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Emergency bridge loan for SVB customers

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Re: Emergency bridge loan for SVB customers

#51

Post by gpm »

eek2121 wrote: post #47
gpm wrote: post #11

Earlier quoted context omitted.

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

Uh, no? Do you know how they got into this mess to begin with? They were over-exposed to US treasuries. Let's talk about that for a moment: 1) When yields go up, treasury prices fall. 2) When yields go down, treasury prices rise. 3) The only way you get the basis cost for a treasury back is if you hold to maturity. When a bank run happens, you (if you are bank) need cash. Lots of it. If you own assets, you have to se…

Assume your guesstimate of 50% is right.

If I lend you 25% of your SVB deposit secured against your SVB deposit, I should still be fine (as long as my claim comes early enough in any ensuing bankruptcy).

Re: Emergency bridge loan for SVB customers

#52

Post by ummonk »

ivalm wrote: post #14
ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

They were still solvent despite the mark to market losses - they just couldn't meet reserve requirements (and planned to raise money through a stock sale to that effect) after the assets were marked to market. Meeting reserve requirements is a much higher bar than simply having assets worth more than liabilities.

Re: Emergency bridge loan for SVB customers

#53

Post by 462436347 »

joefigura wrote: post #34
SirensOfTitan wrote: post #30

Earlier quoted context omitted.

I think you massively underestimate how hard it is to coordinate under these kinds of conditions. Plenty of startups are going to be unable to make payroll, which can pierce the corporate veil in CA, it's not a situation where cooperation is the first thought.

Yeah, it's like a stampede in a crowded theater - once the panic sets in everyone's fleeing for the exit and telling everyone else to go too. You could call that coordination, but it's more like once the panic starts it will carry itself out.

> Yeah, it's like a stampede in a crowded theater

It was the same situation with LTCM, with their counterparties (large banks) rushing to liquidate before LTCM became insolvent, which the Fed feared would send shockwaves through the financial system. The banks quickly, collectively agreed to do the right, responsible thing and stopped the fire selling, and injected some emergency capital into LTCM, and then gradually unwound LTCM's postions (and made money in the process).

Re: Emergency bridge loan for SVB customers

#54

Post by eek2121 »

ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

let's say you have an emergency fund of 6x your monthly earnings. Instead of holding that in cash, you put that money into US treasuries at a price of 1:1.

When yields rise, prices fall. Remember that.

Now let's say you need to access that emergency fund, and the amount you need is 90% of it. However, what you've found is that treasury prices have fallen so far, your investment is now only worth 50% of what it was before unless you hold it for another 5 years. If you don't sell now, you will be homeless. If you do sell now, you buy a bit of time and can possibly get a loan, and barring that, you will be homeless.

That is what happened to SVB.

Re: Emergency bridge loan for SVB customers

#55

Post by readthenotes1 »

hackernewds wrote: post #44
ivalm wrote: post #14

Earlier quoted context omitted.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

That's a liquidity crisis, not insolvency. They were invested in long term maturity US treasuries! The safest asset there is (arguably)

The income from them is safe, but the value of them is not.

Same with their mortgage-backed securities.

Re: Emergency bridge loan for SVB customers

#56

Post by ummonk »

bryfb wrote: post #20
gpm wrote: post #16

Earlier quoted context omitted.

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. Per the FDIC

I thought the follwoing was an interesting analysis: Aside from the fact that those assets don't seem to be valued at the current price (i.e. are marked at cost basis, not market,) much of it is already pledged as collateral. https://twitter.com/FedGuy12/status/1634031134505066496

They had 45 billion in withdrawals before they ran out of liquidity and were taken over by FDIC, so that analysis would appear to be incorrect, since it implied they only had 80-55 = 25 billion of liquidity available.

Re: Emergency bridge loan for SVB customers

#57

Post by JumpCrisscross »

gpm wrote: post #11
nostrebored wrote: post #6

Earlier quoted context omitted.

97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

> the assets of the balance sheet exceed the liabilities by a reasonable percentage

Until the FDIC pores over their books, nobody can say anything sensible about what they own, what they sold, what they sent out and what is secured as collateral.

Re: Emergency bridge loan for SVB customers

#58

Post by readthenotes1 »

462436347 wrote: post #42
SirensOfTitan wrote: post #30

Earlier quoted context omitted.

I think you massively underestimate how hard it is to coordinate under these kinds of conditions. Plenty of startups are going to be unable to make payroll, which can pierce the corporate veil in CA, it's not a situation where cooperation is the first thought.

> I think you massively underestimate how hard it is to coordinate under these kinds of conditions. I think you're unfamiliar with the Long-Term Capital Crisis, and the speed with which it was resolved (two days: Sep 22-23). In fact, it's partly because the NY Fed and big banks acted so swiftly and responsibly, that most people have never heard of this and don't realize how close we came to a financial crisis: >The F…

4 main firms, plus 11, and many of the players located in Manhattan with the Fed making the phone calls.

Does svb have a similar client list?

Re: Emergency bridge loan for SVB customers

#59

Post by eclipticplane »

ttsgeysygd wrote: post #28
nostrebored wrote: post #6

Earlier quoted context omitted.

97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.

Word is that 50% of assets already sold by FDIC. Which will allow a large chunk of each account to be unfrozen by Wed so companies can make payroll. FDIC is not fucking around. Hat tip to them. Balance to take 2-3 months. Will require an actual application and paperwork.

Where did you find the 50% number?

Re: Emergency bridge loan for SVB customers

#60

Post by ummonk »

eek2121 wrote: post #54
ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

let's say you have an emergency fund of 6x your monthly earnings. Instead of holding that in cash, you put that money into US treasuries at a price of 1:1. When yields rise, prices fall. Remember that. Now let's say you need to access that emergency fund, and the amount you need is 90% of it. However, what you've found is that treasury prices have fallen so far, your investment is now only worth 50% of what it was be…

I understand how they ended up with losses, having bought long duration securities at the top. I'm saying they were still solvent despite the losses. They just weren't liquid.
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