View Full Version : Silicon Valley Bank
I feel like Rob here starting the Covid thread, but anyone else very concerned about our financial system today? Anybody got any words of comfort and wisdom? I fear we are hitting 2008 again.
frugal-one
3-12-23, 11:12am
Why do you feel this way?
Yellen isn't too concerned and she's not bailing them out.
Why do you feel this way?
because it was announced on a Friday, when they announce the really bad news, and the news was quickly saying, there's no contagion impact, and I feel like it is being downplayed to avoid a panic.
I think banks are not regulated to help people. My main concern is the high interest rates on credit cards. which the states get to control, not the Feds. I never have to pay it, as i pay it off every month, but for anyone who got into debt trouble the 24-25% interest rate insures they will NOT EASILY recover, even if they stop spending. It is loan sharking. Banks own pawn shops, same day loans....There needs to be more regulation of those things. I believe usury is a crime unless the banks do it. I realize people spend foolishly and just hide their heads...I have family members who fell into the trap and didn't learn. I know others who did and with determination recovered.
I am most concerned about contagion and bank runs on Monday, and the impact on the stock market. But so far, it has impacted some Etsy sellers and wineries, who have been locked out of their accounts. I think this is going to be bigger than the initial spin is trying to say, that it is contained within the startup industries.
I just read several articles on SVB’s situation in the Economist (I’m a subscriber). There are a number of factors that make SBV’s situation unique. We’ll have to see what the feds do. I couldn’t tell if it will have a big impact or not. The fact that it catered to start-ups is part of its issues.
dado potato
3-12-23, 6:39pm
In the 1930s when there was a run on a bank, the tellers were often directed by branch managers to count the money very slowly for customers who were making withdrawals. Thus, the lineup of depositors got longer and more emotional about the situation.
In the era of online banking, depositors who have an alternative bank account elsewhere can make transfers out of the panic bank by electronic funds transfer (EFT) or by wire. Silicon Valley Bank was rapidly "cleaned out" by online withdrawals.
I understand that First Republic Bank (FRC) settled with the Federal Deposit Insurance Corporation (FDIC) that effective 3/10/2023 FRC is no longer processing any wire transfers. I wonder if EFTs have become difficult or impossible at FRC. If so, it is the modern equivalent of instructing the bank tellers to count slowly.
The resolution of bank liquidity issues will always be cloaked in secrecy. Depositors will certainly be able to withdraw deposits up to the limit of FDIC insurance.
I believe that misinformation is worse than no information at all. It is difficult for me to obtain reliable information. So here we are, living with the known unknowns.
In the 1930s when there was a run on a bank, the tellers were often directed by branch managers to count the money very slowly for customers who were making withdrawals. Thus, the lineup of depositors got longer and more emotional about the situation.
In the era of online banking, depositors who have an alternative bank account elsewhere can make transfers out of the panic bank by electronic funds transfer (EFT) or by wire. Silicon Valley Bank was rapidly "cleaned out" by online withdrawals.
I understand that First Republic Bank (FRC) settled with the Federal Deposit Insurance Corporation (FDIC) that effective 3/10/2023 FRC is no longer processing any wire transfers. I wonder if EFTs have become difficult or impossible at FRC. If so, it is the modern equivalent of instructing the bank tellers to count slowly.
The resolution of bank liquidity issues will always be cloaked in secrecy. Depositors will certainly be able to withdraw deposits up to the limit of FDIC insurance.
I believe that misinformation is worse than no information at all. It is difficult for me to obtain reliable information. So here we are, living with the known unknowns.
Signature Bank was just closed, too. I guess we will see what tomorrow brings when it comes.
In the 1930s when there was a run on a bank, the tellers were often directed by branch managers to count the money very slowly for customers who were making withdrawals.
In 1933, when bank runs seemed popular, Barney Kroger of Kroger supermarket fame quelled a run on Provident Bank in Cincinnati by stacking up $15,000,000 of his own money in the banks window. All curious depositors could see that their money was available and safe so they all went home happy.
dado potato
3-12-23, 7:09pm
As Tybee noted a moment ago, Signature Bank (SBNY) is in FDIC receivership.
dado potato
3-12-23, 7:20pm
Western Alliance Bank (WAL) based in Chandler AZ, claiming to be present "wherever bidness happens", could also be sweating this weekend. I wish them well.
dado potato
3-12-23, 7:35pm
PacWest Bancorp (PACW) 3/10/2023 press release: we... want to reiterate that Pacific Western Bank is a well-performing, well-diversified full-service commercial bank.. I wish them well also.
Too big to fail? Is this a movie we've seen before?
littlebittybobby
3-13-23, 12:41am
Okay---I reckon that before the dust settles, one O' the high-rollers from Sillycone Valley will pick up that Bank for a song, and it'll be back in business. Prolly need it, just to cash their paychecks. Yup. But yeah--You can take that to the Bank, as Baretta used to say. So anyway---back in the early fifties, there was a Hudson racer who wasn't a front-runner by any means, but he got by without factory support until he got hit HARD in a crash in 1955, and though he survived, he quit racing the next year and lived to 85. Yup. See photo. Thankk Mee.52645265
Not to worry. They are being bailed out.
Yes. The day after Janet Yellen said there would not be a bailout, the President was taking a victory lap.
The markets love that kind of consistency.
Yes. The day after Janet Yellen said there would not be a bailout, the President was taking a victory lap.
The markets love that kind of consistency.
A bailout by another name is still a bailout. Eventually the cost will be passed on to us. It seems like increased bank regulation would reduce the risk of future events, which the GOP typically fights.
A bailout by another name is still a bailout. Eventually the cost will be passed on to us. It seems like increased bank regulation would reduce the risk of future events, which the GOP typically fights.
I think this was more about incompetence than inadequate rules. There are already thousands of pages of banking regulations. In this case, regulators failed to spot the mismatch of maturities between assets and liabilities.
That could be. Though I don't know how far we can trust banks and depositors to be competent and how much can be regulated. If they are not competent enough to have trust in managing the publics money something should change. When this happens and they are somehow bailed out each time, there is not a whole lot of incentive to change on their own. I imagine it will be an ongoing discussion.
That could be. Though I don't know how far we can trust banks and depositors to be competent and how much can be regulated. If they are not competent enough to have trust in managing the publics money something should change. When this happens and they are somehow bailed out each time, there is not a whole lot of incentive to change on their own. I imagine it will be an ongoing discussion.
Yes, I think there is a difference between regulation and oversight. Didn't we used to have more active oversight?
If anything, it’s more intensive since Dodd Frank.
Frontline had a special about the Fed Reserve and the last decade of prolonged low interest rates, ie easy money. All of the economists and money guys they interviewed save for the one Fed person who would appear had very negative forecasts about how things will play out.
Frontline had a special about the Fed Reserve and the last decade of prolonged low interest rates, ie easy money. All of the economists and money guys they interviewed save for the one Fed person who would appear had very negative forecasts about how things will play out.
It does not fill me with confidence that the head of SVB sat on the board of the SF Reserve.
If anything, it’s more intensive since Dodd Frank.
Didn't they remove some of the Dodd-Frank protections in 2018?
frugal-one
3-15-23, 1:18pm
Didn't they remove some of the Dodd-Frank protections in 2018?
You can thank trump for that.
Didn't they remove some of the Dodd-Frank protections in 2018?
That’s true. They lowered the threshold for “enhanced federal supervision” from $50 million to $250 billion of consolidated assets. SVB was around 210. Sen Warren is claiming that would have prevented the failure, but the reserve policies at SVB were so obviously bad, just normal reporting should have caught it. They were covering short term liabilities with long term assets.
The midsize county government I worked for reported details on reserve securities maturities and marked to market data every quarter to monitor our solvency. We had nightly sweeps of excess funds into short term treasuries, collateral agreements, and other measures to handle bank risks. I have to wonder about the various corporate treasurers affected not using the many available tools to mitigate the risks of a bank failure. A bank deposit is essentially a loan, and it seems many of them weren’t doing their due diligence on a major counterparty.
The midsize county government I worked for reported details on reserve securities maturities and marked to market data every quarter to monitor our solvency. We had nightly sweeps of excess funds into short term treasuries, collateral agreements, and other measures to handle bank risks. I have to wonder about the various corporate treasurers affected not using the many available tools to mitigate the risks of a bank failure. A bank deposit is essentially a loan, and it seems many of them weren’t doing their due diligence on a major counterparty.
No kidding. The podunk port district I ran used the same sensible practices, and the state port association and the state government even provided education on the matter - it didn't seem like rocket science.
Maybe a case of Tech Lords thinking they were too smart to bother listening to the lowly finance trolls.
ToomuchStuff
3-15-23, 9:03pm
That’s true. They lowered the threshold for “enhanced federal supervision” from $50 million to $250 billion of consolidated assets. SVB was around 210. Sen Warren is claiming that would have prevented the failure, but the reserve policies at SVB were so obviously bad, just normal reporting should have caught it. They were covering short term liabilities with long term assets.
The midsize county government I worked for reported details on reserve securities maturities and marked to market data every quarter to monitor our solvency. We had nightly sweeps of excess funds into short term treasuries, collateral agreements, and other measures to handle bank risks. I have to wonder about the various corporate treasurers affected not using the many available tools to mitigate the risks of a bank failure. A bank deposit is essentially a loan, and it seems many of them weren’t doing their due diligence on a major counterparty.
That sounds like government accounting, because that would be a raising anywhere else.
That sounds like government accounting, because that would be a raising anywhere else.
Should have said lowered.
ToomuchStuff
3-16-23, 9:14am
Should have said lowered.
You did!
$250 Billion is more then $50 million.
Should have said raised. Or better yet, should have said nothing.
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