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Post by bobfl on Mar 11, 2023 22:27:08 GMT
Any thoughts? I remember when Bank of America was forced to take Merrill Lynch. Their debt traded a long time afterwards. And Lehman's debt was assumed by another bank and still traded. SVB debt still shows up and sells for 20% less than the price during the low last year. I read the problems are because the FED rates are high, depositors are pulling deposits to get yields in Treasuries. Then the deals that they financed with deposit money started to be cashed out. Then I read that it is because it is a niche bank dealing with startups. Their funding is drying up. So SVB has less deposits to finance SVBs investments. Next I read it is because of Crypto companies they financed. Also attempted a stock offering to get more cash, but the run stopped that. Fortunately I passed on SVB last year and is the reason I quickly sold First Republic Bank when I grabbed its debt last year. First Republic Bank kept issuing stock for some reason and had a ton of FDIC filings. You never know.
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Post by racqueteer on Mar 12, 2023 0:32:30 GMT
Just as a semi-aside: My son called me concerning an apparent social media drumbeat to pull money out of banks on Monday. Not sure how many will actually DO that, but it appears that the start of the week may be a little exciting for banks!
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Post by retiredat48 on Mar 12, 2023 0:58:23 GMT
SVB also being discussed on another thread...
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Post by Mustang on Mar 12, 2023 1:03:24 GMT
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Post by Capital on Mar 12, 2023 11:35:09 GMT
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Post by yogibearbull on Mar 12, 2023 12:21:13 GMT
IntraFi for Large Deposits at BanksFor a small fee, IntraFi (old ICS/CEDARS) would auto-split large $amounts into multiple FDIC insured banks, or you can do this yourself. www.intrafi.com/solutions/depositors/
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Post by bobfl on Mar 12, 2023 12:37:51 GMT
SVB also being discussed on another thread... Found it. From that thread I am attaching Yogibearbull's post from Barrons because it states the case nicely: Pg 12: All BANKS/FINANCIALS sold off last week (KRE, KBE, XLF). But most differ from SVB Financial/SIVB (and Silvergate/SI). The problem with SIVB was a large loss on huge forced-sale of available-for-sale (AFS, market-to-market) Treasuries, and its efforts for raising capital failed (and the Fed or the FHLB didn’t step in for the rescue). Most large banks have diversified businesses, are well capitalized and can tap multiple sources of funding. While rising RATES are generally good for banks, some overleveraged banks with poor quality loan-books get squeezed. DEPOSITS are also moving from banks into higher-rate Treasuries and money-market funds. SIVB was really a bank for venture-capitalists (VCs) who are sophisticated investors that can move large amounts of money (its sudden closure during the business hours may have been to limit that flight). In better times, SIVB just parked excess deposits into Treasuries that it had to sell suddenly at depressed prices (due to higher rates now). All banks now have large unrealized losses that may be hidden within their hold-to-maturity (HTM, not marked-to-market) portfolios – really, a permissible accounting trick. (In a bank run, the distinction between HTM and AFS basically disappears) Large banks also have tougher regulations and undergo annual stress-tests by the Fed. So, this general selloff offers opportunities in banks now – FITB, HBAN, JPM, KEY, MTB, PNC, RF, USB, etc.
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Post by Fearchar on Mar 12, 2023 13:20:36 GMT
Looks to me that KeyCorp may be the best buy:
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Post by retiredat48 on Mar 12, 2023 15:58:57 GMT
Re-posted here from a parallel thread: -------------------- ..... Yes...bailouts for all...forever. Why doesn't the fed just allow a complete SVB bankruptcy?? Yes, payoff (or redirect to another bank) the depositors up to $250,000 and under. Let the rest play itself out. Defaults will be sent along to the next person/company until the losses can be absorbed. IOW if you think the fed is not "bailing out the rich here", then why doesn't the fed just stop after relieving the up to $250,000 FDIC depositor. BTW I am not that sympathetic with the (sometimes self-serving) argument by startup companies etc (depositors of millions) that they will not be able to make payroll Monday. First, how many have Monday payrolls? Usually Friday. Second, what are these companies doing having all their cash/assets in one bank. A bank holiday or closing having such a big impact. Heck, I have accounts with three separate banks and monies at both Fidelity and Vanguard, so if anyone is closed, I can still operate. Like, if Fido hacked, I can use Vanguard. I predict what you will see here, when dug down deeper, is that the same people who were investors of SVB, are the same people who received loan benefits, who are the same people who had millions dollar accounts in SVB. Lot of back scratching going on. Like: SVB will loan startup X the money to startup, provided you keep your operational cash in SVB, and perhaps become a shareholder of SVB as well. Keep the bank growing! Some of this comes from skuttlebut from my daughter who works in wine business in NAPA. You will see about 2% of depositors are NAPA wine country people, and the underground always knows what is happening. Those wine owners got deposits out quicker than you could say "Jackie Robinson."(an old timers saying). R48
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Post by FD1000 on Mar 12, 2023 16:18:29 GMT
www.fidelity.com/news/article/top-news/202303120102RTRSNEWSCOMBINED_KBN2VE02V-OUSBS_1US preparing to stem SVB fallout with 'material action'-sources
BY LANANH NGUYEN, PETE SCHROEDER AND SARAH N. LYNCH, REUTERS - 30 MINUTES AGO TOP NEWS Email Facebook. Twitter. LinkedIn. Print NEW YORK (Reuters) -U.S. authorities were preparing "material action" on Sunday to shore up deposits in Silicon Valley Bank and stem any broader fallout from its collapse, sources familiar with the matter told Reuters. Biden administration officials worked through the weekend to assess the impact of startup-focused lender SVB Financial Group's failure, with a particular eye on the venture capital sector and regional banks, the sources said. Earlier, U.S. Treasury Secretary Janet Yellen said she was working with regulators to respond to the implosion of SVB, which on Friday became the largest bank to fail since the 2008 financial crisis.
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Post by yogibearbull on Mar 12, 2023 16:25:19 GMT
Many startups & early-stage companies were required to use SVB Bank for substantial deposits (payroll, corporate purposes, etc) as condition of their funding via the VCs + SVB Bank. They had no choice.
2 thoughts.
May be there can be 2 kinds of FDIC insurance - for individual & corporate a/c. They can have different fees & conditions.
During the GFC, the Fed/Treasury guaranteed all m-mkt funds (for unlimited amounts) for 10 bps insurance fee for 2008-10. There were no claims in those 2 years. Something like this can be brought back for banks + m-mkt funds. It's confidence that is at stake.
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Post by retiredat48 on Mar 12, 2023 16:57:37 GMT
I posted above: "You will see about 2% of depositors are NAPA wine country people, and the underground always knows what is happening." ---------------------------- Here's one: Here is startup winery owner racecar driver Danica Patrick: linkR48
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Post by whisper on Mar 12, 2023 17:33:30 GMT
Yeller says no bailout. Of course, because "bailout" is a word with negative connotations. It will be called "restoration" or something like that. But it will be a bailout.
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Post by bobfl on Mar 12, 2023 20:12:18 GMT
Yeller says no bailout. Of course, because "bailout" is a word with negative connotations. It will be called "restoration" or something like that. But it will be a bailout. Do I remember 2008 correctly? The government concluded it was all the people down stream that they had to protect. So they made deal after deal to keep the whole banking system and automobile industry from imploding. The government let one bank fail and 2 auto companies restructure through bankruptcy. Also remember that Warren Buffet bought very profitable preferreds from one bank to save it. They had to give him the deal of a lifetime. I remember the savings and loan collapse, vaguely. Not too clear, but I remember many years ago, many banks failed. Now the government jumps in to merge banks. Not even sure the FDIC has enough funds to cover many bank failures. So the government has to stop the failures. I remember how pissed the BAC CEO was when the government made him take Merrill Lynch. They threatened him big time and MADE him take it. BAC made money off that deal after the economy recovered.
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Post by Deleted on Mar 12, 2023 20:39:28 GMT
Yeller says no bailout. Of course, because "bailout" is a word with negative connotations. It will be called "restoration" or something like that. But it will be a bailout. Do I remember 2008 correctly? The government concluded it was all the people down stream that they had to protect. So they made deal after deal to keep the whole banking system and automobile industry from imploding. The government let one bank fail and 2 auto companies restructure through bankruptcy. Also remember that Warren Buffet bought very profitable preferreds from one bank to save it. They had to give him the deal of a lifetime. I remember the savings and loan collapse, vaguely. Not too clear, but I remember many years ago, many banks failed. Now the government jumps in to merge banks. Not even sure the FDIC has enough funds to cover many bank failures. So the government has to stop the failures. I remember how pissed the BAC CEO was when the government made him take Merrill Lynch. They threatened him big time and MADE him take it. BAC made money off that deal after the economy recovered. Good and rational post, Bob! I would add that the government made money off of TARP too. Though I believe we may have lost some money on the GM stock that they eventually sold. Despite all the talk at that time of "moral hazard", I doubt very much that anyone here would be better off today had it gone laissez faire.
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Post by Deleted on Mar 12, 2023 20:41:44 GMT
Apologies in advance for trying to post some actual facts, at least what is known at this time. And for not immediately politicizing this event, before all the facts are even known. "The collapse may have been an unforced, self-inflicted error: The bank’s management chose to sell $21 billion of bonds at a $1.8 billion loss, in large part, it appears, because many of those bonds were yielding an average of only 1.79 percent at a time when interest rates had risen drastically and the bank was starting to look like an underperformer relative to its peers. Moody’s was considering downgrading its rating. The bank’s management — with the help of Goldman Sachs, its adviser — chose to raise new equity from the venture capital firm General Atlantic and also to sell a convertible bond to the public." "It appears that the bank’s management successfully lobbied regulators in 2015 to loosen rules that might have prevented it from taking some of the risks it did. The Lever news organization reported about testimony that the company’s president made to the Senate at the time seeking to weaken some rules." There appears to be no credibility to those claiming this was due to a focus on "global warming" or "wokeness" or "virtue signaling". Or that the DOJ will fail to pursue bad actors. Those who advance such notions, without evidence, should be viewed with a great deal of skepticism for their willingness to politicize and falsely characterize events. And for their eagerness to grasp at such opinions. Those here that have advanced such notions have been known to repeatedly lament about politics on investment forums. It wouldn't surprise me one bit, if the bank's CEO goes to jail for "insider trading" for his selling stock options on the eve of the collapse. And maybe he should. No one should be above the law, not CEOs or very wealthy individuals or the politically connected. www.nytimes.com/2023/03/11/business/dealbook/silicon-valley-bank-collapse.html
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Post by newtecher on Mar 12, 2023 20:50:48 GMT
Those who advance such notions, without evidence, should be viewed with a great deal of skepticism for their willingness to politicize and falsely characterize events. And for their eagerness to grasp at such opinions. Those here that have advanced such notions have been known to repeatedly lament about politics on investment forums. +1
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Post by archer on Mar 12, 2023 21:06:11 GMT
Yeller says no bailout. Of course, because "bailout" is a word with negative connotations. It will be called "restoration" or something like that. But it will be a bailout. Do I remember 2008 correctly? The government concluded it was all the people down stream that they had to protect. So they made deal after deal to keep the whole banking system and automobile industry from imploding. The government let one bank fail and 2 auto companies restructure through bankruptcy. Also remember that Warren Buffet bought very profitable preferreds from one bank to save it. They had to give him the deal of a lifetime. I remember the savings and loan collapse, vaguely. Not too clear, but I remember many years ago, many banks failed. Now the government jumps in to merge banks. Not even sure the FDIC has enough funds to cover many bank failures. So the government has to stop the failures. I remember how pissed the BAC CEO was when the government made him take Merrill Lynch. They threatened him big time and MADE him take it. BAC made money off that deal after the economy recovered. Interesting, the shift from the problem of "too big to fail" to perhaps too many to keep track of? I was, and am still in agreement with the reasoning behind Gov aid to large businesses like that given in 2008, but I can understand it being a bitter pill to swallow for many.
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Post by Fearchar on Mar 12, 2023 21:34:10 GMT
Ramin provides a primer on banking, the Silicon Valley Bank and a bit on what actions may be announced. He covers both a US and UK perspective. www.youtube.com/watch?v=NwyOTDNaKCA
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Post by bobfl on Mar 13, 2023 2:47:05 GMT
I retired from what was the third largest software company in the US. The CEO went to prison because he posted the closing of a big software sale one day early at the end of a quarter so he could get a bonus. Now I see so many unpunished violations. Oh, except for Martha Steward. :-) The company I worked for eventually merged with Qualcomm.
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Post by bobfl on Mar 13, 2023 12:58:09 GMT
In a stunning decision: From the American Banker (a publication for the banking industry) and Bloomberg News: REGULATION AND COMPLIANCE In abrupt reversal, regulators to cover Silicon Valley Bank, Signature uninsured deposits By Kyle Campbell Claire Williams March 12, 2023, 8:18 p.m. EDT
SVB-SIGNATURE The Treasury Department authorized a "systemic risk exception" Sunday night, allowing regulators to cover all uninsured deposits at Signature Bank of New York, which was closed on Sunday, and Silicon Valley Bank, which was closed on Friday. Bloomberg News WASHINGTON — In a stunning decision, federal regulators issued a systemic risk exception to protect uninsured customer deposits at Silicon Valley Bank of Santa Clara, California, in the wake of the bank's sudden failure on Friday, and the Federal Reserve announced the creation of a lending facility large enough to cover all the insured deposits in the banking system.
The regulators also said they would enact a similar systemic risk exception for Signature Bank of New York after its state chartering authority closed the bank on Sunday.
Regulators are seeking to insulate the rest of the banking system from the contagion effects of the two failures, including the potential for runs at other financial institutions that cater to specific industries.
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Post by mnfish on Mar 13, 2023 13:28:57 GMT
I'm too simplistic to understand so explain if you can.
I create a startup company based on some app I hope to sell. I get $100k from my parents and others for seed money. I present my app to a group of investors(a VC?) and they agree to invest for a portion of my company's profits down the road(hopefully) and agree to back a loan from the bank for $1m. The bank agrees and deposits $1m in my checking account and only $250k is insured and requires my company to keep the money there. I hire 10 people to help with development. The bank has many of these relationships, rates rise and things quickly become iffy. The VC calls me and says pull out your money and I am successful in moving it to another bank.
Who owes the first bank the remaining balance of the $1m loan?
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Post by liftlock on Mar 13, 2023 14:09:02 GMT
I'm too simplistic to understand so explain if you can. I create a startup company based on some app I hope to sell. I get $100k from my parents and others for seed money. I present my app to a group of investors(a VC?) and they agree to invest for a portion of my company's profits down the road(hopefully) and agree to back a loan from the bank for $1m. The bank agrees and deposits $1m in my checking account and only $250k is insured and requires my company to keep the money there. I hire 10 people to help with development. The bank has many of these relationships, rates rise and things quickly become iffy. The VC calls me and says pull out your money and I am successful in moving it to another bank. Who owes the first bank the remaining balance of the $1m loan? You, or your start up company, still owes the loan to the bank that lent you the money. You loan is still an asset owned by the bank. Another bank or VC firm may come along and buy your loan, but they are not likely to pay full price for it because of the risk that you, or the VC company that backed your loan, may be unable to repay the loan.
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Post by johnsmith on Mar 13, 2023 16:40:25 GMT
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Post by Deleted on Mar 13, 2023 17:51:43 GMT
The current debate about bank regulation and loosening of restrictions has been raging for over a decade now. It seems to be rather black and white. Either one monitors and regulates banking activity at all levels to PRECLUDE such events from happening or we deal with them as they occur.
Obviously rate hikes had an impact on this situation. Still, unless we start seeing multiple banking entities fail for a similar reason, this was bad decisions and bad management. SVB and GS both had a hand in this.
I don't understand this fixation on semantics. From the linked article - "Is it a "bailout" if it doesn't cost the government anything to do it? And even if it is a "bailout", if it doesn't cost the government anything to do it is it still a bad thing to do? Why is fixing a problem a bad thing? Why must the finger be pointed at those offering solutions that appear to benefit all concerned?
If finger-pointing must occur, why can we not focus the blame on the bad decisions and the bad actors? From those who lobbied to loosen regulations, to those who accommodated them, to those who eventually made the bad decisions and to those who made it even worse with bad advice?
The FED has been perfectly clear that they are going to raise rates until inflation is demonstrably under control. Should they stop because a couple banks requested more lax oversight and then used that lack of oversight to go out on a limb? Then GS helped saw off that limb? Should we let the chips fall (fail to intervene), knowing that those who will probably be most impacted are people who had no part in the making of the problem - employees, landlords, creditors, depositors, vendors? And that events like this are capable of destroying the wealth of everyone involved in the investing community?
Who here prefers to take a 20-30% haircut, after a very bad 2022, and write it off to "no bailouts" and "moral hazard"? A little contagion can go a long way. Hey, everyone can scoop up the bargains from the wreckage. It'll be great.
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Post by retiredat48 on Mar 13, 2023 18:08:50 GMT
Some thoughts...the amount of a "haircut" or loss the UNINSURED DEPOSITORS would have is estimated to be, worse case, 10%. And may take some time to unwind. But the assets are there to pay 90% of amounts depositors have on deposit.
So, why not let this play out? Let them take the haircut. Fed, don't shift this to be a cost born by the public...as you try to "make everyone whole."
R48
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Post by retiredat48 on Mar 13, 2023 18:27:15 GMT
There's all this talk by the President et al that there is no public money being used, as the FDIC insurance will pay things, even for non-insured depositors.
I see it differently. This is the use of "public money." Let me explain with an analogy.
Consider FLOOD INSURANCE. The fed provides voluntary flood insurance home policies to people across the USA. Sometimes even insuring absurd homes, located in extreme risk areas. Let's say 50% of population buys such insurance.
And a lot of smug millionaires pass on the flood insurance, deciding to self insure...or simply risk it. They pay nothing for years.
Comes a time a major flood occurs in one area of the country. The fed dusts off its policies and pays the insurers their due. But wait, the fed/and president/and regulators want to pay off (make whole) everyone, even the uninsured. They take from the insurance pool kitty, enough to pay off all these uninsured homeowners.
Clearly, such money is coming from gvt holdings...from reserves meant to help insure all USA flood policy holders. To make this "policy" permanent requires all homeowners to pay insurance (perhaps at increased costs), or live with the "moral hazzard" that what you are doing is unfair to many.
Ditto for bank failures. "Making whole" uninsured depositors is doing what the flood insurance analogy did. A moral hazzard...as a minimum. And a host of many other unintended consequences.
R48
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Post by johntaylor on Mar 13, 2023 18:31:44 GMT
Tad early to claim moral hazard, or know if other banks are similarly situated, or who to send to Coventry if it can be pinned on a political pariah
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Post by Deleted on Mar 13, 2023 22:28:58 GMT
So did US Govt. just said there is effectively no limit on FDIC insurance on bank deposits? that is US govt. will always make people whole on bank deposits.
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Post by acksurf on Mar 13, 2023 22:53:27 GMT
Apologies in advance for trying to post some actual facts, at least what is known at this time. And for not immediately politicizing this event, before all the facts are even known. "The collapse may have been an unforced, self-inflicted error: The bank’s management chose to sell $21 billion of bonds at a $1.8 billion loss, in large part, it appears, because many of those bonds were yielding an average of only 1.79 percent at a time when interest rates had risen drastically and the bank was starting to look like an underperformer relative to its peers. Moody’s was considering downgrading its rating. The bank’s management — with the help of Goldman Sachs, its adviser — chose to raise new equity from the venture capital firm General Atlantic and also to sell a convertible bond to the public." "It appears that the bank’s management successfully lobbied regulators in 2015 to loosen rules that might have prevented it from taking some of the risks it did. The Lever news organization reported about testimony that the company’s president made to the Senate at the time seeking to weaken some rules." There appears to be no credibility to those claiming this was due to a focus on "global warming" or "wokeness" or "virtue signaling". Or that the DOJ will fail to pursue bad actors. Those who advance such notions, without evidence, should be viewed with a great deal of skepticism for their willingness to politicize and falsely characterize events. And for their eagerness to grasp at such opinions. Those here that have advanced such notions have been known to repeatedly lament about politics on investment forums. It wouldn't surprise me one bit, if the bank's CEO goes to jail for "insider trading" for his selling stock options on the eve of the collapse. And maybe he should. No one should be above the law, not CEOs or very wealthy individuals or the politically connected. www.nytimes.com/2023/03/11/business/dealbook/silicon-valley-bank-collapse.htmlReally? Going most of 2022 without a Chief Risk Officer..at a bank is not a good look. Meanwhile SVB was quite active on the ESG front getting an A rating and promising all kinds of loans for "sustainable businesses" (they might have tried to sustain their own business a bit better!). Furthermore, the "G" really is in question when your CEO is/was a Dir Federal Reserve Board of San Francisco Federal Reserve Bank. On another note, Barney Frank (aka Mr. Bank Regulation) was a board member at Signature Bank which also was taken over recently by FDIC. No inside ball/politics anywhere to be found I guess, just hard working folks. Wish I was part of that club. That NY Times snipped is also highly politicized - nothing to see here, move along folks! Come on man!
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