Anyone following the bank failure

[pixy0stix]

... I posted an article that explained the world wide implications that lists how many branches this bank has.

[sent]

Mar 12, 2023 10:47:50 GMT -5 pixy0stix said:

... I posted an article that explained the world wide implications that lists how many branches this bank has.

Sorry, somehow I missed that in the chaos of last night in my house. I will read it in a bit. 

[k3am]

Mar 11, 2023 17:11:37 GMT -5 sakoro said:

Mar 11, 2023 12:14:18 GMT -5 msmerymac said:

The only thing I can think of is that they may have to just move around so much money so often that $250k is not nearly enough for their needs. 

I read that SVB forced companies to move all of their money over to them in order to qualify for loans.

This is not just SVB that does this. This is every commercial lender that engages in the type of lending (no hard asset) that SVB provides. The only way to perfect in cash (collateral for the loan) is to have dominion over cash, you have dominion over cash by having it at your institution.

[wanderingback]

Mar 12, 2023 9:40:56 GMT -5 Bad Dingo said:

Mar 12, 2023 9:14:27 GMT -5 wanderingback said:

Why are a lot of people blaming the business owners in here?
I mean I’m all for exposing capitalistic greed, but it doesn’t really seem like that’s what’s happening here.

I'm not blaming random business owners who may have made poor banking decisions, but the ones who made a run on the bank causing this by withdrawing $42 billion in one day ($1 million per second for 10 hours straight).

Luckily any small business will have access to their $250k insured amount still.

Maybe I’m misunderstanding but I thought SVB sold a bunch of securities so that worried people about the bank’s stability so that’s when people decided to take out their money to protect it?

I don’t think people pulled their money to be assholes, but just as people mentioned in this thread they wanted to protect their money/diversify it since it seemed like SVB could potentially be in trouble.

Or am I not understanding correctly and people taking out their money was done in a nefarious manner?

[tiki]

Mar 12, 2023 11:46:53 GMT -5 wanderingback said:

Maybe I’m misunderstanding but I thought SVB sold a bunch of securities so that worried people about the bank’s stability so that’s when people decided to take out their money to protect it?

I don’t think people pulled their money to be assholes, but just as people mentioned in this thread they wanted to protect their money/diversify it since it seemed like SVB could potentially be in trouble.

Or am I not understanding correctly and people taking out their money was done in a nefarious manner?

The bank failed because so much money was pulled out all at at once - a classic "run on the bank". The people who managed to complete large transactions on Thursday & Friday moments before everything shut down absolutely knew that they were feeding the panic and jeopardizing the entire bank. They were also scared and desperate and didn't care. Like a stampede at a crowded concert, if everybody had just stayed chill, SVB would not have failed and everyone would still have all their money today. 

[wanderingback]

Mar 12, 2023 12:11:06 GMT -5 tiki said:

Mar 12, 2023 11:46:53 GMT -5 wanderingback said:

Maybe I’m misunderstanding but I thought SVB sold a bunch of securities so that worried people about the bank’s stability so that’s when people decided to take out their money to protect it?

I don’t think people pulled their money to be assholes, but just as people mentioned in this thread they wanted to protect their money/diversify it since it seemed like SVB could potentially be in trouble.

Or am I not understanding correctly and people taking out their money was done in a nefarious manner?

The bank failed because so much money was pulled out all at at once - a classic "run on the bank". The people who managed to complete large transactions on Thursday & Friday moments before everything shut down absolutely knew that they were feeding the panic and jeopardizing the entire bank. They were also scared and desperate and didn't care. Like a stampede at a crowded concert, if everybody had just stayed chill, SVB would not have failed and everyone would still have all their money today. 

Yes, that’s what I said. I thought SVB made the ”first move” by selling securities so that worried people.

I’m pretty sure if there was a post on here telling everyone that Bank of America was running out of funds and you should consider moving your money, many people would do just that. The government only guarantees $250,000 so yes I would move it if it were more than that. I guess hindsight is 20/20?

[tiki]

wanderingback, yes, from what I've heard SVB handled their situation poorly and created the conditions for a panic - selling shares on Wednesday to get themselves some extra cash and then giving a crappy explanation for why.

From there, account holders were split into three groups - the well-connected who decided to move enormous sums immediately no matter who got hurt, the well-connected who tried to hold the line and keep people calm, and the smaller account holders who found out Friday after it was all over.

[k3am]

Sooo.. this is my world that I live in and industry I work in. I turned down a job with them for where I am now. Most of my former colleagues ended up there and will likely be out a job unless they announce a sale of the company tomorrow, which many think will happen.

I.. don’t understand how they got to this point. I mean, I understand it, but I don’t understand how they went from business as usual to reporting the sale of bonds at a loss via an 8k when their 10k just went out on 2/24. I have admittedly NOT read thru their filings - perhaps they DID include a subsequent event notice - but I imagine that their accounting firm is going to have their hand slapped. And their CEO selling shares? If anyone knew this was on the horizon, it would be him, and the optics are REALLY bad.

FWIW, SVB is not a traditional bank. And people who think it’s just “tech bros” are sorely mistaken. Most people had never heard or thought twice about SVB and have limited or no understanding of their business model.

[icedcoffee]

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

[wanderingback]

Mar 12, 2023 14:44:54 GMT -5 icedcoffee said:

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

This is good to know! Learning lots in this thread.
So there is a way to have millions insured by the government at the same bank? I assume it might just take a few days to get a hold of your money? Is there any limit to what the government will insure within 1 bank?

[icedcoffee]

Mar 12, 2023 14:55:12 GMT -5 wanderingback said:

Mar 12, 2023 14:44:54 GMT -5 icedcoffee said:

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

This is good to know! Learning lots in this thread.
So there is a way to have millions insured by the government at the same bank? I assume it might just take a few days to get a hold of your money? Is there any limit to what the government will insure within 1 bank?

I believe our program brings the limit up to $2.5M that is insured in 1 account. We can withdraw in full and close the account all at once.

[sent]

Mar 12, 2023 14:44:54 GMT -5 icedcoffee said:

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

Thank you for this. I knew about the $250K limit but after this event I started wondering how the $250K limit could be for personal and commercial because it seems so low for commercial. This makes much more sense. 

[pixy0stix]

U.S. says ‘all’ deposits at failed bank will be available Monday

www.washingtonpost.com/us-policy/2023/03/12/silicon-valley-bank-deposits/

[wanderingback]

A New York bank was also shut down.
It also says everyone will get their money and taxpayers won’t be left responsible.

www.cnbc.com/amp/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

[k3am]

Mar 12, 2023 14:44:54 GMT -5 icedcoffee said:

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

What bank is this? And what product offering? Feel free to PM me the details.

I work in a bank and have done tech lending for my entire career and have never heard of this product offering. The closest I can get to a similar product is a CDRS account or a sweep investment, but neither are what you’re talking about.

[konapoppy]

k3am - I wonder if we know people in common. My LinkedIn is insane. Whew.

[k3am]

Mar 12, 2023 21:10:54 GMT -5 konapoppy said:

k3am - I wonder if we know people in common. My LinkedIn is insane. Whew.

I am not good at keeping track of people online, where they’re from, what they do.. if you happen to be in the Bay Area and know lots of bankers, I wouldn’t be shocked! (ETA: we joke that there are only about 10 of us who do what we do and jump from bank to bank. It’s a relatively small market.) And if you do, hi!

[konapoppy]

Mar 12, 2023 21:12:29 GMT -5 k3am said:

Mar 12, 2023 21:10:54 GMT -5 konapoppy said:

k3am - I wonder if we know people in common. My LinkedIn is insane. Whew.

I am not good at keeping track of people online, where they’re from, what they do.. if you happen to be in the Bay Area and know lots of bankers, I wouldn’t be shocked! (ETA: we joke that there are only about 10 of us who do what we do and jump from bank to bank. It’s a relatively small market.) And if you do, hi!

I am sure we have limited degrees of separation!

[marlenabell]

You work in the industry yet you don’t understand how we got here ?

It’s pretty simple - there’s no big bad boogyman (evil VC people or otherwise).

Banks need money (deposits) to function and make loans.

The underlying issue is with the Fed and the unrelenting interest rate hikes. Currently the yield for a 6 month treasury rate is 5%! So who is going to keep their money in deposits at the bank when you get get 5% basically risk free?

SVB had to sell their bonds at loss, raised equity with Goldman since they saw customers pulling their funds for alternative investments. and this spooked a lot of people.

The treasury yields and interest rate hikes are a
BIG PROBLEM going forward. Banks need to maintain a strong deposit base to function and this is really just the beginning unless interest rates cool off.



quote author="k3am" source="/post/14271761/thread" timestamp="1678645633"]Sooo.. this is my world that I live in and industry I work in. I turned down a job with them for where I am now. Most of my former colleagues ended up there and will likely be out a job unless they announce a sale of the company tomorrow, which many think will happen.

I.. don’t understand how they got to this point. I mean, I understand it, but I don’t understand how they went from business as usual to reporting the sale of bonds at a loss via an 8k when their 10k just went out on 2/24. I have admittedly NOT read thru their filings - perhaps they DID include a subsequent event notice - but I imagine that their accounting firm is going to have their hand slapped. And their CEO selling shares? If anyone knew this was on the horizon, it would be him, and the optics are REALLY bad.

FWIW, SVB is not a traditional bank. And people who think it’s just “tech bros” are sorely mistaken. Most people had never heard or thought twice about SVB and have limited or no understanding of their business model.[/quote]

[k3am]

Mar 12, 2023 22:07:59 GMT -5 marlenabell said:

You work in the industry yet you don’t understand how we got here ?

It’s pretty simple - there’s no big bad boogyman (evil VC people or otherwise).

Banks need money (deposits) to function and make loans.

The underlying issue is with the Fed and the unrelenting interest rate hikes. Currently the yield for a 6 month treasury rate is 5%! So who is going to keep their money in deposits at the bank when you get get 5% basically risk free?

SVB had to sell their bonds at loss, raised equity with Goldman since they saw customers pulling their funds for alternative investments. and this spooked a lot of people.

The treasury yields and interest rate hikes are a
BIG PROBLEM going forward. Banks need to maintain a strong deposit base to function and this is really just the beginning unless interest rates cool off.



quote author="k3am" source="/post/14271761/thread" timestamp="1678645633"]Sooo.. this is my world that I live in and industry I work in. I turned down a job with them for where I am now. Most of my former colleagues ended up there and will likely be out a job unless they announce a sale of the company tomorrow, which many think will happen.

I.. don’t understand how they got to this point. I mean, I understand it, but I don’t understand how they went from business as usual to reporting the sale of bonds at a loss via an 8k when their 10k just went out on 2/24. I have admittedly NOT read thru their filings - perhaps they DID include a subsequent event notice - but I imagine that their accounting firm is going to have their hand slapped. And their CEO selling shares? If anyone knew this was on the horizon, it would be him, and the optics are REALLY bad.

FWIW, SVB is not a traditional bank. And people who think it’s just “tech bros” are sorely mistaken. Most people had never heard or thought twice about SVB and have limited or no understanding of their business model.

[/quote]


I KNOW how we got here. I don’t know how we got here with the first inklings of it being a handful of days ago, when they’re a public company with requirement to disclose material changes promptly and this wasn’t something that just popped up. Someone sat on that information.

Eta.. im a little surprised by your snark?

[neverfstop]

SO as of this morning....

This is NOT a bailout....the investors of the bank (not customers) will lose their investments, but the government is stepping into provide liquidity. SVB will be required to pay back all the money & they were in a decent position to have most of their liabilities backed by assets. Yes, they did have a lot of tech related cusotmers (who usually run more risky and/or volatile businesses) but SVB was also making their own investments in tons of tech & high risk things (i.e. they were too concentrated in an industry). So when rumors started flying & the bank run caused a liquidity crunch.

It seems like some of this was preventable/foreseeable, but also it's the nature of our banking system to invest customer assets as loans/investments.

[icedcoffee]

Mar 12, 2023 20:39:56 GMT -5 k3am said:

Mar 12, 2023 14:44:54 GMT -5 icedcoffee said:

Banks do have products to assist customers to stay under FDIC limits. They sweep the funds out to different banks as you spend. It’s more expensive than your regular business checking account, but it’s like insurance. You pay for it in case the worst happens.

—CPA for an org with more than $250k in cash that is all FDIC insured but can still pay our more than $250k payroll each pay period.

What bank is this? And what product offering? Feel free to PM me the details.

I work in a bank and have done tech lending for my entire career and have never heard of this product offering. The closest I can get to a similar product is a CDRS account or a sweep investment, but neither are what you’re talking about.

Wells Fargo Expanded Bank Deposit Sweep

Sounds like bankers are like mortgage guys.  Our guy has jumped to about 10 different places over the 12 years we've known and used him.  Every time we have a new mortgage need we joke that we might not be able to find him, but somehow we always do. LOL

[k3am]

Mar 13, 2023 8:04:38 GMT -5 icedcoffee said:

Mar 12, 2023 20:39:56 GMT -5 k3am said:

What bank is this? And what product offering? Feel free to PM me the details.

I work in a bank and have done tech lending for my entire career and have never heard of this product offering. The closest I can get to a similar product is a CDRS account or a sweep investment, but neither are what you’re talking about.

Wells Fargo Expanded Bank Deposit Sweep

Sounds like bankers are like mortgage guys.  Our guy has jumped to about 10 different places over the 12 years we've known and used him.  Every time we have a new mortgage need we joke that we might not be able to find him, but somehow we always do. LOL

Wow! My old company, I had the second most seniority at ~8 years. I moved to a more diversified company (more traditional vs. pure tech/VC lending, even though that’s what I still do), and this place actually holds tenure. And we’re (thankfully) in a much better position than a lot of banks, but I’m dreading this week.

Your deposit product you’re using isn’t common at smaller banks. We don’t offer it. And we cater to a section of the population that a big bank like WF won’t lend to. . It will be interesting to see how it gets handled. I’ve already had clients reach out with concerns about their accounts not having FDIC insurance, so hopefully management provides guidance soon on how they want us to address those concerns. We do have a correspondent relationship with WF, so maybe it will be a potential offering to offset some exposure.. about half my portfolio is in excess of the increased coverage amount.

[meanie]

I work at one of the big investment banks, we mostly were impacted on Friday when clients were trying to pull back wires going to SVB. I know of someone who works higher up at a local office (friend of a friend) who said the last few days have been hell. I feel bad for the people who work there but had nothing to do with the decision making that led to this, it reminds me of the 2008 collapse - not in scale, but the atmosphere internally I'm sure is similar.

[tealblue]

Mar 13, 2023 8:04:38 GMT -5 icedcoffee said:

Mar 12, 2023 20:39:56 GMT -5 k3am said:

What bank is this? And what product offering? Feel free to PM me the details.

I work in a bank and have done tech lending for my entire career and have never heard of this product offering. The closest I can get to a similar product is a CDRS account or a sweep investment, but neither are what you’re talking about.

Wells Fargo Expanded Bank Deposit Sweep

Sounds like bankers are like mortgage guys.  Our guy has jumped to about 10 different places over the 12 years we've known and used him.  Every time we have a new mortgage need we joke that we might not be able to find him, but somehow we always do. LOL

Oh this sounds familiar. I think the company I worked for used a similar product like this as well. At least on one bank we used- our big ones at the time we’re BoA and PNC if my memory serves me right- it’s been about 10 years since I left that role. But we definitely had some sort of sweep account set up. We had smaller local banks we used as well for some of our smaller companies which didn’t offer that and we’d do our best to keep our accounts at the lowest levels we could there.

[Bad Dingo]

Heather Cox Richardson's post about SVB:
heathercoxrichardson.substack.com/p/march-12-2023

[k3am]

Mar 12, 2023 22:07:59 GMT -5 marlenabell said:

You work in the industry yet you don’t understand how we got here ?

It’s pretty simple - there’s no big bad boogyman (evil VC people or otherwise).

Banks need money (deposits) to function and make loans.

The underlying issue is with the Fed and the unrelenting interest rate hikes. Currently the yield for a 6 month treasury rate is 5%! So who is going to keep their money in deposits at the bank when you get get 5% basically risk free?

SVB had to sell their bonds at loss, raised equity with Goldman since they saw customers pulling their funds for alternative investments. and this spooked a lot of people.

The treasury yields and interest rate hikes are a
BIG PROBLEM going forward. Banks need to maintain a strong deposit base to function and this is really just the beginning unless interest rates cool off.

I’d like to point out that your explanation of the situation isn’t entirely correct. SVB didn’t have a run off of funds because people could get higher rates elsewhere.

SVB invested their excess client deposits (a SHORT term liability) in LONG TERM bonds. This a classic mismatch of assets – their beginning analysts are taught that you don’t do this. They can get away with it in a stagnant rate environment, but in this case.. rates were not stagnant. And they didn’t just randomly start going up recently – we’ve known for a LONG TIME that the Fed would be implementing rate hikes. So yes, the rising rate environment is an issue… FOR THEM.. because they did not structure their balance sheet appropriately. And the fact that their auditors didn’t call this out at least THREE quarters ago is incredibly alarming. The fact that it wasn’t noted in their 10K is alarming.

In SVB’s case.. their customer base is largely well funded by professional investors and keep a LOT of cash in deposit accounts. And a LOT of their customers lose money, not make money. Historically, when their balances got low, investors step in and fund them. Investor funding, IPO’s, etc, have been incredibly slow lately. So instead of those balances getting bolstered as they have in the past, companies are burning through their deposits. SVB had to liquidate those long-term bonds early at a loss. Customers weren’t pulling their funds from SVB to put them in other accounts chasing higher yields. If SVB had structured appropriately, it likely wouldn’t have been an issue.

Back to my original statement though.. I don’t know how we got to this point that on 2/24, their auditors released their financial statements with no going concern qualifications. This should not have been news on Thursday, it should have been news long ago. So your implication that I don't know what's going on is insulting. 

[litebright]

Mar 13, 2023 10:13:24 GMT -5 Bad Dingo said:

Heather Cox Richardson's post about SVB:
heathercoxrichardson.substack.com/p/march-12-2023

She has a real gift for making something understandable. I read a number of the initial breaking news articles on this last week and I didn't feel like I had any kind of handle on what had happened and how interest rates factored in until I read her breakdown of it. 

We've had various kinds of financial crises over my adult lifetime and this one is a bit weird to me because it isn't about the bank making risky loans, or the depositors overextending themselves or defaulting, or somebody shorting something or other, or shady financial vehicles like credit default swaps, or some kind of widespread market collapse that then made some financial institution's house of cards fall apart (although I suppose the last bit might be a possible interpretation of what did happen). This was a bank that made what would usually be considered a pretty safe investment (Treasury bonds) and rising interest rates made them enough-less-profitable that they needed more money and boom, as soon as they said they needed more capital, there was a "classic run on the bank," which seems to be a phrase used in like every story on this.

I do have questions, though. Um, if you have gazillions in funds and Treasury bond yields going down from (what I can tell) almost 4-percent something to not quite 2-percent something means you suddenly have to raise a couple billion dollars to plug a hole, that seems ... catastrophic for those little bitty numbers. If that makes sense. Were you as a bank are running way to close to the bone on your reserves if the difference between 4% something and 2% something breaks you? Or did you, a Silicon Valley bank, have that much of your portfolio in bonds that all/most of your eggs were basically in one basket? It is fascinating to me that a go-to bank for startups (young/hungry/risky companies) would be shoveling so much money into bonds, but maybe that's just my lack of knowledge about where banks usually put money.

It is kind of interesting, though, because it seems like previous financial crises have been based on financial institutions putting money into investments that were too risky and blew up in their faces, and here we have one that seems to be a bank putting its money into something considered "safe" and also running into trouble. 

[msmerymac]

Mar 12, 2023 12:15:41 GMT -5 wanderingback said:

Mar 12, 2023 12:11:06 GMT -5 tiki said:

The bank failed because so much money was pulled out all at at once - a classic "run on the bank". The people who managed to complete large transactions on Thursday & Friday moments before everything shut down absolutely knew that they were feeding the panic and jeopardizing the entire bank. They were also scared and desperate and didn't care. Like a stampede at a crowded concert, if everybody had just stayed chill, SVB would not have failed and everyone would still have all their money today. 

Yes, that’s what I said. I thought SVB made the ”first move” by selling securities so that worried people.

I’m pretty sure if there was a post on here telling everyone that Bank of America was running out of funds and you should consider moving your money, many people would do just that. The government only guarantees $250,000 so yes I would move it if it were more than that. I guess hindsight is 20/20?

Well, it worried Peter Thiel, who tweeted about it, and then it spiraled from there. 

Also, technically, the FDIC has a loooong period of time to get you that money. In this case the deposits will be available tomorrow, but in a "normal" circumstance you might not see your money for a year or two.

[carmenere]

Mar 12, 2023 22:23:49 GMT -5 k3am said:

Mar 12, 2023 22:07:59 GMT -5 marlenabell said:

You work in the industry yet you don’t understand how we got here ?

It’s pretty simple - there’s no big bad boogyman (evil VC people or otherwise).

Banks need money (deposits) to function and make loans.

The underlying issue is with the Fed and the unrelenting interest rate hikes. Currently the yield for a 6 month treasury rate is 5%! So who is going to keep their money in deposits at the bank when you get get 5% basically risk free?

SVB had to sell their bonds at loss, raised equity with Goldman since they saw customers pulling their funds for alternative investments. and this spooked a lot of people.

The treasury yields and interest rate hikes are a
BIG PROBLEM going forward. Banks need to maintain a strong deposit base to function and this is really just the beginning unless interest rates cool off.



quote author="k3am" source="/post/14271761/thread" timestamp="1678645633"]Sooo.. this is my world that I live in and industry I work in. I turned down a job with them for where I am now. Most of my former colleagues ended up there and will likely be out a job unless they announce a sale of the company tomorrow, which many think will happen.

I.. don’t understand how they got to this point. I mean, I understand it, but I don’t understand how they went from business as usual to reporting the sale of bonds at a loss via an 8k when their 10k just went out on 2/24. I have admittedly NOT read thru their filings - perhaps they DID include a subsequent event notice - but I imagine that their accounting firm is going to have their hand slapped. And their CEO selling shares? If anyone knew this was on the horizon, it would be him, and the optics are REALLY bad.

FWIW, SVB is not a traditional bank. And people who think it’s just “tech bros” are sorely mistaken. Most people had never heard or thought twice about SVB and have limited or no understanding of their business model.

I KNOW how we got here. I don’t know how we got here with the first inklings of it being a handful of days ago, when they’re a public company with requirement to disclose material changes promptly and this wasn’t something that just popped up. Someone sat on that information.

Eta.. im a little surprised by your snark?[/quote]

You wouldn’t be surprised if you looked at their post history 🙄