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2023 Bank Crisis and Meltdown: Silicon Valley Bank, Signature Bank, Credit Suisse ...


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2023 Bank Crisis and Meltdown: Silicon Valley Bank, Signature Bank, Credit Suisse ...

  #11 (permalink)
SunTrader
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Although SVB doesn't fit this category (non-bank Fincl's) just got this yesterday from FedRes:-

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1057.pdf

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  #12 (permalink)
 
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 AllSeeker 
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phantomtrader View Post
SVB's business was start ups and risky tech investments. These companies will not be able to meet payroll or pay bills without their lines of credit. That means multiple bankruptcies coming up. Some of these companies may have gone
public and are already trading on the NASDQ. If that's the case, there may be a negative impact on the futures. In any case, the bankruptcies will filter down through the economy as SVB had a huge portfolio of companies they
lent to. On top of that, they have a major portfolio in treasuries whose yield has steadily gone down due to interest rate increases. Why they didn't liquidate the treasuries is a mystery. Maybe they used them as collateral. Who knows.

The government is in charge now. And remember: "We're the government. We're here to help!"

Truly, I'm also little confused by it. Every person who has been following basic economic news probably knew fed rates were going to get hiked, this is not something happening overnight, so obviously if one had huge assets in treasuries, any sensible organization would start moving it to some place else.

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 phantomtrader 
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AllSeeker View Post
Truly, I'm also little confused by it. Every person who has been following basic economic news probably knew fed rates were going to get hiked, this is not something happening overnight, so obviously if one had huge assets in treasuries, any sensible organization would start moving it to some place else.

Exactly. That's why I'm thinking they used the bond portfolio as collateral, possibly borrowing from other banks to pay the bills.

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 bobwest 
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phantomtrader View Post
SVB's business was start ups and risky tech investments. These companies will not be able to meet payroll or pay bills without their lines of credit. That means multiple bankruptcies coming up. Some of these companies may have gone
public and are already trading on the NASDQ. If that's the case, there may be a negative impact on the futures. In any case, the bankruptcies will filter down through the economy as SVB had a huge portfolio of companies they
lent to. On top of that, they have a major portfolio in treasuries whose yield has steadily gone down due to interest rate increases. Why they didn't liquidate the treasuries is a mystery. Maybe they used them as collateral. Who knows.

As I understand it, they did liquidate their treasuries heavily, once they got hit by depositor withdrawals -- and they took a serious loss on them because the fixed rates they had from earlier bonds were much lower than current rates, so their market value had tanked. A big part of their problem was the they needed to meet panicky depositor withdrawals, and then they tried to raise the cash, they couldn't. California (they were a state-chartered bank) declared them insolvent on Friday -- unable to meet their obligations to their depositors -- and named the Federal Deposit Insurance Corporation to manage their liquidation.

It was a classic bank run: assets mostly long-term and illiquid, and short-term depositors demanding their cash now. That's why it all went bad so fast, as depositors got nervous.

There probably will be serious consequences to the tech firms that not only were financed by loans from them, but had their money on deposit there, too. Deposit insurance only goes to $250k guaranteed, and the balance, which will be large for many companies, may or may not be recoverable. Often the feds can find another bank that is willing to take over the failed bank -- the loans to the tech companies they have outstanding are still assets and may be attractive to a buyer, but probably not at full face value.

It can get very messy for a while.

Bob.

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-- Cervantes, Don Quixote
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  #15 (permalink)
 
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 phantomtrader 
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bobwest View Post
As I understand it, they did liquidate their treasuries heavily, once they got hit by depositor withdrawals -- and they took a serious loss on them because the fixed rates they had from earlier bonds were much lower than current rates, so their market value had tanked. A big part of their problem was the they needed to meet panicky depositor withdrawals, and then they tried to raise the cash, they couldn't. California (they were a state-chartered bank) declared them insolvent on Friday -- unable to meet their obligations to their depositors -- and named the Federal Deposit Insurance Corporation to manage their liquidation.

It was a classic bank run: assets mostly long-term and illiquid, and short-term depositors demanding their cash now. That's why it all went bad so fast, as depositors got nervous.

There probably will be serious consequences to the tech firms that not only were financed by loans from them, but had their money on deposit there, too. Deposit insurance only goes to $250k guaranteed, and the balance, which will be large for many companies, may or may not be recoverable. Often the feds can find another bank that is willing to take over the failed bank -- the loans to the tech companies they have outstanding are still assets and may be attractive to a buyer, but probably not at full face value.

It can get very messy for a while.

Bob.

Thanks. I hadn't read that yet. $250,000 is a drop in the bucket. You can't even open an account at SVB without a large deposit. I would wager 80% are at risk for a lot more.

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  #16 (permalink)
 iq200 
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SunTrader View Post
Shows .... nothing but a blurred image for me.

If you are on a PC, hover above the image and click on the [] button along the bottom of the image to expand to full screen. Once in full-screen, you can zoom in..

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  #17 (permalink)
 
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 phantomtrader 
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You could have made a bet in Vegas that this was going to happen:

"CEO of Silicon Valley Bank sold $3.57 million of stock in the troubled bank just TWO WEEKS before its dramatic collapse in automated trade planned on January 26 - and CFO ditched $575,000 the same day
Greg Becker sold 12,451 shares at an average price of $287.42 each on February 27. The price plunged to just $39.49 in premarket Friday before trading halted

The day his sale went through, Becker bought the same number of shares using stock options priced at $105.18 each, according to filings with the SEC
CFO Daniel Beck sold 2,000 shares at $287.59 per share on the same day

https://www.dailymail.co.uk/news/article-11846085/CEO-Silicon-Valley-Bank-sold-3-57-million-stock-dramatic-collapse.html

I'm sure most of the insiders did the same thing. With their contacts at the FED and the WH, probably a good bet there will be no consequences.

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  #18 (permalink)
 
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 Big Mike 
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bobwest View Post
As I understand it, they did liquidate their treasuries heavily, once they got hit by depositor withdrawals -- and they took a serious loss on them because the fixed rates they had from earlier bonds were much lower than current rates, so their market value had tanked. A big part of their problem was the they needed to meet panicky depositor withdrawals, and then they tried to raise the cash, they couldn't. California (they were a state-chartered bank) declared them insolvent on Friday -- unable to meet their obligations to their depositors -- and named the Federal Deposit Insurance Corporation to manage their liquidation.

This is my understanding as well though admittedly I'm not following super close. A quick message to my primary bank to ask about contagion and I was satisfied with their answer so backed off for the moment.

But this is just the beginning....imo

Mike

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  #19 (permalink)
 
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 Big Mike 
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Just read that Roku held $500MM there and was mostly uninsured.



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  #20 (permalink)
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iq200 View Post
If you are on a PC, hover above the image and click on the [] button along the bottom of the image to expand to full screen. Once in full-screen, you can zoom in..

Thanks that made it larger but still not legible - for me at least.

Anyway I have PDF now so all good.

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Last Updated on March 28, 2023


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