Sorry but why didn't the VCs get together and bail this bank out themselves???
FDIC Takes over Silicon Valley Bank
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Re: FDIC Takes over Silicon Valley Bank
#732So that's it, all 6500 employees are out of work? Is there any severance in this situation?
They may get to continue to work for the bank in the short term, under new management.
Re: FDIC Takes over Silicon Valley Bank
#733Earlier quoted context omitted.
> - The issue is that as the Fed raised interest rates in 2022 and continued to do so through 2023, the value of SVB’s MBS plummeted. This is because investors can now purchase long-duration "risk-free" bonds from the Fed at a 2.5x higher yield. Let's be clear, the issue wasn't that the Fed raised rates to a historically average level, it was that they were manipulating the bond market in 2021 with trillions of dolla…
Is there a reason they couldn't have just purchased shorter term bonds and securities instead?
Greed. Those were yielding close to zero and they wanted the 1.x%
Re: FDIC Takes over Silicon Valley Bank
#734Earlier quoted context omitted.
The team making these poor choices at SVB should be criminally charged ... The tax payer shouldn't have to bail out banks.
Another bank will acquire the company and make depositors whole. Government won't actually do the bailout, just facilitate/force it.
So where does the lost money come from? Another bank just gives it up?
Re: FDIC Takes over Silicon Valley Bank
#735[deleted]
Re: FDIC Takes over Silicon Valley Bank
#736An 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!…
One of the differences between a central bank and regular bank is that the regular banks should do the riskier stuff and offer the higher interest rates.
This in theory creates a diverse non-correlated system of capital deployment with the best projects winning over the bad ones.
However when the central bank offers interest rates that a private bank cannot match even when it's deploying into safe and endorsed assets like MBS then some weird stuff happens...
The Fed can promise risk-free returns at whatever rate they want but once it exceeds the private banks', then the banks no longer serve any purpose. If there were a way for individuals to hold accounts directly w/ the Fed, they'd all do that. Money will be sucked away from banks that deploy capital in the private sector and squeeze into ones that just passthrough to the Fed's like money market funds.
With high enough interest rates, the Fed can end up sucking up liquidity even from good and safe projects and cause widespread asset collapse b/c the entities that are supposed to be doing price discovery can't compete anymore.
Re: FDIC Takes over Silicon Valley Bank
#737Earlier quoted context omitted.
Edit - this has been the first fdic takeover since 2020, so no, it does not happen often. This chart of historic bank failures paints a different picture: https://www.fdic.gov/bank/historical/bank/
And this chart paints an even different picture: https://twitter.com/alistairmbarr/status/1634275645235793920
Is total assets a useful measure here? I would be more interested in a chart that showed budgetary shortfalls. It sounds like SVB is only short about 10% of total assets if I am remembering what I read earlier this morning.
Re: FDIC Takes over Silicon Valley Bank
#738Earlier quoted context omitted.
If you don't understand the sentiment, I recommend that you read about what happens in a "run on the bank". Too many large withdrawals at the same time results in a liquidity crisis. No bank in the country has enough reserves to pay all of its customer accounts at the same time; it's part of our system of fractional reserve banking. A massive spike in withdrawals forces a bank to sell long term securities in a disadv…
I think we all understand why VCs telling people to get their money out caused or accelerated the collapse. But what was any individual VC supposed to do, tell their startups to just go down with the ship? It's the same dynamic as the toilet paper shortages at the beginning of covid: most people weren't panic buying because they thought that there wouldn't be enough toilet paper to go around if everyone kept cool, th…
"When there is a run on the bank, it's important to be first in line."
Bank runs are fascinating psychological dilemmas to me. On one hand the SVB CEO was correct - everything would have been fine if every depositor hadn't run for the door. But, when a bank says "please don't run for the door", it's already too late.
Re: FDIC Takes over Silicon Valley Bank
#739Umm our CEO just posted on the team channel that SVB is our bank and we don't know what happened yet
What does this mean for the company I work for, are they screwed?
Re: FDIC Takes over Silicon Valley Bank
#740Is this a good guess as any?
* With-in a week or so uninsured accounts will get 40-60 cents per dollar
* In years when the liquidation process is finished they will have gotten 5-20 cents more in addition per dollar
* Shareholders will get nothing in this scenario
Are there any better guesses or any flaws that makes this guess unresonable?