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FDIC Takes over Silicon Valley Bank

fdic.gov

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Re: FDIC Takes over Silicon Valley Bank

#961

Post by FollowingTheDao »

gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

> It's not like those government bonds won't pay out...eventually.

You go ahead and think that...

https://www.svbsecurities.com/team/joseph-gentile/

Joseph Gentile is the Chief Administrative Officer at SVB Securities.

Prior to joining the firm in 2007, Mr. Gentile served as the CFO for Lehman Brothers’ Global Investment Bank where he directed the accounting and financial needs within the Fixed Income division.

Re: FDIC Takes over Silicon Valley Bank

#962

Post by lvl102 »

tlb wrote: post #263
bagacrap wrote: post #168

Earlier quoted context omitted.

they don't lose anything if they're not forced to liquidate those bonds but can hold them to maturity. It seems like the real problem here is a lack of diversity in liabilities (all tech/biotech startups).

That's not true. When interest rates go up, they have to pay the higher rates on customer deposits, but they're not getting any more from their bonds. Perhaps they can spread the losses over 10 years, but the losses are the same.

Right because interest rates only go up, right?

Re: FDIC Takes over Silicon Valley Bank

#963

Post by bdangubic »

zenlikethat wrote: post #927
bdangubic wrote: post #823

Earlier quoted context omitted.

all other details aside - if you purchase $80bn of “mortage-backed” anything you deserve everything that will eventually come your way

In general people pay their mortgages. Just because a financial crisis has happened around it once doesn’t mean the asset class is inherently bad. It’s more regulated than ever, the problem was rising interest rates and not being able to keep their head above water with the position.

“in general” is not good enough when you are pouring in $80bn mate.

would you mortgage (no pun intended) your family’s entire financial health on something that works “in general”?

Re: FDIC Takes over Silicon Valley Bank

#965

Post by rvnx »

Randalthorro wrote: post #709
rvnx wrote: post #687

Earlier quoted context omitted.

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

Yeah, and now, the "independent and safe" UK branch is preventing people to take their money.

"SVB Online Banking (US, UK, Canada Branch Accounts) will be unavailable throughout the weekend."

Re: FDIC Takes over Silicon Valley Bank

#966

Post by lr4444lr »

duxup wrote: post #435
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!…

I have some family who (with some other partners) founded a small community bank that has grown over the years. They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc). The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who wer…

Can you ELI5 this for me? Why is it terrible for the banks to simply sit on deposits if there aren't sound lending opportunities? I understand that the owners might prefer to sell rather than wait, but a small bank doesn't seem any inherently different than any other small business who's owner simply enjoys the work of running something. What is the inherent downside to idle deposits?

Re: FDIC Takes over Silicon Valley Bank

#967

Post by killerstorm »

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…

> What I don't understand is why do banks work this way?

Because people want economy to be self-regulating. What is the correct amount of money in circulation? What are interest rates? Let the market decide. Banks is how market decides, basically.

Re: FDIC Takes over Silicon Valley Bank

#968

Post by semi_cityplan »

lr4444lr wrote: post #966
duxup wrote: post #435

Earlier quoted context omitted.

I have some family who (with some other partners) founded a small community bank that has grown over the years. They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc). The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who wer…

Can you ELI5 this for me? Why is it terrible for the banks to simply sit on deposits if there aren't sound lending opportunities? I understand that the owners might prefer to sell rather than wait, but a small bank doesn't seem any inherently different than any other small business who's owner simply enjoys the work of running something. What is the inherent downside to idle deposits?

Deposits aren’t free. We will use round numbers. If I take $100B in deposits and pay .5% interest, that’s an expense of $500M per year and including overhead even when rates were 0, deposits at a bank cost more than 0.5%.

So I need to lend it out so I can make the spread and I’m not just bleeding it money

Re: FDIC Takes over Silicon Valley Bank

#969

Post by tomrod »

duxup wrote: post #435
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!…

I have some family who (with some other partners) founded a small community bank that has grown over the years. They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc). The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who wer…

> “too much money”

Its not so much this as deposits are bank liabilities.

Re: FDIC Takes over Silicon Valley Bank

#970

Post by lightbendover »

MichaelMoser123 wrote: post #838
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!…

fifteen years ago we had simpler explanations of why things are going to pieces. Nowadays everything is more complicated - but the results are the same... (i think HN needs a black bar, we are all screwed)

Pretty much the only outcome when reprehensible greed meets company structures indistinguishable from scams and charlatans masquerading as leadership.
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