Is Silicon Valley Bank the canary in the economy’s coal mine?
Someone shook our techno-elites’ piggy bank and it was empty
Link: https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-down-by-regulators-fdic-to-protect-insured-deposits.html
Replies to: Is Silicon Valley Bank the canary in the economy’s coal mine?
It's causing some rumbles. I got a call from my advisor.
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Makes you wonder if the non-committed cash-like stuff should be moved to an insured account.
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Cash, yes. But the securities seem to be the issue.
The cash can be distributed to various participating banks if someone need sit.
But the investments (which are almost always the much larger bulk of the money as well) is ocnsidered part of that total SIPC insured coverage. You can't shift around investments like that. You also can't insure it adequately as a brokerage. You might have an impressive sounding insurance policy with Lloyds of London, but when you compare it to the massive trillions in some of these brokerages and the fact that the insurance coverage is split amongst all investors....it isn't really mush coverage at all.
Hopefully not. It was a bit of a special case.
They catered to startups who has been flush with cash and didn't require loans. They made the mistake of buying long term treasuries and agency mortgages with the deposit money since they didn't have a large corporate loan portfolio.
This caused a serious mismatch between demand deposits and long term bonds. As interest rates rose, the value of their assets went down. Meanwhile, the spigot of cash for startups turned off, so all the tech bros started burning through their cash. When demand for return of the deposits occurred, they were in the bad position of needing to sell those assets.
This caused serious losses to the point that assets no longer covered liabilities (deposits).
It was a weird bank that didn't do what most banks do because of their target market. Hopefully won't mean large contagion risk. Although Mr Market is going to take a run at SBNY next week.
Looks like you finally read the article I posted…your summary is correct.
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Mate, if you think I read cnn for financial news you are mistaken
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They're a small bank that made some bad choices...enhanced by internet calls for customers to
withdraw funds immediately....
Link: https://www.cnn.com/2023/03/10/investing/svb-bank/index.html
This is the 16th largest bank in the US…
Not small and it’s a lot more complicated than just withdrawing funds when a bank is in FDIC receivership. The last thing the FDIC wants is an all out run.
Yes and Tyrone says it's a small Bank. Ridiculous
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They're not small. Second largest failure ever.
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Correct. 18th largest Bank in The USA. Not small at all.
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'Small' as in 'Niche'...their clientele is very limited...lot's of money, but not affecting many
people...definitely affecting only 1%ers and above, i.e. folks who won't be destitute as a result of this failure....as opposed to vast swaths of American financial interests with mortgages in 2008.
Perhaps the investors in SVB will learn how to better recognize and deal with risk...
Read the article...btw, how was the flight?
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