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2023 bank failures


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1 hour ago, wackawacka said:

This is categorically untrue. Globally systematically important banks have to mark their portfolio to market and have liquidity requirements that SVB and other regional banks who have assets under $250b do not. 

The liquidity requirements alone would have triggered a change in their portfolio approach. Additionally, it would not allowed them to be surprised by loses on long dated treasury as those loses were only realized when sold vs GSIBs have to make their portfolio to market.

What is categorically untrue? I'm not sure what you actually have an issue with.

GSIBs do not have the option to "opt-out" of AOCI recognition, but that makes absolutely no difference here. Zero. It is all reported with 100% clarity in the call report regardless of if they are recognizing it or not. Please describe what additional "liquidity requirements" SVB would have been beholden to. Describe in detail as I am always looking to build out my blind spots. Is it net noncore funding dependence? Is it the basic liquidity ratio calculation? Days to negative? I'm very interested, tell me what FRB did not see that would have been seen in an enhanced regulatory environment. 

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1 hour ago, Mullet Free said:

If the SVB failure was simply caused by psychology, how would you explain the rest of the failures seemingly following it in line? All the effect of shaken confidence?

What multiple bank failures are you referring to? Signature and....?

What CAMELS component(s) was most deficient in the SVB and SB failure? What was the regulatory trigger than took them down? Capital? Nonaccrual loans? Looking for actual analysis rather than cursory high level talk.

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On 3/15/2023 at 1:02 PM, Chewbacca said:

No, I don't think most do.  That's kind of my point here.  Bankers are, for the most part, pretty conservative people.  However, if one were predisposed to do so, guaranteeing deposits does not change that.

Guaranteeing deposits does nothing to change bank behavior. It does everything to change depositor behavior. 

On 3/15/2023 at 1:23 PM, Beau Vine said:

What's really incredible about this story to me is that SVB got killed by duration mismatching, which, if I were teaching an Intro to Commercial Bank Management class, would literally be the one thing that I would want to make sure everyone understood by the end of the semester.  

It's like a lawyer getting a case thrown out for misnumbering exhibits.

It’s insane how stupid whatever they were transacting and their inability to properly address it through their risk management procedures. Like mind-numbingly Banking 101 shit. 

On 3/15/2023 at 3:09 PM, Buzzrock said:

SVB’s deposits tripled during the two years that $6T extra dollars were printed and dumped into the world. I can’t believe the two things were completely unrelated.

I heard an economist say the Fed is acting as arsonist and firefighter. Funny.

Doesn’t excuse the bank runners on the duration mismatch. Huge blunder.

Money is extremely fungible but their deposits took off with money pouring into tech. While funny, linking the Fed as the arsonist would be impossible to do. 

On 3/16/2023 at 11:45 AM, Skipper said:

Most likely nothing.  Depositors are just fleeing smaller/regional banks in droves.  

Yes. And this is precisely WHY we needed the action we got one week ago, @Dahobbs, because without it it’d have been disastrous. 

On 3/16/2023 at 3:04 PM, Aqua Buddha said:

Good write up on the parallels between these few banks and Penn Square from back in the day.  I thought that was a more local story but I guess it was national.  I was surprised how quickly the business media brought it up.  Basically, they made a bunch of loans to a sector that hid the skids.  Balance sheet went bad and rising rates wiped them out.  With PS, the contagion was limited to the one sector (O&G).  May play out like that now.  These are all tech heavy banks and the others, even the mid sized, don’t seem to have the same problems.

https://www.axios.com/2023/03/15/the-silicon-valley-bank-crisis-parallels-to-the-1980s

I can’t see any parallels at all. Both unique situations. PS was caught up in Texas O&G, CRE and S&L scandal, and was making huge asinine loans. SVB was TOTALLY different and a much much better bank. 

On 3/16/2023 at 4:43 PM, Samson's Wig said:

I don't know why the so-called experts are missing the obvious part of this story.

Silicon Valley Bank  |  Signature Bank  |  Silvergate Bank

Do you see it?

 

If you have money in the following banks, watch your cornhole (not a complete list):

Sidney State Bank

Silex Banking Company

Silver Lake Bank

Simmesport State Bank

Simmons Bank

Simply Bank

Siouxland Bank

 

Samsonite Bank. You were way off. 

On 3/16/2023 at 10:11 PM, Fudge Nuggets said:

I was told the Fed doesn't do bailouts.

It doesn’t. 

On 3/17/2023 at 11:08 AM, washparkhorn said:

C14E3E6E-DF4F-4D5E-A2C7-077768C10C78.jpeg.48d29b1db9e5ec2516974e48cea3e235.jpeg

 

Dumb. King of dumbass populist rep. 

9 hours ago, Auto Driller said:

I think we all know why nothing was done despite adequate warning signs. The executives and large account holders at SVB ran in the right social circles and possibly/probably donated to the right politicians. Regulators never fuck with “their people”. It’s pretty reliable that the only ones who are consistently under scrutiny are the poors.

If you know banking regulators this is 100% wrong. 

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19 minutes ago, Jackson P. Neighbors said:

What is categorically untrue? I'm not sure what you actually have an issue with.

GSIBs do not have the option to "opt-out" of AOCI recognition, but that makes absolutely no difference here. Zero. It is all reported with 100% clarity in the call report regardless of if they are recognizing it or not. Please describe what additional "liquidity requirements" SVB would have been beholden to. Describe in detail as I am always looking to build out my blind spots. Is it net noncore funding dependence? Is it the basic liquidity ratio calculation? Days to negative? I'm very interested, tell me what FRB did not see that would have been seen in an enhanced regulatory environment. 

Not a banking regulation expert so going to mishmash my wording due to the lack of mark to market that the bank did not have the recognize the loses on the loans until they sold the treasuries. As a result, the capital reserve lose was recognized all at once when they sold the treasuries vs GSIBs who have had to continual mark their books to market resulting in hedging and managing their capital reserve. You see this with JPM who came out months ago saying they would not touch long date treasuries with a 10 foot pole because it was clear that interest rates would rise causing loses on these investments having to be realized.

The regional banks did not have to realize these loses because of mark to market rules and were forced to sell because deposit draw down was accelerating. Because SVB deposit base was shrinking so fast (mostly VC money being lite on fire by tech) and lack of new funding from VCs into the ecosystem, SVB had to shore up its capital reserve. The only way to do that was sell its loan book. If SVB had to mark to market, they would had to months ago change their capital reserve sooner and not all at once. 

Arguably if they had to mark to market and loses were born over time instead all at once, you would not have had the mass panic causing the capital flight.

Lots of mistakes were made including how GS handled the equity raise which was comically bad. That does not change the situation where mark to market could have prevented the situation.

I don't have the specifics on liquidity but understood that is related but not wholly dependent on mark to market on loan portfolio to test ability to sell assets on reasonable prices to test if a bank can handle reasonably extreme market movements.

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10 minutes ago, wackawacka said:

Not a banking regulation expert so going to mishmash my wording due to the lack of mark to market that the bank did not have the recognize the loses on the loans until they sold the treasuries. As a result, the capital reserve lose was recognized all at once when they sold the treasuries vs GSIBs who have had to continual mark their books to market resulting in hedging and managing their capital reserve. You see this with JPM who came out months ago saying they would not touch long date treasuries with a 10 foot pole because it was clear that interest rates would rise causing loses on these investments having to be realized.

The regional banks did not have to realize these loses because of mark to market rules and were forced to sell because deposit draw down was accelerating. Because SVB deposit base was shrinking so fast (mostly VC money being lite on fire by tech) and lack of new funding from VCs into the ecosystem, SVB had to shore up its capital reserve. The only way to do that was sell its loan book. If SVB had to mark to market, they would had to months ago change their capital reserve sooner and not all at once. 

Arguably if they had to mark to market and loses were born over time instead all at once, you would not have had the mass panic causing the capital flight.

Lots of mistakes were made including how GS handled the equity raise which was comically bad. That does not change the situation where mark to market could have prevented the situation.

I don't have the specifics on liquidity but understood that is related but not wholly dependent on mark to market on loan portfolio to test ability to sell assets on reasonable prices to test if a bank can handle reasonably extreme market movements.

You have a good high-level grasp of the issues at hand, and I concur with many of your points. However, I do not agree that any sort of mark to market recognition of AOCI losses would have averted this situation. As I said, all of the exposure is very clearly identified in call report data:

image.thumb.png.436a6c45208974963d62064d572d4a46.png

You can even see that AOCI _increased_ in the 4Q as interest rate increases moderated. Most recent Q is on the left.

I also previously posted that SVB is not even in the top 100 banks nationwide for AOCI/Total Deposit ratio. Its not even close. Mickey mouse mark to market accounting had zero to do with this failure. Not excusing dumb investment decisions at all but that is not what caused this failure. A $42B run in one day will ruin any institution over $250B and subject to all the "enhanced regulatory" screening out there.

Again, you seem to have a nice hold on the subject at hand, and I enjoy the discussion and am very interested in both giving and receiving knowledge about this disaster. But don't tell me that anything I am typing about is categorically untrue.

 

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3 hours ago, Jackson P. Neighbors said:

A few comments:

Of course they would have, and I guarantee they had ongoing capitalization stress tests done internally all the time. This is just how banks that size operate despite the uninformed comments here. There is zero that would have been done differently considering the D-F $250B threshold and the so-called rollbacks. For those that care, a stress test is a set of pre-defined economic scenarios that attempt to describe an adverse operating environment and the output is what an institution's capital adequacy, earnings performance, asset quality, liquidity, and market risk/sensitivity position would look like given such a scenario. There is no proscribed model to carry out a scenario, it is up to each institution to develop their own which is then scrutinized and blessed by the regulator. If you happen to be a stats nerd, think of the overall scenario as a 95% adverse VAR case. Basically a very extreme outlier economic situation. What SVB encountered was well beyond that and cannot be effectively modeled. Just like it is impossible to model fraud, it is equally impossible to model a bank run. "Human nature" is not a measurable value to be used as an independent variable in multivariate regression.

Regarding the post about the Fed having 'heightened attention' or somesuch on SVB, this is just to try and get out ahead of inevitable upcoming criticism of FRB regulation by congress. MRA (matters requiring attention) are not uncommon and are outlined in examination reports. These are issues to be addressed by bank management but they are not legal issues. This is a very important but poorly understood fact. If the Fed had ongoing, long-term serious regulatory issues with SVB, a publicly-available Enforcement Action/Formal Agreement/Cease and Desist order would have been issued in the normal channels. This is what such a document looks like: Order to Cease and Desist (federalreserve.gov) There may have been plenty of issues identified in a recent regulatory exam, but they did not rise to the level of a public notice. This is a fact.

This was simply a bank run driven by self-fulfilling hysteria. And frankly, that is much scarier than an actual failure due to capital or bad loans or fraud or insider conduct. The government and public cannot guard effectively against a run. It is gut wrenching to look at what is happening right now and to know there is no easy way out.

 

 

 

Ok banker

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1 hour ago, Jackson P. Neighbors said:

What multiple bank failures are you referring to? Signature and....?

What CAMELS component(s) was most deficient in the SVB and SB failure? What was the regulatory trigger than took them down? Capital? Nonaccrual loans? Looking for actual analysis rather than cursory high level talk.

I can’t provide actual analysis. I am more of a high level person. I trust the people with obvious experience over my assessment. That’s why I follow this thread and ask people like you questions.  
 

As an example I basically equate bailouts to failures so I would throw First Republic and now Credit Suisse in that bucket. So are those just psychological phenomena or is there something wrong in the system?

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9 hours ago, Jackson P. Neighbors said:

You have a good high-level grasp of the issues at hand, and I concur with many of your points. However, I do not agree that any sort of mark to market recognition of AOCI losses would have averted this situation. As I said, all of the exposure is very clearly identified in call report data:

image.thumb.png.436a6c45208974963d62064d572d4a46.png

You can even see that AOCI _increased_ in the 4Q as interest rate increases moderated. Most recent Q is on the left.

I also previously posted that SVB is not even in the top 100 banks nationwide for AOCI/Total Deposit ratio. Its not even close. Mickey mouse mark to market accounting had zero to do with this failure. Not excusing dumb investment decisions at all but that is not what caused this failure. A $42B run in one day will ruin any institution over $250B and subject to all the "enhanced regulatory" screening out there.

Again, you seem to have a nice hold on the subject at hand, and I enjoy the discussion and am very interested in both giving and receiving knowledge about this disaster. But don't tell me that anything I am typing about is categorically untrue.

 

It was the definitive nature of the original post is my issue. I believe where we fundamentally disagree is impact on mark to market. Very few people are looking at company financials much less are customers. There is a reason that regional banks are overwhelming impacted by this issue while GSIBs are not.

 

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10 hours ago, Jackson P. Neighbors said:

What multiple bank failures are you referring to? Signature and....?

What CAMELS component(s) was most deficient in the SVB and SB failure? What was the regulatory trigger than took them down? Capital? Nonaccrual loans? Looking for actual analysis rather than cursory high level talk.

Correct me if I’m wrong, but wasn’t Credit Suisse having issues before recent events? 
 

 

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11 hours ago, AUS-97HORN said:

dammit this is starting to feel like 2008 again. 

 

 

In 2008 they put up some semblance of guardrails in the wake of the disaster.  This time they bailed out the banks, fundamentally changed the market with guarantees, and then did nothing else to prevent this from happening again...a blank check check and a pat on the wrist

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11 hours ago, AUS-97HORN said:

dammit this is starting to feel like 2008 again. 

 

 

what's the saying, history doesn't repeat itself, but it rhymes.  Not quite the same as 2008 but investor psychology is all going back to that period.   We are in the FAFO phase of a decade of zero interest rate policy.  Depositors are going to pull cash and put it into various not bank required products that are 'safe'.  Yields are being pushed down across the board due to both fear of growth and capital flows. 

Regulation would not have stopped this mess from showing up.  This is poor risk management at banks combined with a Fed driven balance sheet nuke and severe capital control issues by VCs and their underlying companies.  

I'm aware of a company that had $20mm in deposit at SVB along with a very small loan line.  They were required, as part of their loan covenants, to keep the cash on deposit at the bank.  Could not do anything else with it.

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4 minutes ago, babysdaddy said:

I'm aware of a company that had $20mm in deposit at SVB along with a very small loan line.  They were required, as part of their loan covenants, to keep the cash on deposit at the bank.  Could not do anything else with it.

If I were to put on my """free market capitalist""" hat, I'd have to tell them that's a tough titty and they should have factored that risk in when choosing a bank. If they couldn't otherwise access liquidity, maybe that's a good signal they might be too risky themselves. If it was just a matter of SVB giving them a sweeter deal thanks to their clearly higher tolerance for risk, then why shouldn't that company FAFO?

 

...

 

Now I don't think that's exactly right or fair to the employees of that company to get fucked because of a bad management decision, but that is what's supposed to happen in an actually free market economy. Instead now, we must protect the investors at all costs who decided to bank with a riskier but more profitable bank

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11 hours ago, Jackson P. Neighbors said:

You have a good high-level grasp of the issues at hand, and I concur with many of your points. However, I do not agree that any sort of mark to market recognition of AOCI losses would have averted this situation. As I said, all of the exposure is very clearly identified in call report data:

image.thumb.png.436a6c45208974963d62064d572d4a46.png

You can even see that AOCI _increased_ in the 4Q as interest rate increases moderated. Most recent Q is on the left.

I also previously posted that SVB is not even in the top 100 banks nationwide for AOCI/Total Deposit ratio. Its not even close. Mickey mouse mark to market accounting had zero to do with this failure. Not excusing dumb investment decisions at all but that is not what caused this failure. A $42B run in one day will ruin any institution over $250B and subject to all the "enhanced regulatory" screening out there.

Again, you seem to have a nice hold on the subject at hand, and I enjoy the discussion and am very interested in both giving and receiving knowledge about this disaster. But don't tell me that anything I am typing about is categorically untrue.

 

 

2 hours ago, wackawacka said:

It was the definitive nature of the original post is my issue. I believe where we fundamentally disagree is impact on mark to market. Very few people are looking at company financials much less are customers. There is a reason that regional banks are overwhelming impacted by this issue while GSIBs are not.

 

 

10 minutes ago, babysdaddy said:

what's the saying, history doesn't repeat itself, but it rhymes.  Not quite the same as 2008 but investor psychology is all going back to that period.   We are in the FAFO phase of a decade of zero interest rate policy.  Depositors are going to pull cash and put it into various not bank required products that are 'safe'.  Yields are being pushed down across the board due to both fear of growth and capital flows. 

Regulation would not have stopped this mess from showing up.  This is poor risk management at banks combined with a Fed driven balance sheet nuke and severe capital control issues by VCs and their underlying companies.  

I'm aware of a company that had $20mm in deposit at SVB along with a very small loan line.  They were required, as part of their loan covenants, to keep the cash on deposit at the bank.  Could not do anything else with it.

 

thanks for the discussion.  i agree with jackson and babysdaddy.  the dodd frank repeal didn't matter.  no LCR is going to stem a $40+ B outlay in the matter of a week, much less one day.  and if you consider the extreme scenario of marking all of their HTM and AFS to market this would still have occurred albeit at an earlier date.  

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4 minutes ago, Neonmoon said:

So for the "bank crisis", we have 

SVB - classic bank run due to panic of poor CAMEL 

Signature Bank - Crypto problems

Credit Suisse - Decades of shit

First Republic  - Saved by JP Morgan, but related to the SVB issues?

Silvergate - FTX exposure (crypto problem)

SVB - bank run / poor CAMEL

Signature - had similar CAMEL to SVB, didn't have as drastic a bank run, but deposit flight from SVB news was snowballing.  Their crypto clients had nothing to do with anything except how the Feds handled them

First Republic - same as Signature, except no crypto clients, so Feds "helped" banking sector throw them a lifeline

Janet Yellen testifying that Fed backstop is only for systemic risk banks (big boys in the club) is contributing to deposit flight for companies and high net worth individuals with uninsured deposits in regional banks,.

UBS takeover of CS doesn't mean European bank stress is resolved.  CS is a big bank and ...

Quote

...
Neil Shearing, group chief economist at Capital Economics, said a complete takeover of Credit Suisse may have been the best way to end doubts about its viability as a business, but the "devil will be in the details" of the UBS buyout agreement.

"One issue is that the reported price of $3,25bn (CHF0.5 per share) equates to ~4% of book value, and about 10% of Credit Suisse's market value at the start of the year," he highlighted in a note Monday.

"This suggests that a substantial part of Credit Suisse's $570bn assets may be either impaired or perceived as being at risk of becoming impaired. This could set in train renewed jitters about the health of banks."

https://www.cnbc.com/2023/03/20/ubs-shares-tumble-after-emergency-rescue-of-rival-credit-suisse.html

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Bold emphasis is mine:

Quote

WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association, by Flagstar Bank, National Association, Hicksville, New York, a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York.

The 40 former branches of Signature Bank will operate under New York Community Bancorp's Flagstar Bank, N.A., on Monday, March 20, 2023. The branches will open during their normal business hours. Customers of Signature Bridge Bank, N.A., should continue to use their current branch until they receive notice from the assuming institution that full-service banking is available at branches of Flagstar Bank, N.A.

Depositors of Signature Bridge Bank, N.A., other than depositors related to the digital banking business, will automatically become depositors of the assuming institution. All deposits assumed by Flagstar Bank, N.A., will continue to be insured by the FDIC up to the insurance limit. Flagstar Bank's bid did not include approximately $4 billion of deposits related to the former Signature Bank's digital banking business. The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business. Questions may be directed to (866) 744-5463.
...

https://www.fdic.gov/news/press-releases/2023/pr23021.html

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13 minutes ago, bernorange said:

Signature - had similar CAMEL to SVB, didn't have as drastic a bank run, but deposit flight from SVB news was snowballing.  Their crypto clients had nothing to do with anything except how the Feds handled them

also unfortunately a victim of poor timing.  if the run had started at the beginning of the week instead of the beginning of the weekend they would have been able to access FHLB credit.  as it happened that two-day combo of sat and sun was their ultimate demise.

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30 minutes ago, Neonmoon said:

So for the "bank crisis", we have 

SVB - classic bank run due to panic of poor CAMEL 

Signature Bank - Crypto problems

Credit Suisse - Decades of shit

First Republic  - Saved by JP Morgan, but related to the SVB issues?

You forgot the part about the Fed pledging about $2T in stimulus via an emergency loan facility. 

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12 minutes ago, wildcat09 said:

So FDIC is giving their depositors their shitcoin deposits back and you're mad about that?

FDIC effectively split off and debanked their crypto clients.  Operation Choke Point is in full effect and the peanut gallery is cheering.  Surly leftists sure love them some Eye of Sauron when it targets folks they don't like.

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5 minutes ago, bernorange said:

FDIC effectively split off and debanked their crypto clients.  Operation Choke Point is in full effect and the peanut gallery is cheering.  Surly leftists sure love them some Eye of Sauron when it targets folks they don't like.

your point is noted, Mr. Liberterian upset because of lack of government intervention.

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6 minutes ago, DefinitelyNotHollywoodColt said:

your point is noted, Mr. Liberterian upset because of lack of government intervention.

I think you have misunderstood my posts.  "lack of government intervention" is not what has irked me on this issue.  Quite the opposite. 

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SVB had zero hedging in place even though they bet heavily on the side of continued low interest rates. I don't know how you pass a stress test when you're a bank who hasn't hedged a lick of the securities in your portfolio but maybe the Fed doesn't look at that type of thing for the TFTF banks, though it would be completely asinine if they didn't. SVB could have hedged just as easily as any of their clients.

 

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15 minutes ago, Chopper said:

SVB had zero hedging in place even though they bet heavily on the side of continued low interest rates. I don't know how you pass a stress test when you're a bank who hasn't hedged a lick of the securities in your portfolio but maybe the Fed doesn't look at that type of thing for the TFTF banks, though it would be completely asinine if they didn't. SVB could have hedged just as easily as any of their clients.

 

Go back and read @Jackson P. Neighbors post up thread…the bank didn’t do anything wrong. Just bad luck really.

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9 minutes ago, Chopper said:

SVB had zero hedging in place even though they bet heavily on the side of continued low interest rates. I don't know how you pass a stress test when you're a bank who hasn't hedged a lick of the securities in your portfolio but maybe the Fed doesn't look at that type of thing for the TFTF banks, though it would be completely asinine if they didn't. SVB could have hedged just as easily as any of their clients.

 

Yes.  

Agreed that it's crippling to have ~15% of deposits drawn in 2 days.  Panic and self-fulfilling prophecy is difficult to stress test against.  But that's assuming a bank has reasonably hedged its risk.  How much of the panic was from big depositors that had the wherewithal to understand interest rate hedging and how interest rates affect the underlying value of the treasuries in a rising interest rate environment?  Even if it's a small percentage, that might have been enough to exacerbate the run to critical levels.

It's inexcusable to run any non-speculative business - especially one this size - without addressing the single biggest risk factor in its continued success.  Hedge fund wants to take that position - that's fine - LPs' dollars are locked up and presumably able to lose everything.  But a commercial bank with $250B of depsosits?  That's insane.

The incompetence with SVB is staggering, regardless of whether it was kosher with regulations.  Where's the common sense?  Interest rate swaps matching some percentage of the debt, with the same tenors.  Those unrealized hedges carry MTM value and can be liquidated quickly, in theory offsetting the loss on selling treasuries before maturity 1:1.  Unless there's some Byzantine regulation I'm unaware of (and please correct me if I'm off here), why was this not done?

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3 hours ago, Captainant said:

If I were to put on my """free market capitalist""" hat, I'd have to tell them that's a tough titty and they should have factored that risk in when choosing a bank. If they couldn't otherwise access liquidity, maybe that's a good signal they might be too risky themselves. If it was just a matter of SVB giving them a sweeter deal thanks to their clearly higher tolerance for risk, then why shouldn't that company FAFO?

 

...

 

Now I don't think that's exactly right or fair to the employees of that company to get fucked because of a bad management decision, but that is what's supposed to happen in an actually free market economy. Instead now, we must protect the investors at all costs who decided to bank with a riskier but more profitable bank

Idiotic post is idiotic but consider the author. Again, most loans attained require you to hold all deposits related to the entity receiving the loan at that bank. This is standard. If you don’t like it, you don’t have to take the loan. If you go down the street, the next bank will require the same. And if that’s considered “riskier” for the Borrower, please point to the banks that’ve failed aside from SVB and SB.  I’ll hang up and listen with baited fucking breath  

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15 minutes ago, Porterhouse said:

Idiotic post is idiotic but consider the author. Again, most loans attained require you to hold all deposits related to the entity receiving the loan at that bank. This is standard. If you don’t like it, you don’t have to take the loan. If you go down the street, the next bank will require the same. And if that’s considered “riskier” for the Borrower, please point to the banks that’ve failed aside from SVB and SB.  I’ll hang up and listen with baited fucking breath  

Reading this thread and talking to non-transactional attorneys this week, it's been kind of amazing to me that some assumed "prudent" companies spread deposit risk across 20+ different banks or that their lenders would have ever allowed them to do that. 

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51 minutes ago, DefinitelyNotHollywoodColt said:

Go back and read @Jackson P. Neighbors post up thread…the bank didn’t do anything wrong. Just bad luck really.

I read it. I agree in part, and am skeptical in part. If SVB had bothered to mitigate their risk they wouldn't have had the credit rating problem they had with Moody's which it seems to me was the trigger (edit: I should have written, it was a key trigger, certainly not the only one) for the run. Also if they had been treated as TBTF I don't see the Fed just turning a blind eye to the huge, unhedged bets they made. I'll just leave it at that because I'm not certain what other conclusion we're meant to draw from his post.

I heard a former FDIC director say on Preet Bharara's podcast that if there had been a 10 percent haricut across the board for SVB's depositors that would have avoided a bailout. I think it's a huge mistake treating them like their TBTF; we've not seen anything showing their failure was a systemic risk. But if the FDIC now wants to treat every bank failure as deserving of a bailout, that seems likely to require congressional action, which was something else the former FDIC director (Sheila Bair) said. 

Edited by Chopper
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NYT had a good story about the hour by hour stress from one of the tech founders that had all of their accounts at SVB.  Even the company credit cards were there.

Then, there was this kid bit at the end.  Stop with the cool start ups and get a fucking bank:

I knew I would have to wake up really early on Monday to try and initiate the wire transfer out of SVB. I was trying to figure out how early. Did Monday morning mean midnight? That would be 9 p.m. Pacific on Sunday. I quickly figured out it wasn’t 9 p.m. We also got a new credit card from this company called Ramp, and I was able to move charges to the Ramp card.

https://www.nytimes.com/2023/03/18/business/silicon-valley-bank-collapse.html

 

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49 minutes ago, DefinitelyNotHollywoodColt said:

Go back and read @Jackson P. Neighbors post up thread…the bank didn’t do anything wrong. Just bad luck really.

They had some bad luck AND they did a lot of things horribly wrong.  And lot of that bad luck was their own creation - their depositors were hyper-concentrated in in the most volatile part of the most volatile sector in the economy.  

 

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41 minutes ago, Skipper said:

Reading this thread and talking to non-transactional attorneys this week, it's been kind of amazing to me that some assumed "prudent" companies spread deposit risk across 20+ different banks or that their lenders would have ever allowed them to do that. 

They don’t have a choice and it doesn’t matter 100% of the time. 

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47 minutes ago, Chopper said:

we've not seen anything showing their failure was a systemic risk. 

Huh?  Tens of Billions in deposits were moved from regionals to top 4 banks last week.  It had absolutely nothing to do with any actual balance sheet risk at those banking institutions and 100% to do with CEO realization/panic that there is deposit risk outside of a clear TBTF bank.   It was a social media/twitter induced panic like we've never seen.   Without the FDIC's announcement Sunday it would have been worse and I'm 100% confident additional banks would have failed as no bank can withstand an all out run on deposits.   There will be long term ramifications of the last 10 days that still aren't clear but I don't think positive outcome for anyone.

Even on the micro level I needed to send a wire today for a personal investment which I do 3-4X annually.  This was the first time BOA didn't waive the wire fee.  Branch manager told me they took the button away from him.  So without even thinking through what this means for small and regional bank lending and the impact that will have on growing businesses, mega banks no longer needing to compete for deposits is not ideal for the consumer either.

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  • blacklab changed the title to 2023 bank failures

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