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Silicon Valley Bank's board of directors and management failed

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Re: Silicon Valley Bank's board of directors and management failed

#11

Post by eugene2010 »

JumpCrisscross wrote: post #4
mistrial9 wrote: post #3

the response of the oversight committee was to place blame on local management and call to increase oversight. What about the endless oversight so famously wrapped around every bank right now? Is it true that you cannot in reality start a Bank in the USA without an Oracle license? due to the vast and arcane reporting requirements already in place for decades? Does this lead to a situation where the innovators are act…

> response of the oversight committee was to place blame on local management The Fed's review found "four key takeaways on the causes of the bank's failure." The first fingers management. Nos. 2 to 4 criticise supervisors. > What about the endless oversight so famously wrapped around every bank right now SVB was not subject to liquidity coverage ratios (LCRs), a regulatory rollback pushed through in 2017 [1]. Had SVB…

There is a remarkable paragraph in the report:

"On March 9, SVB lost over $40 billion in deposits, and SVBFG management expected to lose over $100 billion more on March 10. This deposit outflow was remarkable in terms of scale and scope and represented roughly 85 percent of the bank’s deposit base. By comparison, estimates suggest that the failure of Wachovia in 2008 included about $10 billion in outflows over 8 days, while the failure of Washington Mutual in 2008 included $19 billion over 16 days. In response to these actual and expected deposit outflows, SVB failed on March 10, 2023, which in turn led to the later bankruptcy of SVBFG."

Re: Silicon Valley Bank's board of directors and management failed

#12

Post by JumpCrisscross »

eugene2010 wrote: post #11
JumpCrisscross wrote: post #4

Earlier quoted context omitted.

> response of the oversight committee was to place blame on local management The Fed's review found "four key takeaways on the causes of the bank's failure." The first fingers management. Nos. 2 to 4 criticise supervisors. > What about the endless oversight so famously wrapped around every bank right now SVB was not subject to liquidity coverage ratios (LCRs), a regulatory rollback pushed through in 2017 [1]. Had SVB…

There is a remarkable paragraph in the report: "On March 9, SVB lost over $40 billion in deposits, and SVBFG management expected to lose over $100 billion more on March 10. This deposit outflow was remarkable in terms of scale and scope and represented roughly 85 percent of the bank’s deposit base. By comparison, estimates suggest that the failure of Wachovia in 2008 included about $10 billion in outflows over 8 days…

> On March 9, SVB lost over $40 billion in deposits, and SVBFG management expected to lose over $100 billion more on March 10.

March 9th and 10th were the Thursday and Friday before SVB collapsed.

On March 8th, Goldman Sachs advised SVB to go public with non-binding stock commitments [1][2]. The stock dropped, the commitments vanished, and then it plummeted. Because SVB was pretending its 70¢ bonds were worth $1, it had clearly lost the faith of big investors, and it couldn't go to the Fed; it was illiquid and insolvent.

[1] https://www.ft.com/content/7e7fdddb-724c-42fd-98ee-5d7248d53...

[2] https://ir.svb.com/news-and-research/news/news-details/2023/...

Re: Silicon Valley Bank's board of directors and management failed

#13

Post by JumpCrisscross »

TechBro8615 wrote: post #7
toomuchtodo wrote: post #6

Earlier quoted context omitted.

You can. If you're in the US, sign up for a brokerage and park your uninvested cash in a government securities (primarily US treasuries) invested money market fund [1]. You're now backed by the Federal Reserve instead of FDIC and their oversight of fractional reserve banking [2] This is a nice hack around the fact that the Fed won't approve a Narrow Bank [3]. [1] https://www.investor.gov/introduction-investing/invest…

I'm talking about cryptocurrency.

> I'm talking about cryptocurrency

What restricts people from putting their money in crypto?

Re: Silicon Valley Bank's board of directors and management failed

#14

Post by TechBro8615 »

JumpCrisscross wrote: post #13
TechBro8615 wrote: post #7

Earlier quoted context omitted.

I'm talking about cryptocurrency.

> I'm talking about cryptocurrency What restricts people from putting their money in crypto?

It's being increasingly regulated and exchanges are being shut down.

Re: Silicon Valley Bank's board of directors and management failed

#15

Post by 0zemp2c »

Amusing that people are fleeing to BofA, JPM, Wells Fargo as if they are safe

How many DOA car loans is BofA sitting on? How many 2.7% mortgages did WF underwrite? How much dead commercial RE is backed by JPM?

And they ALL bought US Treasuries yielding nothing

Go look at top banks by % of uninsured deposits...I believe First Republic is #10, way down the list

SVB was only guilty of being small

When landlords really start bailing on commercial RE, you will see a major bank implode, only a matter of time. Or, the car loan bubble pops first.

Re: Silicon Valley Bank's board of directors and management failed

#16

Post by mrguyorama »

0zemp2c wrote: post #15

Amusing that people are fleeing to BofA, JPM, Wells Fargo as if they are safe How many DOA car loans is BofA sitting on? How many 2.7% mortgages did WF underwrite? How much dead commercial RE is backed by JPM? And they ALL bought US Treasuries yielding nothing Go look at top banks by % of uninsured deposits...I believe First Republic is #10, way down the list SVB was only guilty of being small When landlords really s…

>SVB was only guilty of being small

No, SVB was guilty of having extremely coordinated risk: All their depositors had basically identical risk profiles, being cash rich, profit seeking VC funded companies that could easily move that cash around and had the same cohort of friends and networking buddies that whatever one did, the others would be sure to follow.

They are also guilty of being straight up negligent with regards to hedging their risks in terms of interest rates changing, and didn't even diversify their treasury portfolio. It's insanely stupid, like first year econ level stuff. Most people understand the downside risk to locking up your money for several years the first time they learn about CDs.

Re: Silicon Valley Bank's board of directors and management failed

#17

Post by dilyevsky »

0zemp2c wrote: post #15

Amusing that people are fleeing to BofA, JPM, Wells Fargo as if they are safe How many DOA car loans is BofA sitting on? How many 2.7% mortgages did WF underwrite? How much dead commercial RE is backed by JPM? And they ALL bought US Treasuries yielding nothing Go look at top banks by % of uninsured deposits...I believe First Republic is #10, way down the list SVB was only guilty of being small When landlords really s…

They are “safe” bc whatever happens they will be backstopped by the government not bc people expect some amazing governance there. Also these banks are stress tested regularly

Re: Silicon Valley Bank's board of directors and management failed

#18

Post by rahimnathwani »

I want Ben Mezrich to write a book about this.

From the linked summary:

1. Silicon Valley Bank's board of directors and management failed to manage their risks;

2. Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity;

3. When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough; and

4. The Board's tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.

Re: Silicon Valley Bank's board of directors and management failed

#19

Post by nborwankar »

0zemp2c wrote: post #15

Amusing that people are fleeing to BofA, JPM, Wells Fargo as if they are safe How many DOA car loans is BofA sitting on? How many 2.7% mortgages did WF underwrite? How much dead commercial RE is backed by JPM? And they ALL bought US Treasuries yielding nothing Go look at top banks by % of uninsured deposits...I believe First Republic is #10, way down the list SVB was only guilty of being small When landlords really s…

Little appreciated facts that IMHO were the fundamental drivers

a) CEO of SVB was on the Board of Govs of SF Fed Reserve, the entity that is supposed to supervise and regulate banks b) He had earlier lobbied Congress to relax stress test requirements so the SVB would be in the exempt group.

So when you have a bank regulator (SF Fed board member) lobbying Congress to deregulate his own bank (so much to unpack here) does the rest really matter? It would only be a matter of time before the proverbial shtuff hit the fan.

Re: Silicon Valley Bank's board of directors and management failed

#20

Post by landemva »

TechBro8615 wrote: post #14
JumpCrisscross wrote: post #13

Earlier quoted context omitted.

> I'm talking about cryptocurrency What restricts people from putting their money in crypto?

It's being increasingly regulated and exchanges are being shut down.

And it is peer-to-peer, so buy it from a friend.
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