General > General Technical Chat

Silicon Valley Bank Collapses

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tom66:
I think it's funding the $6.7 bn or so in customer deposits that's a little more important.

I've often wondered about these £1 nominal sale things.  Does someone actually wire a pound to the SVB UK arm?  How do you divide that £ between all of the shareholders?    Or is it just a legal fiction for convenience?

coppice:

--- Quote from: tom66 on March 14, 2023, 10:20:58 pm ---I think it's funding the $6.7 bn or so in customer deposits that's a little more important.

I've often wondered about these £1 nominal sale things.  Does someone actually wire a pound to the SVB UK arm?  How do you divide that £ between all of the shareholders?    Or is it just a legal fiction for convenience?

--- End quote ---
I think someone would be very sure to get that pound paid and receipted. If the business is turned around without the sale being properly receipted there would be battles in court.

tooki:

--- Quote from: bdunham7 on March 14, 2023, 09:03:44 pm ---
--- Quote from: tooki on March 14, 2023, 08:03:55 am ---I think the key thing to remember in this instance is that SVP had not actually lost anything. It was strictly a liquidity issue — plenty of assets (more than enough to cover their liabilities and deposits), but far too little cash.

--- End quote ---

I can tell you from experience that almost every insolvent person or company starts out thinking they have a liquidity issue.  If you have assets that are difficult to value and sell, that narrative can allow you to get in pretty deep before you are faced with the fact that the issue is actually insolvency.  However, when assets can be valued precisely, then it is much easier to tell the difference.  And if your assets have an active, liquid market like treasury securities do, then the problem is their actual current value, not your inability to sell for the correct value.  The fact that the current value has dropped far below some future value, no matter how certain that future value is, does not really make it a liquidity issue. 

--- End quote ---
What exactly is your point? Mine wasn’t to explain SVB’s thinking, but rather to elucidate that the bailout isn’t high-risk for the buyer of SVB, since the bonds will more than cover the deposits once they mature. (And indeed, that it’s not really a bailout in the traditional sense of dumping money into a company to replace actual losses.)

james_s:
The thing that annoys me about this whole thing is that it reflects a fundamental part of irrational human behavior that has always irritated me. If everyone pulls all their money out, a bank will fail, any bank. If people continue on as usual it's unlikely to fail, and it is insured by the government up to a value that no individual with any sense should have sitting in their account. People get worried about a bank collapsing, fear spreads and then these same people cause the bank to collapse in the rush to get their money out.

themadhippy:
what gets me is the bank expect the government to bail them out when things go bad,but try every trick in the book to keep every penny in there pockets when times are good

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