What's really scary about the SVB situation is the dynamic that there's no cost to causing a bank run, so now you've got all these VC guys who are disingenuously claiming that every bank in America is now at risk because of SVB. We all know what they're doing - they're trying to create panic so that the government has to step in, but it's a massively dangerous game to be playing. If other regional banks do start failing it's going to be in no small part due to these people preaching doomsday scenarios. Will they pay a price for their behaviour. Of course not.
> VC guys who are disingenuously claiming that every bank in America is now at risk because of SVB
They’re deflecting blame. A bailout is unrealistic given the House. And there is no contagion to the systemically-important banks. VCs should have advised their founders to adopt reasonable treasury procedures. Instead, they funnelled them into an easy solution.
Maybe the standard banking model is broken. Banks offer a theoretical guarantee of the ability withdraw your money at any time and then just hope the situation that prevents that doesn't happen.
Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit).
If by "cause" you mean "say lots of scary-sounding stuff in public", then no, there probably isn't. If by "cause" you mean "take your money out", then yes, there is a cost. It takes time and effort to do. It especially costs if you're playing dodgeball, trying to get out of every institution that everyone says might possibly be in danger of failing.
From @commbankerguy | https://twitter.com/commbankerguy | on Twitter on evaluating your bank, where more than one factor should be in play to probably be of concern:
1. Red flag if cash as % of assets or deposits is below 3%. Meaning can they handle a withdrawal of up to 3% or is cash tied up in bonds.
2. Red flag if tangible capital is under 4% after looking at bond portfolio as % of tangible capital (this one wasn't totally clear, but I think get the idea).
3. Red flag if over 20% of liabilities are brokered deposits and/or funds borrowed from FHLB. If the bank is not well capitalized those funds become restricted/unavailable.
Also:
High concentration of consumer deposits is less likely to face destabilizing run.
It's an article about stock prices. The US stock exchanges close at 4 p.m. Eastern time on Friday. Aside from opinions and speculation, what has changed re: First Republic's stock price since then?
Most banks do not have most of their capital tied up for ten years; SVB had to sell their treasuries before the ten years at a loss. The only thing tying other banks who don't do that to SVB is random fear of a bank run.
If I’m a treasurer at a small firm, I’m just going to move my funds to the biggest bank I can find. Who has the time or energy to spend interrogating the asset mix and bond duration of the bank with your checking account?
> Most banks do not have most of their capital tied up for ten years;
{{Citation needed}}
Why would SVB be particularly special with respect to investments? They were all sharing the yield environment the the current effects of recent monetary policy.
As a public service, I would recommend you down vote into oblivion any comment/article spreading FUD like this one. Although the fears are valid, talking about it and spreading it is exactly what causes the vicious cycle that will lead to another unnecessary bank run. If you want to pull your money, do so silently. Stop telling other people about it.
It's interesting to see First Republic bank having this trouble. It seems clear (feel free to correct me) that they ALSO had massive loan portfolios at extremely low rates which have likely rapidly and seriously declined in value over longer terms. And it's likely they too were enjoying a deluge of deposits from the valley's success and are now seeing huge amounts of money drying up. I'm not saying the bank is bankrupt, but they too could easily end up in a liquidity crisis. In fact, I wonder if they already are heading in that direction...
This is FUD without analytic support. Loan portfolios are floating rate and pricing for loans has been stable. You need to look at interest rate exposure which is not in the loan portfolio.
I'm not sure i understand the difference here between "a liquidity crisis" and bankruptcy. people want to withdraw their deposits made at low interest rates and invest them with better yields.
The banks have misrepresented their ability to pay out the current deposits.
No bail out! It's your own fault for! You shouldn't have taken such insane risks! You deserve to lose your money, that's capitalism in action! We shouldn't socialize your losses!
Ah, the age old question: is it cheaper to bailout (to one degree or another) 1 bank or watch 9 more fail because they're in the same position but the run hasn't started yet...
I wonder how much this outcome was foreseen and discussed by the fed when they went into full rate rise mode.
Panic is contagious. The real risk to any bank these days seems to be a Crypto affiliation. Fatal Bank runs happen if you have a group of people who talk to each other and have a large % of holdings in the bank (so sudden pull of those holdings ends up putting the bank under liquidity thresholds). Circle has the biggest or one of the biggest accounts in SVB and the stable-coin run or another factor made them rebalance. VCs, another large connected cluster at SVB got wind of it, and drained the rest. First Republic has VC exposure but not to Circle. There are 5 other banks that are affiliated with Circle and if any of them are struggling with underwater bonds, that would be a big problem.
There are a lot of interest-rates-weakened non-crypto affiliated banks in the US, but their deposits are mostly under the FDIC threshold. SVB had the worst vin diagram of all: Crypto, large average deposits, and very inter-connected client base.
> The real risk to any bank these days seems to be a Crypto affiliation.
Maybe. Meanwhile the second biggest bank failure in the history in the US is undergoing and it has nothing to do with crypto.
> Circle has the biggest or one of the biggest accounts in SVB and the stable-coin run or another factor made them rebalance.
It's Circle's fault now?
> There are 5 other banks that are affiliated with Circle and if any of them are struggling with underwater bonds, that would be a big problem.
Circle, unless they're lying, said they have $5.4 bn at BNY. $3.3 at SIVB and the rest over the 5 other banks. So out of $9.8 bn in USD cash reserves, there is at most $1.1 bn left, spread over 5 banks.
I don't think it's a problem as big as you pretend it is.
I also think it's an argument made in very bad faith that Circle is responsible for this. SIVB had, at one point, $200 bn AuM. $3.3 bn is not nothing but it's not much compared to $200 bn.
The SVB run was unrelated to crypto, other than that VCs also invest in crypto startups. We're also past the point of a group of people talking to each other about bank risk; now everyone's looking at it.
[+] [-] SilverBirch|3 years ago|reply
[+] [-] JumpCrisscross|3 years ago|reply
They’re deflecting blame. A bailout is unrealistic given the House. And there is no contagion to the systemically-important banks. VCs should have advised their founders to adopt reasonable treasury procedures. Instead, they funnelled them into an easy solution.
[+] [-] zug_zug|3 years ago|reply
Perhaps they should require your consent to invest your money in illiquid assets. If they can't promise depositors liquidity they are cheating on their obligation in hopes seek a higher interest rate (profit).
[+] [-] AnimalMuppet|3 years ago|reply
[+] [-] BeFlatXIII|3 years ago|reply
[+] [-] paulddraper|3 years ago|reply
For SVB it was tiny. I'm guessing other banks it is bigger but idk
[+] [-] howmayiannoyyou|3 years ago|reply
https://twitter.com/commbankerguy/status/1634637082659364866
1. Red flag if cash as % of assets or deposits is below 3%. Meaning can they handle a withdrawal of up to 3% or is cash tied up in bonds.
2. Red flag if tangible capital is under 4% after looking at bond portfolio as % of tangible capital (this one wasn't totally clear, but I think get the idea).
3. Red flag if over 20% of liabilities are brokered deposits and/or funds borrowed from FHLB. If the bank is not well capitalized those funds become restricted/unavailable.
Also:
High concentration of consumer deposits is less likely to face destabilizing run.
For example @commbankerguy says:
"If 50% in brokered/FHLB and capital level of 5%, I would recommend you move your money if over $250k." https://twitter.com/commbankerguy/status/1634764850126520320...
@Citrini7 shorted $SIVB in late 2022 after marking their holding to market and finding their book value was negative. https://twitter.com/Citrini7/status/1583593158738612226?s=20
Then this dude created an SVB recovery analysis that is legend:
https://docs.google.com/spreadsheets/d/13OyOLDePh85Wna5xcyTi...
[+] [-] unknown|3 years ago|reply
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[+] [-] jp_nc|3 years ago|reply
[+] [-] perrygeo|3 years ago|reply
[+] [-] coldcode|3 years ago|reply
[+] [-] mikeyouse|3 years ago|reply
[+] [-] LatteLazy|3 years ago|reply
[+] [-] nullc|3 years ago|reply
{{Citation needed}}
Why would SVB be particularly special with respect to investments? They were all sharing the yield environment the the current effects of recent monetary policy.
[+] [-] fairity|3 years ago|reply
[+] [-] aliljet|3 years ago|reply
[+] [-] the_optimist|3 years ago|reply
[+] [-] ouid|3 years ago|reply
The banks have misrepresented their ability to pay out the current deposits.
[+] [-] photonbeam|3 years ago|reply
[+] [-] neon_electro|3 years ago|reply
[+] [-] paxys|3 years ago|reply
[+] [-] anon291|3 years ago|reply
[+] [-] dexter0|3 years ago|reply
[+] [-] SigmundA|3 years ago|reply
Pretty scary to go from thinking you have a safe emergency fund regardless of the market to a potential bank run seemingly overnight.
Wondering what tomorrow will look like and how many people are wait to transfer funds out of any at risk bank.
[+] [-] ninjazee124|3 years ago|reply
[+] [-] pyrophane|3 years ago|reply
[+] [-] unknown|3 years ago|reply
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[+] [-] Mistletoe|3 years ago|reply
[+] [-] drstewart|3 years ago|reply
[+] [-] LatteLazy|3 years ago|reply
I wonder how much this outcome was foreseen and discussed by the fed when they went into full rate rise mode.
[+] [-] zhte415|3 years ago|reply
[+] [-] joseftexas|3 years ago|reply
[deleted]
[+] [-] dzink|3 years ago|reply
There are a lot of interest-rates-weakened non-crypto affiliated banks in the US, but their deposits are mostly under the FDIC threshold. SVB had the worst vin diagram of all: Crypto, large average deposits, and very inter-connected client base.
[+] [-] TacticalCoder|3 years ago|reply
Maybe. Meanwhile the second biggest bank failure in the history in the US is undergoing and it has nothing to do with crypto.
> Circle has the biggest or one of the biggest accounts in SVB and the stable-coin run or another factor made them rebalance.
It's Circle's fault now?
> There are 5 other banks that are affiliated with Circle and if any of them are struggling with underwater bonds, that would be a big problem.
Circle, unless they're lying, said they have $5.4 bn at BNY. $3.3 at SIVB and the rest over the 5 other banks. So out of $9.8 bn in USD cash reserves, there is at most $1.1 bn left, spread over 5 banks.
I don't think it's a problem as big as you pretend it is.
I also think it's an argument made in very bad faith that Circle is responsible for this. SIVB had, at one point, $200 bn AuM. $3.3 bn is not nothing but it's not much compared to $200 bn.
[+] [-] dehrmann|3 years ago|reply
[+] [-] lordfrito|3 years ago|reply
Few understand.
/s