Posted on 03/10/2023 8:56:57 AM PST by PJ-Comix
Silicon Valley Bank has been closed by regulators, which have taken control of the bank’s deposits, the Federal Deposit Insurance Corporation announced Friday.
The California Department of Financial protection and Innovation closed SVB, and named the Federal Deoposit Insurace Corporation as the receiver.
The FDIC has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
Yeah, you might want to read the ZeroHedge piece in #2 which articulates that BOA is not in much better shape than SVB for a similar "unrealized loss" position, and then goes on to lay the doom on regionals:
"Which boils down to the following: if depositor confidence in the regional/small bank sector is now shot - and after both Silvergate and SIVB it very well may be - we will see a small (to medium if not larger) deposit run among the regionals which could prove devastating for these reserve-constrained banks which will need to scramble to raise capital a la SIVB in what eventually transforms into a death spiral for the sector, especially if depositors take one look at what is going on with regional bank prices - which have been in freefall in the past two days - and extrapolate what may come next"
Why is this important? Because BOA is a top-3 holder of CRE debt, and regionals compose banks 4,5,6,7,8,9,10 on CRE debt list. If BOA even gets the sniffles because of the "unrealized loss" problem that just took down SVB, there will be a chain of defaults at regionals and the CRE debt market will implode and 2024 is gonna look a lot like 2008.
Welcome back, President Trump!
Thanks. Nice and succinct!
I just saw that. Wow.
Anyone who set up a long-term bond portfolio where 97% of the bonds had a maturity of 10+ years and had an average yield 1.56% is 'effing retarded.
It was loading up on low-interest treasury bonds that did in SVB.
Ten years at that rate! Jeez, just get T Bills.
This is much wider than just Silicon Valley Bank. Look at all the other bank holding company stocks taking a beating today. There are about a dozen. There will be more second-tier banks being taken over by the regulators this weekend and next week.
Not all depositors were rats.
But more money needs to go to Ukraine!(/S)
I never said that. I do know that less that 4% of the depositors were under $250k, and that doesn't strike me as a middle class clientele .
My energy stocks got hammered harder than the banks, it seems!
A married couple can set up three separate accounts and be insured up to $750,000-$250,000 each: husband, wife, and husband and wife.
Fraud in the ordinary sense is also unlikely to be involved. The Silicon Valley Bank fell prey to a poor loan strategy that picked investments -- US Treasury bonds -- that are utterly safe as to repayment but were at risk due to their locked in low interest rates. In effect, the bank was losing money due to the way that its Treasuries fell in value due to inflation.
Although regulators may be fended off with a so-called hold to maturity valuation for Treasuries, markets and depositors know better because they can do the math and see that the liability side of the bank's balance sheet -- deposits -- was becoming greater than the declining actual market value of its assets in the form of low interest loans to the US government.
When that happens and the thin cushion of shareholder capital and reserves is inadequate, a bank technically becomes insolvent. Share prices collapse and large depositors rush to get their money out, which soon makes a forced sale under FDIC auspices or a liquidation inevitable.
There is a larger issue that so far seems to have escaped comment. Go to the bank's website and have a good laugh at their ESG goals and utter wokeness. The Silicon Valley Bank would have been far better off without that kind of trendy codswallop and instead have put cautious, traditional bankers in charge. They would have recognized US Treasuries as a bad investment due to rising inflation and interest rate risk.
One does not even need a green eye shade and wear dull suits and sensible lace up shoes to see that, but you do have to ignore woke nonsense and see things as they are. The big, big fraud that is going on is the way that the inflation spurred by Joe Biden and the Democrats is eating up the value of low interest loans to the US government.
Uh oh....Lots of wealthy leftist snobs around that area.
“Go to the bank’s website and have a good laugh at their ESG goals and utter wokeness.”
Wokeness/virtue signaling is a great way to hide criminal fraud.
Key officers dumped their stock in the last couple of weeks.
Got the same basic message after logging into my Wells Fargo account.
“ but even large depositors will likely be made whole by the FDIC and the Fed…”
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Maybe… but the FDIC insurance cap is $250,000 per depositor per account.
So it depends upon how deposits at the bank are “structured”. It’s individual depositors without financial savvy who could get burned.
As for Cramer, i bet dollars to donuts that Comcast/NBCUniversal were heavily invested in SVB. Probably was told to shill SVB.
The FDIC insurance cap is almost always waived for individual depositors. As a matter of policy, my guess is that it will also be waived for corporate depositors in this instance because of the economic and political importance of venture capital.
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