Silicon Valley Bank is a particularly scary failure. Here's why.

yahoo ^ | 3-10-23 | Alistair Barr

[dynachrome]

At the end of 2022, SVB had uninsured deposits in its US offices of $151.5 billion, versus total deposits of $173 billion. That's 88% of all SVB deposits that didn't have FDIC insurance.

[dynachrome]

Lots of $$$ going bye-bye

[lump in the melting pot]

Sounds like they had a lot of stupid, gullible clients...

[SaveFerris]

They should have named it SBF

[Dan in Wichita]

I wonder how they’re going to blame this on Trump and/or the GOP.

[Romulus]

Oh dear how sad never mind.

[TalBlack]

Ok so where did those total deposits go? What ate them

[Rlsau1]

Can one say “money laundering “?

[Alberta's Child]

I get the exact opposite impression. If 88% of its deposits aren’t insured, then this bank failure doesn’t seem to be affecting many people.

I’d be more concerned with a bank failure where 0% of its deposits aren’t insured.

[absalom01]

But their ESG score was solid!

[POWG]

I worked for FDIC for many years. We always had a small number of people with way more than the insured limit in their accounts ($100,000 per customer back then). However, it was never anywhere near 40% uninsured. That’s unbelievably bad money management.

[blackdog]

Here's the rub....Tech firms weren't making any money. They were borrowing "earnings" at 1.5% and enjoying speculative stock values rising 5% every quarter. As long as cash is available for less than 5%, the scheme continues.

Uh-oh! Cash is at 5.5%. "Big Bada-Boom"!

[Alberta's Child]

It sounds like most of the uninsured SVB deposits are in business accounts, not personal accounts.

[POWG]

The deposits are loaned out for cars, real estate or whatever. The loans are the assets and deposits are the liabilities. Only a small part of the deposits are kept on hand (liquid) for day to day transactions.

[tired&retired]

SVB political contributions in 2022

Warner, Mark $8,300 $5,800 $2,500 Candidate (D-VAS2)

Schumer, Charles E $5,800 $5,800 $0 Candidate (D-NYS2)

Barnes-Israel, Stu $4,900 $4,900 $0 Candidate (R-IN09)

Warnock, Raphael $3,387 $3,387 $0 Candidate (D-GAS2)

Harder, Josh $3,000 $3,000 $0 Candidate (D-CA10)

Neumann, Cora $2,800 $2,800 $0 Candidate (D-MT01)

Meeks, Gregory $2,500 $0 $2,500 Candidate (D-NY05)

DNC Services Corp $2,432 $2,432

https://www.opensecrets.org/orgs/svb-financial-group/summary?id=D000057336

[bunkerhill7]

This bank was acting like a venture capitalist group. They sent out thousands of messages, for years and years, to startups who were unsuccessful in obtaining venture capital funding. That there, folks, is your problem.

[DannyTN]

What can depositors in Silicon Valley Bank expect regarding their deposits

ChatGPT using WebChatGPT extension to grab recent Web aticles:

"Depositors in Silicon Valley Bank can expect to receive up to $250,000 in insured deposits from the Federal Deposit Insurance Corporation (FDIC) [1][7]. However, depositors with uninsured deposits exceeding $250,000 may not receive all their money back, as the bank reported that 87.5% of its $173.1 billion in deposits were uninsured as of the end of 2022 [8]. The FDIC said it will pay uninsured depositors an advance dividend in the next week and a certificate for the remainder of their account balance, to be funded by the sale of Silicon Valley Bank assets [3]. However, it is uncertain if the regulator will recover enough money from selling Silicon Valley Bank assets to fully compensate uninsured depositors [1][4]. Congress and regulators are urged to learn from Silicon Valley Bank's collapse [9]."

Things, I'm hearing. Large banks have plenty of cash on hand. It's small and regional banks that could have trouble. Banks don't have a problem if they can hold their investments to maturity.

The problem is when depositors start withdrawing funds forcing the banks to sell assets that have lost value due to the interest rate hikes. Selling assets early forces the banks to recognize losses. And if their capitalization is low, then they have to raise capital. Raising capital throws up a red flag that causes panic withdrawal of deposits, exasperating the problem.

Insured Depositors will eventually get all of their money back through the FDIC.

Uninsured depositors will have to wait for the FDIC to liquidate the assets that Silicon Valley Bank was holding. And that can take a while. And while I'd expect they would get most of their money, it won't be immediate.

If you're a startup, maybe you don't need those funds immediately. But if you do, you could be screwed.

[Nifster]

Doesn’t make it better

[FreedomVsControl]

I hate to even type this, but watch Biden and the Dems come out next week and announce that they will make all the “woke” millionaires in Silicon Valley whole, above and beyond the FDIC limits.

I hope the Repubs can stop them.

[tired&retired]

Contributions by Party of Recipient

Cycle Total Democrats % to Dems Republicans % to Repubs
2022 $51,139 $37,902 79.71% $9,647 20.29%

2020 $204,395 $185,446 92.65% $14,713 7.35%

2018 $80,913 $56,366 69.79% $24,400 30.21%

2016 $75,981 $62,339 82.13% $13,566 17.87%

2014 $49,811 $32,400 65.05% $17,411 34.95%

2012 $105,322 $68,656 65.19% $36,666 34.81%

2010 $36,090 $30,340 84.65% $5,500 15.35%

2008 $43,500 $33,400 76.78% $10,100 23.22%

2006 $28,010 $20,400 72.83% $7,610 27.17%

2004 $69,825 $65,525

[Alberta's Child]

It means the problem may not be extensive and may affect very few people compared to a typical bank failure.