Silicon Valley Bank Collapse: Not Every Bank Failure Necessarily Means Disaster

Trading Desk ^ | 03/10/2023 | Hillary Kramer

[dynachrome]

Nothing to see ere. Move along.

[oldplayer]

These same folks could hardly wait to FORCE Oklahoma and Texas banks to fold back in the great crash in the oil fields.

Let Silicon Valley Bank fold and their employees and uninsured depositors learn to code.

[11th_VA]

SVB won't lead to massive bank failures

The vaccine will prevent the virus

...

[lasereye]

It is possible that the collapse of SVB could actually help the stock market. It could force the Fed to stop raising interest rates.

[Dennis M.]

But that will not stop our gov from spending. This is a real rock and hard spot situation. Time for some pop corn.

[CFW]

Well, that is some major gas-lighting. Plus, I’ve heard this tune before. Back in 2008 just before the tax-papers had to bail out several banks and businesses.

The fact that this bank’s troubles were hidden from investors and depositors until today shows me that there is more trouble ahead in the financial sector. When Janet Yellen testified there were several banks they were “keeping an eye on” she didn’t say which ones, but I believe she mentioned the tech sector. I suspect this is not the only shoe to fall.

[CFW]

Stopping increases in the interest rate would do great things for the stock market, but awful things for inflation.

I’m getting an awful 2008 or even 1970’s feeling here. I’m afraid there is no soft landing in our near future.

[DannyTN]

Hate to be the bearer of bad news, but the government needs to get ahead of this thing and quickly. They need to boost confidence in the banking system to prevent deposits from flowing out of the weaker banks. Things the government can do:

• They just raised the capital rates on the banks to 11%. They could temporarily lower them back to 8% or even lower to stave off more banks having to sell assets prematurely.
• The can slow or temporarily stop the rate increases, giving banks time to adjust their asset portfolios.
• Steven Van Metre said that the Federal Reserve is competing against banks for deposits buy buying up $500B of overnight repurchase agreements at 4.74%, which it then offers to money market funds after a haircut. Van Metre, suggested the FED should lower their rate back below what banks were offering and quit competing against them. Widespread Panic Hits the Banks as Fears of a Systemic Liquidity Crisis Cause a Massive Bank Run Steven Van Metre
• Cathie Wood of Ark Invest has been saying the FED has gone too far. And she thinks these bank failures will be a wake up call and cause a change in the conversation at the FED. Is The Fed Listening? | ITK with Cathie Wood Great analysis!!

[Governor Dinwiddie]

"Not Every Bank Failure Necessarily Means Disaster …"

[J. Worthington]

USDC Stablecoin is dropping now. Down 10% now. Trading suspended.

[aquila48]

What exactly triggered the SVB meltdown?

Was it a run in the bank? And if so, what caused it?

[pepsionice]

You can go to 8 Feb (CNBC segment) and see the ‘leak’ starting on public attention spiraling. I would make a guess that already by late December....insiders to the bank were in distress.

[cgbg]

This article sounds like an “equity” hire airline pilot announcing on the loud speaker that the passengers need not worry about the bumpy ride—what they should be worried about is that the pilot has never landed a plane before....

;-)

[Angelino97]

But we need the FDIC to move fast here to liquidate its assets and make uninsured depositors whole.

Why do we "need" that?

[Captain Peter Blood]

Because a number of companies have a lot of money in that bank they need back. Don’t think for moment that calls were not made and favors are being called in to have deal ready for some sort of bail out by Monday to sort it all out. The Fed will be expected to step in and make something happen under the guise that the entire banking sector needs to be stable.

All the banks are sitting with Bond Portfolios that are going under water because of Rate Hikes and will not be able to unload them except at a loss. Powell is now in a really tight position, he will be under Big Pressure for no more rate hikes and even possibly a rate cut to stabilize the mess of our own making. No good choices here.

[DannyTN]

My understanding from both Steven Van Metre and Cathie Wood is that a lot of banks are sitting on unrealized losses due to the unprecedented rate hikes.

But what caused started it with SVB was two things. SVB is highly concentrated with customers in Venture capital and their start up clients. Venture is perceived to have too much risk right now, so people were withdrawing their deposits.

And the bank was offering lower interest rates than money markets, so depositors were also shifting deposits from the bank to money markets.

This forced the bank to sell some of the assets that were underwater due to the rate hikes. When they did, they had to recognize a huge loss. And they tried to raise capital to get their capitalization ratio back up.

The market saw that and panicked.

Not sure what caused the other bank, but their clients were heavily crypto. And they were under some of the same interest rates are better elsewhere pressure that SVB was.

[DannyTN]

SVB announced the need to raise capitals Wednesday.
There was a large 10%? drop in the price of the stock on Thursday. Not sure how many deposits were withdrawn.
But on Friday the stock literally crashed and the FDIC stepped in and took over.
Peter Thiel? who has a lot of venture capital relations, ordered everyone of his funds out of the bank.

So yeah it was a run.

[Tupelo]

A deep Recession or even a Depression will certainly take care of Washington’s inflation problem. ‘That’s for sure. That’s for danged sure.’

[Repeat Offender]

The bank mainly handled investments in risky tech startups. 90% of the bank’s deposits were uninsured.

Explain to me again why I need to pay gambling debts for the wealthy and make those uninsured losses “whole.”

In your benevolence and endless supply of currency, do you think you could find a little extra make the losses to my portfolio whole? I sure would appreciate it.