Silicon Valley Bank collapses

[woolfe9998]

SVB is the premier lender to venture capital firms that supply investment to tech companies. Evidently they had invested heavily in bonds, and the bond market collapsed after the fed raised interest rates. Yesterday there was a paniced run on this bank. My wife knows someone who had a high 7 figure account there, and tried to transfer it out early yesterday morning, but the transaction failed. The bank has now been placed on receivorship under the FDIC. FDIC insures deposits for up to $250,000, which is a tiny fraction of what some people had in there.

https://www.cnn.com/2023/03/10/investing/svb-bank/index.html

There is some concern about runs on other banks causing a domino effect, but the person quoted in the article thinks the major banks are strong on fundamentals.

I suppose for as long as this remains isolated to SVB, it will probably only affect rich people.

 

[Brainonska511]

I feel like if you're concerned about a run on your bank ever happening, don't keep more than $250k per person in it. I'm sure it's a problem most people will not have to worry about. But it's definitely an AT problem, because we're all multimillionaires that burn hundred dollar bills to light our cigars.

 

[IronWing]

$250k per person, period. It doesn’t matter if you split it among multiple accounts at the same bank.

 

[conehead433]

Not to worry the government will prop up the bank so the super rich with accounts there will be able to get their money in spite of the $250k cap.

 

[hal2kilo]

$250k per person, period. It doesn’t matter if you split it among multiple accounts at the same bank.

You can have accounts at different banks though, right?

 

[woolfe9998]

You can have accounts at different banks though, right?

Yes its per bank you have an account in, but not multiple accounts at the same bank, and different branches of the same bank count as the same bank.

 

[woolfe9998]

Not to worry the government will prop up the bank so the super rich with accounts there will be able to get their money in spite of the $250k cap.

They may get more than the $250K, because FDIC is supervising the bank's liquidation and all liquidated assets will be distributed to deposit holders. However, they aren't being propped up. They're already done.

 

[IronWing]

This American Life had a good podcast on what happens when the FDIC liquidates a bank. It's amazing how fast it happens.

Unbreaking The Bank - This American Life

NPR reporter and Planet Money contributor Chana Jaffe-Walt reports this story of what it really looks like when a bank fails and is taken over by the FDIC.

www.thisamericanlife.org

 

[Wreckem]

They may get more than the $250K, because FDIC is supervising the bank's liquidation and all liquidated assets will be distributed to deposit holders. However, they aren't being propped up. They're already done.

The rich are already calling for a govt bailout “to protect the economy”.

 

[UNCjigga]

Thank the lord my fintech was acquired last year!! We still have some exposure with SVB but not like we keep our funding there.

Edit: Not “mine”—I’m just a peon who works there

 

[gothuevos]

Explain it to me like I'm 5 years old ...in the grand scheme of things, how worrying is this for the economy as a whole?

 

[woolfe9998]

Explain it to me like I'm 5 years old ...in the grand scheme of things, how worrying is this for the economy as a whole?

According to the experts quoted in the article, not much.

Despite initial panic on Wall Street over the run on SVB, which caused its shares to crater, analysts said the bank’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.

“The system is as well-capitalized and liquid as it has ever been,” Zandi said. “The banks that are now in trouble are much too small to be a meaningful threat to the broader system.”

But smaller banks that are disproportionately tied to cash-strapped industries like tech and crypto may be in for a rough ride, according to Ed Moya, senior market analyst at Oanda.

“Everyone on Wall Street knew that the Fed’s rate-hiking campaign would eventually break something, and right now that is taking down small banks,” Moya said.

 

[woolfe9998]

The more I think about this, it seems like a case of incompetent investing. It's not like the fed's rate hikes came on suddenly. There were news articles discussing the imminent hikes, then after the first hike, more news articles about how there would be another, and another. It seems to me that investing so heavily in the bond market that your institution will tank if it goes south, under those known circumstances, was pretty dumb.

Also, this is another reason they should never have repealed the Glass Steagall Act. Under that legislation, this bank could not invest and take deposits, meaning no one's money would have been at risk for their bad investment, no one's but their own.

 

[UNCjigga]

Explain it to me like I'm 5 years old ...in the grand scheme of things, how worrying is this for the economy as a whole?

For the general consumer, not a big deal…just another sign that inflation isn’t done yet and we might still be headed towards recession before recovery. For cash-strapped VC-funded firms out west, it’s a moderate deal, especially if SVB was underwriting your funding. For anyone with a fintech startup whose services are essentially white-labeled SVB stuff (doing things like online-only checking accounts, tokenized credit cards, real-time payments, etc.) it might or might not be a big deal, depending on how quickly you can find another platform (though I suspect some of these services can still run while FDIC is running operations.)

 

[SteveGrabowski]

The more I think about this, it seems like a case of incompetent investing. It's not like the fed's rate hikes came on suddenly. There were news articles discussing the imminent hikes, then after the first hike, more news articles about how there would be another, and another. It seems to me that investing so heavily in the bond market that your institution will tank if it goes south, under those known circumstances, was pretty dumb.

Also, this is another reason they should never have repealed the Glass Steagall Act. Under that legislation, this bank could not invest and take deposits, meaning no one's money would have been at risk for their bad investment, no one's but their own.

What are you, a fucking commie? Why do you hate capitalism?

 

[UNCjigga]

The more I think about this, it seems like a case of incompetent investing. It's not like the fed's rate hikes came on suddenly. There were news articles discussing the imminent hikes, then after the first hike, more news articles about how there would be another, and another. It seems to me that investing so heavily in the bond market that your institution will tank if it goes south, under those known circumstances, was pretty dumb.

Also, this is another reason they should never have repealed the Glass Steagall Act. Under that legislation, this bank could not invest and take deposits, meaning no one's money would have been at risk for their bad investment, no one's but their own.

I was thinking the same way—like I’ve been hearing about inverted yield curves for at least 12-18 months so what gives??

 

[Indus]

With inflation being an issue, I do think its time the FDIC limit is increased to 500k per person.

 

[Moonbeam]

I wonder if it was a case of a poor investment strategy or an effort to inflate the value of someones personal investments by throwing other people's money into it. Didn't silver once sell dirt cheap until the Hunt brothers got involved. You can hardly get an itch anymore without suspecting your cats of having fleas.

 

[evident]

who are all these people asking the fdic to cover everyone's investments??? $250K per account, right?

 

[K1052]

lol

https://twitter.com/i/web/status/1634296022942752774

 

[fskimospy]

lol

https://twitter.com/i/web/status/1634296022942752774

from that Twitter thread - double lol.

https://twitter.com/i/web/status/1634296691045306368

 

[brycejones]

Explain it to me like I'm 5 years old ...in the grand scheme of things, how worrying is this for the economy as a whole?

The systemic risk appears to be as big as your balls.

 

[brycejones]

I feel like if you're concerned about a run on your bank ever happening, don't keep more than $250k per person in it. I'm sure it's a problem most people will not have to worry about. But it's definitely an AT problem, because we're all multimillionaires that burn hundred dollar bills to light our cigars.

Only the fucking poors use a single hundred dollar bill to light a cigar.

 

[K1052]

from that Twitter thread - double lol.

https://twitter.com/i/web/status/1634296691045306368

Bailouts are bad until they are for me then they are good is the perfect encapsulation of that particular asshole's worldview.

 

[Pens1566]

Bailouts are bad until they are for me then they are good is the perfect encapsulation of that particular asshole's worldview.

And Sacks is neck deep in the twitter fiasco. Fuck him. Doubly.