Silicon Valley Bank failure is disgusting

[MikeH]

The SVB failure baffles me.

How is the 16th largest bank in the U. S. NOT diversified?
• Its borrowers were predominately in ONE industry (Hi-tech),
• in ONE state, and,
• What's a bank, that normally needs short-term cash, doing investing at least 10% of its assets in BONDS? ... (Normally very long-term money)... SVB announced last week that they lost $2 billion on a sale of $21 billion of bonds, which was TEN % of their assets.

I've not gone looking for their financials to see if the $21 Billion in bonds was SVB's entire bond portfolio, but a bank has no business placing at least 10% of its assets in such a specific long-term investment, especially one where the value is subject to interest rate swings?

This reflects incredibly bad management, and it's typical of the overall arrogance in Hi-tech.

• Where was their outside CPA firm? (KPMG)?
• Where was the California State Agency that was responsible for regulating SVB ? SVB was a state-charted bank, so California's "Department of Financial Protection and Innovation" had primary responsibility for regulating SVB.

Both KMPG and the DFPI should have commented, or, in the DFPI's case, simply not allowed, this crazy illiquidity scenario?

It shows, to me, how much California Hi-tech owns the California State government.

Sounds like the Roaring 20s, all over again.

[vegasone]

This stuff keeps happening all the time....every so often the S*** hits the fan. Government rules or lack of rules allow it to happen and then they can come and say "We will fix the problem..or not ...depending on whether they like the victims or perpetrators.



In the end the taxpayers front the bill. That way no one learns their lesson and keep doing the same thing.

[MikeH]

Right now, the jury's still out on whether the taxpayers will foot the bill, or the shareholders.

Remember that the FDIC is funded, primarily over the long term, by premiums paid by the banks, so, in the "competitive capitalistic" economic model that the US has, this gets split between the banks' customers and the shareholders. These premiums will be used to cover the FDIC losses on the first $250k per depositor.

The news today makes it sound as though no politician is in favor of a SVB bailout, so the losers right now would be the current shareholders, who have seen their investment of, maybe $200 - $400 per share wiped out.

We'll see.

[ReplayRandall]

When you gamble badly, the consequences are sometimes very severe....

[vikingrob]

News reports are that the SVB depositors will be made whole, regardless of how much had been deposited at SVB.

Also, Signature Bank, in New York, was also closed today and placed in FDIC receivership; their depositors will also be made whole.

I believe the idea was to get this done before markets opened in Asia and Australia to prevent bigger problems.

With how easy it is nowadays to move money around by clicking a mouse or tapping a screen, we are going to see banks put into receivership in the middle of the week, and, as was the case here, regulators now have to be ready to act at any time, including weekends and holidays.

The lesson to be taken from the last few days: Pay attention to the FDIC coverage limits, and have a contingency plan in case a bank you use runs into this kind of issue.

[JustRalph]

Originally Posted by vikingrob

News reports are that the SVB depositors will be made whole, regardless of how much had been deposited at SVB.

Also, Signature Bank, in New York, was also closed today and placed in FDIC receivership; their depositors will also be made whole.

I believe the idea was to get this done before markets opened in Asia and Australia to prevent bigger problems.

With how easy it is nowadays to move money around by clicking a mouse or tapping a screen, we are going to see banks put into receivership in the middle of the week, and, as was the case here, regulators now have to be ready to act at any time, including weekends and holidays.

The lesson to be taken from the last few days: Pay attention to the FDIC coverage limits, and have a contingency plan in case a bank you use runs into this kind of issue.

Read between the lines. They will be made whole by depositors from Maine to Mexico. Every bank in the U.S.

Instead of the 250k “they will be made whole” is a thing only the high rolling leftist bank of Silicon Valley would get.

If this bank was in East Palestine Ohio, 250k and that’s it!

[vegasone]

Well, markets jumped up after this news. Hope no one was short.

[PaceAdvantage]

Originally Posted by vegasone

Well, markets jumped up after this news. Hope no one was short.

you were saying?

[vegasone]

Still up, just not by much.