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2023 bank failures


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12 minutes ago, GringoSalado said:

I can't find a link but upthread somebody posted that SVB incented clients to keep more deposits with them via favorable loan terms? So it sounds like Roku et. al. may have maintained deposits in excess of insured-levels not because they did no risk mgmt. but because they needed/wanted those better terms. Maybe we shouldn't allow that (banks to encourage customers to exceed insured deposit level).

It also sounds like a lot of their customers don't have significant revenue so their deposited loan is how they make payroll, next week and every week after that. So without any cash flow to fund ops, you are more likely to see a bank run.

 

But I'm an idiot.

All banks do this. If you are going to use them for lending for operational purposes, they typically require your main operating account be with that bank also. I can’t think of any that I deal with that don’t require that.

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47 minutes ago, wildcat09 said:

 

The quoted tweet is fucking amazing. These people are so stupid.

Yes and it's interesting that we have the SLX type posting here who think gov't workers should bake the bank's clientele a dozen cookies each and hand deliver them along with a promissory note to return the entirety of their SVB deposits by Wednesday at the latest. Apparently he believes that's how capitalism and insurance should work.

 

7 minutes ago, GringoSalado said:

I can't find a link but upthread somebody posted that SVB incented clients to keep more deposits with them via favorable loan terms? So it sounds like Roku et. al. may have maintained deposits in excess of insured-levels not because they did no risk mgmt. but because they needed/wanted those better terms. Maybe we shouldn't allow that (banks to encourage customers to exceed insured deposit level).

It also sounds like a lot of their customers don't have significant revenue so their deposited loan is how they make payroll, next week and every week after that. So without any cash flow to fund ops, you are more likely to see a bank run.

I think what you're referring to is the VC firms made it a condition of their financing deals that their invested clients would bank with SVB. These VC firms also led the fight to allow SVB to escape getting regular financial "stress tests," and to allow SVB to basically gamble with their deposits. I don't think we know yet what the VC firms received in return from SVB.

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5 minutes ago, Bevo said:

One issue that could come up in the future is the power of social media. Presumably, people could crowd source companies and cause stock fluctuations from which they could profit. It seems like it would be pretty easy to do with small companies on the exchange.

 

Like Gamestop?

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1 minute ago, Bevo said:

If he was investing in SVB and pulling that investment due to insider knowledge then it would be insider trading. Pulling your money out of a bank because you don't trust it or for any reason is not against the law. Now if he was on the board of SVB, then there are other issues but it still wouldn't be insider trading.

One issue that could come up in the future is the power of social media. Presumably, people could crowd source companies and cause stock fluctuations from which they could profit. It seems like it would be pretty easy to do with small companies on the exchange.

 

I suppose on the last issue you could argue some sort of anti-trust violation?

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5 minutes ago, Bevo said:

One issue that could come up in the future is the power of social media. Presumably, people could crowd source companies and cause stock fluctuations from which they could profit. It seems like it would be pretty easy to do with small companies on the exchange.

 

Social media and the exacerbated version of group think that apparently comes along with it in today’s world will be the end of us.

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2 minutes ago, Brew said:

All banks do this. If you are going to use them for lending for operational purposes, they typically require your main operating account be with that bank also. I can’t think of any that I deal with that don’t require that.

It does make a ton of sense for the bank. But also prompts borrowers to exceed the insured limit.

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59 minutes ago, wildcat09 said:

 

The quoted tweet is fucking amazing. These people are so stupid.

So reading through the original tweet, that dude bought shares of SVB on Thursday and then was part of the problem by moving all his funds he could late Thursday/Friday. Some of these people are special.

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10 minutes ago, Bevo said:

One issue that could come up in the future is the power of social media. Presumably, people could crowd source companies and cause stock fluctuations from which they could profit. It seems like it would be pretty easy to do with small companies on the exchange.

What do you think happened in the stonk market during the pandemic with the likes of GameStop and Bed Bath and Beyond? Or was that ok because it was the common man sticking it to the evil short sellers? 

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3 minutes ago, GringoSalado said:

It does make a ton of sense for the bank. But also prompts borrowers to exceed the insured limit.

Most of the borrowers that are in the scale of requiring the operating accounts to be held by the bank are going to exceed FDIC limits. $500m is excessive, but I have plenty of clients that exceed the limits. Our firm accounts exceed the limits. There is no reasonable way for a company of legitimate size to not exceed the limits operationally. Early stage funded companies that are going to need money in the future should be a lot smarter. Companies running 7 figures a week in cash in/out have to somewhat trust the banking system. There are ways to secure collateral and sweep to other banks, but neither are reasonable options for most at that level.

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2 hours ago, Chopper said:

"Making sure depositors lose their uninsured funds"...I am reasonably certain nobody has argued the Pro-side of that debate but SLX is certainly up for arguing the Con side.

Plenty have overtly lacked sympathy. I don’t really care either way, except I know what the results will be if depositors aren’t backstopped. They’ll be made whole eventually but the markets will be in turmoil in the interim. Major turmoil. And, some idiot here suggested about EQUITY holders should receive excess proceeds of various entities’ deposits over $250k. Not only is that not how things have ever been done, but it reeks of an anti-government populist Surly poster that let his 14-year old post for awhile. So let’s not act like some posters here aren’t rooting for depositor losses. They are. 

2 hours ago, Dahobbs said:

Yeah, but a government backstop for the depositors prevents other private mechanisms from being adequately developed to address depositor concerns. We're preventing the market from becoming more resilient and self-reliant. I don't disagree with the government stepping in where broader economic impact is implicated. But I just don't see that here. 

You don’t know how markets work and you don’t understand the implications. 

2 hours ago, Sawbonz said:

Yes?

Letting Lehman fail unquestionably led to more pain and spurred true bailouts like AIG. 

2 hours ago, Dahobbs said:

We aren't I guess, other than you keep talking about pitch forks and asserting that someone wants the depositors to lose all their money. I haven't seen that argument made. I'm really not clear what your position is other than you don't like the idea of the depositors losing money. 

 

2 hours ago, Chopper said:

Dead on. It's very trite and tiresome propaganda.

 

Contagion. Do you two not understand what will happen tomorrow without some assurance?  I mean it’s been said here ad nauseam but you’re like financial markets anti-vaxxers. 

2 hours ago, 52-80 said:

The tenor of this question is exactly like the political point scoring battle of “are we technically in a recession”

Earnestly…what the fuck does it matter?

Its a cashflow issue. Not solvency. Bank is under govt administration to help short term business continuity, facilitate better-than-predatory asset recovery, and stave off contagion….in the end with little or no cost to taxpayer. 

So whether this govt action is called a bailout or not matters how? 

The billions in shareholder equity is already gone.

It’s 100% gone. The bank as existed last Friday morning is gone. Never to return. Employees there may be there short term but most are likely gone. The bank has failed. There will be no bailout.  Such a rescue of the bank hasn’t been proposed by anyone, especially Ackman. It is apparent it is tough for posters here to distinguish between the bank, which was gone Friday morning, and it’s depositors. 

1 hour ago, Macanudo said:

I realize the bonuses were for 2022 but...    WTF? 

Article on CNBC says they ranged from $12,000 (rank and file) to $140,000 (Managing Director.)   As of 12/31/22, SVB had just over 8,500 employees.  IF, and that's a not what happened, everyone only got the minimum, that comes out to over $100,000,000 paid in bonuses.  Another WTF?   I work for a fairly large financial services company with over 35,000 employees.   The rank and file get between around 1/4 of SVB's low end.    How does SVB justify the overall bonus policy?   This is outside the scope of the failure issue but it seems to me like this was a fialry poorly run enterprise from the get go.

They likely accrued this bonus amount the entirety of 2022 for that fiscal / calendar year and had a March 15 or March 31 scheduled payment date. This is not a great sum of money.  $140k for an MD isn’t a lot of money. These people are abruptly out of work and had no culpability in this failure. I do agree the timing looks terrible and if I were a Board member or executive there, I’d have major problems approving it. 

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Looks like we’re sitting on about $100k in ACH’s hung up in this mess. It’s interesting reading through the barrage of emails coming from our processor and making sure to point out it’s not their fault. Dumbasses kept processing into Friday night/Saturday morning instead of immediately blanket shutting the ACH option down when the shit hit the fan. Also, have talked to several clients with $250k CD’s with them.

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34 minutes ago, Dahobbs said:

The companies that had all their cash tied up in SVB and no other source for temporary funding probably don't have much in the way of employees. The other companies will continue to make payroll, but struggle with or delay paying other debts. I also expect the overall number of workers that would be affected would be quite small. And I think all the employees will eventually be made whole, although some may have to find new jobs (not uncommon for those working in this space). At any rate, there are a number of mechanisms already available to assist any employees who aren't paid. The call for additional government action here isn't to protect the employee payroll, but rather the equity of those invested in the companies. It is disingenuous to suggest otherwise.  

This thread continues to amaze.

The freezing of a bank larger than Ally, USAA, Comerica, will only affect a count of people in a number that’s “quite small”.  (And also nevermind small suppliers)

The accounts with problems are the large ones…but they happen to “dont have much in the way of employees” 

“They will eventually be made whole”, as a new relevation, as if that wasnt the crux of the issue in the first place — cashflow / time-dependency of money. 

Finally, you found the hidden motivation for all of us here: secretly cheering for Sequoia Capital because they’re the ones with money issue. 

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10 minutes ago, Brew said:

So reading through the original tweet, that dude bought shares of SVB on Thursday and then was part of the problem by moving all his funds he could late Thursday/Friday. Some of these people are special.

He’d already begun attempting to withdraw all of his and his company’s money when he decided to buy SVB shares. Just absolutely braindead. I wouldn’t trust this idiot to park my car and it’s probably best for America long-term if he and his friends all end up homeless and incapable of getting a loan for a used car.

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9 minutes ago, Chopper said:

The fact that SVB was in some peril wasn't unknown. Shit got real when Moody's informed them they were going to downgrade their debt rating.

Note the Jan 18 date.

 

This is one of the things that frustrates me.   Stuff about SVB was coming out a while ago.  I'm just a neophyte investor who barely follows the financial news but I knew something was going on with SVB before all of this broke this week.  I didn't know this fiasco was the end result but they had popped up enough that I knew who they are and that VC firms had a huge hand in them. 

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7 minutes ago, Porterhouse said:

They likely accrued this bonus amount the entirety of 2022 for that fiscal / calendar year and had a March 15 or March 31 scheduled payment date. This is not a great sum of money.  $140k for an MD isn’t a lot of money. These people are abruptly out of work and had no culpability in this failure. I do agree the timing looks terrible and if I were a Board member or executive there, I’d have major problems approving it. 

$140,000 for a MD was not the point.   Far greater $100,000,000+ for 8,500 employees kind of is.

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4 minutes ago, Porterhouse said:

Plenty have overtly lacked sympathy. I don’t really care either way, except I know what the results will be if depositors aren’t backstopped. They’ll be made whole eventually but the markets will be in turmoil in the interim. Major turmoil. And, some idiot here suggested about EQUITY holders should receive excess proceeds of various entities’ deposits over $250k. Not only is that not how things have ever been done, but it reeks of an anti-government populist Surly poster that let his 14-year old post for awhile. So let’s not act like some posters here aren’t rooting for depositor losses. They are. 

You don’t know how markets work and you don’t understand the implications. 

Letting Lehman fail unquestionably led to more pain and spurred true bailouts like AIG. 

 

Contagion. Do you two not understand what will happen tomorrow without some assurance?  I mean it’s been said here ad nauseam but you’re like financial markets anti-vaxxers. 

It’s 100% gone. The bank as existed last Friday morning is gone. Never to return. Employees there may be there short term but most are likely gone. The bank has failed. There will be no bailout.  Such a rescue of the bank hasn’t been proposed by anyone, especially Ackman. It is apparent it is tough for posters here to distinguish between the bank, which was gone Friday morning, and it’s depositors. 

They likely accrued this bonus amount the entirety of 2022 for that fiscal / calendar year and had a March 15 or March 31 scheduled payment date. This is not a great sum of money.  $140k for an MD isn’t a lot of money. These people are abruptly out of work and had no culpability in this failure. I do agree the timing looks terrible and if I were a Board member or executive there, I’d have major problems approving it. 

By all means, school me on how markets work. While you do so, please explain why anyone should listen to you when you continually get basic facts wrong. You obviously aren't a complete idiot. But it is difficult to put any credence in your analysis when you are consistently disconnected from the facts. 

At any rate, I actually think we agree on quite a bit here. 

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6 minutes ago, Porterhouse said:

Contagion. Do you two not understand what will happen tomorrow without some assurance?  I mean it’s been said here ad nauseam but you’re like financial markets anti-vaxxers. 
 

This thing was triggered by a bank run, and if the wrong signals are sent, may trigger subsequent bank runs. 

Apparently we’re the crazy ones to think guaranteeing public assurance in the US banking system is a little bit important.  

 

6 minutes ago, Porterhouse said:

They likely accrued this bonus amount the entirety of 2022 for that fiscal / calendar year and had a March 15 or March 31 scheduled payment date. This is not a great sum of money.  $140k for an MD isn’t a lot of money. These people are abruptly out of work and had no culpability in this failure. I do agree the timing looks terrible and if I were a Board member or executive there, I’d have major problems approving it. 

Q1 is when everyone does annual reviews and bonus payouts. The kooks who take stock in this conspiracy are the same who highlight the CEO’s (planned) 10b5 equity disposal….

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Just now, 52-80 said:

This thing was triggered by a bank run, and if the wrong signals are sent, may trigger subsequent bank runs. 

Apparently we’re the crazy ones to think guaranteeing public assurance in the US banking system is a little bit important.  

 

Q1 is when everyone does annual reviews and bonus payouts. The kooks who take stock in this conspiracy are the same who highlight the CEO’s (planned) 10b5 equity disposal….

And I'm not saying there is any grand conspiracy because of the bonuses.   I understand Q1 is when this happens.   I got mine 2022 bonus earlier this year as well.   But I am suspicious of a bank that pays those kinds of amounts.   I realize that SVB probably didn't have a bunch of tellers and retail staff.   It isn't that kind of bank.

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36 minutes ago, Dahobbs said:

2. You said in blanket terms that TARP wasn't a bailout. It was. You didn't say anything specific about banks, and neither did I. But, yes, funds from TARP went to banks to help stabilize them (e.g., Wells Fargo). That is a bailout as the term is used. Have you looked up when GM was bailed out and when TARP was created yet?

3. It is a fact that the FDIC is backed by the full faith and credit of the US government. It is a fact that it can directly access the Treasury if it needs to. It is a fact that it has never needed to do so. It is my opinion that I wouldn't expect FDIC to need to do so if it guarantees SVB deposits. It is my opinion that a guarantee of SVB deposits is unnecessary. I really have no idea what you're trying to say here. 

2. I said you got me with GM. I recall there was a lot of anger that the Obama admin diverted funds designed to stabilize the banking system to a single, albeit large company (and Chrysler). TARP was designed as stability, not a bailout, for banks. This is my whole point. If you think Wells Fargo “needed” TARP to survive, you’re smoking crack. None of the reluctantly-chosen “winners” of TARP funds wanted or needed it. Banks that were too far gone that wanted it didn’t get it. It was a pretty genius system concocted by Bush admin higher-ups that were largely comprised of former private finance guys. I know I’m in the minority of TARP not being a bailout, and don’t really care. 

3. First, SVB won’t be a bailout because the bank is gone. Can we agree the bank has failed and will not be attempted to be put back together?  Second, as it pertains to $195B of depositors’ funds, we can agree that the vast majority (if not all) will be returned by the SVB assets. I think we can agree to that, right?  Third, the full faith of the government is a warm and fuzzy and nothing more. Here are your own words: “It is a fact that it has never needed to [access Treasury funds]”, including during a time of extraordinarily larger tumult, the Great Recession.  Fourth, and you probably know this, the FDIC is MUCH more robustly funded now than 10-15 years ago. For all of these reasons, providing some sort of FDIC guarantee of all SVB deposits in no way risks Treasury $. With this, in combination with the fact that SVB is gone never to return, there is no bailout. 

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33 minutes ago, Brew said:

So reading through the original tweet, that dude bought shares of SVB on Thursday and then was part of the problem by moving all his funds he could late Thursday/Friday. Some of these people are special.

Not only that he tweeted in great detail with time stamps about his movements. If he had $100k to burn on the stock in hopes that it’d quickly return to $300 and he could’ve sextupled his money, then okay, he should’ve explicitly stated that. However it was still dumb. Rarely do I go counter to the market unless I have a very full picture of the fundamentals. You can’t do that with a bank, particularly one that lost 70% of its MV the day before you decide to buy.  If you’re gonna catch a falling knife, don’t fucking tweet about it. 

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Everything here stinks.  Wretched.  The US has the most sophisticated corruption in the world.

https://twitter.com/KobeissiLetter/status/1634683511972962313?s=20

https://twitter.com/KobeissiLetter/status/1634605973208801280?s=20

SVB promised to provided an exit of sorts to tech founders based on inflated valuations in return for their commercial banking business.  Who's screaming the loudest? VC and tech founders.  A lot of the "loans" are of this form, and I have no idea how they'll be valued, so I retract my previous statement about the loan book being sufficient to cover most of the depositor shortfall.  A lot of it is crypto-related, so it'll be interesting to see how 3rd party banks value founder equity - which is the collateral for the partial exits SVB provided.

 

 

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20 minutes ago, Macanudo said:

$140,000 for a MD was not the point.   Far greater $100,000,000+ for 8,500 employees kind of is.

Look I’m not arguing for the decision. I don’t know enough. But $100,000,000 is nothing compared to the $195,000,000,000 that SVB has the assets to cover anyway. 

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21 minutes ago, Dahobbs said:

By all means, school me on how markets work. While you do so, please explain why anyone should listen to you when you continually get basic facts wrong. You obviously aren't a complete idiot. But it is difficult to put any credence in your analysis when you are consistently disconnected from the facts. 

At any rate, I actually think we agree on quite a bit here. 

Well, thanks?  First, I’m not getting any facts wrong here about finding sources, etc. We disagree on what constitutes a “bailout” nothing about that colloquial term should be considered a fact. Let’s put the term aside. Markets will be in turmoil tomorrow. But, if no assurances are made to SVB depositors, what will happen?  Just look at this very thread and the litany of discussions about which banks in Texas may also share similar characteristics to SVB. There will be a mass outflow of funds from community and regional banks to money center banks. The TBTF critical institutions will only become stronger. This isn’t wild speculation. This is predictable human behavior. This will compromise some of those banks. I’m not predicting this but the consequences of doing nothing are much more catastrophic than the benefits of doing nothing. 

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19 minutes ago, Macanudo said:

And I'm not saying there is any grand conspiracy because of the bonuses.   I understand Q1 is when this happens.   I got mine 2022 bonus earlier this year as well.   But I am suspicious of a bank that pays those kinds of amounts.   I realize that SVB probably didn't have a bunch of tellers and retail staff.   It isn't that kind of bank.

Not pointing at you specifically, because there are other who in total contributed a lot more to the crackpot

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23 minutes ago, Macanudo said:

And I'm not saying there is any grand conspiracy because of the bonuses.   I understand Q1 is when this happens.   I got mine 2022 bonus earlier this year as well.   But I am suspicious of a bank that pays those kinds of amounts.   I realize that SVB probably didn't have a bunch of tellers and retail staff.   It isn't that kind of bank.

The ones that received $12k bonuses are branch type employees. The ones that received $140k were likely junior level MDs, akin to VPs or junior level SVPs for banks with older-school titles. I can assure you that a) SVB paid out far more in bonuses than that figure (or not and only paid junior staff that $100MM+ sum, removing bonuses for more senior middle management and execs); and b) whatever they paid is in line for a bank of their size / historical profitability. 

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22 minutes ago, Porterhouse said:

2. I said you got me with GM. I recall there was a lot of anger that the Obama admin diverted funds designed to stabilize the banking system to a single, albeit large company (and Chrysler). TARP was designed as stability, not a bailout, for banks. This is my whole point. If you think Wells Fargo “needed” TARP to survive, you’re smoking crack. None of the reluctantly-chosen “winners” of TARP funds wanted or needed it. Banks that were too far gone that wanted it didn’t get it. It was a pretty genius system concocted by Bush admin higher-ups that were largely comprised of former private finance guys. I know I’m in the minority of TARP not being a bailout, and don’t really care. 

3. First, SVB won’t be a bailout because the bank is gone. Can we agree the bank has failed and will not be attempted to be put back together?  Second, as it pertains to $195B of depositors’ funds, we can agree that the vast majority (if not all) will be returned by the SVB assets. I think we can agree to that, right?  Third, the full faith of the government is a warm and fuzzy and nothing more. Here are your own words: “It is a fact that it has never needed to [access Treasury funds]”, including during a time of extraordinarily larger tumult, the Great Recession.  Fourth, and you probably know this, the FDIC is MUCH more robustly funded now than 10-15 years ago. For all of these reasons, providing some sort of FDIC guarantee of all SVB deposits in no way risks Treasury $. With this, in combination with the fact that SVB is gone never to return, there is no bailout. 

2. I agree that we disagree on the definition of a bail out. That's why I've asked you for yours. 

3. I agree SVB isn't being bailed out (nor should it be). I agree depositors assets will eventually be substantially returned. I disagree that "full faith and credit" is merely a warm and fuzzy. It is an actual obligation of the United States government, the breach of which would have profound worldwide effects. You believe that because a liability has a low risk of impacting an entity that it can be ignored. I believe that is exactly why entities like SVB end up in this situation. I also don't think the use of the government Treasury is a pre-requisite for the term bailout to apply. Private entities are perfectly capable of bailing out other entities. No government funds needed. 

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4 hours ago, Sawbonz said:

Is that not another way to say “FDIC will only reimburse the depositor up to the limit of the policy?”

 

I have had money spread over multiple banks since 2008 precisely to avoid the above. It can be a pain the ass moving things around to be sure. So many clicks…

Statement and question re individual vs a small business

For an individual  with 251k to say a few million who wants to keep their money in the bank it’s not really that hard to have several different accounts to keep it all FDIC insured. Maybe inconvenient but doable. But for a small town business with say 50 employees that has bills, rent, salary, and retirement plan to fund its a bit more difficult to spread that 250-1 million around to 5 accounts and use that rolling capital every week. So what are the options can a company purchase insurance for their working capital that’s in the bank and valued at over 250k - 

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14 minutes ago, Neonmoon said:

I understand you pay bonuses in Q1 but doing do on Friday before the Feds took over is a little on the nose 

"Sorry we weren't able to complete the wire transfer you asked for, Mm. Client. At that particular time our wire transfer facility was being used to transfer annual bonus pay outs to the accounts at the banks our employees and management use. As you can imagine, that took some time because those accounts were all newly established."

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Website still up.  Check out the video on tax and liquidity strategies for founders.  On its surface, it might just look like standard wealth management.  But if you play it out, particularly in light of tech valuations, there's a lot of potential for the bank to exert a ton of leverage over founders and their companies and introduce huge conflicts of interest.

https://www.svb.com/private-bank/who-we-help/founders

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2 hours ago, wildcat09 said:

 

The quoted tweet is fucking amazing. These people are so stupid.

Quote

 

1:30 PM: SVB is a solid bank. I know their CEO, Greg Becker. Great guy. I figure this is a temporary issue caused mainly by people panicking. They'll recover. I buy shares of SVB at what I consider significantly low prices.

He does this as he is in the process of wiring every penny out of said bank for multiple businesses and his personal accounts.

WTF?

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Thanks for those that explained the collapse in such an easy to understand way.
 

I’ve not really made up my mind re:bailing people out (it’s not going to happen and I understand why) but the posters who feel that it shouldn’t happen at all it’s because the people who lost money beyond $250k were too stupid to diversify so oh well?

Hey, I feel that way about handouts and taxing the crap out of the middle class to pour all our money that we’ve worked out asses off for into a bottomless pit of the poor and special interest groups and continue to take more and more resources away from those who’ve earned it.
 

 It’s like jumping into the water to save a drowning person (who should be wearing a life jacket or shouldn’t be in the goddamn water anyway if they can’t swim) and because they are flailing about so much you drown along with them. The vast majority of us are existing paycheck to paycheck and busting our asses…many people are living in multigenerational homes just to pay the bills. We are barely treading water and they want us to try and save the drowning guy who is always drowning no matter how much help you give him.

It’s not that much different. Except the people who lost their money in SVB were drunk fell and off their yacht without wearing a life jacket. But currently we are killing the middle class to save the guy too dumb enough to stay away from water when he doesn’t know how to swim. 

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1 hour ago, Bevo said:

 

One issue that could come up in the future is the power of social media. Presumably, people could crowd source companies and cause stock fluctuations from which they could profit. It seems like it would be pretty easy to do with small companies on the exchange.

 

Animated GIF

 

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11 minutes ago, Dahobbs said:

2. I agree that we disagree on the definition of a bail out. That's why I've asked you for yours. 

3. I agree SVB isn't being bailed out (nor should it be). I agree depositors assets will eventually be substantially returned. I disagree that "full faith and credit" is merely a warm and fuzzy. It is an actual obligation of the United States government, the breach of which would have profound worldwide effects. You believe that because a liability has a low risk of impacting an entity that it can be ignored. I believe that is exactly why entities like SVB end up in this situation. I also don't think the use of the government Treasury is a pre-requisite for the term bailout to apply. Private entities are perfectly capable of bailing out other entities. No government funds needed. 

2. I’ve answered but maybe not directly. A bailout in my mind is something needed to survive. Banks that received the purported bailouts in ‘08-‘09 didn’t need them. GM, Chrysler and AIG (none banks) did. 

3. Previously you did NOT agree that SVB (or its depositors) were receiving a bailout. You probably still wouldn’t agree on the depositors not receiving a bailout if they enact Ackman’s plan.  And that’s fine; my argument with you is that there is no chance of the American taxpayer providing these depositors funds based on a significantly long 90-year history of it not happening including in a MUCH more dire time of just 15 years ago. Even if the FDIC comes out of pocket, which would be an unprecedented deviation from its 90-year history, it would not be borne by the taxpayer.  When a “full faith and credit of the US govt” guarantee is made with zero chance of it coming to fruition, that’s what I call a warm and fuzzy. 

Further, I DO believe SVB’s disregard of what was a low risk for them got them into this mess. I am trying to address the situation NOW.  And knowing the FDIC and its history and current funding and how it gets its funding (through bank premiums), it is a significantly lower risk (no risk) to Treasury than SVB’s risk in getting them into this mess. That risk was borne out of greed.  Look at this chart for how this happened to them so quickly:

image.thumb.png.9d73eb682df7ec42312d16c3b2e07692.png

I’ll respond later on the impacts of that. 

4 minutes ago, DefinitelyNotHollywoodColt said:

“We got ourselves into a huge pickle of our own making again and if you don’t do something to save us it’s going to be really bad!”

”Oh and our industry should be less regulated because we’re smarter than you and we promise not to do more dumb shit while making ourselves filthy rich.”

Save whom?  SVB is gone. And no, the industry should be more regulated. It is very well regulated on the loan side but other banks had similar failures in the aftermath of 2007-2008 and the OCC has done a deplorable job of securities side of regulation. 

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22 minutes ago, Farmerted said:

Statement and question re individual vs a small business

For an individual  with 251k to say a few million who wants to keep their money in the bank it’s not really that hard to have several different accounts to keep it all FDIC insured. Maybe inconvenient but doable. But for a small town business with say 50 employees that has bills, rent, salary, and retirement plan to fund its a bit more difficult to spread that 250-1 million around to 5 accounts and use that rolling capital every week. So what are the options can a company purchase insurance for their working capital that’s in the bank and valued at over 250k - 

For many borrowers, it is a REQUIREMENT to hold all deposits with a bank with the loan. Problem is, if you have, say $5.5mm borrowed with $10mm in deposits, the $4.5mm is at risk, minus the $250k insured. I suspect there will be a great relaxation of those Borrower requirements. By the way, those figures above are exactly what I had on 3/31/22.  We made another acquisition using mainly cash, and now have only $4.0mm of debt with $1.0mm of cash. Had SVB occurred last March instead of Friday, I would’ve taken an unnecessary $4.5mm distribution. Even though there’s no SVB-type risk to my bank. You’re going to see a lot of these actions tomorrow and in the days and weeks and months to come. 

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17 minutes ago, Nicole44 said:

I’ve not really made up my mind re:bailing people out (it’s not going to happen and I understand why) but the posters who feel that it shouldn’t happen at all it’s because the people who lost money beyond $250k were too stupid to diversify so oh well?

FDIC coverage is $250,000 per depositor, per insured bank, for each account ownership category. In theory much more than $250k per depositor is eligible to be insured. That's because the different types of accounts that can be FDIC-insured for every depositor are: Checking accounts, Negotiable Order of Withdrawal (NOW) accounts, Savings accounts, Money Market Deposit Accounts, and Time deposits such as certificates of deposit, Cashier's checks, money orders, and other official items issued by a bank.

I am open to correction but I don't believe there's even a limit on the number of insurable CDs that one individual or bank can have.

edit - Also don't fall for the scare tactics that this is definitely going to have some huge ripple effect across the banking system. Some of the same people who've argued here that the government needs to step in have also expressed their full confidence that every depositor will be made whole when the bank's assets are sold. SVB is a regional bank and even their client industry base is very narrow. If the Fed goes through their books and comes to the determination that SVB's failure poses system risk, then they'll backstop it.

My sense is that the people screaming for federal intervention at this point, with zero proof that SVB's failure poses any risk whatsoever to the banking system, have motivations that they haven't thus far disclosed.

 

 

 

 

Edited by Chopper
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9 minutes ago, longhornmatt said:

Yes. He hedged the risk that the bank really was in trouble and he might lose his deposits by … buying equity in the bank.  Finance 101.

The question is, which major character in the Silicon Valley tv show would have done this? All of 'em?

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13 minutes ago, Chopper said:

FDIC coverage is $250,000 per depositor, per insured bank, for each account ownership category. In theory much more than $250k per depositor is eligible to be insured. That's because the different types of accounts that can be FDIC-insured for every depositor are: Checking accounts, Negotiable Order of Withdrawal (NOW) accounts, Savings accounts, Money Market Deposit Accounts, and Time deposits such as certificates of deposit, Cashier's checks, money orders, and other official items issued by a bank.

I am open to correction but I don't believe there's even a limit on the number of insurable CDs that one individual or bank can have.

edit - Also don't fall for the scare tactics that this is definitely going to have some huge ripple effect across the banking system. Some of the same people who've argued here that the government needs to step in have also expressed their full confidence that every depositor will be made whole when the bank's assets are sold. SVB is a regional bank and even their client industry base is very narrow. If the Fed goes through their books and comes to the determination that SVB's failure poses system risk, then they'll backstop it.

My sense is that the people screaming for federal intervention at this point, with zero proof that SVB's failure poses any risk whatsoever to the banking system, have motivations that they haven't thus far disclosed.

 

 

 

 

I understand that! Thanks for the explanation. I do wonder if anyone might be going to jail for any of this…or white collar prison. 

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  • blacklab changed the title to 2023 bank failures

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