Update: First Citizens acquires $72 billion in assets of defunct Silicon Valley Bank following FDIC concessions

[GeneticBlueprint]

3 minutes ago, Commissar SFLUFAN said:

I do have one question for these companies that had such large volumes of cash just chilling in bank accounts:

 

Why -- pray tell -- are you holding on to so much cash, the most unproductive asset possible?

 

A common target I've heard that some VCs have set for their holdings is for them to have 2+ years of cash on hand to fund their operations.

[Commissar SFLUFAN]

3 minutes ago, GeneticBlueprint said:

 

A common target I've heard that some VCs have set for their holdings is for them to have 2+ years of cash on hand to fund their operations.

 

TWO YEARS?!?!?

 

That's a lot of liquid capital to essentially throw in a lockbox and just forget that it even exists.

[Guest]

11 minutes ago, Commissar SFLUFAN said:

I do have one question for these companies that had such large volumes of cash just chilling in bank accounts:

 

Why -- pray tell -- are you holding on to so much cash, the most unproductive asset possible?

Everybody is running to bulk up their cash positions. Keeping the powder dry.

[GeneticBlueprint]

3 minutes ago, Commissar SFLUFAN said:

 

TWO YEARS?!?!?

 

That's a lot of liquid capital to essentially throw in a lockbox and just forget that it even exists.

 

I think after COVID's market volatility and right now's market volitility they're essentially wanting their investments financially prepared for another pandemic-type event where commerce slows significantly.

[Guest]

4 minutes ago, GeneticBlueprint said:

 

I think after COVID's market volatility and right now's market volitility they're essentially wanting their investments financially prepared for another pandemic-type event where commerce slows significantly.

It’s actually really simple: we went from effectively free borrowing to relatively expensive borrowing with current rates. So the companies who raised again last year just need to reduce expenses and coast on that cheap cash.

 

For the actual VCs themselves, they are holding on to cash because they are vultures waiting for cash poor companies to burn through their reserves and buy them (and/or their IP) on the cheap.

[Commissar SFLUFAN]

Roblox Corp just filed with the SEC that they have (had?) $150 million (5% of their $3 billion in cash and cash equivalents) in the bank with a note that's the financial disclosure equivalent of "we're not going to actually notice if it goes up in smoke."

[Commissar SFLUFAN]

[SuperSpreader]

[ThreePi]

So, when do the Ron Paul's of the world start telling everyone to invest in gold again? I think it's been a few years since my city has had a Cash4Gold store, we gonna see those open up?

[Jason]

Very, 100% believable that this has nothing to do with today's banking news (Enzo is a fintech app that until today had a cash back debit card program).

 

[mclumber1]

Should I transfer my 401k from stocks to bonds because the market is about to shit itself again?

[Chris-]

5 minutes ago, mclumber1 said:

Should I transfer my 401k from stocks to bonds because the market is about to shit itself again?

 

No, they just had bad projections. Sounds contrite but it's true:

 

Quote

SVB catered mainly to the insular ecosystem of startups and the investors that fund them. Its deposits boomed alongside the tech industry, rising 86% in 2021 to $189 billion and peaking at $198 billion a quarter later. The bank poured large amounts of the deposits into U.S. Treasurys and other government-sponsored debt securities.

 

Tech tumbled after the Federal Reserve began raising rates last year to curb inflation. Startups, as a result, drained their deposits with SVB faster than the bank expected. And new investment stalled, meaning fresh money wasn’t coming into the bank. 

 

Silicon Valley Bank Closed by Regulators, FDIC Takes Control

WWW.WSJ.COM

---

Some tech startups had been rushing to transfer money out

 

 

Never get high off your own supply.

[Commissar SFLUFAN]

As @sblfilms pointed out, SVB failed in the most "conservative" way possible.

[Air_Delivery]

So is this gonna cause a 2008 type crisis?

[chakoo]

33 minutes ago, Air_Delivery said:

So is this gonna cause a 2008 type crisis?

No

[stepee]

2 minutes ago, chakoo said:

No

 

But what if we put all of our collective energy into making it so???

[chakoo]

I'd say for the moment just stay away from tech stocks and VC funds for a bit.

[Guest]

I do think there is a chance that tech takes a beating at the bell Monday. There is also a chance that the bank is acquired over the weekend and all deposits are secured, and this is nothing more than a blip.

 

Again, very important to understand that this was not (seemingly) due to any real malfeasance on their part. They did have some balance sheet issues that were brought up earlier in the week, but seemingly shouldn’t have been a problem to fix. 

[Spork3245]

 

[SuperSpreader]

I just love all these tech libertarians crying for help. CRY MOAR BITCH

[Kal-El814]

Libertarian in the streets, bailouts in the sheets.

[Jwheel86]

Some tech CEO posted an insanely long tweet that if their isn't a bail out on Monday, then every uninsured deposit in every not JP Morgan size bank will be transferred to a JP Morgan size bank. He just making it sound worse to get the bail out?

[osxmatt]

10 minutes ago, Jwheel86 said:

Some tech CEO posted an insanely long tweet that if their isn't a bail out on Monday, then every uninsured deposit in every not JP Morgan size bank will be transferred to a JP Morgan size bank. He just making it sound worse to get the bail out?

 

The only moral bailout is my bailout.

[CitizenVectron]

There's a long-running joke that "Canada is just five banks in a trench coat," but this is one of those situations that wouldn't happen here (also due to differences in how mortgages are handled, etc). Usually it means Canadians have worse banking that costs them more, but it's one of the few upsides, that our banking is national, and is very, very regulated.

[SuperSpreader]

2 hours ago, Jwheel86 said:

Some tech CEO posted an insanely long tweet that if their isn't a bail out on Monday, then every uninsured deposit in every not JP Morgan size bank will be transferred to a JP Morgan size bank. He just making it sound worse to get the bail out?

 

That's how these dudes got ahead, bullshit and intimidation, FUCK 'EM

[Guest]

The federal reserve should step in and buy the assets and liabilities of SVB and 100% cover all deposits. In 10 years, they will 5x the net cost of the acquisition due to all the warrants SVB holds in the companies within their venture debt portfolio. 

[Guest]

I also think there is some confusion about the notion of a bailout here. I don’t think anybody is arguing to bailout SVB. At the end of the day, they made bad (though understandable) bets and lost control of the narrative when they moved to correct those bets.

 

The idea of backstopping this doesn’t mean saving SVB, you can let that bank die. It just means not allowing potentially thousands of depositors to become insolvent due to their bank collapsing. These are not large businesses either, majority are going to be well under 100 employees. And none of them did anything wrong.

[Commissar SFLUFAN]

None of what @sblfilms proposes benefits investors -- they will be wiped out under any scenario.  The intention is to protect depositors from becoming collateral damage in the fallout.

 

This isn't a "bailout".

[Guest]

3 hours ago, Jwheel86 said:

Some tech CEO posted an insanely long tweet that if their isn't a bail out on Monday, then every uninsured deposit in every not JP Morgan size bank will be transferred to a JP Morgan size bank. He just making it sound worse to get the bail out?

One other thing I was thinking about right now, and why I don’t think this claim is incorrect: if depositors can get destroyed when a top 20 bank gets run on like this, and the Fed and/or Treasury does nothing, then we know the big 4 are truly the only safe institutions for deposits above the FDIC threshold because we know 100% JP Morgan, BofA, WF, and Citi are in the “too big to fail” category. The Fed/Treasury would undoubtedly prop those guys up without a second thought.

 

I would not be surprised at all to see some other regionals begin faltering by the middle of next week if depositors aren’t completely protected here.

[b_m_b_m_b_m]

I hope not. Jpmc fucking sucked to have for a bank 

[b_m_b_m_b_m]

11 minutes ago, sblfilms said:

One other thing I was thinking about right now, and why I don’t think this claim is incorrect: if depositors can get destroyed when a top 20 bank gets run on like this, and the Fed and/or Treasury does nothing, then we know the big 4 are truly the only safe institutions for deposits above the FDIC threshold because we know 100% JP Morgan, BofA, WF, and Citi are in the “too big to fail” category. The Fed/Treasury would undoubtedly prop those guys up without a second thought.

 

I would not be surprised at all to see some other regionals begin faltering by the middle of next week if depositors aren’t completely protected here.

To me this leads to one conclusion: if 100% of deposits (or whatever they’re legally called) are subject to government protection and guaranteed then that needs to be made explicit for all banks not just those too big to fail and there needs to be some insurance paid from the banks to facilitate the associated expansion of the scope of the FDIC based on their deposits

[Guest]

1 minute ago, b_m_b_m_b_m said:

To me this leads to one conclusion: if 100% of deposits (or whatever they’re legally called) are subject to government protection and guaranteed then that needs to be made explicit for all banks not just those too big to fail and there needs to be some insurance paid from the banks to facilitate the associated expansion of the scope of the FDIC based on their deposits

I think you could increase the FDIC protection by simultaneously limiting what a bank can do with those deposits under the the FDIC threshold. While the financial instruments SVB is holding are incredibly safe and will bear the full yield at maturity, long dated products like that are a timing mismatch to deposit accounts which need more value stable liquid assets behind them.

[Anathema-]

maybe banks are bad

[Jason]

42 minutes ago, Anathema- said:

maybe banks are bad

 

We should go back to cash stuffed into mattresses. 

[rc0101]

You know I think a lot of this could have been avoided if SVB had employed a Chief Risk Officer over the past year or so.
 

A Chief Risk Offer would have/should have done a liquidity stress test when rates were climbing, and were told that rates will continue to climb. Or maybe their examiners or state banking agency could have taken a peak at their portfolio and noticed that they have a rather large concentration in tech. 
 

Also, I would argue the flight of deposits to large banks would be more dangerous than it would be to smaller regional and community banks.

 

 

also, I don’t see any scenario where they wouldn’t be acquired.