Financial Institutions

[Crap Throwing Clavin]

16 hours ago, Nouseforaname said:

An honest question, why does anyone keep anything over the insured amount in a bank? 

 

Most wouldn't.  A lot of who was caught with huge deposits at SVB were start-ups.  

 

Bigger question: why would any large start-up keep all their cash in one bank?  I've got my liquid assets spread between four, each with SIPC insurance up to half a million.  I think it was Roku I saw that had more than 300 million at SVB? 

[Crap Throwing Clavin]

13 hours ago, Cinga said:

 

And this is bullshit, just like the bailouts in 2008. I'm sorry, I'm of the mind if it's going to fail, let it so something better can be created from the mess. With bailouts your only rewarding them for that failure.

 

 

2008 was substantially different.  We were facing a complete breakdown of the capital markets, that would have driven major non-financial companies (e.g. GE, GM) into bankruptcy by November of '08.  Wasn't a bailout of banks, it was a bailout of the whole system.

 

 

[Nouseforaname]

23 minutes ago, Crap Throwing Clavin said:

 

Most wouldn't.  A lot of who was caught with huge deposits at SVB were start-ups.  

 

Bigger question: why would any large start-up keep all their cash in one bank?  I've got my liquid assets spread between four, each with SIPC insurance up to half a million.  I think it was Roku I saw that had more than 300 million at SVB? 

Yes it was Roku.  Exactly, even if you’re a startup banks have special insurance for large volume of deposits.

 

This whole situation is very confusing.

[Cinga]

Seriously? Bank of England buys SVB for 1 euro?

 

https://archive.is/2023.03.13-075323/https://www.bbc.com/news/business-64937251#selection-871.60-871.62

[Alaska Darin]

I love the fact that Biden blamed the previous administration for these failures (as if he hasn't been in office for 2+ years).  This takes the proverbial cake:

 

 

[devnull]

5 minutes ago, Cinga said:

Seriously? Bank of England buys SVB for 1 euro?

 

https://archive.is/2023.03.13-075323/https://www.bbc.com/news/business-64937251#selection-871.60-871.62

 

No, they didn't buy it for one Euro

 

They bought it for £1 (1 British Pound)

 

Which right now is 1.13 Euro or $1.21

[Nouseforaname]

24 minutes ago, devnull said:

 

No, they didn't buy it for one Euro

 

They bought it for £1 (1 British Pound)

 

Which right now is 1.13 Euro or $1.21

Well the equity and bond holders were wiped out so it’s probably worth less than that.

[Cinga]

1 hour ago, Crap Throwing Clavin said:

 

2008 was substantially different.  We were facing a complete breakdown of the capital markets, that would have driven major non-financial companies (e.g. GE, GM) into bankruptcy by November of '08.  Wasn't a bailout of banks, it was a bailout of the whole system.

 

 

 

We'll see, I think this could end up worse. Realize one of SVG biggest problem was it's investment into treasury bonds which have been taking a huge hit under Xiden. The way interest rates are going due to inflation this may be just the beginning

 

Here are unrealized gains and losses for banks according to FDIC. Look at the last 2 years

 

[Ann]

6 hours ago, Foxx said:

Inverse Cramer is a thing. They actually keep track of it.

My son told me a story that they tested his picks against monkeys doing the picking, and the monkeys picked better over the same period of time. 

[Ann]

2 hours ago, Crap Throwing Clavin said:

 

Bigger question: why would any large start-up keep all their cash in one bank?  I've got my liquid assets spread between four, each with SIPC insurance up to half a million.  I think it was Roku I saw that had more than 300 million at SVB? 

Tying. It is illegal, but they made them do it.

[Nouseforaname]

12 minutes ago, Ann said:

My son told me a story that they tested his picks against monkeys doing the picking, and the monkeys picked better over the same period of time. 

That’s why buy and hold is my approach.

[devnull]

1 hour ago, Ann said:

My son told me a story that they tested his picks against monkeys doing the picking, and the monkeys picked better over the same period of time. 

 

Monkey's don't have an agenda

 

Cramer is the host of an infomercial that encourages people with disposable income to invest in Comcast's corporate interests

[B-Man]

 

 

The Biden Economy Is Falling Apart, Everything, Everywhere, All at Once

BY STEPHEN GREEN 

 

The Biden Economy — hailed Monday morning by Presidentish Joe Biden as “strong” — seems like it’s falling apart, everything, everywhere all at once.

 

NYSE halted trading of Charles Schwab, whose shares fell by more than 20%, and even a few Etsy sellers have been impacted by the fallout of Silicon Valley Bank’s (SVB) collapse.

 

Schwab’s fall was the firm’s “most ever on an intraday-basis,” even as company execs assured investors in a press release that “Schwab’s long-standing reputation as a safe port in a storm remains intact.”

 

Overall, trading of shares in over 30 banks was halted on Wall Street Monday morning, as the entire sector suddenly looks like a risk investors aren’t willing to take.

 

Almost everything banking was down, down, down in pre-market trades, which MarketWatch described as “panic-like activity.”

 

“Among some of those that have already been halted at least twice,” MarketWatch reported, “shares of Western Alliance Bancorp WAL, -51.05% plummeted 78.2%, Regions Financial Corp. RF, -5.33% sank 15.6%, First Republic Bank FRC, -64.05% plunged 65.5%, Comerica Inc. CMA, -21.24% tumbled 39.4% and PacWest Bancorp. PACW, -25.18% took a 47.7% dive.”

 

Signature Bank, “a key financial institution for the cryptocurrency industry,” according to the New York Post, was shut down on Sunday over “similar systemic risk” to SVB.

 

SVB and Signature are the second- and third-largest bank failures in U.S. history, respectively, with combined assets in excess of $300 billion. Depositors will be made whole, even deposits greater than the $250,000 covered by FDIC insurance. “Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure,” according to CNBC.

 

Investment holdings at SVB, however, are wiped out. “When the risk didn’t pay off, investors lose their money. That’s how capitalism works,” Biden said in his national address on Monday.

 

That’s what happened with Lehman Brothers, too, in 2008, before bigger faults were discovered and Washington went into Bailout All the Things Mode. This new crisis might just be getting started.

 

What went wrong? In a word: Inflation. In a few more words: The higher interest rates needed to combat inflation smashed the cheap-money expectations that SVB’s bond portfolios required. Other sectors of the economy that have become addicted to historically low interest rates include high-tech, particularly startup firms, and the housing market.

 

“I would be surprised if there weren’t other things that break. Maybe not directly related to the problems of SVB, but to some degree we’re already seeing breakage in terms of things like weakness in the housing market, other areas that are clearly in recession in the economy, even if we’re not in an overall recession,” warned Schwab’s chief investment strategist, Liz Ann Sonders, on Monday.

 

It’s been one helluva morning, and that’s just in the banking sector. Looks like it’s time to haul out the Chart of Doom that surfaced on the internet back in 2008.

 

More at :https://pjmedia.com/vodkapundit/2023/03/13/the-biden-economy-is-falling-apart-everything-everywhere-all-at-once-n1677787

[snafu]

3 hours ago, Cinga said:

 

We'll see, I think this could end up worse. Realize one of SVG biggest problem was it's investment into treasury bonds which have been taking a huge hit under Xiden. The way interest rates are going due to inflation this may be just the beginning

 

Here are unrealized gains and losses for banks according to FDIC. Look at the last 2 years

 

 

No, I think the moral of the story isn't that Treasury Bonds taking a hit.

The moral of the story is that this idiot bank invested it's depositors' money into long-term bonds and when there was a run, they had to incur gigantic losses to come up with the cash to fund the deposits.

 

The problem may be much bigger than SVB, but only if other banks are just as stupid with their investments -- and if the auditors and regulators don't catch the problem.

 

The bottom line for SVB (I guess) would be that if there was no run on the bank, there might not have have been a collapse (they had an unrealized loss before the run).  But on the other hand, the Bank put themselves and their depositors in a very bad position which turned the unrealized loss into a realized loss, I suppose.

 

 

 

[snafu]

42 minutes ago, B-Man said:

 

 

The Biden Economy Is Falling Apart, Everything, Everywhere, All at Once

BY STEPHEN GREEN 

 

The Biden Economy — hailed Monday morning by Presidentish Joe Biden as “strong” — seems like it’s falling apart, everything, everywhere all at once.

 

NYSE halted trading of Charles Schwab, whose shares fell by more than 20%, and even a few Etsy sellers have been impacted by the fallout of Silicon Valley Bank’s (SVB) collapse.

 

Schwab’s fall was the firm’s “most ever on an intraday-basis,” even as company execs assured investors in a press release that “Schwab’s long-standing reputation as a safe port in a storm remains intact.”

 

Overall, trading of shares in over 30 banks was halted on Wall Street Monday morning, as the entire sector suddenly looks like a risk investors aren’t willing to take.

 

Almost everything banking was down, down, down in pre-market trades, which MarketWatch described as “panic-like activity.”

 

“Among some of those that have already been halted at least twice,” MarketWatch reported, “shares of Western Alliance Bancorp WAL, -51.05% plummeted 78.2%, Regions Financial Corp. RF, -5.33% sank 15.6%, First Republic Bank FRC, -64.05% plunged 65.5%, Comerica Inc. CMA, -21.24% tumbled 39.4% and PacWest Bancorp. PACW, -25.18% took a 47.7% dive.”

 

Signature Bank, “a key financial institution for the cryptocurrency industry,” according to the New York Post, was shut down on Sunday over “similar systemic risk” to SVB.

 

SVB and Signature are the second- and third-largest bank failures in U.S. history, respectively, with combined assets in excess of $300 billion. Depositors will be made whole, even deposits greater than the $250,000 covered by FDIC insurance. “Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure,” according to CNBC.

 

Investment holdings at SVB, however, are wiped out. “When the risk didn’t pay off, investors lose their money. That’s how capitalism works,” Biden said in his national address on Monday.

 

That’s what happened with Lehman Brothers, too, in 2008, before bigger faults were discovered and Washington went into Bailout All the Things Mode. This new crisis might just be getting started.

 

What went wrong? In a word: Inflation. In a few more words: The higher interest rates needed to combat inflation smashed the cheap-money expectations that SVB’s bond portfolios required. Other sectors of the economy that have become addicted to historically low interest rates include high-tech, particularly startup firms, and the housing market.

 

“I would be surprised if there weren’t other things that break. Maybe not directly related to the problems of SVB, but to some degree we’re already seeing breakage in terms of things like weakness in the housing market, other areas that are clearly in recession in the economy, even if we’re not in an overall recession,” warned Schwab’s chief investment strategist, Liz Ann Sonders, on Monday.

 

It’s been one helluva morning, and that’s just in the banking sector. Looks like it’s time to haul out the Chart of Doom that surfaced on the internet back in 2008.

 

More at :https://pjmedia.com/vodkapundit/2023/03/13/the-biden-economy-is-falling-apart-everything-everywhere-all-at-once-n1677787

 

It has felt really strange these past 12 months after the Fed finally admitted that inflation wasn't "transitory".

The whole message has been "let's create a recession" and "oh crap, the employment market is still good".  Regular, non-economy guys like me are left scratching our heads.  To me, the inflation we've seen is really a direct result of the LAST TIME they created a recession.  Seems like once the economy eventually went back to normal the inflation would have washed itself out.  But the government decided to spend trillions of unnecessary dollars in the meantime.  But who knows, I'm just guessing.  I think most trained economists guess, too.

 

 

 

[Nouseforaname]

11 minutes ago, snafu said:

 

No, I think the moral of the story isn't that Treasury Bonds taking a hit.

The moral of the story is that this idiot bank invested it's depositors' money into long-term bonds and when there was a run, they had to incur gigantic losses to come up with the cash to fund the deposits.

 

The problem may be much bigger than SVB, but only if other banks are just as stupid with their investments -- and if the auditors and regulators don't catch the problem.

 

The bottom line for SVB (I guess) would be that if there was no run on the bank, there might not have have been a collapse (they had an unrealized loss before the run).  But on the other hand, the Bank put themselves and their depositors in a very bad position which turned the unrealized loss into a realized loss, I suppose.

 

 

 

 

Normally asset liability management should manage any of the interest rate risk and any prop trading should have been 'held for maturity' which removed any mark to market requirements.  From what I understand, they didn't manage the interest rate risk correctly which forced them to sell some securities that weren't necessary if held to maturity and which caused the contagion.

[snafu]

22 minutes ago, Nouseforaname said:

 

Normally asset liability management should manage any of the interest rate risk and any prop trading should have been 'held for maturity' which removed any mark to market requirements.  From what I understand, they didn't manage the interest rate risk correctly which forced them to sell some securities that weren't necessary if held to maturity and which caused the contagion.

 

Is that what started the run?

I can't imagine any depositor coming to that realization -- let alone a lot of depositors.

 

 

 

[Nouseforaname]

5 minutes ago, snafu said:

 

Is that what started the run?

I can't imagine any depositor coming to that realization -- let alone a lot of depositors.

 

 

 

 

I'd have to dig out the WSJ article but from memory, yes.

[snafu]

15 minutes ago, Nouseforaname said:

 

I'd have to dig out the WSJ article but from memory, yes.

 

According to this article, it was a newsletter or email generated by one big Venture Capital company.

How that one company came to its conclusion is unknown.

 

https://noahpinion.substack.com/p/why-was-there-a-run-on-silicon-valley

 

 

[Nouseforaname]

2 hours ago, snafu said:

 

According to this article, it was a newsletter or email generated by one big Venture Capital company.

How that one company came to its conclusion is unknown.

 

https://noahpinion.substack.com/p/why-was-there-a-run-on-silicon-valley

 

 

Didn’t know about the emergency capital raising that was done but the sharks probably smelled blood.