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Silicon Valley Bank Collapses

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bdunham7:

--- Quote from: EEVblog on March 12, 2023, 11:56:43 pm ---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.

--- End quote ---

The assets (UST, MBS and their loan portfolio plus the real estate and furniture) don't get marked to market, they get marketed now, either as a whole, in large pieces or small pieces.  The UST and MBS parts apparently have a current duration of 6.2 years (according to random chatter and unreliable sources) and their own loan portfolio is unknown to us at this point.  Their overreliance on securities actually makes it a bit easier because the price of those is easily determined and this will allow the FDIC to give back good chunk (maybe half) of the uninsured money right away.  However, the insured deposits are paid first and the FDIC isn't Santa Claus--that money comes out of those same assets.
Then their loan portfolio is going to have to be liquidated and that will be at substantial discounts.     

bdunham7:

--- Quote from: EEVblog on March 13, 2023, 12:13:17 am ---Reports on Twitter that a "bailout" has happened. All deposits of any value have been guaranteed.

--- End quote ---

Yes, and another bank has been siezed (on a Sunday!) and is the third largest failure in US history.  Signature Bank NY.  I can't see exactly what went wrong with it at the moment.  Three banks in one week and they all start with "Si".  Hmmmm.

Black Phoenix:
https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e


--- Quote ---The U.S. government took extraordinary steps Sunday to stop a potential banking crisis after the historic failure of Silicon Valley Bank, assuring all depositors at the failed financial institution that they would be able to access all of their money quickly.

The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread, and only hours before trading began in Asia. Regulators had worked all weekend to try and come up with a buyer for the bank, which was the second largest bank failure in history. Those efforts appeared to have failed as of Sunday.

In a sign of quickly the financial bleeding was occurring, regulators announced that New York-based Signature Bank had failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history.
--- End quote ---


--- Quote --- Regulators had to rush to close Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.

Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank.
--- End quote ---

EEVblog:
A bailout thar's not a bailout
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm
They knew the systemtic risk.

Problem is, anyone with any sense at all will immediatley withdraw every cent from SVB. In which case where would the $20BN shortfall come from?

bdunham7:

--- Quote from: EEVblog on March 13, 2023, 12:52:33 am ---Problem is, anyone with any sense at all will immediatley withdraw every cent from SVB. In which case where would the $20BN shortfall come from?

--- End quote ---

I don't know that they will since it takes a fair amount of work to switch banks if you are a medium-ish or larger company.  The shortfalls in general are going to be covered for a little while by the new program that will loan money to banks against their securities at par value, not market value.  IOW, the shortfall will come from a loan for more than the collateral is presently worth.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm

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