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Silicon Valley Bank Collapses
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SiliconWizard:
3 months ago:

https://techcrunch.com/2022/12/08/spend-management-startup-tripactions-secures-400m-in-credit-facilities-from-goldman-sachs-svb/
Stray Electron:

--- Quote from: bdunham7 on March 12, 2023, 10:50:36 pm ---
--- Quote from: EEVblog on March 12, 2023, 10:39:38 pm ---Official reports that something like 95%+ of accounts were not covered under FDIC insurance. i.e. greater than $250k.

--- End quote ---

By my calculations, ~86% of overall deposits were uninsured.  For all the details, I've attached their Dec 2022 call report.  The information on why they failed (off balance-sheet losses wiped out capital reserve) is on forms RC and RC-B and the info on uninsured deposits is on form RC-O.  They had $151B in uninsured out of a total of $175B.

--- End quote ---

 One of my family members is on the inside of this mess (I'm not allowed to say how) but I can tell you that this has completely torpedoed a lot of SVB's commercial customers and they are SCRAMBLING to find other loans or investors and i suspect that most of them will be going out of business shortly.  As others have already pointed out MOST of the money deposited in SVB is well in excess of the $250,000 FDIC per account insurance limit so a great many of the SVB's customers are probably not going to get their money back.  Everyone involved is hoping that the US Gov will FULLY insure all of the deposits but I don't think that that's going to happen. Also several US politicians have already announced their opposition to such a move. Even if it does it will take months before the depositors get the money.  I think that this will cause a lot of the smaller companies to fail and I'm wondering what effect that will have on other Silicon Valley companies and other US companies, suchas say someone such as one of the chip suppliers that supplies chips to Ford.  I'm also wondering if this will precipitate a run on some of the other weaker banks.

  Monday is likely to be an interesting day!  I think this whole business could very quickly go sideways!
EEVblog:

--- Quote from: Stray Electron on March 12, 2023, 11:51:43 pm ---
--- Quote from: bdunham7 on March 12, 2023, 10:50:36 pm ---
--- Quote from: EEVblog on March 12, 2023, 10:39:38 pm ---Official reports that something like 95%+ of accounts were not covered under FDIC insurance. i.e. greater than $250k.

--- End quote ---

By my calculations, ~86% of overall deposits were uninsured.  For all the details, I've attached their Dec 2022 call report.  The information on why they failed (off balance-sheet losses wiped out capital reserve) is on forms RC and RC-B and the info on uninsured deposits is on form RC-O.  They had $151B in uninsured out of a total of $175B.

--- End quote ---

 One of my family members is on the inside of this mess (I'm not allowed to say how) but I can tell you that this has completely torpedoed a lot of SVB's commercial customers and they are SCRAMBLING to find other loans or investors and i suspect that most of them will be going out of business shortly.  As others have already pointed out MOST of the money deposited in SVB is well in excess of the $250,000 FDIC per account insurance limit so a great many of the SVB's customers are probably not going to get their money back.  Everyone involved is hoping that the US Gov will FULLY insure all of the deposits but I don't think that that's going to happen. Also several US politicians have already announced their opposition to such a move. Even if it does it will take months before the depositors get the money.  I think that this will cause a lot of the smaller companies to fail and I'm wondering what effect that will have on other Silicon Valley companies and other US companies, suchas say someone such as one of the chip suppliers that supplies chips to Ford.  I'm also wondering if this will precipitate a run on some of the other weaker banks.

  Monday is likely to be an interesting day!  I think this whole business could very quickly go sideways!

--- End quote ---

Yellen has already said there will be no bailout.
If they find a buyer (the government will no doubt offer a sweet deal) then everything goes back to normal.
Otherwise it's sounding like the big despositors will get a substantial haircut. I'm hearing talk of a $20BN shortfall.
A lot will depend if assets have to be marked to market or not.

In any case, all depositors will have access to at least $250k FDIC this morning, but for the big business that's not even going to pay a weeks wages. So if all their operating cash was tied up there, they won't be able to make payroll until a sale is made.
bdunham7:

--- Quote from: TimFox on March 12, 2023, 11:33:49 pm ---WaMu's problems were tied to property lending, i.e. subprime mortgages, but SVB's problem is different.

--- End quote ---

SVB actually choked mostly on MBS (mortgage backed securities) but the the problem wasn't credit quality, it was duration/interest rate causing the current (market) value to drop.  Because they had opted to designate these as HTM (hold to maturity) they weren't required to account for the interim drop in value on their balance sheet.  Once they had to sell them to cover the deposits, the manure hit the spreader tines.

There's an nice explanation from JP Morgan along with a comparison showing that SVB is(was) an outlier regarding losses in held securities (they had an unusually large amount) but that sort of glosses over the fact that lots other banks may have similar issues with their own internally-generated loan portfolio and none of them have to attempt to mark those to market.  The picture from the .pdf shows their capital ratio from the balance sheet (blue) and then their capital ratio taking into account unrealized losses on HTM securites. 



https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf
EEVblog:
Reports on Twitter that a "bailout" has happened. All deposits of any value have been guaranteed.
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