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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#781

Post by kgwgk »

worik wrote: post #772
opportune wrote: post #648

Earlier quoted context omitted.

This, these bonds/mbs are liquid instruments, they just lost value at market prices. When I make a deposit in a bank I am not purchasing a CD - I expect full liquidity. If the bank invested my deposit in something that lost money but should be worth my deposit amount in X years that is purely the bank’s fault, not my fault.

> This, these bonds/mbs are liquid instruments It is all relative, not all relevant Anything is liquid if you will lower the price enough

Liquidity is defined as being able to sell quickly at a fair price.

Surely they did sell those treasuries without any hiccup. (I'm not 100% certain about the MBS they hold but the main problem is that the fair value is down and not the discount relative to that price that would be required to sell quickly.)

Re: FDIC Takes over Silicon Valley Bank

#782

Post by snuxoll »

zomglings wrote: post #642
weego wrote: post #601

Earlier quoted context omitted.

When the fuck are retail banks going to be ring-fenced away from being able to trade in MBS. They're consistently cancerous to our banking systems.

I do not think this is a problem of mortgage-backed securities. The problem is that SVB tied up their liquidity for 10 years at a yield far lower than they would get with more secure investments after the FED's rate hikes. The specific assets they invested into are immaterial.

Aye, the mistake was the duration, not the instrument. I hope nobody would take 60% of their brokerage account and invest it in a 10 year bond either, ladders exist not just to manage liquidity but also to limit the duration you have to suffer low yields with.

Re: FDIC Takes over Silicon Valley Bank

#783

Post by SmartJerry »

boosting6889 wrote: post #508
rsync wrote: post #445

Earlier quoted context omitted.

"97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%." I'd like to learn more about the dramatic drop in MBS - elsewhere, downthread, it is asserted that they have dropped 30-50% ? I understand the inverse relationship between bond price and yield ... ... but I am surprised that an asset yielding ~1.5% drops 30% in value when treasuries of similar duration rise to 3-4%. Are there other fac…

There’s a misconception that bonds are safe investments. They are not. You’re just trading one kind of risk for another. You can do the math, compare 4% and 1.5% compounding for 10 years and that’s why no one wants the bonds yielding 1.5%. Dumping 90%+ of your liquid funds into a single thing other than cash is completely insane especially when it’s not yours.

Bonds are perfectly safe investments when the normal consideration of safety is that you cannot lose money and you know your exact return through maturity. Can you miss out on better investments, ofcourse. The only issue is investing someone else's money into bonds - because they are the ones to decide when the cash is needed, not you. But I'd be shocked if at any given time at least 90% of cash is not invested in someway. You only want to keep what you need immediately out of investments.

Re: FDIC Takes over Silicon Valley Bank

#784

Post by samstave »

hef19898 wrote: post #186
vineyardmike wrote: post #127

Earlier quoted context omitted.

> If you had more than $250k in SVB yesterday you probably just took a huge haircut. You may not lose money. The money isn’t gone yet. The restructuring may save the money. There’s a playbook for this sort of thing.

Well, and until everything is sorted all your deposits above 250k are illiquid now. So, I guess one way to not go under is to find a bank that gives you a generous credit line against whatever deposits there are at SVB. At huge risk margin, and quite a discount on the deposits. If there are such banks willing to do so, that is.

all Thos banks usually start with 'swiss' passports in their name.

Re: FDIC Takes over Silicon Valley Bank

#785

Post by [deleted] »

nickrubin wrote: post #715

Garry Tan: "30% of YC companies exposed through SVB can’t make payroll in the next 30 days. If you or your company are affected, I recommend that you reach out to your local congressman to get this on their radar TODAY." https://twitter.com/garrytan/status/1634286688922132481

[deleted]

Re: FDIC Takes over Silicon Valley Bank

#786

Post by bialpio »

boosting6889 wrote: post #508
rsync wrote: post #445

Earlier quoted context omitted.

"97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%." I'd like to learn more about the dramatic drop in MBS - elsewhere, downthread, it is asserted that they have dropped 30-50% ? I understand the inverse relationship between bond price and yield ... ... but I am surprised that an asset yielding ~1.5% drops 30% in value when treasuries of similar duration rise to 3-4%. Are there other fac…

There’s a misconception that bonds are safe investments. They are not. You’re just trading one kind of risk for another. You can do the math, compare 4% and 1.5% compounding for 10 years and that’s why no one wants the bonds yielding 1.5%. Dumping 90%+ of your liquid funds into a single thing other than cash is completely insane especially when it’s not yours.

Safe investment means you're not risking losing the money, not that there will never be a better opportunity (that may be just as safe). Alternative cost is not really coming into play here IMO.

Re: FDIC Takes over Silicon Valley Bank

#787

Post by serf »

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

>If you need to talk to someone immediately: 800-273-8255

it's an 800 number, perhaps you should be clear to where you're directing people: the American National Suicide Prevention Lifeline.

I get that you're trying to be light-footed around the topic, but I feel as if I must point out that not all people that need to talk to someone even have the concept of self-harm on their mind.

If you actually just need to talk to someone , try a Warmline. [0]

[0]: https://warmline.org/warmdir.html#directory

Re: FDIC Takes over Silicon Valley Bank

#788

Post by mannerheim »

zomglings wrote: post #642
weego wrote: post #601

Earlier quoted context omitted.

When the fuck are retail banks going to be ring-fenced away from being able to trade in MBS. They're consistently cancerous to our banking systems.

I do not think this is a problem of mortgage-backed securities. The problem is that SVB tied up their liquidity for 10 years at a yield far lower than they would get with more secure investments after the FED's rate hikes. The specific assets they invested into are immaterial.

Yep. Let's not forget this same thing pretty much happened last year in the UK - pension funds got margin called because they borrowed money to buy gilts (UK gov bonds). Low interest bonds, money tied up, messed them up when interest rates rose.

Re: FDIC Takes over Silicon Valley Bank

#789

Post by justin66 »

ecf wrote: post #773
nickrubin wrote: post #715

Garry Tan: "30% of YC companies exposed through SVB can’t make payroll in the next 30 days. If you or your company are affected, I recommend that you reach out to your local congressman to get this on their radar TODAY." https://twitter.com/garrytan/status/1634286688922132481

So is this going to be a “privatized profits, socialized losses” type scenario? Are taxpayers going to be bailing out this bank and the companies that use them?

If the bank's failure doesn't represent a systemic risk to the economy, such that the executive branch would be justified in propping them up, we're talking about a popularity contest. Who does the American public like less, nerds or bankers? might not play in congress quite the way the OP is hoping.

It might not come to that, since the specifics of the bank's financials will determine whether everyone eventually gets their money back.

Re: FDIC Takes over Silicon Valley Bank

#790

Post by positr0n »

egiops wrote: post #739

Umm 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?

Worse case, imho, is your company has trouble making the next payroll since most of it's funds are temporarily inaccessible. And after the dust settles they take a ~10% haircut on all the cash they had in the bank.

SVB still has lots of assets, they just aren't very liquid and it's possible the value (if you sold them all today) isn't quite enough to cover all deposits.

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