The FDIC / Fed are currently on-site working on SVB resolution.
what's your source?
Bloomberg / the real world
SVB in talks to sell itself after attempts to raise capital fail
211–220 of 310 posts
Re: SVB in talks to sell itself after attempts to raise capital fail
#212Earlier quoted context omitted.
and then makes the next failure even more likely - companies will take on more and more risks if they know they will be bailed out. I for one am tired of privatizing the profits, and socializing the losses.
The entire financial system is built on trust and stability. When a bank is rescued its shareholders suffer (by selling at a loss, nationalization, whatever). It’s not a positive outcome for them, but rescuing a bank has big implications for systematic stability.
Taking a vitamin C pill and avoiding the doctor saves money fighting cancer. What’s your point?
Re: SVB in talks to sell itself after attempts to raise capital fail
#213Very curious to understand how this works. For all intents and purposes, if the bank was unable to raise capital, it is at least nominally bankrupt. What value would another entity find in a bank that has failed? To be fair, the government may find value in shoring this bank up. That's a different story. The bank will be essentially nationalized at that point.
There's a difference between being bankrupt and being worthless. Bankrupt means you can't pay the bills you owe today. You can have enough assets to meet the obligations but be unable to turn them into cash fast enough. Another company with cash can buy the company, use their cash on hand to pay the bills, and then sell the assets in less of a panic. If the return on those assets is worth more than the cost to buy the company and cash outlay then buying company makes money.
Re: SVB in talks to sell itself after attempts to raise capital fail
#214Earlier quoted context omitted.
I’d argue preventing a total financial collapse in 2020 is more important than SVB and some startups failing.
Yup. FDIC insurance exists for this reason -- you can let a bank that made bad decisions fail without causing a chain reaction through the economy.
Yeah, although SVB's failure demonstrates a major shortcoming with deposit insurance (in its role as a deterrent for bank runs). If you have more than $250k in assets, or are worried about short-term liquidity, you're still incentivized to run from the bank.
Re: SVB in talks to sell itself after attempts to raise capital fail
#215One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…
The issue is that a startup needs that capital right now. They cannot wait for bankruptcy courts to redistribute.
Exactly. These startups know that they don't have a lot of runway to wait so they rushing to the exit.
Re: SVB in talks to sell itself after attempts to raise capital fail
#216Earlier quoted context omitted.
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.
> I’m expecting receivership before Monday.
It’s done.
Re: SVB in talks to sell itself after attempts to raise capital fail
#217In 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 Fed gave plenty of warning that they would raise rates. Preventing 10% unemployment was absolutely worth the covid helicopter money. SVB is obviously incompetent just from seeing how they've handled the last couple days and should've realized that their long term bonds would get blown up in the post pandemic monetary environment.
> The Fed gave plenty of warning that they would raise rates.
The market bet against the fed, assuming fed was all talk no action. Wrong move.
Most of the market is still anticipating a fed pivot / fed put and / or tax-payer bailout. Time will tell.
Re: SVB in talks to sell itself after attempts to raise capital fail
#218Earlier quoted context omitted.
> That's a lot but also means depositors get 80-85% of their money back That's not what happens. Let's say 100 clients each deposited $1 in the bank, and the bank loses $20, so only has $80 to pay out when liquidated. Let's say half (50) depositors withdraw their funds early, they each get $1 back. So now the bank has $30 in assets and has to pay 50 people. Suppose 20 people demand withdrawals, and the bank pays $20…
This isn't bitcoin world though, deposits are FDIC insured to stop this
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Re: SVB in talks to sell itself after attempts to raise capital fail
#219Startups with good VC and investor relationships will most likely make payroll and pay bills through short term loans from the investors until they can access their funds. But it is a good lesson in money management…something about eggs and just one basket?
Here’s somethingI don’t understand. Say you raise $100m funding round. Investors just give you the entire amount, in cash? And companies just put that entire cash amount in a bank?
It seems like it would be better for VCs to keep the money, invest it (in, I don’t know, the S&P500), and then pay out to the companies on a monthly basis or some other terms.
I can’t fathom how there are hundreds of companies, each with 10s of millions of dollars, just sitting in a zero interest bank account?
Re: SVB in talks to sell itself after attempts to raise capital fail
#220One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…
> That's a lot but also means depositors get 80-85% of their money back That's not what happens. Let's say 100 clients each deposited $1 in the bank, and the bank loses $20, so only has $80 to pay out when liquidated. Let's say half (50) depositors withdraw their funds early, they each get $1 back. So now the bank has $30 in assets and has to pay 50 people. Suppose 20 people demand withdrawals, and the bank pays $20…
There are certain clawback provisions in such cases, however I don't know extend of them.