The SVB and Signiture bank crash thread

blackface

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Regulators have stepped in. SVB deposits are now being held by California FDIC and they will be made available to depositors on Monday. Tbd to see who gets a haircut.

SVB (Silicon Valley Bank) is one of the main lending platforms for the venture capital (VC) ecosystem. Their stock dropped 80% today causing bank stocks to lose ~$80 Billion in value. Depositors are (rightly) panicking and withdrawing their assets. This could trigger a death spiral.

At a high level this is what happened / is happening:

Context
1. SVB has grown immensely over the last 2 years with deposits going from $85 Bn to $200+ Bn. As the VC / startup ecosystem grew they basically gained a **** ton of deposits.
2. they used the cash inflows to double the number of outstanding loans to $66 Bn
3. they grew their securities portfolio by 7x, primarily agency MBS (mortgage backed securities issued and guaranteed by US government agencies)

Problem
4. the securities are mostly classified as HTM (hold to maturity) which means they aren't obliged to mark them to market
5. they bought their agency MBS at the top of the credit market so they now have mark to market losses of $15.9 Bn
6. they only have $11.5 Bn of common equity
7. so they are basically insolvent but because they don't need to mark to market the HTM assets they can keep operating.

Today
8. they sold their AFS (available for sale) securities today (which they have to mark to market) for $1.8 Bn loss to raise capital
9. they also issued new shares to the tune of $500 M to increase liquidity

Future Problem

10. if depositors take their money out they will have a huge asset liability mismatch
11. not sure how this works in relation to reserve requirements but it's basically a run on the bank and when liabilities> assets + equity they go bust
12. all the startups that didn't pull their money out of SVB early get ****88 and go bust because their money disappears
 

Jam

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cs3000

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@blackface the fed is covering all the bank losses Federal Reserve Board - Press Releases

all money covered , even deposits over $250,000. just not stock losses. will be paid for by other banks like 2009
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

these 2 banks were especially vulnerable because of their client base being tech companies / startups during a bear market, (initial public offerings dried up so lack of need for a bank) .
but yeah that MBS allocation is ironic considering that was the same trigger for the 2007 crisis, loop
they didnt expect bonds rates / mortgage rates to spike so high. wonder if many more did the same , but most are probably better hedged or less allocated after last time (you'd think..). still never know which will be the straw that breaks

The Valley of Despair & "Panic in the banking system" blockworks video
 
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blackface

blackface

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JUST IN - Trading halted for multiple U.S. bank stocks at open.

Western Alliance Bancorp down 75%
First Republic Bank down 66%
Customers Bancorp down 54%
PacWest Bancorp down 46%
Zions Bancorp down 44%
Bank of Hawaii down 42%
Comerica down 39%
East West Bancorp down 32%
 

PhilParma

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Nasdaq is up 1.5-2% on the day and crypto assets are up 10-20%. In the clown world of 2023, bank failures are good for markets because everyone knows that banks don't bear the costs of their failures; the printing press just gets kicked into overdrive and the financial heroin addicts get their fix. This marks the Fed pivot that the credit junkies have been pining for over the past 12 months. Reality is in the rear view mirror disappearing over the horizon. Speculation is back on the table. Inflation is inevitable, probably with some wild swings of volatility mixed in. Free credit > hike and taper until crisis > bailout; this program will continue to be run until they've stolen so much wealth that the masses can't afford bread.
 

Momma

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Nasdaq is up 1.5-2% on the day and crypto assets are up 10-20%. In the clown world of 2023, bank failures are good for markets because everyone knows that banks don't bear the costs of their failures; the printing press just gets kicked into overdrive and the financial heroin addicts get their fix. This marks the Fed pivot that the credit junkies have been pining for over the past 12 months. Reality is in the rear view mirror disappearing over the horizon. Speculation is back on the table. Inflation is inevitable, probably with some wild swings of volatility mixed in. Free credit > hike and taper until crisis > bailout; this program will continue to be run until they've stolen so much wealth that the masses can't afford bread.
What timeline or timeframe rather do you project?
 

charlie

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this program will continue to be run until they've stolen so much wealth that the masses can't afford bread.
A days wages for a loaf of bread, no where have I read that before? :praying:
 

gunther

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Connected?
 

David PS

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@blackface - Thank you for starting this thread. There is a lot of related stuff happening that will never make it to mainstream news.

I am trying to connect some dots here, China just signed a deal with the Iran and Saudi.

Saudi Arabia sells oil and China has a huge appetite for oil. China has a much bigger need for oil than the US. I am wondering if Iran was included in the deal so that a pipeline can be built to carry oil to China. I am also wondering how much longer the US dollar will be used as the currency for buying and selling oil on the world market. Other smaller countries have tried to remove the US dollar as the standard currency for trading oil and, coincidently, they were invaded by the US. This new Saudi-China relationship may change things.
 
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