SVB and Signature big bank bailout

sityeuropa

sityeuropa

sityeuropa

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This is an interesting video. After the two recent bank collapses


If you are using a small bank you probably wouldn't likely to see any deposits again after $250,000.
But if you are a big bank that causes disruption, the government looks like they would bail you out after a vote. Probably as it would cause too much market disruption.

Is this the torch paper for the CBDC, nobody will trust the smaller banks now.
 
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SVB (Sillicon valley bank) is used by a lot of startups in the tech sphere. That's a lot of funding that has now dissappeared. I think one company had in the region of $490 mill in there account at SVB (This wasn't all their funds).

The lack of cashflow for a number of these companys could be crippling or have knock on affects to other industrries as they try to accomodate this situation.

It does highlight why companies like to buy back their own stocks.

Edit:
Roku: 487 million at SVB
Roblox: 150 million at SVB
AcuityAds: 55 million at SVB
rocket labs: 3 million at SVB

 
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I see Etsy and others were inconvenienced by this also but payment problems are now resolved. Id keep an eye on Reddit (I know I know) as sometimes you get bits of news earlier than other forums etc, and a feeling I get is that the FDIC prefer shutting distressed banks on Fridays, I wonder if today will see the end of any more?
 
How many Banks can fail before the Government just says sorry, we can't afford to bail you out again.

SVB was poorly risk managed, by somebody who cared more for social justice than the Banks financial stability, the tax payer is the one who loses out yet again for this type of nonsense.
 
Chuk_Chuk said:
What did the Dodd-Frank law actually do?
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The Dodd-Frank Act was signed into law in 2010 after the 2008 financial crisis sent shockwaves through the banking system, causing Washington Mutual to collapse in what is now known as the biggest US bank failure. It was designed to protect consumers from abusive financial practices while increasing accountability in the US banking system.

In 2018, the House passed a rollback of regulations in Dodd-Frank by a vote of 258-159, and in the Senate, 17 Democrats joined Republicans to get the bill to Trump's desk and signed into law. The bill raised the threshold for regulation standards from $50 billion to $250 billion, which left less than ten big banks in the US subject to stricter federal oversight and allowed banks with under $250 billion in assets to escape increased scrutiny.
 
VincentHanna said:
The Dodd-Frank Act was signed into law in 2010 after the 2008 financial crisis sent shockwaves through the banking system, causing Washington Mutual to collapse in what is now known as the biggest US bank failure. It was designed to protect consumers from abusive financial practices while increasing accountability in the US banking system.

In 2018, the House passed a rollback of regulations in Dodd-Frank by a vote of 258-159, and in the Senate, 17 Democrats joined Republicans to get the bill to Trump's desk and signed into law. The bill raised the threshold for regulation standards from $50 billion to $250 billion, which left less than ten big banks in the US subject to stricter federal oversight and allowed banks with under $250 billion in assets to escape increased scrutiny.
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I should have asked this a different way. What exactly do these regulations actually do? What/how are they testing? I guess what I am really asking is how does it apply to this case?
25% of the total deposits where requested in a single day from SVB (which drained all the cash they had on hand), which led to a downward spiral. Does the regulation cover such a scenario? Does the regulation say they need to keep 40% of deposits instead 15%? Which would have prevented this.

I often see people just bring up a regulation when a tragedy happens, but actually it would not have made much of a difference. So i'm curious if this is one of those instances, because your link doesn't give much info.

Edit: While he doesn#t go into detail on what the regulation would have changed to have prevented this he does go into a lot of detail on the cause of this crisis.

 
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Chuk_Chuk said:
I often see people just bring up a regulation when a tragedy happens, but actually it would not have made much of a difference
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which appears to be the case

What experts say about the 2018 law and SVB​

For obvious reasons, it’s impossible to say for sure whether SVB might have been able to survive in an alternate universe without the 2018 rollback. And any bank collapse has numerous complex causes. So experts and advocates are divided on the extent to which the Trump law played a role in SVB’s downfall.

John Coffee, a Columbia University law professor and an expert in corporate governance, said in an email that SVB might well have been “less exposed to a bank run” under the Dodd-Frank rules from 2010. Matthew Richardson, a professor of finance at New York University’s business school, said in an email that although he disagreed with the big 2018 increase to the $50 billion threshold, he doesn’t believe it “would have made any difference in this case” if the threshold had never been raised.

Richardson said that even without the change, the Fed’s severe-stress test, which involves a hypothetical big recession, wouldn’t have captured the current rising-interest-rates scenario that bedeviled SVB on account of its hefty holdings of long-term bonds. And he said that the way the Fed calculates its capital requirement means that calculation wouldn’t have captured the decline in the value of SVB’s bonds.

....
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With Credit Suisse now teetering on the edge and getting bailed (I think this is the third or fourth bank in the last few weeks that has had substantial issues) I hope this isn’t a sign of deeper financial troubles to come.
 
Chuk_Chuk said:
With Credit Suisse now teetering on the edge and getting bailed (I think this is the third or fourth bank in the last few weeks that has had substantial issues) I hope this isn’t a sign of deeper financial troubles to come.
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Some nutjobs are apparently hoping that all those that voted for Donald Trump in 2020, try and collapse society if he gets arrested tomorrow, by pulling all their money from the banks :cry:
 
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I wasn't worried about the UK banking sector.....until Downing Street have now just come out and said there's nothing to worry about over the UK banking sector :p
 
Freakbro said:
I wasn't worried about the UK banking sector.....until Downing Street have now just come out and said there's nothing to worry about over the UK banking sector :p
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This is the party that was all set to throw financial regulation on the bonfire a few months back remember....all in the name of 'growth'.
 
StriderX said:
SVB as an idea was stupid from the outset, an entire bank focused on tech companies and start-ups in particular is far too dangerous.
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Made sense as it built more competition in Silicon Valley against The Big Four. But now they probably going to take their ideas and give it to them anyway due to lack of funding.
 
StriderX said:
SVB as an idea was stupid from the outset, an entire bank focused on tech companies and start-ups in particular is far too dangerous.
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Why? That's it tech has no bearing on what went wrong. Could have been servicing any industry.

It's simply a bank that had insufficient liquidity to survive a run. You'd have to ask Trump why it was a good idea to let a large bank get into that position.
 
not necessarily - thought the tech aspect was maybe accompanied by higher amounts of liquid venture capital for them to gamble with in their investment portfolio, bond purchases.

e: https://www.economist.com/finance-a...-banks-collapse-mean-for-the-financial-system
Thus svb’s deposits more than quadrupled—from $44bn at the end of 2017 to $189bn at the end of 2021—while its loan book grew only from $23bn to $66bn. Since banks make money on the spread between the interest rate they pay on deposits (often nothing) and the rate they are paid by borrowers, having a far larger deposit base than loan book is a problem. svb needed to acquire other interest-bearing assets. By the end of 2021, the bank had made $128bn of investments, mostly into mortgage bonds and Treasuries.
 
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