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Off-Topic Stock Market & Crypto Discussion
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Not listed in the results so I have to assume due to it being private they aren't required.
SVB is heavily involved in tech startups. Those start-ups deposit large sums of VC raise capital at SVB then use the cash to pay bills as needed. When you factor in a down-turn of liquidity, slow down of the economy, changes to tax code on R&D, and likely some really bad investments happening you get a bank that has a run on deposits.
Most of the major banks are likely in a better position so long as the slowdown of our economy doesn't last for 3,4,5 years.
mr.h
I hate F$U and ND
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We should se a 25 or a pause..inflation is less serious than treasuries and bond funds, that we’re bought up earlier, that are now getting killed. Some banks held Bitcoin too.
This could take away my soft landing scenario.
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After SVB, I doubt we get above 5.5% and likely see the FED cutting rates in 6-9 months assuming the bank run gets worse. IF for some reason things cool off, the FED may be able to get 1-2 more hikes in before we find something else that cracks. Commercial lending could be the next shoe that drops as ARMs renew at higher rates leading to defaults...
In short, the FED is not going to beat inflation this go-round so bonds are not likely to see big highs.
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I sure am glad we had leadership who, in the wake of 2008, put measures in place to ensure we'd never have a bank fail again.
Its actually a bigger deal than the tweet is implying, hundreds of billions of uninsured deposits at SVB, First Republic and other potentially shaky banks
While the Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000 even in the event of a bank’s collapse, the deposits of many corporate customers are far beyond that mark. In its last annual 10-K filing, Silicon Valley Bank estimated that, at the end of 2022, it has deposits of $173.1 billion, with about $165.4 billion, or nearly 96 percent, uninsured by the state or federal government.
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This might be the reason why the data appears to be conflicting.
www.wsj.com
Falling Survey-Response Rates Undermine Economic Data
The declines skew government measures of inflation and the job market.
www.wsj.com
Remember that banks are sitting on probably a $1T+ of mark to market losses on their bond portfolios, so my sense is, unless the Feds guarantee ALL deposits (which they shouldnt, it creates unnecessary risk taking), logic says we are going to have more bank runs.
Said another way, If I am a corporate treasurer of any entity, PE fund, charity, etc. why would I keep money at First Republic and other smaller banks? There could be nothing wrong with them (I doubt it), but why risk your career/reputation?
What that also means is that the stock market is headed down still, and that the Fed will have to pause raising and (especially) QT much earlier than thought just one week ago.
Said another way, If I am a corporate treasurer of any entity, PE fund, charity, etc. why would I keep money at First Republic and other smaller banks? There could be nothing wrong with them (I doubt it), but why risk your career/reputation?
What that also means is that the stock market is headed down still, and that the Fed will have to pause raising and (especially) QT much earlier than thought just one week ago.
Its a top 20 bank, so it should have had a stress test, but in any case, even without a stress test its pretty easy to figure out that the bank had a YUGE mark to market problem, so in addition to poor management, the regulators effed up.
This is what I am referring to, why would anyone in their right mind have cash over $250K at First Republic and similar institutions?
Total deposits at First Republic were $176.4 billion, or 90% of its total liabilities, as of Dec. 31. About 35% of its deposits were noninterest-bearing. And $119.5 billion, or 68%, of its deposits were uninsured, meaning they exceeded Federal Deposit Insurance Corp. limits.
Total deposits at First Republic were $176.4 billion, or 90% of its total liabilities, as of Dec. 31. About 35% of its deposits were noninterest-bearing. And $119.5 billion, or 68%, of its deposits were uninsured, meaning they exceeded Federal Deposit Insurance Corp. limits.
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I'm sure they'll be called to task for missing it. If there's one thing that certain in government work, it's accountability.
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Can't the Fed just buy SVB's medium/long-term holdings (which will make money) giving SVB the cash they need to refund the deposits? Doesn't SVB have the collateral, just isn't fully liquid? ESPECIALLY after you consider the FED knowingly is the driving force in causing this. They literally expected stuff to break in the financial system by their actions. So it seems to me like the Fed (or others) buying these assets/debts for a reasonable price would be the best way out of this mess.
While I agree we shouldn't bail out companies that take big risks or are incompetently ran, having >40% of depositors make a bank run in one day is a pretty difficult thing to hold off. And ultimately if nobody trusts these smaller not too-big-to-fail banks, it'll ultimately just consolidate banking into the like 3 main players that WILL get backed, and the people could be even worse off for it.
While I agree we shouldn't bail out companies that take big risks or are incompetently ran, having >40% of depositors make a bank run in one day is a pretty difficult thing to hold off. And ultimately if nobody trusts these smaller not too-big-to-fail banks, it'll ultimately just consolidate banking into the like 3 main players that WILL get backed, and the people could be even worse off for it.
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Goldman, Lehman, SVB all played in higher-risk investments. I'd rather not support the behavior with FED or Fiscal funds.
I do think this will lead to some additional runs. This is why CBDC (central bank digital currency) is actually important. Organizations and individuals should be able to quickly move deposits from Bank A to B or Offline(not paper) via blockchain. Currently, you have to stand in line and hope to get to the teller before the bank is out of funds.
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Sure but at the same time the Fed just raised rates quicker than like ever before in history AND they had a large bank-run. And it's not like taking over their assets would A) lose the Fed money once those mature or B) would really be considered a "bail out".
Are we assuming that SVB has enough invested in quality mid/long-term investments to pay off all deposits? I'm not sure I'd be willing to assume that at this point.
I agree with @90scane , you simply cant reward or encourage risky behavior.
One of the key issues is that last year, fixed income as a whole lost about 15%. You and I felt in our portfolios, but banks do not have to mark to market. So as I noted earlier, ALL of them are sitting on huge mark to market losses, even on their Treasury holdings.