Parent Company of Silicon Valley Bank Files for Bankruptcy (nytimes.com) 69
SVB Financial Group, the former parent company of Silicon Valley Bank, the lender that was seized by regulators last week after a devastating run on deposits, filed for bankruptcy on Friday. From a report: The move would place SVB Financial, which owns other businesses aside from Silicon Valley Bank, into a court-led process, as it auctions off units that include the investment manager SVB Capital and the brokerage firm SVB securities. Those units continue to operate and were not part of the bankruptcy filing. The bankruptcy process would be separate from the sale of assets led by the Federal Deposit Insurance Corporation to repay Silicon Valley Bank's depositors. SVB Financial said in a statement that it "believes it has approximately $2.2 billion of liquidity." The company had about $3.3 billion in debt outstanding and a type of shares worth $3.7 billion.
Rats desert sinking shp (Score:2)
Getting fired for buying IBM? (Score:2)
Kind of a feeble FP, though it appears you were going for Funny. Like the savage tortoise that you are?
The "funny" (to me, with my extremely distorted sense of humor) part of this story that is increasingly bothering me is that the bank was heavily invested in US Treasury bonds. That's supposed to be the safest of safe investments. They used to say you wouldn't get fired for telling your bosses to buy an IBM computer, but now it looks like the financial system is at risk of burning down because this bank bo
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They bought the bonds at a bad time, when interest rates were very low. Now that interest rates have hiked their yield is much lower. Yes, they're generally safe bets; you don't get rich from bonds but they're relatively safe. The money *in* the bonds is safe but the yield is lower; meaning less profit per year even if the captial is safe.
But when operating on a thread that little bit of profit is important. Combine that with prices going up and startups now need to borrow more money, borrowing is more
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Thanks, and I know it was something like that, though my point was supposed to be sort of ironic. But then again I was working for IBM as the company was backing out of the hardware sides of the computer business... Most of the IBM computer options went away.
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Well that is exactly it isnt it. - To much politics in the money.
These banks bought long dated bonds mostly Treasuries. They paid relatively low rates, because wait for it the FED had kept rates low for 15 years. Suddenly they found they could not sell them for net-present value because rates went up rapidly and supply (odd word in context) of other debt offerings remained high, because that same FED started to let its balance sheet run off and the economy is/was still loaded up with pent up demand for th
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Mostly the ACK with partial concurrence. You were focusing mostly on the timing aspects, even in your summary of the latest proposed WWE scam.
However my "politics out of money" joke was mostly related to the notion of fiat currency depending on the whims of politicians (though I'm also contemplating the reverse form we hear so often and I think the two forms of abuse do interact and reinforce each other). Your closest approach on that angle was in your second paragraph about the FED. However, I think their
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No, its not politics in money... at least outside the 2 years under Trump when he stupidly politicized it briefly. TBills are still perfectly safe. Let me very very oversimplify.
You have a $100 bill that pays back $110 in 10 years. Five years later the rates go up and now the 5 year one pays $120. Your bill that you spent $100 on that should give you $110 in 5 more years... if you were to sell it now, it would be worth $90... cause people expect $20 back.
So what does that have to do with the bank? When
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Yes, and thanks for the details, though most of them aren't really relevant to my main point... Let me try again:
When I half-joked we need to get the politics out of money I was referring to the way politics influences imaginary values. On the money side, the value of fiat currency itself is essentially a matter of opinion driven by political processes. Each government wants its own currency to be perceived as valuable, but the governmental processes that actually affect the value of the currency are then d
Re: Getting fired for buying IBM? (Score:1)
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NAK
But don't call it a bailout. (Score:1)
We're protecting only the depositors money . . . not the investors! That's capitalism!
Seriously, there may be a reasonable argument that bailing out an industry bank is good for mom and pop down on the farm. But let's be honest about what this is.
And even if there is a good argument, there is also a good argument that investors in this kind of enterprise should bear not only the risk of their investmentm but also associated risks created by actions of the bank. That is, investors should be on the hook for t
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Chapter 11 isn't a bail out, it's screws the creditors to protect workers. Other than the overhead of the judges/etc working on it, it doesn't cost taxpayers money.
Re:But don't call it a bailout. (Score:4, Insightful)
Anyway, sit down, dear likely non college educated Trump supporter, and pay attention, you might actually learn something.
FDIC has funds collected from member banks paid as insurance premium. The shortfall in SVB is less than 6 billion dollars. 80 billion long bonds worth 74 billion after interest rate hike. This six billion will be spread over all the banks in next years premium, mostly by the big banks with trillions in deposits. And the rural tiny bank in Wisconsin with 10 million in deposits would pay may be a 100$ more.
Will this be passed on to consumers? may be, Or it will help its depositors to stay in the small rural bank instead of deserting to a big city bank. So the additional premium is well worth the price for the small banks.
As for why Wisconsin should bail out CA. The blue states have been subsidizing the red states for a long long time. The fly over country does not generate much of income or wealth. Often the federal govt jobs, subsidies and support is what helping them. Absent that all of them will move to cities and the rural counties will be even more deserted. Like the Loving County of Texas, total population of 57, less than the population of my apartment building.
Re:But don't call it a bailout. (Score:5, Informative)
The Biden administration unilaterally deciding that depositors with more than the $250k FDIC limit at SVB will be given all their money back regardless of the rules we've all known for our entire lives is the bailout.
You're confused. Uninsured != Unrecoverable, and never has.
As has always been the case, $250K is a limit on how much the FDIC guarantees, not a limit on how much the USG can recover from the bank once the bank's assets are seized. In this case, the USG is able to recover enough to cover all of the deposits because the bank had sufficient assets. Simple as that.
And to suggest taxpayers aren't paying for it is one of the most brazen lies told yet.
There's nothing even here for the taxpayer to pay. SVB had sufficient assets to cover deposits, but they weren't liquid. They are being forced to liquidate them. As expected, that is enough to cover deposits. This isn't complicated.
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>In this case, the USG is able to recover enough to cover all of the deposits because the bank had sufficient assets.
Unless you have information you are not sharing, that's a "probably, maybe." I have not seen any source that has identified SVB's assets, so it's impossible to determine their current worth, or their worth when actually liquidated or transferred.
There are also those transaction and infrastructure costs . . .
Re:But don't call it a bailout. (Score:5, Interesting)
Seriously, there may be a reasonable argument that bailing out an industry bank is good for mom and pop down on the farm. But let's be honest about what this is.
I agree, let's be honest: this is a government-enforced disbursement of privately-owned assets, not a bailout by the government. SVB's problem wasn't that their debts exceeded their assets. SVB's problem was that they didn't keep enough of their assets liquid and thus couldn't handle a self-inflicted run on the bank. Given that SVB will not exist after this is said and done and that SVB is paying for their own mistakes from their own assets, those referring to this as a "bailout" are standing on shaky ground.
Re:But don't call it a bailout. (Score:5, Informative)
You seem to be using the word "bailout" wrong.
If the government pays a private debt, using taxpayer money, that's a bailout.
In this case, the government is NOT paying the depositors, NOR is the government paying the investors.
So it's not a bailout.
Who is paying? The bank is paying. The government is NOT giving the bank the money to pay with. The bank MUST pay with ITS OWN money. That is precisely why it is not a bailout.
The only thing that matters here is that the government is requiring the bank to pay its depositors before it pays its investors. That is interesting and uncommon, but it's still not a bailout because the government is still not the one paying.
I am trying really hard to make it clear why this doesn't qualify as a bailout. Who gets the money doesn't matter. Who provides the money is what matters. It's only a bailout if the government provides the money, and the government is NOT providing the money.
Of course the article is paywalled so I can't read it. There may be something about this proceeding that I don't understand, so if I have my facts wrong about who is paying what, please correct me.
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You don't get it. Go back to listening to Sidney Powell or Rudy Giu
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There is a difference between liquidity and solvency. The clueless SVB CEO pulled an anti-Elon. Elon tweeted "Funding secured" when it was not in the middle of a trading day. SVB CEO figuratively tweeted "Funding not secured" triggering a panic. There was enough time for him to raise 2 billion cash and then claim funding secured. Dumb ass CEO.
Re:But don't call it a bailout. (Score:4, Insightful)
No, that is not what that means. You still don't understand.
By analogy, if someone had about $2.50 cash, and owned 400 high-quality rental properties in various wealthy cities, that person would accurately be described as "rich." So if suddenly that person had a $5000 debt to pay, they can't say "oh but I only have 2.50 to my name, so I can't pay that debt. I guess I get off scott-free!" Nope, we force that person to sell one of those houses, maybe at a terrible loss because they must sell quickly, in order to pay the debt.
So you see, even though the person had no cash, the person had plenty of assets to cover the debt. As a matter of common semantic simplicity, we refer to the wealth that those houses represent as "money" even though that wealth is not in cash form at the moment.
So when that person is forced to sell a house to pay a debt, that person has not been "bailed out." If instead the government gave that person some free money to pay the debt, THAT would be "bailing out."
Its the same situation here. The bank didn't have the cash on hand but that doesn't matter one bit. The bank had plenty of assets to cover its debts. So, the government said "we aren't going to bail you out. Sell your assets and pay this yourself."
What I really don't understand, Train0987, is why this is so hard for you to understand. You seem to have some sort of emotional block here, some sort of bias or something that is clouding your ability to think clearly. Or maybe you really don't know very much at all about money, investments, how they are managed, and how people talk about these things. In either case, what you seem to be arguing is simply false, and your reasons for it are clearly wrong.
I humbly request that you please acquire the requisite education and understanding before engaging in dialogues on these topics.
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The fact that you do not understand the difference between “asset” and “liquidity” (or as you put it, “money”) shows you to be somewhat unqualified to post in this thread.
Anon because I’ve been modding you troll and don’t want to lose that.
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The bank (which doesn't have any money) is funding this?
Your parenthetical is contrafactual. The bank had sufficient assets, they just weren't liquid enough to service their short-term needs. The government is forcing the bank to liquidate those assets. This isn't complicated.
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Every article I have reviewed says the US Government is paying all depositors the full amount of their deposit. *Perhaps* the people will recover that amount from the bank, but that is not a completed transaction. The declaration of bankruptcy suggests that SVB's parent has insufficient assets to pay back its creditors, of which the people are now one.
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Millionaires and billionaires don't keep large amounts of cash in the bank. Cash in the bank is stupid money that grows smaller as time progresses because interest rates are below inflation.
Rich people keep their money in vehicles that get them higher returns on their investment. The only time big
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Re:But don't call it a bailout. (Score:4, Insightful)
Before you go off on how that's totes a bad thing... remember how much money many companies continued to sit (for years) instead of reinvesting or paying it out as dividends. Maybe Etsy shouldn't be sitting on money for as long as they were instead of batching it out regularly? Etsy wants the interest, or to use it as capital float, for their own purposes, well then Etsy can be on the hook when it loses a few hundred million.
Stop with the end stage Capitalism of socializing the risk, while privatizing the profits. Stop the rent-seeking behavior of vulture Capitalism.
They claim to be worshippers of the market, let the market burn them down.
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I don't see this as a failure of bank regulation, at least not yet. SVB overshot, crashed, and burned, but then again look how much economic activity it facilitated over the last 10 years
Now show that the same economic activity would not have occurred without it.
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The regulations did fail (Score:5, Insightful)
Larger banks - over $250bn - are subject to 'stress tests' that look at how a major change in the wider economic environment would affect their business. SVB was too small to have those tests applied to it - as a result of bipartisan changes to banking regulations in the Trump era. So yes, we have a problem...
For a fuller discussion see this - though it's probably paywalled.
https://www.economist.com/lead... [economist.com]
Re:The regulations did fail (Score:4, Insightful)
Unanimous support from ALL the Republicans senators and reps. 17 Democratic senators and 30 Reps provided a fig leaf of bipartisanship. It was nakedly a Republican act. The few DINOs does not get Democrats 50% of the blame. It is 90% Republicans and 10% Democrats, blame allocation.
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17 out of 50 Democrat senators is not a fig leaf.
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Bipartisan makes it look like both parties supported it equally. Nope.
Unanimous support from ALL the Republicans senators and reps. 17 Democratic senators and 30 Reps provided a fig leaf of bipartisanship. It was nakedly a Republican act. The few DINOs does not get Democrats 50% of the blame. It is 90% Republicans and 10% Democrats, blame allocation.
Yes but to be fair that list of "DINOs" rotates so they can get re-elected while providing cover for the ultra rich and corporations.
The first thing we need to do is work on shredding the ability the Roberts court created for corporations (and thus, the ultra-rich) to legally bribe politicians. The next is to start making it so that politicians don't get to choose their voters.
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It's not like the investments in question were speculative. Glass-Steagal wouldn't have prevented using long term treasuries as assets.
The only way to have prevented their collapse would be for government to micromanage consumer bank investment strategies beyond Glass-Steagal restrictions (and not get it wrong too) or it should have hid their books so outsiders couldn't do the math and determine they were mark to market insolvent.
I don't think either makes sense.
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The 250k isn't per account. It is per bank.
If I had a million dollars at a dead bank in 1 account I would be covered for 250k.
If I had a million dollars at a dead bank in 4 accounts I would still be covered for the same 250k.
In both cases I would take a 750k beating.
So, looking at Roku with 487 million at SVB.... they'd need 487 x 4 banks to cover that. And they actually had about 2 billion in cash so to cover all 2 billion at 250k per bank would be even more banks.
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False. It is per account.
"The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category."
https://www.fdic.gov/resources... [fdic.gov]
They should probably take that down now that bank deposits have been nationalized. Does anyone think they'll apply that $250k limit ever again after bailing out all those millionaires in Silicon Valley? Maybe they will I guess, our political donations aren't as much as theirs.
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Hm ok. Not what my bank told me. Need to have a chat with them now, thanks.
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> keeping millions in a single set of bank accounts
But what's the alternative if only $250,000 is safe in any one bank? Should every business in the nation break up its funds and scatter it to the four winds with ams deposits in tens or hundreds of banks? That would be absurdly unwieldy to manage, given the size of business accounts and bills. I guess that'd be a good thing if you wanted job security as an accountant. But can you even imagine the productivity hit from that level of administrative ove
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Let the FED create a classification that allows a bank to voluntarily agree to abide by Glass-Steagall Act or Dodd-Frank Act. Let FDIC certify "Yes, this bank is compliant with: A Glass-Steagall, B Dodd-Frank voluntary C Dodd-Frank compulsory D none"
Let people move their deposits to whatever level of risk they are comfortable with.
Make public companies disclose where they park their cash, and what the risk rating of that bank.
Then let the free market rule.
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Perhaps what's needed is for the larger accounts to have larger coverage...and also larger payments into the FDIC insurance plan.
In fact, perhaps what's needed is that the coverage and payments be indexed to inflation...but how do you measure inflation in this part of the market?
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It's a bailout since the government decided to ignore their own FDIC rules and guarantee 100% of those rich people's deposits instead of the $250k limit.
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Oh, that argument.
I don't think forcing each account with more than $250K to distribute deposits among multiple banks would accomplish anything. Not even spreading risk, since the total number of banks and total amount of deposits would still be the same... just more finely divided up into smaller accounts to avoid the $250K threshold.
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Why do those FDIC limits even exist then? Sweep accounts have been a thing for a very long time. There are dozens of other ways to protect your wealth too since FDIC insurance limits have existed for a very long time as well. How is their lack of basic fiduciary sense now my problem? Rich people have financial advisors to prevent this sort of thing you know, unless of course they've all always known the rules only apply to you and me and that they'd be exempt from any pain for their poor decisions to ma
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If SVB had enough collateral to cover all deposits why was it so important for the President of the United States to hold an emergency press conference on a Sunday to reassure all those millionaires/billionaires that he was guaranteeing all their deposits above the $250k limit? Do you know what the word "bankrupt" means? You know, the subject of the story we're commenting on?
How stupid do you think we are? That "collateral" is illiquid worthless garbage.
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Limited liability works really well - don't mess (Score:3)
Limited liability is one of the unsung invention of the modern era. It allows entrepreneurs to raise money for high risk projects whilst protecting the investors from any fallout. Whilst sometimes this is abused - and regulators struggle to prevent those abuses - on the whole it enables the mobilisation of capital for difficult projects that simply wouldn't otherwise happen.
In the case of SVB the shareholders are presumably going to take a massive loss (sale of the UK subsidiary to HSBC for £1 certain
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I agree that if the consequences of risk are limited only to investor and entrepreneur, the investor should be liable only to the extent of their investment. But when the consequences of realized risks are spread to others who did not profit from the venture, the investors should be responsible for those additional damages. True for taxpayers here, and for the countless folks exposed to toxic chemicals in Ohio and beyond. Investors should be liable for those damages.
Additionally, limited liability allows a
Banking 101 (Score:2)
ALL banks borrow short and lend long. That's their business. So yes, 'no bank can survive a run over some percentage of withdrawal'.
Let's take an example. Suppose I want a mortgage to buy my house for $400,000. So 400 people keep $1,000 in their chequing accounts on average. So the bank can offer me that mortgage because the average has been true for decades. Then some clown starts a panic about the bank - and suddenly all 400 people want their $1000. Result: the bank collapses.
Thus it was until the creatio
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I don't have a problem with fractional reserve banking, are even more complex financial products, or using government funds to mitigate damages in the short term.
My disagreement with you is about the extent of liability of investors. To whatever extend this bank failure, or the East Palestine Derailment, or the local grocery store's salmonella outbreak damages third parties, it should be the investors who pay for it. In the case of SVB, to whatever extend the people incur expenses that are not recovered thr
Re:They should have printed some tethers (Score:4, Informative)
Since they were a crypto company they could have printed a few billion tethers to keep going. No one loses money in crypto since they just print more.
Sure you're not thinking of Silvergate Capital, which failed last week as well? It was heavily into crypto. SVB was a regular bank that has existed for decades.
Shares worth 3.7 Billion? (Score:2)
It seems they have a bunch of units alright. Don't think anyone wants to pay enough for those, unless they provide some priority over the debt holders they are worth 0$ most likely.
Will they claw back dividends and boni (Score:2)
All the pay and benefits to the board paid in the last 3 years, to be clawed back.,
Estimate the additional dividends paid by SVB over the norm, Claw them back too from the directors and the C suite operatives
Null and void all the golden parachutes.
Threaten them with jail time if they don't return the cash.
In Soviet Russia, Legacy Explores You! (Score:2)
Let's take a trip down memory lane and talk about the good old days of Soviet Russia. You know, the days of standing in line for hours just to get some bread and waiting for the government to give you permission to buy a car?
But hey, at least they had some cool stuff like the first satellite and the first human spaceflight. It's like they were saying, "Yeah, our country may be falling apart, but we can still send a dude into space!"
And let's not forget about their comm