All you're seeing so far is just the tip of the iceberg.

Regional banks hold 70% of commercial real estate loans[you'll have to Google that, it won't let me post the link]. Guess what's happening to commercial real estate in pretty much every city in the US? It's tanking. Buildings are empty, rents will be going way down. Commercial RE loans are all adjustable. When they come due, borrowers will face a double take: the interest rate on the new loan will be significantly higher, and revenue from leases will be significantly lower. That will drive the value of the property down which will either raise the interest rate more or will make the loan not doable.

Virtually every type of loan right now is seeing default rates increase dramatically. When the perfect storm hits commercial real estate it will make 2008 look like the really good old days.

Big Mike 

Is this enough to stop the bleeding? Avoid a collapse?

yes , as far as the run on the banks by depositor's are concerned . The collapse is in the bank stocks and profits . Until there is transparency in their bond portfolios , loans that are sensitive to interest rates , and the extra cost of capital the banks my have to raise there will be more bleeding .

becker908 

All you're seeing so far is just the tip of the iceberg. Regional banks hold 70% of commercial real estate loans[you'll have to Google that, it won't let me post the link]. Guess what's happening to commercial real estate in pretty much every city in the US? It's tanking. Buildings are empty, rents will be going way down. Commercial RE loans are all adjustable. When they come due, borrowers will face a double take: the interest rate on the new loan will be significantly higher, and revenue from leases will be significantly lower. That will drive the value of the property down which will either raise the interest rate more or will make the loan not doable. Virtually every type of loan right now is seeing default rates increase dramatically. When the perfect storm hits commercial real estate it will make 2008 look like the really good old days.

Ah, I read that article on one of the main financial websites. I guess we'll have to see what happens. Generally, if there is going to be a recession, those free websites are saying nothing fear related, and may even sound positive encouraging people to buy stocks. If the market downturn and recession is at the bottom, and right about to go back up, those websites will put in articles that will scare everyone half to death, and every hedge fund manager in the world will be on there saying the economic world is about to end. That's how I have often read when to buy into the maximum fear level, which usually turns out to be the bottom. I believe we start to see those articles when big money is buying, because they need sellers on the other side of their trades. 2018 was the worst with a myriad of super fear based articles on the day before the bottom.

Gentlemen – I am no authority on banking other than my advanced age and having lived in Silicon Valley for the last 45 years. I agree with what I read above, but it doesn’t go far enough.

1) The management of SVB was incompetent or, worse. Witness the burst of insider loans and stock sales. Why didn’t the regulators call this out sooner?
2) Are the regulations adequate, and the regulators asleep at the wheel? I think so.
3) The Fed moved interest rates fast – that is their purview. Any fool should have been asking about the impact. SVB waited too long to take action. They chose not to take pain early, resulting in the death of a significant Silicon Valley financial capability.
4) There are many questions about the mix of businesses chosen by SVB, and now First Republic. Is this regulated? Indeed, it can be evaluated and advised upon. Perhaps disclosed.
5) The Government took weekend action – THANK GOODNESS. Just before the Asia open!

Whose responsibility is this? Janet Yellen reversed her public proclamations several times last week. I cannot believe she should be representing our Treasury Department. America deserves MUCH better. Where is Hank Paulson when we need him?

I continue to focus on being at the mercy of politicians. I have no confidence – i.e. to quote above; We are in for a very shaky ride until we get more able and responsible people running the show.

From todays Wall Street Journal Opinion Section.... (not the full article)

The FDIC’s Sweetheart Bank Deal for SVB
First Citizens scores a great deal, while the deposit insurance fund takes a $20 billion hit.
By The Editorial BoardFollow
March 27, 2023 6:35 pm ET

North Carolina-based First Citizens will acquire all of SVB’s deposits, loans and branches but leave $90 billion in securities and other assets with the FDIC. First Citizens will buy SVB’s $72 billion in loans at a sizable $16.5 billion discount and share future losses or gains with the FDIC. How sweet it is for First Citizens, whose shares rose 45.5% Monday.

The FDIC loss-share agreement is a tacit recognition that SVB’s large book of loans to unprofitable startups carries substantial credit risk. SVB’s business model involved extending low-cost credit to tech startups, many with no revenue, and getting repaid when they were acquired by larger companies, raised more private funds or floated shares publicly.

I suspect the only way to really stop the bleeding and collapse of banks will in fact cause a recession. In order to stop the outflow of deposits towards money markets and other higher rate instruments that will in turn cause insolvencies, banks will have to pay more to depositors perhaps a lot more to keep them from leaving. Which means loan standards for businesses and households will tightened with passing along higher loan interest rates to borrowers essentially choking off economic activity. I suspect politically it is better for the Federal Reserve to have a temporary recession brought on by this than allow long term inflation which just steals from everyone but the wealthy.