED, but the negligent management of SVB that purchased such products because of greediness.

When interest rates raise, previously issued bonds lose in value because there are more attractive ones available.

It's like if they missed the Chapter 1 lesson about investing into bonds.

Re: FDIC Takes over Silicon Valley Bank

#625

Post by eftychis »

Just because there is a whole lot of misuse of terms that makes it hard to understand certain comments and debate over if SIVB is insolvent or illiquid, here are some definitions:

https://www.investopedia.com/terms/s/solvencyratio.asp#toc-s...

Defn. (informal) A company is illiquid if they can not service short term liabilities/debt as it comes due. This includes the ability to quickly sell assets to raise cash.

According to what we hear Silicon Valley Bank is/was illiquid: They were struggling to _liquidate_ at well below the maturity value of the MBS to serve their liabilities -- withdrawals. They were not able to service the withdrawal rate (there were withdrawals/wires frozen for hours yesterday).

In essence, driving themselves towards the insolvent side (hopefully not, because if they are insolvent now (discounting the equity value) we are going to have contagion.

Re: FDIC Takes over Silicon Valley Bank

#626

Post by FireBeyond »

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!

And to spin the quote further:

"And there are a lot of smart people in Silicon Valley. It's a hell of a lot easier to be first."

Re: FDIC Takes over Silicon Valley Bank

#627

Post by jamiequint »

somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

I hope it's accurate. What I should have said though is "This is not a *solvency* issue as long as SVB maintains their deposits", it's obviously a liquidity issue.

Re: FDIC Takes over Silicon Valley Bank

#628

Post by jamiequint »

lkbm wrote: post #401
BlandDuck wrote: post #389

Earlier quoted context omitted.

"This is not a liquidity issue as long as SVB maintains their deposits, since these securities will pay out more than they cost eventually." But that's exactly the problem. With higher interest rates, those deposits will be looking for a higher deposit rate. With their assets tied up in low-paying long-term bonds, SVB will not be able to pay that higher rate. It would only work out "eventually", if the depositors wou…

He meant solvency issue. Someone else called this out downthread and he confirmed. Definitely felt like it should've been corrected more prominently, though.

Yes, I mis-spoke. If only there was some way to edit tweets or to pin your replies to the top of a thread :P

Re: FDIC Takes over Silicon Valley Bank

#629

Post by jamiequint »

lapcat wrote: post #608
somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

> An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): [1] - https://twitter.com/jamiequint/status/1633956163565002752 That tweet is unattributed verbatim from https://www.livemint.com/news/world/explainer-silicon-valley... [EDIT:] See the thread, it seems that the story may have stolen from the tweet! Pretty shocking for one of India's biggest business pu…

My tweet was posted before that article.

Re: FDIC Takes over Silicon Valley Bank

#630

Post by VirusNewbie »

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.

Interesting you say this, their stock is up despite rest of my portfolio being red
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