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SVB in talks to sell itself after attempts to raise capital fail

cnbc.com

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Re: SVB in talks to sell itself after attempts to raise capital fail

#131

Post by lvl102 »

ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

People will point to duration mismatch but Fed raised too fast without proper warnings.

Re: SVB in talks to sell itself after attempts to raise capital fail

#132

Post by rcme »

rich_sasha wrote: post #103
rcme wrote: post #95

Earlier quoted context omitted.

No, failing is failing. It means the bank is insolvent. That doesn't mean the bank is worthless, but it doesn't have enough cash to meet its obligations. And yes, depositors will likely get some of their money back, but only after a long battle. Also, the bonds held by the bank are likely off the run. The market for these is not large.

Yes, insolvent, but the money doesn't go poof. I never traded cash bonds but would struggle to imagine it would be hard to liquidate. Sure, over a week, but surely SVB can't be a major bondholder.

These types of bonds are what caused the pound's dramatic fall a few months ago. There isn't a large market for these. If you need to sell a lot at once, you're in trouble. The treasury recently explored stepping in to provide liquidity for off-the-run bonds: https://www.reuters.com/markets/us/yellen-says-taking-steps-...

Re: SVB in talks to sell itself after attempts to raise capital fail

#133

Post by kolbe »

ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

> of course shouldn't have said those words yesterday.

They were going to have to say something sooner-or-later. I think the biggest part is that before they could raise capital, they needed to be honest about their books or risk securities fraud charges.

Re: SVB in talks to sell itself after attempts to raise capital fail

#134

Post by nemo44x »

lazide wrote: post #90
endisneigh wrote: post #32

Earlier quoted context omitted.

most of the last 10 years had near 0% interest rate

It’s really mind boggling that SVB put so much money into bonds with long maturations at essentially zero or negative interest rates. I wonder how many others did similar?

It's not like they wanted to. Loads of money was coming in from funded companies but the demand for loans was low. So they had to put the money somewhere and banks (not just SVB) began putting record amounts into treasuries. At least they got something from them so they could pay interest on things and keep the lights on.

The government printed a ton of money and demand for loans crashed after the pandemic started. People even paid loans down. Many companies weren't borrowing much because of supply chain issues - why borrow if you can't use it? I'm not blaming the government - unemployment went through the roof for awhile and they had to protect people. But this is a side effect that no one really saw. That the treasuries would lose a lot of value because of super rapid interest rate increases while companies start eating away at their runway because no new investment is coming.

It all makes sense today but literally no one saw this coming a couple weeks ago.

Re: SVB in talks to sell itself after attempts to raise capital fail

#135

Post by eqmvii »

ttul wrote: post #83
yellow_postit wrote: post #69

Will all the private assets that have avoided markdowns since the downturn be forced to get re-valued when a new entity buys SVB? They’d have to I assume to value their new books. If yes that’s a lot of valuation haircuts.

Any buyer would do their own diligence and assign their own estimated value to the assets. I believe there will be a healthy competition for SVB despite their current problems. Many other banks have long wished to establish a presence in the tech world, where SVB has for a very long time been a leader.

CNBC has been reporting all morning that their deposits are evaporating too fast for a sale. I’m expecting receivership before Monday.

Re: SVB in talks to sell itself after attempts to raise capital fail

#136

Post by huevosabio »

ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

The pandemic was going to shake the boat regardless. It was impossible to right-size the stimulus, and in hindsight we over did it, but given the information we had then I think we did the right move, at least with the 2020 stimulus. The 2021 stimulus is much more shady given that then we already had a vaccine deployed and were in a trajectory to recovery.

Re: SVB in talks to sell itself after attempts to raise capital fail

#138

Post by toast0 »

jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

FDIC is probably involved with this sale already. But even if not, they likely will be soon, might as well start dilligence and figure out what your price would be.

Re: SVB in talks to sell itself after attempts to raise capital fail

#139

Post by dragontamer »

lvl102 wrote: post #131
ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

People will point to duration mismatch but Fed raised too fast without proper warnings.

Inflation is still 6% YoY.

Fed hasn't raised fast enough and is looking at +.50% next meeting.

Re: SVB in talks to sell itself after attempts to raise capital fail

#140

Post by prottog »

ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

It seems like we've had just as many financial crises before the advent of the Federal Reserve in 1913 than after, so it remains unclear to me the benefits of having it around, particularly as its nominal independence from the political process is eroding.

Sure, keep the lender of last resort; but maybe let the market determine interest rates through money markets, with incentive-control through judicious laws, instead of by fiat.

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