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FDIC Takes over Silicon Valley Bank

fdic.gov

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Re: FDIC Takes over Silicon Valley Bank

#721

Post by NovemberWhiskey »

kypro wrote: post #671
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!…

> - 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…

>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 dollars of QE.

One of the principle, statutory purposes of the Federal Reserve is to conduct monetary policy to achieve maximum employment and stable prices. That means it's the job of the Fed to manipulate interest rates.

Re: FDIC Takes over Silicon Valley Bank

#723

Post by walrus01 »

weego wrote: post #601
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!…

When the fuck are retail banks going to be ring-fenced away from being able to trade in MBS. They're consistently cancerous to our banking systems.

This is a symptom of the problem of middle class single family home residential real estate being treated as an unreasonably-price-increasing bubble inflated investment and not a place for people to live in.

The irrational exuberance in price increases in this segment of the market over the past 4-5 years is not sustainable.

It is not logical, sane or normal for houses that were valued at $150k five years ago to now be valued at $400k in some suburbs and metro areas.

Re: FDIC Takes over Silicon Valley Bank

#724

Post by nemo44x »

kuczmama wrote: post #361

What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…

> Then the bank could make money by providing services to their customers.

The point of a bank is to loan money. That's it. This is how they make money. They need deposits so they can loan money. They pay the depositor a part of the interest on the loans they write. They don't exist to sell services because that's a really bad business. They provide services to attract deposits so they can write more loans. That's what banks are.

> ...and then invest that money trying to make a return on it.

No, they don't do that. They loan the money. If they can't loan it then they put it into a variety of safe places that can earn some interest, among other things. But they don't gamble depositors money. Investment banks may, but that's an entirely different thing.

Re: FDIC Takes over Silicon Valley Bank

#725

Post by sam345 »

lots of comments about bank but what about business clients ? WSJ says lots of startups in danger of losing their funds over FDIC limit ? Anybody having experience with that ? https://archive.is/tetbD

Here's a good thread https://news.ycombinator.com/item?id=35094447. on affect to startups

Re: FDIC Takes over Silicon Valley Bank

#726

Post by t0mas88 »

mikeyouse wrote: post #328
bombcar wrote: post #176

Earlier quoted context omitted.

The thing that's strange is FDIC took control and setup a receiving bank for liquidation. That's not normal; FDIC works quite hard to find a bank willing to take over - usually they can work out what the "cost" is to take over, and FDIC pays the receiving bank that amount to "eat" the dying one. If they don't announce they have a bank to assume SVP by Monday, it's quite abnormal.

So what I think is happening here is that if you take over a bank the traditional way, you need to mark-to-market all of the bank's assets -- so all of the losses from the long-dated MBS that would be perfectly fine if held to maturity would have to be recognized immediately, just crushing the balance sheet of anyone who bought it. Probably trying to line someone up who can either absorb that loss, figure out a way t…

But from what I read it's common for FDIC to "sell" to the acquiring bank at a price that wouldn't make a loss.

So if you marked to market all those long term bonds and then sold SVB to a bigger bank at the resulting (possibly negative) valuation. Why wouldn't a big bank take that deal?

Re: FDIC Takes over Silicon Valley Bank

#727

Post by kgwgk »

dragonwriter wrote: post #350
dahdum wrote: post #324

Earlier quoted context omitted.

DFPI specifically called them insolvent in their release today, does that change your opinion on depositors being made whole? https://dfpi.ca.gov/2023/03/10/california-financial-regulato...

> DFPI specifically called them insolvent in their release today, does that change your opinion on depositors being made whole? If the asset/deposits balance hasn't changed much since December (which I'm not sure is the case), depositors are likely to eventually be made whole for the deposit amounts, but liquidity issues and facilitating sale of assets to make that happen may result in substantial delays. For deposit…

Being made whole several years down the line may not be better than getting liquidated as soon as possible.

In a extreme example, getting $100 in 10 years is not as good as getting $70 next month.

Re: FDIC Takes over Silicon Valley Bank

#728

Post by KirillPanov »

kypro wrote: post #671
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!…

> - 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…

[flagged]

Re: FDIC Takes over Silicon Valley Bank

#729

Post by darkerside »

kypro wrote: post #671
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!…

> - 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…

Is there a reason they couldn't have just purchased shorter term bonds and securities instead?

Re: FDIC Takes over Silicon Valley Bank

#730

Post by roguecoder »

kypro wrote: post #671
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!…

> - 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…

... housing prices have continued to rise at wildly unsustainable rates, leading to record homelessness. Which is the exact opposite of what happened with the crypto market, where the Ponzi scheme collapsed.

When the assets haven't even moved in the same direction, I don't know how you are going to blame federal policy to counteracted the recessionary impact of covid for moving them. Whereas the fed has caused significant damage & also been ineffective at fighting the current supply-side inflation caused by Russia's war of aggression.

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