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

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

#231

Post by hnfong »

HDThoreaun wrote: post #145
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 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.

In 2022. Up till the end of 2021, they kept saying inflation is "transitory". According to reports SVB bought a bunch of 10 year MBS in 2021.

SVB is obviously incompetent in believing in that Fed BS about transitory inflation -- wait but should they have believed in the rate hikes as well then?

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

#234

Post by cameldrv »

I think that this should turn out OK for depositors, hopefully soon. It seems that while the bank essentially has no equity if you mark to market, assets and liabilities are about equal. That means that they have enough money to pay depositors, but no reserve.

Given this, it's pretty attractive for a buyer. The buyer just needs to provide some capital to bring the reserves back into compliance.

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

#235

Post by berberous »

hnfong wrote: post #210
chollida1 wrote: post #183

Earlier quoted context omitted.

> The story seems to be that SV put all their deposits into 10 y bonds in 2021. Not sure who told you that, its incorrect. https://twitter.com/jamiequint/status/1633956163565002752?s=...

Seems a bit pedantic, MBS are basically bonds. The important part is the 10 year term.

It says 10+. I wonder what the average duration is.

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

#236

Post by listenallyall »

jedberg wrote: post #167
batmaniam wrote: post #155

What made SVB so attractive to startup founders? All the news reports I'm reading is saying that's their target customer. What advantages did SVB provide that other brand named bank didn't? Wouldn't it have been safer to put your startup's money in Bank of America, or JP Morgan, etc? I've never heard of SVB until the crash.

It was a lot of little things, but the main thing was that the understood startups so they would take into account your funding as well as your LOIs when making loan decisions, whereas most banks would not because they didn't understand them. That made it easier to get free cash when all of your startup's assets were basically owed money.

Or maybe the conservative old guard banks do understand, that startups without reliable cash flow, or on a growth-at-all-costs trajectory, are poor lending prospects. Seems whatever you claim that SVB "understood" led to its demise.

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

#237

Post by sorry_outta_gas »

makestuff wrote: post #228
SteveNuts wrote: post #201

Earlier quoted context omitted.

Not to the amount that most startups would have in their account

The startup I worked for used SVB. While I am unsure if all of their money was with SVB, it was company that had raised over 100m. I wonder if there will be issues with paychecks going out. Surely they diversified their accounts, but who knows.

[dead]

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

#238

Post by dahdum »

rootusrootus wrote: post #169
CydeWeys wrote: post #158

Earlier quoted context omitted.

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.

It's great, but it punishes the smaller banks while leaving the 'too big to fail' conglomerates in a position to be bailed out by taxpayers. We need to chop down any bank that poses a systemic risk so that it's small enough for the FDIC to handle.

TARP arguably turned a profit, so a bailout isn't necessarily bad. Might be better to let them fly high, get burned, and then let investors get wiped out while keeping customers whole. What we don't want is socialized losses, but distressed investment gains are a-ok with me.

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

#239

Post by dh2022 »

rich_sasha wrote: post #87

One 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…

Well, treasurers looking to park their cash and use US Gov debt guarantees usually buy shorter dated treasury bills - around 3-6 months. This matches their duration - chances are they will need the money quickly. In general treasurers match the duration of liabilities (when they will need the money) with the duration of assets (bonds).

If SVB really parked most of the cash in 10-year old treasury bonds that sounds.... questionable...

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