FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#841

Post by nightmarish » Sat, Mar 11, 2023, 12:50 AM UTC

javajosh wrote: post #699

joosters wrote: post #480

Earlier quoted context omitted.

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)

Not an expert, but was having some thoughts. Let debt be a graph where the nodes are people (with ledgers) and the edges are all of the form "alice rents $x from bob for y% APR". Actions that resolve/relax graph are payments of the form "alice pays bob $z", that lead to all balances being 0. Let the edges decay to null when balance is 0, such that a 'resolved graph' is simply a list of nodes with no edges, meaning 'n…

Proposition 2 is flawed: some people DO want the graph to die.

Re: FDIC Takes over Silicon Valley Bank

#842

Post by opportune » Sat, Mar 11, 2023, 12:52 AM UTC

Randalthorro wrote: post #711

tlb wrote: post #109

The regulations that allow a bank to hold long-term fixed-rate bonds backing variable-rate liabilities (since deposit rates float) seems broken. It's straightforward to reckon their exposure to interest rates: they had $90B in 10-year fixed rate bonds, so they lose $9 billion per % of interest increase. They must have known that a 4% increase in interest rates would put them underwater, but they did it (and were allo…

What’s crazy to me is the fed hasn’t been raising rates out of the blue. What the fuck was this bank doing the last two years during every raise? They should have been rebalancing.

I think what probably happened is that, for whatever reason (hubris, incompetence, some bull thesis) they didn’t sell their HTM assets during interest rate increases until it got to a point that taking a loss on them would have forced them to recalculate their reserves such that they were lower than deposits (ie insolvent). Technically they were allowed to do this because they get to count the maturity price as reserves rather than the market price. Selling at a loss at any point would have fixed the problem but force them to lower their reserve calculations and realize a loss.

Once their HTM assets’ market price fell enough that rebalancing would force them to admit to insolvency by recomputing their reserves, they literally could not do anything with them except hold and pray that they make it, which may have just made things worse. Who knows how long they’d really been underwater

Re: FDIC Takes over Silicon Valley Bank

#843

Post by anshumankmr » Sat, Mar 11, 2023, 12:52 AM UTC

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!…

Why would someone buy an MBS after 2008?

Re: FDIC Takes over Silicon Valley Bank

#844

Post by opportune » Sat, Mar 11, 2023, 12:54 AM UTC

UnpossibleJim wrote: post #53

chollida1 wrote: post #30

some note i've been taking > To protect insured depositors, the FDIC created a new entity called the Deposit Insurance National Bank of Santa Clara, or DINB. DINB will maintain Silicon Valley Bank’s normal business hours, with banking activities resuming no later than Monday, including online banking and other services, the FDIC said. Customers with accounts in excess of $250,000 are being told to contact FDIC direcl…

So, first off, I am not very literate when it comes to the comings and goings of banking procedures, so forgive me if this is a dumb question. Would an incident like this make other banks shore up their defenses about this sort of thing happening to them, or will more banks fall due to market conditions in general?

Yes, this may trigger many banks to sell off long term underwater assets which would further reduce their prices, incentivizing further sales. It can also trigger more bank runs that put time pressure on banks to do this. Bad situation overall

Re: FDIC Takes over Silicon Valley Bank

#845

Post by Scoundreller » Sat, Mar 11, 2023, 12:56 AM UTC

34679 wrote: post #59

Pasorrijer wrote: post #36

Earlier quoted context omitted.

I mean, potentially. The reality is they try to protect as much of the assets as they can and even those over 250k will probably not lose as much as they would have without the FDIC

Good luck to any companies with over 100 employees trying to make payroll and other obligations on $250k.

Maybe smart for orgs to do their payroll on a Tuesday or Wednesday instead of down to the wire on friday with everyone else.

Sure you get to hold onto funds for a day or two later, but it also puts your payroll at risk if the bank is failing.

(Seriously I worked for an org that changed payroll from Thursday to Friday and I’d be first to file with the labour board for missed employment payment if they blamed the weekend or bank failure for missing a payment).

Re: FDIC Takes over Silicon Valley Bank

#846

Post by ripper1138 » Sat, Mar 11, 2023, 12:57 AM UTC

anshumankmr wrote: post #843

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!…

Why would someone buy an MBS after 2008?

All banks still buy and sell MBS.

Re: FDIC Takes over Silicon Valley Bank

#847

Post by robertwt7 » Sat, Mar 11, 2023, 1:00 AM UTC

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!…

Please correct me if i'm wrong since i'm not a finance guy,

apart from the loss of $1.8bn and the delta of the interest - growth from their assets.

Isn't everyone still going to get their money back - the percentage of the loss that SVB has which should be less than 5-9%? Sure FDIC has to liquidate all the money from the assets and it takes time. But at least the impact is not going to be as hard as losing all the money like FTX or Maedoff in 2008 right.

Re: FDIC Takes over Silicon Valley Bank

#848

Post by Animats » Sat, Mar 11, 2023, 1:01 AM UTC

"System Maintenance Notice"

"SVB Online Banking (US, UK, Canada Branch Accounts) will be unavailable throughout the weekend, but will resume next week in accordance with the guidance provided by the FDIC. Please check this page again next week for availability. Our apologies for any inconvenience this may cause."

That's the current login page for Silicon Valley Bank. The main page still doesn't show they're down.

Re: FDIC Takes over Silicon Valley Bank

#849

Post by eclipticplane » Sat, Mar 11, 2023, 1:01 AM UTC

kmlx wrote: post #215

Silicon Valley Bank UK confirms it’s a standalone independent UK regulated bank. London, 10 March, 2023: Silicon Valley Bank UK, the financial partner of the innovation economy, today moved to confirm to its UK clients, partners and external stakeholders its financial position as a standalone independent banking institution that is regulated and governed by the PRA in the UK. Silicon Valley Bank UK has been an indepe…

This press release didn't age well.

https://www.bloomberg.com/news/articles/2023-03-10/svb-s-uk-...

Re: FDIC Takes over Silicon Valley Bank

#850

Post by hinkley » Sat, Mar 11, 2023, 1:02 AM UTC

If we’re going to treat the US government like an underwriter, maybe we should allow the FDIC to charge fees that look a bit more like insurance.

We won’t stop you from doing X, but the fees are higher because you’re more likely to default.

As things are every time so thing like this happens either taxes go up, the national debt goes up, or we trigger inflation to solve it.