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My guess is that many startups are withdrawing their deposits due to this news. I wonder if SVB can cope with a significant bank run.
So is this the start of 2008 2.0?
I think the real start of it will be after the GPT hype dies down. Everyone is racing to build/add AI things and the hype around that is preventing a freefall in the tech sector, IMO.
It is, of course theoretically possible that some crooks repackaged and sold a bunch of equities as a 'safe' investment instrument to a bunch of morons, on a truly gargantuan scale. But if that has happened, nobody has heard about it.
Earlier quoted context omitted.
SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets. In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.
Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?
As they say themselves, Category IV organizations, like SVBFG, are subject to supervisory stress tests conducted by the Fed "every other year."
So you can get Stress Test results, but they will be stale. See Page 13 here: https://www.svb.com/globalassets/library/uploadedfiles/conte...
Not sure if there are other ways to get tier ratios, would be curious if anyone else could chime in?
If they were to sell those MBS today to get cash, bank’s equity would be wiped out
Source: https://twitter.com/ragingventures/status/161582608803847373...
Is the tech-aligned banking sector getting fragile? Just yesterday Silvergate Bank collapsed. It was the #1 bank in the US for crypto companies. The FTX fallout caused a tidal wave of crypto-related deposits leaving the bank and they were unprepared, apparently having invested the money in bonds that were deep in the red. The Feds stepped in and told them to shut down the bank and repay deposits before things get wor…
SVB is inderwater not only because of tech decline, but mostly because they bought huge amount of agency MBS at the generational high prices (during low rates), thus tying lot of capital for a very long time. If they were to sell those MBS today to get cash, bank’s equity would be wiped out Source: https://twitter.com/ragingventures/status/161582608803847373...
Earlier quoted context omitted.
Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?
>> Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in? As they say themselves, Category IV organizations, like SVBFG, are subject to supervisory stress tests conducted by the Fed "every other year." So you can get Stress Test results, but they will be stale. See Page 13 here: https://www.svb.com/globalassets/library/uploadedfiles/conte...…
https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...
I am not an investment or banking guy. And I’m not sure what category of activity this type of lending falls into. But wouldn’t it make more sense to write off the investment losses rather than throw more bags of money on the burning pile?
They're a bank. They have capital ratios to maintain. If the underlying assets (the assets backing the bank), move in value, then they need to provide extra capital from somewhere. This is them securing that capital base that they need due to the change in value of their current assets (largely US treasuries and mortgage back securities- this isn't really about the value of their tech portfolio).
Earlier quoted context omitted.
I think the real start of it will be after the GPT hype dies down. Everyone is racing to build/add AI things and the hype around that is preventing a freefall in the tech sector, IMO.
A bunch of overpriced tech firms isn't the kind of systemic problem that massive fraud in the 'AAA' mortgage sector was. It is, of course theoretically possible that some crooks repackaged and sold a bunch of equities as a 'safe' investment instrument to a bunch of morons, on a truly gargantuan scale. But if that has happened, nobody has heard about it.
Spacs have entered the chat
If I'm not mistaken, SVB has a huge venture debt portfolio that presumably includes warrants for companies whose valuations have plummeted. Does anyone know what portion of SVB's market cap is accounted for by these warrants? My guess is that many startups are withdrawing their deposits due to this news. I wonder if SVB can cope with a significant bank run.
since there are legions of bureaucrats whose entire professional life revolves around this, and there are legal stress-tests to measure this, and the banking and finance world has a huge whisper network.. maybe one-off speculation is obviously pointless and also maybe manipulative in some way?