Keep an eye on this Silicon Valley Bank Financial thing

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CDUB98
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9:11a, 3/10/23
AG
Quote:
SVB Financial, parent of Silicon Valley Bank, is in talks to sell itself, sources told CNBC's David Faber.

Attempts by the bank to raise capital have failed, the sources said, and the bank has hired advisors to explore a potential sale.


Quote:
Large financial institutions are taking a look at a potential purchase of SVB. However, deposits outflows are so far outpacing the sale process, making it very difficult for a realistic assessment of the bank by potential buyers to take place, the sources told Faber.

Shares of the bank fell 60% on Thursday after SVB announced a plan Wednesday evening to raise more than $2 billion in capital. The stock fell another 60% in premarket trading Friday before being halted for pending news. The shares did not open for trading with the rest of the market at 9:30 a.m. and were still halted.


Quote:
SVB is a major bank for venture-backed companies, and cited cash burn from clients as one reason it was looking to raise additional capital.

However, rising interest rates, fears of a recession and a slowdown in the market for initial public offerings has made it harder for early stage companies to raise more cash. This has apparently led the firms to draw down on their deposits at banks like SVB.


It's not a contagion yet, but it is already affecting the U.S. banking sector as a whole. SVBF has their fingers in a lot of tech startups and projects.

And this is like the dreaded AD "vote of confidence."
Quote:
Wall Street analysts said on Thursday and Friday that the troubles at SVB seemed unlikely to spread widely throughout the banking system. Morgan Stanley said in a note to clients that SVB's issues were "highly idiosyncratic."


https://www.cnbc.com/2023/03/10/silicon-valley-bank-financial-in-talks-to-sell-itself-after-attempts-to-raise-capital-have-failed-sources-say.html
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Detmersdislocatedshoulder
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9:23a, 3/10/23
i am not 100% certain if this is the canary in the coal mine or not but what i can tell you is there is a day in the not to distant future where many americans will learn what the term bank bail in means and it will be to late.

it is all a mirage and when the derivative bubble pops this time it will take everything down with it.
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outofstateaggie
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9:26a, 3/10/23
AG
Saw this yesterday. People were making comparisons to Enron. No idea if those comparisons were valid or not. Lots of money being moved for sure.
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Dies Irae
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9:28a, 3/10/23
one of my largest customers of all time had a lot of funding from SVB, it was one of those companies that went from Zero to gigantic in a space of about 3 years.

They were a huge disruptor in our industry and put a lot of good companies out of business....why? Because they operated wildly inefficient at a huge deficit to gobble marketshare by undercutting competition through pricing below breakeven because they had a huge pool of west coast "tech" money backing them.

We saw the writing on the wall and got off the horse before it bucked us, but I think the "cash burn" they're referencing in the article is finally coming home to roost in a lot of these "disruptor" companies that only cause a disruption because they don't have to make a profit like their competition.

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CDUB98
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In reply to outofstateaggie • 9:45a, 3/10/23
AG
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.


A friend of mine this morning put the potential at Bear Sterns level, but not yet spreading, nor a guarantee it will.
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TRADUCTOR
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9:47a, 3/10/23
Knock over those moneychangers' tables.
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Htownag11
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In reply to outofstateaggie • 9:49a, 3/10/23
AG
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Different than Enron, but I think SVB is just as toast. Enron was deliberately fraudulent.

SVB seems to have made some bad/aggressive loans, has a huge portfolio of treasuries/bonds/MBS on their balance sheet at historically low interest rates that are worth less today because market interest rates have risen, and is being forced to liquidate those impaired assets because of growing deposit redemptions.

Because they were intended to be held to maturity, SVB wasn't required to "mark to market" those impaired assets, until now, that is, when they are being liquidated.

The big banks have the same issue with large holdings of debt securities that are impaired but aren't marked as such because they are classified as HTM.
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CDUB98
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9:50a, 3/10/23
AG
See this thread. I missed it.

https://texags.com/forums/16/topics/3366394/replies/64434263#64434263
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ChiefKiefton
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9:51a, 3/10/23
Would this affect banks like Wells Fargo? My account went to zero this morning and it seems to be happening to a lot of people.
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Deputy Travis Junior
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10:07a, 3/10/23
We'll see what happens, but I think this will be relatively isolated. I think something like half to two thirds of SVB's deposits are from startups (this is insanely concentrated) and it's those startups that are causing the problem. Venture capital fundings have dried up, so the equilibrium between deposit inflows from new fundraises and deposit outflows from startup withdrawals has evaporated. Now there's much less money coming in (fewer fundraises) while startups are still withdrawing a lot to cover their expense. SVB had to sell a bunch of mortgage backed securities at a huge loss to cover those deposit withdrawals and I think they've now reached a point where they have nothing left to sell.

Sounds like they're completely screwed because the VC market isn't picking back up anytime soon so startups are going to continue to withdraw cash, but this seems unique. Other banks don't have the customer concentration of SVB so to get a similar effect the unemployment rate would need to spike to 20% or something, causing people to start drawing down savings while direct deposits simultaneously plunge. I don't think that's going to happen.
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whytho987654
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10:09a, 3/10/23
All the tech hype was fool's gold, and was bound to crash. Start ups promising to create the newest AI that will replace everything and software engineers making 300k working 20 hours a week was not sustainable.
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deddog
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In reply to outofstateaggie • 10:10a, 3/10/23
AG
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Wouldn't Bear Sterns be a better example?
Enron was completely fraudulent. Any evidence of fraud yet?
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Stat Monitor Repairman
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In reply to Detmersdislocatedshoulder • 10:15a, 3/10/23
Detmersdislocatedshoulder said:
i am not 100% certain if this is the canary in the coal mine or not but what i can tell you is there is a day in the not to distant future where many americans will learn what the term bank bail in means and it will be to late.

it is all a mirage and when the derivative bubble pops this time it will take everything down with it.
They'll bail in the banks with some scheme involving CBDC.

That's my prediction.
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outofstateaggie
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In reply to Htownag11 • 10:49a, 3/10/23
AG
Htownag11 said:
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Different than Enron, but I think SVB is just as toast. Enron was deliberately fraudulent.

SVB seems to have made some bad/aggressive loans, has a huge portfolio of treasuries/bonds/MBS on their balance sheet at historically low interest rates that are worth less today because market interest rates have risen, and is being forced to liquidate those impaired assets because of growing deposit redemptions.

Because they were intended to be held to maturity, SVB wasn't required to "mark to market" those impaired assets, until now, that is, when they are being liquidated.

The big banks have the same issue with large holdings of debt securities that are impaired but aren't marked as such because they are classified as HTM.


This just popped up on my Instagram feed. They're listening.

https://www.instagram.com/reel/Cpi-VjkAo7a/?igshid=YmMyMTA2M2Y=

Is this accurate or relevant to this situation?
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LMCane
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10:50a, 3/10/23
Silvergate Bank which was a huge player in crypto collapsed earlier in the week. the last time there were two bank failures was 2008.

Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits
PUBLISHED FRI, MAR 10 202311:46 AM ESTUPDATED MOMENTS AGO

Silicon Valley Bank has been closed by regulators, which have taken control of the bank's deposits, the Federal Deposit Insurance Corporation announced Friday.
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LMCane
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In reply to Deputy Travis Junior • 11:10a, 3/10/23
well stated

aside from a bank failure

won't this make it much more difficult for new startups to get funding and actually succeed?

bullish for the economy!
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Malibu
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In reply to LMCane • 11:23a, 3/10/23
LMCane said:
well stated

aside from a bank failure

won't this make it much more difficult for new startups to get funding and actually succeed?

bullish for the economy!

Yes, but that's not necessarily a bad thing. If the source of that start up funding was due to unprofitable lending from a culture of grow market share, grow fast and break things, we are big tech and we'll figure out the business plan later, it shouldn't have been given out in the first place.

There's still going to be tons of venture funds that will just tell their clients to move their operating accounts to Chase.
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Dies Irae
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In reply to outofstateaggie • 11:24a, 3/10/23
outofstateaggie said:
Htownag11 said:
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Different than Enron, but I think SVB is just as toast. Enron was deliberately fraudulent.

SVB seems to have made some bad/aggressive loans, has a huge portfolio of treasuries/bonds/MBS on their balance sheet at historically low interest rates that are worth less today because market interest rates have risen, and is being forced to liquidate those impaired assets because of growing deposit redemptions.

Because they were intended to be held to maturity, SVB wasn't required to "mark to market" those impaired assets, until now, that is, when they are being liquidated.

The big banks have the same issue with large holdings of debt securities that are impaired but aren't marked as such because they are classified as HTM.


This just popped up on my Instagram feed. They're listening.

https://www.instagram.com/reel/Cpi-VjkAo7a/?igshid=YmMyMTA2M2Y=

Is this accurate or relevant to this situation?
Absolutely it is, money used to be not quite free but extremely cheap to get; to make things very simple; if you wanted to borrow $1,000,000 at 2.5% interest; you had to pay $25,000 of interest per year; $2k/mo not bad. Now fast forward to current times, and you have to pay 7% or so; and the amount of interest you have to pay jumps up to $5,800/mo.

That's the issue a lot of these companies have with their bonds. The bonds they're issuing to repay the previous bonds are costing them 3x as much interest, and they're now buried under debt servicing.
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Dies Irae
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In reply to Malibu • 11:26a, 3/10/23
Admiral Adama said:
LMCane said:
well stated

aside from a bank failure

won't this make it much more difficult for new startups to get funding and actually succeed?

bullish for the economy!

Yes, but that's not necessarily a bad thing. If the source of that start up funding was due to unprofitable lending from a culture of grow market share, grow fast and break things, we are big tech and we'll figure out the business plan later, it shouldn't have been given out in the first place.

There's still going to be tons of venture funds that will just tell their clients to move their operating accounts to Chase.
It's actually a great thing and needed for the economy to actually become "real". Easy obtainable money throws the "risk/reward" equation out of whack and creates havoc in the industry, like the situation I mentioned above where bad companies can put good companies out of business because they don't care about making profit when they have billions from San Jose.

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CDUB98
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In reply to LMCane • 11:32a, 3/10/23
AG
LMCane said:
well stated

aside from a bank failure

won't this make it much more difficult for new startups to get funding and actually succeed?

bullish for the economy!


That's what should happen. The question is whether the Fed will let nature take its course or interfere.
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will25u
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11:35a, 3/10/23

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CDUB98
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In reply to will25u • 11:36a, 3/10/23
AG
This is suboptimal.
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HumpitPuryear
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In reply to Dies Irae • 11:40a, 3/10/23
AG
Dies Irae said:
outofstateaggie said:
Htownag11 said:
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Different than Enron, but I think SVB is just as toast. Enron was deliberately fraudulent.

SVB seems to have made some bad/aggressive loans, has a huge portfolio of treasuries/bonds/MBS on their balance sheet at historically low interest rates that are worth less today because market interest rates have risen, and is being forced to liquidate those impaired assets because of growing deposit redemptions.

Because they were intended to be held to maturity, SVB wasn't required to "mark to market" those impaired assets, until now, that is, when they are being liquidated.

The big banks have the same issue with large holdings of debt securities that are impaired but aren't marked as such because they are classified as HTM.


This just popped up on my Instagram feed. They're listening.

https://www.instagram.com/reel/Cpi-VjkAo7a/?igshid=YmMyMTA2M2Y=

Is this accurate or relevant to this situation?
Absolutely it is, money used to be not quite free but extremely cheap to get; to make things very simple; if you wanted to borrow $1,000,000 at 2.5% interest; you had to pay $25,000 of interest per year; $2k/mo not bad. Now fast forward to current times, and you have to pay 7% or so; and the amount of interest you have to pay jumps up to $5,800/mo.

That's the issue a lot of these companies have with their bonds. The bonds they're issuing to repay the previous bonds are costing them 3x as much interest, and they're now buried under debt servicing.
Federal Government is going to experience the same squeeze.
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11
Adverse Event
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In reply to TRADUCTOR • 11:48a, 3/10/23
TRADUCTOR said:
Knock over those moneychangers' tables.

Bitcoin
What bitcoin’s detractors don’t understand is monetary economics, computer science, software engineering, network protocols, and electrical systems.

It ain't much, but it's honest Proof of Work.
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ac04
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11:49a, 3/10/23
weird, it's almost like fiat is just an enormous ponzi
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aezmvp
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11:55a, 3/10/23
A bunch of startups are about to go under when the FDIC starts taking money from accounts cover those deposits and losses.
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1997 AG
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11:57a, 3/10/23
AG
President of the bank appears to be an Aggie...
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Dies Irae
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In reply to HumpitPuryear • 12:05p, 3/10/23
HumpitPuryear said:
Dies Irae said:
outofstateaggie said:
Htownag11 said:
outofstateaggie said:
Saw this yesterday. People were making comparisons to Enron. No idea if those companions were valid or not. Lots of money being moved for sure.
Different than Enron, but I think SVB is just as toast. Enron was deliberately fraudulent.

SVB seems to have made some bad/aggressive loans, has a huge portfolio of treasuries/bonds/MBS on their balance sheet at historically low interest rates that are worth less today because market interest rates have risen, and is being forced to liquidate those impaired assets because of growing deposit redemptions.

Because they were intended to be held to maturity, SVB wasn't required to "mark to market" those impaired assets, until now, that is, when they are being liquidated.

The big banks have the same issue with large holdings of debt securities that are impaired but aren't marked as such because they are classified as HTM.


This just popped up on my Instagram feed. They're listening.

https://www.instagram.com/reel/Cpi-VjkAo7a/?igshid=YmMyMTA2M2Y=

Is this accurate or relevant to this situation?
Absolutely it is, money used to be not quite free but extremely cheap to get; to make things very simple; if you wanted to borrow $1,000,000 at 2.5% interest; you had to pay $25,000 of interest per year; $2k/mo not bad. Now fast forward to current times, and you have to pay 7% or so; and the amount of interest you have to pay jumps up to $5,800/mo.

That's the issue a lot of these companies have with their bonds. The bonds they're issuing to repay the previous bonds are costing them 3x as much interest, and they're now buried under debt servicing.
Federal Government is going to experience the same squeeze.
and Joe Biden, with exquisite timing, just said the U.S defaulting on its debt payments is the biggest risk facing the U.S economy.
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Dies Irae
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12:10p, 3/10/23
Man this is gonna sting
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CDUB98
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12:10p, 3/10/23
AG
holy hell
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cone
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In reply to ac04 • 12:11p, 3/10/23
AG
I'm starting to think ZIRP made for a fake economy

SAD
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ac04
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12:12p, 3/10/23
the whole thing is fake. no banks actually have the money that the numbers on the screen indicate
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Nanomachines son
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12:17p, 3/10/23


This guy is so consistently wrong that you can make lots of money betting the opposite of what he says.
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cone
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12:17p, 3/10/23
AG
the pressure on Jay Powell must be completely crushing
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CDUB98
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12:18p, 3/10/23
AG
Quote:
This guy is so consistently wrong that you can make lots of money betting the opposite of what he says.


So much this.
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