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FDIC Takes over Silicon Valley Bank

fdic.gov

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Re: FDIC Takes over Silicon Valley Bank

#991

Post by gigatexal »

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!…

Hedging maturity and interest rate risk is literally the only thing a bank needs to do. (Okay not literally but come on you have more or less one job: assure assets are secure and generate some yield safely).

Re: FDIC Takes over Silicon Valley Bank

#992

Post by globular-toast »

kuczmama wrote: post #361

What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…

Because you're a greedy human and you will find a way to take a larger slice of the pie. It happens every single time. You'd think this would be obvious by now.

How you think the banking system works is how "educated" people think it works and even that isn't correct, by the way. There is no reserve. The funds aren't real. It's all just made up numbers. There have been several Hollywood films made about it (e.g. The Big Short and Margin Call). It's almost so stupid you think there must be something else to it, but it's just people playing with numbers.

Re: FDIC Takes over Silicon Valley Bank

#993

Post by ksniwmidjd »

twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

[dead]

Re: FDIC Takes over Silicon Valley Bank

#994

Post by deepsun »

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…

What are insured maximums in the UK's equivalent of FDIC?

Re: FDIC Takes over Silicon Valley Bank

#995

Post by kayamon »

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…

This system will settle on a solution if there is no net total creation of money in the world. As long as new money is allowed to enter this system, edges will keep appearing to protect it.

Re: FDIC Takes over Silicon Valley Bank

#996

Post by kayamon »

_yb2s wrote: post #476
kuczmama wrote: post #361

What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…

The ability to 'borrow' someone else's money to do something valuable with it opens huge opportunities. This model is what fueled the massive economic growth of the last few hundred years, made the industrial revolution possible, and made home ownership possible for non-aristocracy.

The people whose money you're 'borrowing' may have had other ideas about what they'd have liked to see it invested into.

Re: FDIC Takes over Silicon Valley Bank

#997

Post by graderjs »

I was just thinking it would be cool if FDIC posted status reports like an incident update thing…when you have you know a technical issue or an outage this kind of like a running stream of commentary and updates posted by the company if they’re handling it well.

9 am We’re currently experiencing a liquidity issue with our SVB partner and are investigating

11 am Access to 23% of accounts is now restored

12 noon The issue is worse than we first thought. We are taking remediary steps to prevent contagion of the issue

1 pm We aim to have access to under-250k accounts back up by Monday Eastern 9am. Status of larger accounts is unclear as we assess the scope of the damage

Etc…

It’ll be cool if FDIC was posting this kind of info over the weekend…but they probably want to avoid that because it just be fueling the social media speculation mill but it would be good I think.

Re: FDIC Takes over Silicon Valley Bank

#998

Post by [deleted] »

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?

[deleted]

Re: FDIC Takes over Silicon Valley Bank

#999

Post by alarmingfox »

deepsun wrote: post #994
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…

What are insured maximums in the UK's equivalent of FDIC?

I believe the Financial Services Compensation Scheme (FSCS) in the UK insures deposits upto £85,000.

Re: FDIC Takes over Silicon Valley Bank

#1000

Post by mempko »

kgwgk wrote: post #743
mempko wrote: post #495

Earlier quoted context omitted.

Banks don't lend out deposits. They don't take deposits and lend out 90% or so. Fractional reserve banking is a model of how banking works but it's a wrong model. In reality banks make loans (which create deposits). They try to attract deposits from other banks because they need enough bank reserves to cover liquidity issues (like customers transferring money to other banks). When a bank transfers deposits to another…

> Fractional reserve banking is a model of how banking works but it's a wrong model. [...] They try to attract deposits from other banks because they need enough bank reserves Not completely wrong, after all.

Ultimately it's the capital that the banks have that limit how much they can lend, not reserves. Their capital requirements are the limit. Once capital falls below a certain percentage, the bank is in trouble.
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