H/T Ymani Cricket
Posted on 03/10/2023 8:56:57 AM PST by PJ-Comix
OMG!!!!!
What is the import of this? I am clueless about financial stuff.
SVB (Silicon Valley Bank) just melted down.
They’d put a bunch of their reserves, their cash, into US Govt. Bonds and mortgages which paid next to nothing.
When interest rates went up on US Treasuries, people took their money out of the bank, to buy US Treasuries since those paid more interest.
So, the bank had to sell some of their bonds to have money to pay their customers.
But since the bonds held by the bank, paid a lower interest rate than brand-new bonds, the bank lost money selling them, making the problem worse.
(Think of it this way. I’m trying to sell you a bond paying 2% a year. But let’s say you can walk down the street and buy bond from someone else, paying 5%. You’ll buy the other guy’s bond, right? Cause you can earn more.
But what if I HAVE to get the money, so I absolutely positively GOTTA sell you my bond paying 2%? Only way I can do it, is charge a lot less for it than the face value.
And if I do that, the value of all my other bonds paying 2% drops too, ‘cause everyone just found out how much I can sell it for.
And thereby hangs a tale.
You’ve heard of the Federal Reserve, right?
The CEO of this stupid bank, was involved with the SF branch of the Federal Reserve.
And also, that 2nd line I posted, one of the US District Courts has a bunch of its money tied up in this stupid bank.
90% of the bank’s deposits were uninsured.
Re: 68: - why is that surprising?
~5-7% of account holders had on deposit less than $250,000. This is a bank for big boys and girls that know the risks of such an event.
Let’s not forget - SVB is a bank of startup firms. SVB loaned money to tech startups that did not have normal collateral due to the nature of tech startups. When times were good, deposits flowed in. SVB purchased lots of Mortgage Backed Securities. Then interest rates started to rise and those MBS were not such an attractive investment. They attempted to purchase other investments to counter their losses on the MBS and ran into trouble.
For shareholders of SVB, there were warning signs starting in late 2021 when looking at the stock price. Whoever shorted SVB in the last 6 months made a tidy sum.
If you have not done so, take out ALL of your cash and buy real silver and gold. There are many sources that will deliver directly to your door securely , UPS or FED EX ground, signature delivery only.
This is one of them.
https://store.firstmajestic.com/
OMG
Possibly, also curious if regulators fashion costly, exacerbating "solution(s)" to prior regulator-created "solutions" (read: mistakes) after 2008 that lead to SVB collapse.
H/T Ymani Cricket
I worked at the FDIC during the last bank crisis. I don’t recall one instance where the insurance cap was waived. If there are any funds left over after paying insured depositors, then a process is set up where uninsured depositors may file a claim.
When the news hit Friday, I emailed our CEO, and briefly described how the process works. Our real estate company is in acquisition mode. If SVB has any multifamily assets, the FDIC will be looking for buyers. He asked me to reach out to a director I worked for, to schedule a meeting.
For example, Trump's Treasury Secretary made his fortune from the closing of One West Bank in Southern CA. He was one of a group of investors who purchased it from the FDIC. They flipped it two years later, his share of the profits was $200 million.
This is why we need honest bank regulation.
Seems we as a people always forget why such fences exist.
So if FDIC is going to cover all this loss, where does their money come from. Where is it parked?
My wife found out about a month ago that our bank, which had told us our money was all insured, had let information that my wife picked up and investigated, found only about a quarter of it or less was insured.
(this discovery predated the current issue with this Silicon Valley bank)
When we went to the bank for an appointment to discuss it today, I was sitting in the office, and reading a placard on the desk that said:
“FDIC...Backed by the faith and security of the US Government.”
I stared at that for a long time, and the more I looked at it, the more absurd it sounded to me.
There is no faith. Definitely no faith.
There is no security. Definitely no security.
Seeing those police officers outside the bank brought back memories. At a closing in Missouri, one overheard my phone call with a contractor who was not doing what he was supposed to be doing. Let’s just say it was a “terse” call.
The police officer said, “you guys are tough!” Lol, good times. I told him it was the ex-military in me.
I have no idea how they handled this one - I suspect they did the DINB because they didn't have time to shop anything before the closing.
I do know the FDIC did see the upcoming crisis and started hiring liquidation (sorry, "resolution" staff last year.
There are ways to structure accounts so that more than $250,000 can be insured, but the problem is if you tell the bank to do that, and they say they've done it, but the account records don't show that it's done exactly right, you are the one that gets screwed at the closing, not the bank. Safer to have multiple banks.
Trust the bankers to get that right at your own risk.
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