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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.
I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.
Indeed - it really began in late November, 2021. We hit a peak then and we also started to see some of the highest flyers begin to taper off and come down. The not as darling names were first. By early 2022 we started to see the entire segment draw down and it accelerated into Q2 of 2022. The flimsiest startups that weren't generating revenue yet were the canary as they were the first to start doing layoffs in May, J…
(I understand that Big tech is also doing layoffs because they massively overhirred during the pandemic)
Earlier quoted context omitted.
I'm spitballing here but it could be an opportunity for another bank to expand into a new market and acquire new customers. SVB has a unique position in the market, as they specialize in catering to the financial needs of industries such as technology, life science, healthcare, private equity, and venture capital.
Spot on, a ton of Directors / MDs are rushing to push this in front of their leadership (whoever 'leads' the acquisition will no doubt burnish their personal brand / career path /s). That said, if I'm an SVB customer...do I want to stick with the bank that's had this issue? Even so, would I want to bank with the acquirer?
Seems like the reason for acquiring this risking market would be to transition your the clients who succeed into the parent bank for their future banking needs. Sure you will get a bunch of small/medium sized clients for a mega bank, but they are just fishing for a couple giant paydays and want the next Apple or Amazon to start banking with them.
Earlier quoted context omitted.
> FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow. is there precedent for that?
The current limit is the result of such action in 2008: https://archive.fdic.gov/view/fdic/3388
Very 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.
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.
The logic is as follows: This is a liquidity problem (so far). This isn’t because loans went bad or anything, just that they needed cash quick and had to fire sale things (the things they took losses on were US Treasuries. Mostly.) They still have a big loan book that is probably worth more than their liabilities. A large player with liquidity could get those loan assets on the cheap if they agree to provide the shor…
How is that known currently? Edit: As opposed to a solvency problem?
Very 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.
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.
why should the taxpayers be put on the hook for that?
One reason that it was done in the past was because it saves the taxpayers money by bailing out a single meltdown rather than something systemic.
But you should recognize: The taxpayers back up the FDIC, but singleton meltdowns are paid out of the insurance fund, which is paid into by the banks themselves. As long as that fund does not get exhausted (ie a systemic meltdown) it doesn't cost the taxpayers directly.