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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#701

Post by kmlx »

chollida1 wrote: post #11

Shares just fell 60%, not this year, but today, which is the biggest drop I can think of. This is after a $1.25B common stock offering in an attempt to shore up its cash reserves. Keep in mind they are raising cash by selling equity with their shares at $100 when they were at $500 a less than a year ago. That's pawn shop levels of selling. To say they are in trouble is like saying it would be tough to sell a house th…

> Shares just fell 60%, not this year, but today, which is the biggest drop I can think of.

just fell another 44% in pre-market after that 60% fall:

SVB Financial Group

Pre-market 58.60 −47.44 (44.74%)

Re: Bank run on Silicon Valley Bank

#702

Post by raspberry1337 »

smcl wrote: post #663
noizejoy wrote: post #660

Earlier quoted context omitted.

> Thatcher won two landslide re-elections for a reason. Arguably the reason was the war, not domestic policy [0] [0] https://history.com/news/margaret-thatcher-falklands-war

You're downvoted but I don't think you're wrong. In general it seems to be the case that if you're waging a war and you're not getting completely crushed the electorate (or at least the "undecided" voters") tends to rally around whoever happens to be in charge. And indeed I think it's fairly safe to say that most agree that Thatcher benefitted electorally from a strong response to the invasion. I should add that as a…

Gulf war didn't save Senior Bush from the bad-economy, neither did the Iraq War help Tony Blair's popularity.

It's a lot more complex than war-helps-current-leader, at least outside the US. It depends on the war and the context.

Re: Bank run on Silicon Valley Bank

#703

Post by selimthegrim »

brutusborn wrote: post #595
selimthegrim wrote: post #432

Earlier quoted context omitted.

I look forward to your interview with the Taliban finance ministry and Afghan central bank - let us know how they’re doing

I must have missed this one in my Inbox - I look forward to it too haha But to be serious, I'm not arguing that the Islamic system is "better", just that it removes certain risks that unrestricted lending cause. I don't think the solution is to ban lending but instead to be aware of the risks and make sure your regulation and enforcement is adequate. I hate knee jerk dismissal of alternative policies, so I felt I nee…

Believe me I wish there was no hunger in those places too

Re: Bank run on Silicon Valley Bank

#704

Post by kmlx »

kortilla wrote: post #622
jedberg wrote: post #603

I've received emails from a couple of startups that I've invested in with screenshots showing all their money moved out of SVB into another account. I'd say now is a good time to short SVB if you're into that sort of thing.

If you’re reading stories like this, it’s too late. The short interest has already exploded, the stock has already lost 40%, and now we’re in takeover/bailout territory. You’re a day late. Try again on the next bank failure.

> The short interest has already exploded, the stock has already lost 40%, and now we’re in takeover/bailout territory.

> You’re a day late.

just one sec:

SVB Financial Group

Pre-market 57.50 −48.54 (45.78%)

Re: Bank run on Silicon Valley Bank

#705

Post by makomk »

pishpash wrote: post #397
lmm wrote: post #378

Earlier quoted context omitted.

> Similarly from a reserve standpoint they don’t need to worry about inflation as they need to pay back deposits in nominal terms not what the money is worth when withdrawn. The issue is that the sale value of their reserves has dropped below that nominal value. If you take in $1000 of deposits that you're paying 1% interest on and your reserve against that is a 10-year $1000 T-bill with a 2% coupon, you'd think you'…

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 doesn't work either. Remember, the reason that the market value of the T-bills in their reserves has dropped is that the interest rate on them is lower than the current interest rate that people can get by buying them now, so the bank likely cannot afford to pay their customers a market interest rate of 1% below that. The only way for the hold-to-maturity value of their reserves to actually be realised is if customers don't withdraw their deposits and they don't have to substantially increase the interest rates they pay in order to achieve that - otherwise they're likely to run out of money, either quickly or slowly.

Re: Bank run on Silicon Valley Bank

#706

Post by michaelt »

geysersam wrote: post #680
somenameforme wrote: post #503

Earlier quoted context omitted.

Especially in contemporary times banks make money in an immense amount of ways that don't involve touching customer funds: debit transaction fees, international exchange rate "adjustments", ATM fees, the million 'special processing fee' type fees, and so on. In other countries I've even had to pay a fee when depositing, which was quite odd. Of course this all is going to pale in comparison to the amount that banks ma…

I don't believe the claim that non-fractional reserve banking would actually slow economic growth. Is real economic growth even determined by anything but technological development? Of course, the economy can be made to "grow" by some slight of hand, like having a high inflation rate while pretending that we don't. Or by depleting natural resources. But that's not the kind of growth we want.

Some loans go to businesses so they can buy a new widget-making machine, employ more operators, and profitably sell widgets. Economic growth in action!

Other loans go to people who were going to buy a doodad after saving up for 12 months, who instead get the doodad immediately and pay for it for 14 months. That looks like economic growth, because in month 1 doodad sales have risen. But if the sale would have happened anyway, the 'growth' is lot more debatable IMHO.

Re: Bank run on Silicon Valley Bank

#707

Post by jcbrand »

EVa5I7bHFq9mnYK wrote: post #675
chollida1 wrote: post #11

Shares just fell 60%, not this year, but today, which is the biggest drop I can think of. This is after a $1.25B common stock offering in an attempt to shore up its cash reserves. Keep in mind they are raising cash by selling equity with their shares at $100 when they were at $500 a less than a year ago. That's pawn shop levels of selling. To say they are in trouble is like saying it would be tough to sell a house th…

>> your long duration assets drop alot in value so you can't easily liquidate them That conjecture seems wrong. Sure, 2% 30-y treasuries dropped a lot in value, but you still can easily liquidate them.

As a bank, you can't easily liquidate them without that showing up as a huge loss, thereby affecting your reserve requirements and potentially making you insolvent.

If you don't have to sell them and can keep them to maturity, they don't appear as a loss in your accounting.

It's the difference between mark-to-market versus held-to-maturity accounting. If you have to sell, you are forced to mark-to-market. If you don't have to sell, you don't have to account for losses due to bond prices falling in the market.

Re: Bank run on Silicon Valley Bank

#708

Post by willis936 »

dkrich wrote: post #678
CGamesPlay wrote: post #674

Earlier quoted context omitted.

But isn't this the point of FDIC? Even if SVB becomes insolvent, your account value is insured by the federal government? I'm not very familiar with all of this, so please help me understand what I'm missing.

Up to $250k

Or 3 business days of burn at my company.

Re: Bank run on Silicon Valley Bank

#709

Post by sumanthvepa »

dehrmann wrote: post #634
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.

It is. And sadly the Nash equilibrium solution does not favor SVB.

Re: Bank run on Silicon Valley Bank

#710

Post by [deleted] »

raspberry1337 wrote: post #657
MengerSponge wrote: post #576

Earlier quoted context omitted.

It's really amazing that both Thatcher and Reagan came to power at around the same time, delivered such fabulous witticisms, and caused very similar societal harm.

UK before Tatcher was a depressed society with stagflation, rising crimes, crumbling infrastructure; that couldn't even clean its own streets. It was a society completely hamstrung by old unions that would happily collapse the economy in face of global competition, as long as their jobs gave the same pay - nominally. Thatcher won two landslide re-elections for a reason.

[deleted]
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