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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.
I can't count how many times I've read similar comments on HN in the last 10yrs
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Because they sold long term bonds for a huge loss so they could create liquidity.
I meant as opposed to a solvency problem (edited above.)
What we know happened is that they sold US treasuries for less than they paid. They did this because people withdrew money faster than they expected.
If that has an impact on their loan book (mostly loans to investors), at the very least, that line of connection has not yet been drawn.
[0]https://s201.q4cdn.com/589201576/files/doc_financials/2022/q...
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Its obviously risky. A year ago it had a market cap of $35B, if you can buy for next to nothing it could be worth it. Depends a lot if there is a big hole in the accounts and if the old customers come back.
At one point Peloton had a market cap of $60B; was that 35B real? At this point, does SVB have positive brand value anymore, or are they negative?
SVB has positive brand value and (much more importantly) positive book value. At $16bn market cap EOD two days ago, they are also a relative minnow in the banking world.
This slip-up is tarnishing to their management, but the main side-effect is that it makes them a prime acquisition target.
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.
How so?
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The current limit is the result of such action in 2008: https://archive.fdic.gov/view/fdic/3388
They went beyond it for several banks: To my knowledge, nobody lost money in the dozens of banks that the FDIC closed in the 2008 meltdown, despite several depositors being beyond the FDIC limits.
If it's only a handful, it's in the gov't interest to ensure that businesses and people don't loose their savings.
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.
Playing out this scenario: Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail. A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer…
So, in that light, losing these jobs would be like throwing away the kid with the bathwater.
I personally don’t agree with all the premises and conclusions I’ve enumerated above, but imo that’s how a mainstream economist (like one working for the FED right now) is most likely to view things.
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> 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 system…
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.
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.