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There have been 562 bank failures since 2000

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Re: There have been 562 bank failures since 2000

#121

Post by Scoundreller »

MrFoof wrote: post #112
vkou wrote: post #80

Earlier quoted context omitted.

> But the real question is, of those $1 trillion in assets, how much did people actually lose, and how much did either the FDIC or a taking-over bank cover? Anybody have that number? Zero. Since the FDIC was founded, no depositor has lost a dollar of deposits in an FDIC-insured institution. There are some non-deposit things that, if you squinted, looked a bit like deposits, and people have lost out on those.

I believe the reason you are being downvoted is over a technicality. It is correct that no depositor has ever lost a penny of FDIC- insured deposits. This is excellent for the average person, as the average normally-employed person isn’t the one worrying about losing large piles of money. Uninsured deposits is an entirely different ball of wax. In the case of IndyMac for example, of the ~$19B in deposits, roughly ~$1…

From what I can find, the uninsured IndyMac depositors lost 50% of the uninsured amount. They got that 50% FDIC Advanced Dividend and I can't find any records of anything further beyond that initial 50%.

Re: There have been 562 bank failures since 2000

#122

Post by Scoundreller »

IndyMac's sale to OneWest was interesting, as OneWest was newly formed for the purpose of acquiring the leftovers of IndyMac.

> On March 19, 2009, a seven-member investor group, IMB Holdco, led by Steven Mnuchin—which included billionaire Christopher Flowers, John Paulson, Michael Dell, and George Soros—purchased Independent National Mortgage Corporation (IndyMac Bank) of Pasadena, California for $13.65 billion from the FDIC and created OneWest from the remains of IndyMac, which then had 33 branches and $32 billion in assets

> as of December 2014, the FDIC had already paid over $1 billion to OneWest Bank under the shared loss agreements it secured from the FDIC when it purchased IndyMac and La Jolla Banks, and that the FDIC expected it would pay another $1.4 billion.

https://en.wikipedia.org/wiki/OneWest_Bank

Re: There have been 562 bank failures since 2000

#123

Post by jefftk »

swatcoder wrote: post #109
rtkwe wrote: post #103

Earlier quoted context omitted.

Isn't the thing they got caught out on mainly TBills though? So the metaphor falls apart again because they have a practically guaranteed value just with a long time horizon.

The value at maturity doesn’t matter. It’s not like they were going to sit on them for the whole term anyway. They’re just an asset that’s usually fairly stable and that usually stays that way over a certain window, and so they’re actively traded and have a market value based on those characteristics. In their case, the market value of the TBills that they purchased slipped too much. Because that’s just paper value a…

> It’s not like they were going to sit on them for the whole term anyway

Really? Most of the reporting has described them as having a crisis in part because lots of treasuries that they had classified as "held to maturity" needed to be reclassified as "available to sell" which required marking them to market.

Re: There have been 562 bank failures since 2000

#124

Post by swatcoder »

jefftk wrote: post #123
swatcoder wrote: post #109

Earlier quoted context omitted.

The value at maturity doesn’t matter. It’s not like they were going to sit on them for the whole term anyway. They’re just an asset that’s usually fairly stable and that usually stays that way over a certain window, and so they’re actively traded and have a market value based on those characteristics. In their case, the market value of the TBills that they purchased slipped too much. Because that’s just paper value a…

> It’s not like they were going to sit on them for the whole term anyway Really? Most of the reporting has described them as having a crisis in part because lots of treasuries that they had classified as "held to maturity" needed to be reclassified as "available to sell" which required marking them to market.

That’s just accounting. They reclassified now because they were having a crisis, but of course they would have reclassified later when it was advantageous.

They weren’t trying to tie up their funds in extremely low-yield assets for the next decade. They were parking it somewhere that made their books work until they could move it somewhere else.

Re: There have been 562 bank failures since 2000

#126

Post by oarabbus_ »

vikramkr wrote: post #86
greenthrow wrote: post #59

Earlier quoted context omitted.

Your assertion about SVB does not match up with all the information out there, which indicates they do have a shortfall of at least $1.5B. I don't know why HN seems to have locked into this meme that SVB does not have a shortfall. It does not reflect reality.

The shortfall only occurred because they had to sell their assets before maturity, and the value of those assets have decreased. If they were able to hold them to maturity there wouldn't have been a problem - they still pay out the same amount of money at the end - but right now people are willing to pay less for future money than they used to. So if they spend 90 bucks on a bond that matures in 5 years and pays 100…

This seems like a rather exaggerated framing to absolve SVB of any responsibility for what happened, and is not accurate.

SVB overleveraged into long-term bonds in 2021 when interest rates were at an all time low. A financial institution/bank normally would hold a mix of maturities in their fixed-income holdings - 1 year, 3 year, 10 year - to maintain liquidity and reduce insolvency risk.

"If they were able to hold them to maturity there wouldn't have been a problem" does not make any sense - it's as if your company told you just wait an extra month for your paycheck, there won't be a problem. And then you told the mortgage lender to forget about this month's payment - if they just wait until next month, there won't be a problem.

Not to mention they had well over a year's advance notice to do _something_ because they knew exactly by how much their assets would decline in value. In March 2022 the Fed announced the decision to raise rates and continuing to do into 2023. By Sept they had announced the terminal rates would be over 4%, and have continued to openly increase that target since then.

Bond prices moving inversely to interest rates is Econ 101; anyone (at SVB) could've quite literally calculated their ~$25B 10-year 1.8% notes would drop by _at least_ $5B in 2023 before the terminal rate is even reached.

The run was the result of a clearly impending liquidity issue due to lack of near-maturation assets, not the other way around.

Re: There have been 562 bank failures since 2000

#127

Post by paulddraper »

Scoundreller wrote: post #119
SilverBirch wrote: post #88

One thing that's kind of weird here is the peverse incentives. There are quite a lot of people going around insisting that the government has to step in and bail out the large depositors of SVB becuase if you don't, well... then no small bank is safe! There should be a run on every bank! Which is kind of... you know. Scummmy. If your money is locked up in SVB its certainly convenient if the Fed feels it has to step i…

What I'd like to know is what services SVB offered to startups that other banks wouldn't/couldn't/didn't. And if other banks wouldn't/couldn't/didn't, if there was a valid reason for it. I can understand legacy banks not wanting to touch crypto, but what about the rest? Or was a lot of SVB adoption just due to name recognition in the startup ecosystem?

SVB made revenue based debt financing super easy.

See Lighter Capital.

Whether that was smart or dumb, idk

Re: There have been 562 bank failures since 2000

#128

Post by SkyPuncher »

AnimalMuppet wrote: post #6

So I looked it up. As of September 30, 2022, there are 4,746 commercial banks in the US. That's 11.8% failure in 23 years. That includes 2008. Those banks total $23.6 trillion in assets. Looking at the tweet cited by ezekg, I'd eyeball that as about $1 trillion in assets in the banks that have failed in the last 23 years. So, 11.8% by number of banks, but only 4.2% by assets. That's still more than I thought. But the…

Most of those are probably small, "startup" banks.

I lived in a small city for a few years. Annually, I saw the cycle of failed bank buildings having a new banks name put up, only to fail.

Re: There have been 562 bank failures since 2000

#129

Post by [deleted] »

vikramkr wrote: post #86
greenthrow wrote: post #59

Earlier quoted context omitted.

Your assertion about SVB does not match up with all the information out there, which indicates they do have a shortfall of at least $1.5B. I don't know why HN seems to have locked into this meme that SVB does not have a shortfall. It does not reflect reality.

The shortfall only occurred because they had to sell their assets before maturity, and the value of those assets have decreased. If they were able to hold them to maturity there wouldn't have been a problem - they still pay out the same amount of money at the end - but right now people are willing to pay less for future money than they used to. So if they spend 90 bucks on a bond that matures in 5 years and pays 100…

[deleted]
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