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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#631

Post by neural_thing »

danielmarkbruce wrote: post #549
neural_thing wrote: post #468

Earlier quoted context omitted.

Or just use a Too Big To Fail bank. The government will never allow JPM/WF/BofA to go under, that'd wreck the economy.

Maybe. Smart people assumed Lehman wouldn't be left to sink. It was. And it caused a lot of problems. And the people who realized afterward that it was a mistake are retiring right about now.

Lehman had assets of ~4% of GDP and was a pure investment bank.

JPM has assets of ~15% of GDP and has 66 million household clients.

I'll take the odds that it's too big to fail.

Re: Bank run on Silicon Valley Bank

#632

Post by pishpash »

pgwhalen wrote: post #467
pishpash wrote: post #397

Earlier quoted context omitted.

Why would customers be pulling deposits unless you are offering lower than market interest rate? If T-bills are 3%, they can pay depositors 2% now and so whatever condition kept the customers there at -1% risk premium would still keep them there. No run on the bank. And given they are T-bills, duration is minimal, so $1000 might be worth $990 even before coupons. Whoop-de-doo! There would only be a problem if the ban…

This is incorrect, as we learned from Silvergate. Customers pulled their deposits for reasons unrelated to the bank (in Silvergate’s case, the customers of the crypto exchanges wanted all their money back, so the crypto exchanges had to withdraw their deposits from Silvergate). As Levine put it, it’s not an asset problem, it’s a liability problem.

It is not unrelated to the bank. They took concentrated callable funding that somehow was not matched to the liquidity of their assets. They took a risk.

Re: Bank run on Silicon Valley Bank

#633

Post by danielmarkbruce »

UncleOxidant wrote: post #577
kolbe wrote: post #522

Earlier quoted context omitted.

I have no clue about the actual internals at SVB, but an example of why: say a bank has $200bn in assets that they put into mortgage backed securities yielding 1.5% for 10 years. Lets say that means they paid $86 per $100 bond. Now rates rise to 6%, so they're worth $60 per bond. They just lost 30% of $200bn. If their net capital had been +$10bn before this, it's now -$50bn. So, if every single person demanded their…

But why did they pile into bonds all at once? Wouldn't you normally do the equivalent to Dollar Cost Averaging? Did they have no other choice but to park a huge chunk of money into various government bonds at exactly the wrong time?

They didn't get it all in at exactly the wrong time, but it does appear they lost something like $10-15 bill on around $80-$90 bill or so of securities. That's a lot of money given the entire shareholders equity is around $16 bill.

They are public, you can see their filings at the SEC. I'd guess some hedge fund paying attention noticed this weeks ago and just made a killing.

Re: Bank run on Silicon Valley Bank

#634

Post by dehrmann »

rippercushions wrote: post #15

From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.

It's like the prisoner's dilemma.

Re: Bank run on Silicon Valley Bank

#635

Post by danielmarkbruce »

willmadden wrote: post #514
cj wrote: post #400

I just received an email from one of our investors, sent to all portfolio companies, advising everyone to transfer all of their money out of SVB at 8:30am tomorrow morning. Investment/VC funds are doing the same (we’re talking many, many billions of deposits lost in a span of a few days). There is a chance SVB will freeze assets while they deal w liquidity crunch which may impact startup ability to pay bills, pay sal…

Telling everyone to withdraw their money at exactly the same time is a great way to cause more damage to those startups by creating an actual bank run. Do you now if that "investor" is short Silicon Valley Bank's stock, took out long puts, or has other conflicts of interest? Because if so, they just committed a felony. That "investor" had better hope one of the recipients doesn't forward the email to the SEC. Are you…

It's a pretty standard example of a prisoners dilemma. Each VC telling their companies to pull is the right thing for them in isolation.

Re: Bank run on Silicon Valley Bank

#636

Post by refurb »

dools wrote: post #626
refurb wrote: post #607

Earlier quoted context omitted.

Not that shocking. Both the UK and US had suffered under economic policies that didnt deliver. Not shocking the voters wanted something different.

Didn't deliver!? That's an absurd claim.

Not really. Carter didnt talk about the “general malaise” just for fun.

The economy was pretty much in the dumpster for most of the 70’s in both countries.

Not unusual for the old guard to be turfed out when that happens.

Re: Bank run on Silicon Valley Bank

#637

Post by danielmarkbruce »

tito wrote: post #357

SVB is our bank, I got in touch with a member of the senior team there and got the following message to share. (My own interpretation is I'm comfortable and I'm not planning to pursue it further at the moment): As you know, we are limited in what we can share until the transaction formally closes next week but in the meantime I’m attaching concise information on the strength of our business, based on our recent mid-q…

You can pull up their financials from the SEC. They have gotten themselves into quite a pickle. They dusted between 10 and 15 bill on long term bonds. There is a decent chance that will sink them given everyone is pulling their money.

Re: Bank run on Silicon Valley Bank

#638

Post by acchow »

malermeister wrote: post #520
pera wrote: post #52

Earlier quoted context omitted.

Yeah sounds like textbook bank run or cryptocurrency exchange collapse, it's bizarre that this kind of things keep happening every few years.

Is it bizzarre... or just a core feature of capitalism?

Core tradeoff. The feature you get from this is easier and cheaper long term loans

Re: Bank run on Silicon Valley Bank

#639

Post by [deleted] »

kolbe wrote: post #522
tootie wrote: post #497

Earlier quoted context omitted.

But why? Because everyone else is doing it? Is this a power play by another bank? Is there an actual structural problem at SVB?

I have no clue about the actual internals at SVB, but an example of why: say a bank has $200bn in assets that they put into mortgage backed securities yielding 1.5% for 10 years. Lets say that means they paid $86 per $100 bond. Now rates rise to 6%, so they're worth $60 per bond. They just lost 30% of $200bn. If their net capital had been +$10bn before this, it's now -$50bn. So, if every single person demanded their…

[deleted]

Re: Bank run on Silicon Valley Bank

#640

Post by humaniania »

FanaHOVA wrote: post #553
cj wrote: post #400

I just received an email from one of our investors, sent to all portfolio companies, advising everyone to transfer all of their money out of SVB at 8:30am tomorrow morning. Investment/VC funds are doing the same (we’re talking many, many billions of deposits lost in a span of a few days). There is a chance SVB will freeze assets while they deal w liquidity crunch which may impact startup ability to pay bills, pay sal…

I will not be giving advice or opinions, but please don’t post anecdotes as facts to generate panic. This isn’t what most VC funds are doing.

Wouldn't they be FDIC insured?
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