Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

FDIC Takes over Silicon Valley Bank

fdic.gov

Post reply on HN
Print view View original

701–710 of 1001 posts

Re: FDIC Takes over Silicon Valley Bank

#701

Post by danielmarkbruce »

highwaylights wrote: post #694
kypro wrote: post #671

Earlier quoted context omitted.

> - The issue is that as the Fed raised interest rates in 2022 and continued to do so through 2023, the value of SVB’s MBS plummeted. This is because investors can now purchase long-duration "risk-free" bonds from the Fed at a 2.5x higher yield. Let's be clear, the issue wasn't that the Fed raised rates to a historically average level, it was that they were manipulating the bond market in 2021 with trillions of dolla…

Nah, the bank is responsible for their decisions. They bought $80b of fixed-rate bonds at historically and artificially low interest rates in a time of massive QE. Even based on the information available at the time, this is not a surprising outcome at all .

And the $80 bill was about 40% of their assets. And their depositors are all businesses who will move the money out fast because it's not insured over 250k.

Re: FDIC Takes over Silicon Valley Bank

#702

Post by baremetal »

rvnx wrote: post #624
lapcat wrote: post #608

Earlier quoted context omitted.

> An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): [1] - https://twitter.com/jamiequint/status/1633956163565002752 That tweet is unattributed verbatim from https://www.livemint.com/news/world/explainer-silicon-valley... [EDIT:] See the thread, it seems that the story may have stolen from the tweet! Pretty shocking for one of India's biggest business pu…

He is correct, but he is blaming the FED raising interest rates. The responsible is not the FED, but the negligent management of SVB that purchased such products because of greediness. When interest rates raise, previously issued bonds lose in value because there are more attractive ones available. It's like if they missed the Chapter 1 lesson about investing into bonds.

If you inspect the values of SVB here: https://www.svb.com/about-us/living-our-values

You can see that managing money responsibly is not one of their values.

Re: FDIC Takes over Silicon Valley Bank

#703

Post by Randalthorro »

gregruss wrote: post #682
twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

If you don't understand the sentiment, I recommend that you read about what happens in a "run on the bank". Too many large withdrawals at the same time results in a liquidity crisis. No bank in the country has enough reserves to pay all of its customer accounts at the same time; it's part of our system of fractional reserve banking. A massive spike in withdrawals forces a bank to sell long term securities in a disadv…

The same thing happened to all these stupid crypto exchanges and banks and yield scams.

The point is that they are supposed to have capitalization requirements and regulations that show they actually have more assets than liabilities.

But in reality they don’t so fractional reserve doesn’t work here. In fractional reserve the bank still has assets worth more than liabilities. That’s the whole point of the regulation.

This bank doesn’t meet that basic requirement.

This is due to the rate hikes, yes, but just like all the recent events if the bank had properly adjusted its portfolio after the hikes, making losses and having a shitty stock price for a while, it would have been able to weather this storm. The storm came because the bank never adjusted until too late. It waited until it was negative from asset devaluation due to interest rate hikes

Re: FDIC Takes over Silicon Valley Bank

#704

Post by bluetwo »

somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

There are some big parts to this story we don't know.

Yes, they sold the treasuries and took a bath. But if that was their best option, it speaks very poorly to the other "assets" they held on their balance sheet.

We may find out in the coming days that they had a big position in Silvergate, which went bankrupt yesterday, and they had to mark their position to zero, creating the need for liquidity.

Re: FDIC Takes over Silicon Valley Bank

#705

Post by lolinder »

gregruss wrote: post #682
twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

If you don't understand the sentiment, I recommend that you read about what happens in a "run on the bank". Too many large withdrawals at the same time results in a liquidity crisis. No bank in the country has enough reserves to pay all of its customer accounts at the same time; it's part of our system of fractional reserve banking. A massive spike in withdrawals forces a bank to sell long term securities in a disadv…

I think we all understand why VCs telling people to get their money out caused or accelerated the collapse. But what was any individual VC supposed to do, tell their startups to just go down with the ship?

It's the same dynamic as the toilet paper shortages at the beginning of covid: most people weren't panic buying because they thought that there wouldn't be enough toilet paper to go around if everyone kept cool, they were panic buying because they knew not enough other people were keeping cool.

If it looks like the only reward you'll get for keeping your cool is a few weeks with a dirty bottom, it's hard to avoid joining in the run.

Re: FDIC Takes over Silicon Valley Bank

#706

Post by 1attice »

javajosh wrote: post #699
joosters wrote: post #480

Earlier quoted context omitted.

At first glance, bank balance sheets are unintuitive and feel 'the wrong way round'. When someone deposits $1m at a bank, the bank doesn't have $1m more assets, it has $1m more liabilities. (Yes, this is a gross over-simplification)

Not an expert, but was having some thoughts. Let debt be a graph where the nodes are people (with ledgers) and the edges are all of the form "alice rents $x from bob for y% APR". Actions that resolve/relax graph are payments of the form "alice pays bob $z", that lead to all balances being 0. Let the edges decay to null when balance is 0, such that a 'resolved graph' is simply a list of nodes with no edges, meaning 'n…

This is actually a nascent PhD-level thesis. Follow this thread.

Re: FDIC Takes over Silicon Valley Bank

#707

Post by resource0x »

somenameforme wrote: post #367

An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…

Ackman panics, appeals for a bailout

https://www.msn.com/en-us/money/other/billionaire-investor-b...

Re: FDIC Takes over Silicon Valley Bank

#708

Post by baremetal »

rvnx wrote: post #587
voisin wrote: post #469

Earlier quoted context omitted.

> - 97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%. This is a pretty insane bet. Why didn’t they ladder the maturities to have a lower average duration and less risk?

As a bank, parking the money into long maturity bonds, especially when it's not your money, and your customer can take the money back anytime, and the current rates are 0% (so can go upward only...). Sounds like an insane investment decision.

[flagged]

Re: FDIC Takes over Silicon Valley Bank

#709

Post by Randalthorro »

rvnx wrote: post #687
kmlx wrote: post #215

Silicon Valley Bank UK confirms it’s a standalone independent UK regulated bank. London, 10 March, 2023: Silicon Valley Bank UK, the financial partner of the innovation economy, today moved to confirm to its UK clients, partners and external stakeholders its financial position as a standalone independent banking institution that is regulated and governed by the PRA in the UK. Silicon Valley Bank UK has been an indepe…

The announcement is somewhat funny in a way that "independent Silicon Valley Bank"'s announcement actually happens on the website of the US website they are not supposed to have links with.

Their regulatory framework and finances are independent not the company itself
Post reply on HN