Silicon Valley Bank fails

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Seppia
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Re: Silicon Valley Bank fails

Post by Seppia »

Seppia wrote:
Sun Mar 19, 2023 7:29 pm
Interesting that the bond holders are getting wiped out while shareholders are getting 50ish cents in the dollar.
Looking forward to reading Levine on the subject as I don’t understand what’s going on
Credit Suisse Bailout Crosses a Debt Rubicon https://www.bloomberg.com/opinion/artic ... bt-rubicon

Simple explanation of what is happening

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Re: Silicon Valley Bank fails

Post by jacob »

Ego wrote:
Sat Mar 18, 2023 7:27 pm
Image
Continuing the graph, it's beginning to look like the previous ones with a spike following by an exponential decay. It's once again difficult to find 3 month CDs yielding over 5%. Insofar rates keep increasing, it'll end TINA and affect the "everything but cash"-bubble. One hawk: https://www.marketwatch.com/story/feds- ... y-dd1c0cae

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Re: Silicon Valley Bank fails

Post by jacob »

FDIC seizes FRC. JPM buys it. Equity wiped out.

chenda
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Re: Silicon Valley Bank fails

Post by chenda »

jacob wrote:
Mon May 01, 2023 1:54 pm
FDIC seizes FRC. JPM buys it. Equity wiped out.
What's in it for JPM ? Are they now burdened to guarantee deposits at FDIC ? (As well as presumably pensions, staff salaries etc ?)

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Re: Silicon Valley Bank fails

Post by theanimal »

chenda wrote:
Mon May 01, 2023 2:30 pm
What's in it for JPM ? Are they now burdened to guarantee deposits at FDIC ? (As well as presumably pensions, staff salaries etc ?)
Bank assets (loans) at ridiculously low prices leading to presumably higher earnings down the line

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Slevin
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Re: Silicon Valley Bank fails

Post by Slevin »

chenda wrote:
Mon May 01, 2023 2:30 pm
What's in it for JPM ? Are they now burdened to guarantee deposits at FDIC ? (As well as presumably pensions, staff salaries etc ?)
Here’s the really long and detailed explanation of what is in it for them by Matt Levine:

https://www.bloomberg.com/opinion/artic ... t-republic

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Re: Silicon Valley Bank fails

Post by jacob »


chenda
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Re: Silicon Valley Bank fails

Post by chenda »

Thanks all...

Seems fair to me, protect the depositors let the shareholders take the loss.

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Re: Silicon Valley Bank fails

Post by jacob »

Seems like the sharks keep circling over to the next "weakest lifeboat" while dragging the whole regional banking sector down along with it.

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Re: Silicon Valley Bank fails

Post by Salathor »

Slevin wrote:
Mon May 01, 2023 2:57 pm
Here’s the really long and detailed explanation of what is in it for them by Matt Levine:

https://www.bloomberg.com/opinion/artic ... t-republic
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Bankai
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Re: Silicon Valley Bank fails

Post by Bankai »

Markets don't care but the 3 recent bank failures were actually 2nd, 3rd & 4th biggest in US history with combined assets between the 3 much higher than the previous 500 or so failures since 2009 combined. It's probably only a matter of time before there are more failures - will be interesting to see how markets react to those.

Image

bostonimproper
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Re: Silicon Valley Bank fails

Post by bostonimproper »

@Bankai Presumably those numbers are nominal asset amounts, not inflation adjusted?

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Re: Silicon Valley Bank fails

Post by mathiverse »

bostonimproper wrote:
Sun May 07, 2023 7:24 am
inflation adjusted?
They aren't inflation adjusted. It says assets at time of failure on the chart.

Using the BLS CPI-based inflation adjustment calculator, the fourth one on the list is ~$118 billion in 2023 dollars. The fifth is about $110 billion. The sixth is about $46 billion. The seventh is about $78 billion.

So adding up all the ones beforehand would possibly be higher than the sum of the recent three if you adjusted everything for inflation. I'm not 100% sure though. They only include the banks that have failed since 2009 which leaves out a lot of the biggest bank failures based on that list.

Although one thing you can get from the list is that the relevant rankings (ie ordering of 1 - 4 and also that 5 - N are less than all of 1 - 4) are basically correct despite the fact the listing is not inflation adjusted since the 4th is higher than all the ones below it.

Since they left out all the banks that failed due to the last recession and beforehand, maybe the result wouldn't even be that big a deal? Wouldn't it make sense for the biggest bank failures to happen during a country wide recession rather than in the between times when there has been a lot of growth? Maybe this is just the taxi driver vs salaryman thing Taleb talks about where, given the US fiscal and monetary policy, we have mostly small crashes/problems that stay within a small range then huge crashes periodically? I'm not sure.

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Re: Silicon Valley Bank fails

Post by jacob »

Well, this is interesting: https://www.marketwatch.com/story/fed-f ... s-b4bbd650

The regional bank issue seems comparable in form to the S&L crisis (see https://en.wikipedia.org/wiki/Savings_and_loan_crisis ) where interest rates were hiked to combat inflation. Long term liabilities (crypto and construction loans) with lower yields don't pay enough to cover the shorter-term higher rate loans, the banks need to maintain their balance sheets given the continuing outflux of deposits.

Also note that inflation is moderating (lowest in a year) so this gives the Fed an opening to alleviate the regional banking pain.

I'm not convinced that's the right lesson but it is what it is.

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Re: Silicon Valley Bank fails

Post by jacob »

Howard Marks(*) on SVB et al. For those who read with their eyes, there's an 11 page pdf in the left sidebar. Note this is from a month ago.
https://www.oaktreecapital.com/insights ... alley-bank

(*) In case the name doesn't ring a bell, I'm a big HM fan. Whenever anyone presses me for "how I invest", I usually point to his books.

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Ego
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Re: Silicon Valley Bank fails

Post by Ego »

Bank of America nurses $100bn paper loss after big bet in bond market
https://archive.is/Xv9jS

The SVB crisis provided BofA with the funds needed to weather a storm like this. It appears they have the same duration problem but not the same crisis of confidence (yet?) of SVB.

On the other had, the ECB has the "most toxic combination" of high leverage and asset/liability mismatch that Marks mentioned in the link @jacob provided above.

https://archive.is/qfsZM#selection-2351.0-2351.338
“If the functioning of the Bundesbank is endangered by an inadequate or even negative net equity, the Federal Republic of Germany can be obliged to inject capital,” it said. “Depending on the extent and probability, the risks arising from monetary policy could, in the worst case, endanger the budgetary autonomy of the German Bundestag”.

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Re: Silicon Valley Bank fails

Post by PhoneticNachos »

Was wild to see this all unfold from inside the financial industry.

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Re: Silicon Valley Bank fails

Post by jacob »

https://www.marketwatch.com/story/repub ... y-34a7a03b

Also, S&P as well as Fitch have either downgraded several regional banks or put them on review for a potential downgrade.

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