US SVB Bank failure

[Big Grey Wolf]

Guys, grab your $$ and hang on for the ride. Major Silicon Valley bank just failed. They only had assets of some where over $200 billion and failed. Just wait for the dominos to fall!

[Jim]

Hopefully the first of many to fall. Fingers crossed a couple Canadian banks go down with them.

[Big Grey Wolf]

Jim, I will not loose any sleep if some Canadian banks go down. However when to go down with my retirement $$, then I get alittle concerned.

[3blade]

Oh come on. Some boutique “bank” in commiefornia noodles the poodle and the financial world is ending?

Won’t even cause a ripple up here.

Kinda points out the obvious issues when it comes to so called venture capital firms and tech stocks that trade on speculation. Bunch of shysters trying to out shyster each other.

Investing is legalized gambling. If you play, you can lose.

[Big Grey Wolf]

SVB is only 16th largest bank in US. $209 billion in assets, just small Boutique bank?? Knocked hell out of US stock market last week! Oh, forgot it is 2nd largest bank to fail in US history.

[3blade]

Originally Posted by Big Grey Wolf

SVB is only 16th largest bank in US. $209 billion in assets, just small Boutique bank?? Knocked hell out of US stock market!

Never said it was small. But it is a very isolated incident

A dog on the side of the road can knock the hell out of the US stock market. Everyone in the US is scared of 2008. Mostly because they didn’t learn anything and still let the shysters run the show. So everyone is trying to jump the gun and guess what, some end up in front of it and get hit.

Extrapolating that to the Canadian banking system failing immediately is silly

[Trochu]

Maybe I'm wrong, but I don't feel the 16th largest bank in another country is going to effect us much.

[fishtank]

FDIC only cover $250k , over 95% of the account deposit are over that , it’s a bank for tech founders/ start ups so most deposit are in the millions , Roku has over $500 million in deposits And the USDC Stablecoin has over $3 billion in deposits with SVB . There will be some fall outs in the stock market in the coming weeks

Sorry it Roku that has 500 million deposits not Netflix.

[Big Thumper]

Originally Posted by fishtank

FDIC only cover $250k , over 95% of the account deposit are over that , it’s a bank for tech founders/ start ups so most deposit are in the millions , Netflix has over $500 million in deposits And the USDC Stablecoin has over $3 billion in deposits with SVB . There will be some fall outs in the stock market in the coming weeks

It will really hurt in CA with the setback it will cause in tech start-ups. CA doesn't seems concerned about actually having a tax base though.

Originally Posted by Big Grey Wolf

Guys, grab your $$ and hang on for the ride. Major Silicon Valley bank just failed. They only had assets of some where over $200 billion and failed. Just wait for the dominos to fall!

Looks like it was mismanagement, not a overall issue with banks. However, they are a very' woke, inclusive and diverse' bank- so, there is that. Perhaps other banks will learn that good management is better for investors and clients than woke.

[raab]

Delete

[crazy_davey]

Originally Posted by raab

Delete

Good plan.

[urban rednek]

Mismanagement? Bull feces.
This was the latest American version of grifters doing grifter things. Those who were in on it made out OK.
Deregulation of Glass-Steagall in 1999 led to the 2008 collapse. So the Dodd-Frank financial-regulatory package was put in place to prevent that from happening again; it was rolled back in 2018.

In 2015, SVB's president, Greg Barker, appeared before a senate panel to push legislators to exempt more banks- including his own- from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker's lobbying effort was ultimately successful.

Touting "SVB's deep understanding of the markets it serves, our strong risk management practices", Becker argued that his bank would soon reach $50B in assets, which under the law would trigger "enhanced prudential standards", including more stringent regulations, stress tests and capital requirements for his and other similarly sized banks.

In his testimony, Becker insisted that $250B was a more appropriate threshold.

"Without such changes, SVB likely will need to divert significant resources from providing financing from job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements", said Becker. Who reportedly sold $3.6M of his own stock two weeks ago, in the lead-up to the bank's collapse. "Given the low risk profile of our activities and business model, such a result would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk".

Around that time, federal disclosure records show the bank was lobbying lawmakers on "financial regulatory reform" and the Systemic Risk Designation Improvement Act of 2015- a bill that was the precursor to legislation ultimately signed by President Trump that increased the regulatory threshold for stronger stress tests to $250B.

Trump signed the bill despite a report from Democrats on Congress's joint economic committee warning that under the new law, SVB and other banks of its size "would no longer be subject to nearly any enhanced regulations"'

[raab]

Originally Posted by crazy_davey

Good plan.

Long story but computer got covered with coffee mid post, and enter button got hit when I was frantically trying to dry off the keyboard. 😂

Anyways, the video below has a pretty good take on the situation IMO. I do not think this is necessarily a systemic thing, but we will see how it plays out. I am sure bankers are working overtime right now to try and identify any risk they may have overlooked.

https://youtu.be/WowVQ4rhbt8

[roper1]

When I worked in US, I was well-advised to use a State bank vs an independent local. The local bank fees were a bit smaller, & they were freer with credit, but more prone to SVB type problems. I chose $ was happy with the State bank.

[bdub]

These events are happen over and over again in history as the result of bubbles deflating in one way or another. Low rates have created a few bubbles this time around. Housing, tech, crypto, NFT's, SPACS's, bonds and probably a few others I'm sure. Perhaps it's different this time now that we have all the safeguards from the last crisis firmly in place.

[ehrgeiz]

Fractional Reserve System.

I don't imagine contagion will spread on this, but a further reminder that everything is just a ponzi wrapped in a shared delusion. Every bank is susceptible to a run if the thin veneer of confidence is cracked.

But what are you gonna do.

[Grizzly Adams1]

Originally Posted by 3blade

Oh come on. Some boutique “bank” in commiefornia noodles the poodle and the financial world is ending?

Won’t even cause a ripple up here.

Kinda points out the obvious issues when it comes to so called venture capital firms and tech stocks that trade on speculation. Bunch of shysters trying to out shyster each other.

Investing is legalized gambling. If you play, you can lose.

Agreed, Start ups is a very risky business, question being how many other banks and investment funds bought in ? I notice, Flair had four of their aircraft seized for non payment of leasing fees by a " venture capital " company, seems a strange way to fund an air line.

Grizz

[Dean2]

Many of you should take the time to read the back ground info on the SVB collapse. It has ZERO to do with scams, investing in risky business or any of the other nonsense I have read on this thread. It was plain and simple, very poor management and a treasury function that was not up to the task in a bank of this size. It was also a massive failure of the risk management group and a Board that did not understand the risks Treasury was taking. This is why I keep saying, buy the very best run company in any Industry, bad management is very dangerous. As to this being a large Bank, it isn't by Canadian Standards. National Bank is twice this Bank's size asset wise, and National is the smallest by far of the Big Banks.

If you want to run around with your hair on fire fine, but at least know what caused the fire.

The BIG point that many in the media and most others are missing is SVB’s massive exposure to rising interest rates. SVB used floating rate deposits to buy fixed rate bonds. They should have swapped the bonds to floating rate - this is common practice in a well managed bank.

This risk was actually disclosed a year ago - see p92 of the document below. The key figure is -27.7% at YE21. This means that, in the event of a hypothetical sudden rise in interest rates by 2%, SVB would see a drop in its economic solvency by 27.7%. This decline is dramatic: in global bank regulations (“Basel”), a drop of over 15% is seen as unacceptable. Curiously, the number wasn’t disclosed in this year’s 10-k report.

Interest rate risk is important. Interest rate risk management is essential. Banks with excessive levels of interest rate risk can get into trouble if rates rise suddenly - which they have done recently.


0000719739-22-000023
d18rn0p25nwr6d.cloudfront.net • 619 min read
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2054

https://d18rn0p25nwr6d.cloudfront.ne...29d.pdf#page90

[Grizzly Adams1]

It was plain and simple, very poor management

When the unexpected happens and things beyond your control don't work out, it's always poor management, the financial equivalent of "Pilot Error ", sometimes stuff just happens.

Grizz

[Dean2]

Originally Posted by Grizzly Adams1

It was plain and simple, very poor management

When the unexpected happens and things beyond your control don't work out, it's always poor management, the financial equivalent of "Pilot Error ", sometimes **** just happens.

Grizz

In this case it was NOT "****e just happens". They disclosed the risk almost 2 years ago and kept doing it anyhow. That would be like a pilot that keeps flying a normal course in a 2 engine jet when one engine flames out. Doesn't declare the emergency, takes no actions to land the jet immediately and is then surprised when the second engine flames out and he crashes. You can call both pilot error, but the risk was well telegraphed and the outcome completely predictable. Had SVB reacted appropriately 2 years ago and switched to floating rate bonds, interest rates were still fairly low, they had MORE than enough time to completely avoid this crash.

[Dean2]

Just to be clear, the 10-K Disclosure showed a 28% hit at 2% interest rate rise, for about 5 billion. From Dec 2021 to now, the Fed rate has gone up 4.25%, so that is over a 65% hit and north of 11 Billion. That has a huge impact on liquidity and the ability to fund large withdrawals. I have zero sympathy for the companies that had very large deposits with SVB. Too lazy to spread the deposits around and into safe vehicles often turns out badly. There is no good reason for a Fed bail out, there are almost no retail depositors in this Bank.

[raab]

Dean knows way more then I do about banking, but I am starting to worry. https://stocks.apple.com/AUVgnMtW1QkuZXRoiAOO8jg

[Sundancefisher]

Originally Posted by Dean2

Many of you should take the time to read the back ground info on the SVB collapse. It has ZERO to do with scams, investing in risky business or any of the other nonsense I have read on this thread. It was plain and simple, very poor management and a treasury function that was not up to the task in a bank of this size. It was also a massive failure of the risk management group and a Board that did not understand the risks Treasury was taking. This is why I keep saying, buy the very best run company in any Industry, bad management is very dangerous. As to this being a large Bank, it isn't by Canadian Standards. National Bank is twice this Bank's size asset wise, and National is the smallest by far of the Big Banks.

If you want to run around with your hair on fire fine, but at least know what caused the fire.

The BIG point that many in the media and most others are missing is SVB’s massive exposure to rising interest rates. SVB used floating rate deposits to buy fixed rate bonds. They should have swapped the bonds to floating rate - this is common practice in a well managed bank.

This risk was actually disclosed a year ago - see p92 of the document below. The key figure is -27.7% at YE21. This means that, in the event of a hypothetical sudden rise in interest rates by 2%, SVB would see a drop in its economic solvency by 27.7%. This decline is dramatic: in global bank regulations (“Basel”), a drop of over 15% is seen as unacceptable. Curiously, the number wasn’t disclosed in this year’s 10-k report.

Interest rate risk is important. Interest rate risk management is essential. Banks with excessive levels of interest rate risk can get into trouble if rates rise suddenly - which they have done recently.


0000719739-22-000023
d18rn0p25nwr6d.cloudfront.net • 619 min read
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2054

https://d18rn0p25nwr6d.cloudfront.ne...29d.pdf#page90

Good summary Dean.

Curious if you have gleaned what the exposure loss is. Feds protect $250,000 in insured deposits. Tonight the Feds said insured amounts will be available to customers tomorrow and some uninsured funds also.

I also picked up that businesses may be the most at risk with their funds tied up in the bank. Payroll etc.

[slough shark]

Originally Posted by ehrgeiz

Fractional Reserve System.

I don't imagine contagion will spread on this, but a further reminder that everything is just a ponzi wrapped in a shared delusion. Every bank is susceptible to a run if the thin veneer of confidence is cracked.

But what are you gonna do.

Well there has been another bank to fail now, New York based signature bank, 110 billion in assets. Monday just might be an ugly day on the markets while everyone waits to see if there are more.

[fishtank]

There are a few banks free falling …. Probably get halted as the market open.

[bdub]

Gosh sure is funny how a couple small bank failures in the States can spread contagion risk around the globe.

They all, every bank in the world has these long duration bonds on their books that, mark to market right now, they would take a big haircut. When depositors come to pull out the cash the banks don't have the funds because they are locked up in these bonds that are worth far less than they were before the FEDs started jacking rates up in a straight line.

And now Biden before the open is trying to calm the markets...Don't panic, nothing to see here. We will backstop all depositors. Talk about spreading moral hazard. Be thankful we live in Canukistan where this just doesn't happen.

Could be a decent buying opportunity in bank stocks? What assets do Canadian banks own in the US? TD has a 10% stake in Schwab which is down 36+% in the last week for starters.

[58thecat]

2008 all over again?

Yanks dollar dips buy up a bunch and sit and wait

[bdub]

And I just noticed that the CEO of TD sold $1.5million worth of shares last Monday lol. Good timing.

[ehrgeiz]

^
Geez hey, what luck that guy must have had to guess the good timing of that sale!

[ehrgeiz]

Should be a curious week for BTC.

There is all of the sudden a bunch of tech CEO's wondering where the hell they should put their reserve treasure where it isn't subject to counter-party risk.

Could see a lot of corporations all of the sudden starting or growing how much BTC they hold in self custody.