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Emergency bridge loan for SVB customers

brex.com

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Re: Emergency bridge loan for SVB customers

#111

Post by nimbleplum40 »

astura wrote: post #110
gpm wrote: post #3

Honestly this makes a ton of sense. The FDIC will be returning most (or all) of the deposits in SVB, so the debt is reasonably safe (at least as far as debt that startups take on ever is). Whoever is funding this is probably not taking on all too much liability, and if they're heavily invested in the startup ecosystem could easily be making enough back from this indirectly to make it worthwhile. For brex this has to…

>The FDIC will be returning most (or all) of the deposits in SVB 85% of accounts weren't FDIC insured https://time.com/6262009/silicon-valley-bank-deposit-insuran...

Right, so they aren’t guaranteed to get the money back, but SVB had large assets (likely enough to cover all deposits).

Re: Emergency bridge loan for SVB customers

#112

Post by steveBK123 »

gpm wrote: post #3

Honestly this makes a ton of sense. The FDIC will be returning most (or all) of the deposits in SVB, so the debt is reasonably safe (at least as far as debt that startups take on ever is). Whoever is funding this is probably not taking on all too much liability, and if they're heavily invested in the startup ecosystem could easily be making enough back from this indirectly to make it worthwhile. For brex this has to…

More like a 10% haircut given some of the losses they took on recent security liquidations.

Re: Emergency bridge loan for SVB customers

#113

Post by OJFord »

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)

No it isn't? Not having access to enough quickly enough is a liquidity crisis; not having enough even when it is all liquidated is insolvency.

Re: Emergency bridge loan for SVB customers

#114

Post by tekla »

fnordpiglet wrote: post #108
MrMan wrote: post #96

Earlier quoted context omitted.

it is definitely insolvent

No, it’s not. It couldn’t liquidate assets fast enough to cover a run on the bank. But assets exceed liabilities substantially. What you’ll see is a line of credit issued that props up withdrawals as assets are liquidated until the bank stabilizes and it’ll reemerge under a new charter.

https://dfpi.ca.gov/wp-content/uploads/sites/337/2023/03/DFP...

California has declared it insolvent. It literally by definition is now.

Re: Emergency bridge loan for SVB customers

#115

Post by IG_Semmelweiss »

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…

I agree with your assesment but the impairment in those long maturity assets were not 50% to begin with, so the realized losses couldn't be as high.

Back of the napkin, take the 10yr and 30 yr spot prices today for issues from 1-2 years ago, and that's your max haircut. I believe some are trading at 70 cents , so we are talking about 30%. And that's worst case (not all assets would have sold at that price, but better).

Remember this is highly liquid assets. Not some exotic stuff. Its a big loss, but not 50%

Brex's offer is collaterized up to 25 cents per dollar. SO, unless SVB lost huge money elsewhere, there's no way SVB lost > 75% mostly off their MBS portfolio (or other assets, for that matter).

Re: Emergency bridge loan for SVB customers

#116

Post by fairity »

I wonder if Brex ACTUALLY has 3rd party capital lined up to fund these loans yet. It seems just as likely to me that they're getting out early with this message to drive account sign ups, while betting that they can piece together a lending partner on the backend over the next week.

Re: Emergency bridge loan for SVB customers

#117

Post by IG_Semmelweiss »

fnordpiglet wrote: post #108
MrMan wrote: post #96

Earlier quoted context omitted.

it is definitely insolvent

No, it’s not. It couldn’t liquidate assets fast enough to cover a run on the bank. But assets exceed liabilities substantially. What you’ll see is a line of credit issued that props up withdrawals as assets are liquidated until the bank stabilizes and it’ll reemerge under a new charter.

it is insolvent. It sold assets at firesale. That wiped out SVB's entire equity!!

If SVB literally had a way to hack the time-space continuum and wait out for asset prices they own , to stabilize ("maturity") , or to pay them back in full ( a loan)...SVB would STILL likely lack enough funds to pay back their deposits.

Re: Emergency bridge loan for SVB customers

#118

Post by lp0_on_fire »

astura wrote: post #110
gpm wrote: post #3

Honestly this makes a ton of sense. The FDIC will be returning most (or all) of the deposits in SVB, so the debt is reasonably safe (at least as far as debt that startups take on ever is). Whoever is funding this is probably not taking on all too much liability, and if they're heavily invested in the startup ecosystem could easily be making enough back from this indirectly to make it worthwhile. For brex this has to…

>The FDIC will be returning most (or all) of the deposits in SVB 85% of accounts weren't FDIC insured https://time.com/6262009/silicon-valley-bank-deposit-insuran...

85% of _deposits_ weren't FDIC insured, not accounts. Every account is insured up to $250,000 by the FDIC.

I'm sorry for the people in that position but it's a distinction with a difference.

Re: Emergency bridge loan for SVB customers

#119

Post by gpm »

IG_Semmelweiss wrote: post #115
eek2121 wrote: post #47

Earlier quoted context omitted.

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…

I agree with your assesment but the impairment in those long maturity assets were not 50% to begin with, so the realized losses couldn't be as high. Back of the napkin, take the 10yr and 30 yr spot prices today for issues from 1-2 years ago, and that's your max haircut. I believe some are trading at 70 cents , so we are talking about 30%. And that's worst case (not all assets would have sold at that price, but better…

> Brex's offer is collaterized up to 25 cents per dollar.

Do you know this? That's a number I (and some other posters) pulled out of a hat as a reasonable thing to do, but I don't think any of us had any sources for it?

Re: Emergency bridge loan for SVB customers

#120

Post by qbasic_forever »

nimbleplum40 wrote: post #111
astura wrote: post #110

Earlier quoted context omitted.

>The FDIC will be returning most (or all) of the deposits in SVB 85% of accounts weren't FDIC insured https://time.com/6262009/silicon-valley-bank-deposit-insuran...

Right, so they aren’t guaranteed to get the money back, but SVB had large assets (likely enough to cover all deposits).

Those assets are year old long term bonds that have to be sold at a loss now (since interest rates are way up and brand new bonds pay better than these older ones).
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