Silicon Valley Bank failure

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    • #6940
      AvatarMick
      Participant

      With stunning speed, Silicon Valley Bank’s failure has cut a swath through the technology ecosystem. A few thoughts:

      1. SVB is (was) the 16th largest bank in the USA. They grew with stunning speed and expanded into (IMHO) questionable areas.
      2. Greg Becker, the CEO, weathered several storms; the dot-com implosion, the 2009 financial crisis, among others. His profile was a smart, pragmatic Midwesterner from Indiana. To me, he’s the prototypical “experienced” executive, the Steve DeBerg of tech finance. Just good enough to get you beat, as Coach Walsh used to say. Ironically — and as classic midwestern pragmatism goes — Silicon Valley Bank had purchased billions of dollars worth of bonds yielding 1.79%, far below the current yield of 3.9%, which meant they had to sell the existing bonds at a discount, which meant Mr. Midwestern Values had to recognize a $1.8 billion loss, which it needed to recognize with a capital raise, which it couldn’t because their smart venture capital clients started pulling all their money out of the bank in a classic bank run. Nice going there, Greg.
      3. I knew three of his predecessors, and was impressed with two of them, could live with the third. Full disclosure, I did some work for SVB a decade ago when Becker was coming on board. I was hired by their existing head of marketing strategy (Harvard undergrad, Dartmouth MBA), who Greg then replaced with a Cal Poly/SLO grad with Finance (but no banking) experience. My direct experience with the bank was limited to that one senior management transition. If Becker’s other senior management transitions were similar, I definitely see why the bank tanked.
      4. Speaking of Becker, he sold millions of dollars’ worth of shares in the 120 days prior to SVB’s nosedive. Maybe it was part of a regular, planned selling program. Maybe it wasn’t.
      5. There hasn’t been a bank failure in the USA in three years, and now there’s been two in a week (Silvergate). SVB’s failure is the second largest in US history. Will other dominoes fall?
      6. Small depositors (under $250k) will be made whole. Bank management will deservedly lose everything. Bondholders, SVB shareholders and SVB bank investors will take it in the shorts and may lose everything, will certainly lose a lot. Depends on…
      7. …Whether a buyer is found. The next 48 hours will send the signals. If they find a buyer willing to keep the brand and shoulder the mid-and low-level tech financing responsibility — with much better underwriting — then this will be a noticeable financial blip, but not much more than a blip. The people who will be hurt can afford to be hurt. If they can’t find a buyer, then I think it’s the tip of the iceberg.
      8. Also will pay careful attention as to the Fed’s reaction. Frankly, I think they should cut rates, if SVB can’t find a buyer. It’s that big of a deal.
      9. A billionaire VC is calling for an SVB bailout, with a soft landing led by warrants; e.g., a situation in which the Feds could benefit. He correctly perceives SVB’s tanking as having far-reaching implications not just in the technology ecosystem, but in the American economy.
      10. Unfortunately, American politicians will not want to bail out SVB. Politicians on the right hate technologists and their ground-zero bank, who almost exclusively support Democrat causes. They’ll relish the opportunity for payback, and viscerally enjoy the hit on California. Dems may like tech, and they love rich people even more than Repubs, but they will proceed cautiously here.
      11. Silicon Valley (and related) real estate is already under pressure from Mr. Biden’s incessant inflationary campaign. This is one of those situations where the Progressives (who have taken over) really only care about the bottom 10%, maybe the bottom fifth of American society. Generally speaking, they don’t really care about the BigTech-related 1%, no matter how woke it is, no matter how much it donates to Lefty causes.
      12. A certain portion of BigTech is self-consuming. They see “deal” whenever there’s a shakeout. We already had a shakeout, the SVB collapse will turn a small shakeout into a BIG SHAKEOUT. I was talking with a private equity person, and he thinks this will be an interesting existential event, hastening exit strategies, now that many of these companies, always hurting for cash, will literally be starved for cash.
      13. The big question: how will this impact Tech financing? Who will take on the high risk financial plays, now that the largest player in medium and low risk tech finance is (at best) on the ropes, and may fail completely?
      14. Will there be a domino effect?  Over 100 banks failed in 2009 and 2010. It was almost a catastrophic effect for the country…
      15. …and what will be the far-reaching effects on the American economy? I have no confidence in American politicians understanding how badly this country needs Tech to succeed. It is our chief global economic advantage, whether or not you support the technology industry and its variants.
      16. China and other countries to a lesser extent, will take this opportunity to strip both IP assets and engineers as much as they possibly can. They can’t afford not to.

      Anyway…it’s going to get interesting. I wonder what the overall hit will be in hard and financial assets in the San Francisco Bay Area?

      • This topic was modified 1 year, 1 month ago by AvatarMick.
      • This topic was modified 1 year, 1 month ago by AvatarMick.
    • #6941
      Genuine RealistGenuine Realist
      Participant

      Mick,

      Thanks for this. Actual insight.

      To me, it’s not so much that tech is hated as taken for granted. I’m writing this on a Pixel 7 Pro. I now hold on the paim of my hand an information device more powerful than all the libraries in the world in 1923.    . combined. Not Asimov, nor Heinlein, nor Kubrick in their wildest imaginations ever dreamt of such a thing.

      Vaccines for serious plagues developed in nine months, five times faster than anything in history. Not ‘wow’ but ‘yawn’.

      The success of tech magnifies problems less fortunate societies accepted as natural constraints. Many complaints about this. On Twitter, natch.

      BTW, begun drawing Social Security yet?

      I wouldn't give you two cents for all your fancy rules if, behind them, they didn't have a little bit of plain, ordinary, everyday kindness - yeah, and a little looking out for the other fella, too.

    • #6942
      AvatarMick
      Participant

      I would agree, Tech gets taken for granted. I can’t remember where I read it, but I recall reading that all of America’s GDP growth since 1970 can be attributed to the Tech revolution. I wouldn’t disagree. And people in other parts of the country often don’t understand or respect what Silicon Valley brings to the table, just in terms of their quality of every day life, as you point out.

      As for social security benefits, I’m only 60 so I’m not yet eligible. I plan to take full benefits when I turn 65, just as my parents and grandparents did. Did I say 65? I meant 67… ;). At least I’m paying a much higher percentage of my income than those generations did in order to get those benefits. I figured my rate of return, at best, will be negative 8%. That’s if I live much, much longer than I probably will.

    • #6944
      Avatargpn38
      Participant

      Tour de Force Mick.
      I also grew up with the bank. As a VC , they were the bank of choice for most my and firm Investments. Roger Smith ( founder) was a neighbor. Solid guy. Greg had( has) more gravitas and somewhere these people had enough vision and competence to become 16 th largest in US with a fairly niche strategy. The demise is shocking in its simplicity.
      I am hoping that given its crucial importance to the tech sector someone in the valley will do a buy out and keep the main business alive. They don’t need to be in investment banking, wine and other corollaries they expanded into.

      if they don’t make it, the world of tech banking will change forever and not for the best. I still remember when Wells Fargo, BoA et al wouldn’t work with my Start ups.

    • #6945
      rjnwmillrjnwmill
      Participant

      I understand that roughly 94% of SVB’s deposits exceed the maximum covered by FDC insurance. So who’s really at risk?  Folks practicing poor working capital management?  People who don’t understand duration as a driver for portfolio construction?

      Personally, the fundamental topic is moral hazard. As with student loans the only question about eligibility for government largess is who is out in front of the Whitehouse with their tin cup in hand. Who has a handy narrative about their potential impact on the economy/national well being/elected officials.

      Let’s not forget we’ve had 15 years to get this right. Regulators have been securing our banking system since 2008 with reflated balance sheets, untold capital infusions and stress tests. And we find ourselves here with advocates suggesting technology is fundamental to our economy. Isn’t this the industry that that was in the forefront of the outsourcing and overseas investment initiatives?

      I’m not inclined to buy it. We make questionable technology transfer and capacity investments in China, India and Viet Nam and then tell tax payers to foot the bill. I think not.

      Here's a toast with one last pour, may it last forever and a minute more;
      Good fortune seems to you have sung, to live and love way past long

      • #6964
        BeyondThunderdomeBeyondThunderdome
        Participant

        Let’s not forget we’ve had 15 years to get this right. Regulators have been securing our banking system since 2008 with reflated balance sheets, untold capital infusions and stress tests.

        Stress tests were indeed put in place via Dodd-Frank. But they were subsequently removed for banks under $250 billion, like SVB, under the Trump administration (bill S.2155), when Republicans controlled Congress. Diane Feinstein had a prescient warning at the time. The vote was:

        • Republicans: 50 voted in favor, 0 voted against.
        • Democrats: 16 voted in favor, 31 voted against.

        Paul Volker warned against the repeal, as well, among many others.

        Maybe we should repeal the repeal.

        NO MALARKEY

        • #6978
          Avatarrogpodge
          Participant

          With citations to the Fed’s 2022 stress test scenario, please explain how the stress test would have detected the interest rate duration risk.

           

        • #6970
          Avatarrogpodge
          Participant

          Sigh.  I wish people would stop cribbing off Elizabeth Warren’s talking points and pretending like it’s actually smart analysis.

          https://www.federalreserve.gov/publications/2022-Stress-Test-Scenarios.htm

          Key paragraph: Short-term interest rates as measured by the 3-month Treasury rate remain near zero throughout the scenario. Long-term interest rates as measured by the 10-year Treasury yield drop to 3/4 percent during the first quarter of 2022 and remain unchanged in the second and third quarters of 2022, after which they gradually rise to 1-1/2 percent by the end of the scenario. Because short-term interest rates remain near zero, the path of the yield curve slope, as defined by the difference between the 10-year Treasury yield and the 3-month Treasury rate, follows that of long-term interest rates.

          The stress test was meant to test a scenario where asset prices and equity prices are falling, loans are failing, and there’s a recession.  Inflation is falling, not stubbornly rising.  A stress test wouldn’t have detected that the Fed would hike interest rates to the point where 10-year treasuries would basically be worthless because no one would be willing to buy them / be a counterparty to the interest rate risk.  Don’t believe me?

          Click to access 2022-dfast-results-20220623.pdf

          This entire thing is focused on loan losses, not interest rate risk.  Trading and counterparty losses are an afterthought (p20).  Look at the results for Bank of America (p34) and Charles Schwab (p40).  Not a single mark to market loss in sight.

          Just to be clear, SVB screwed up.  Royally.  Their risk management folks went AWOL for eight critical months.  They didn’t hedge interest rate risk.  But part of the problem was also that SVB trusted the Treasury and the Fed when the Fed said that inflation was transitory and they wouldn’t have to raise rates until 2024.  Why did they tell the financial sector that?  To cover up some of the worst fiscal policy since the 70’s, and the utter idiocy of quantitative easing and low interest rate policy since the 2008 financial crisis.

          But bond traders have already priced in that the Fed is going to choose more inflation over liquidity problems and financial sector panic.  We’ll see what the CPI print is tomorrow.

          I’ve said it before, and I’ll say it again, inflation is the most regressive tax on the poor.  Progressives don’t really care about the poor, because if they did, they would be screaming about inflation.  (Also, inflation compounds, like interest, so a 4% target is lunacy).  Progressives only care about power, and that includes pretending that more government control would have prevented whatever bad thing is happening right now.  Repeal the repeal?  Go ahead.  Wouldn’t have changed what the Fed and the Treasury did to cover up what Congress was doing to the economy.

          Oh, and for the record, the Trump rolled back regulations on brakes thing on the Norfolk Southern train derailment was also garbage.  A ball bearing failed, generating heat and leading to an axle failure.  The detection system didn’t detect, and the engineers didn’t notice the sparks and red hot wheels that were on video for 30 miles.  Had nothing to do with brakes.

    • #6947
      johnnyo53johnnyo53
      Participant

      And yet, for 17 years, DeBerg collected  NFL paychecks in the era of cable/satellite revenues. I’m actually attending a roast for him in Kansas City the end of this month… he’s not afraid to have a cocktail, or ten… LOL. I do remind him we kicked his ass at Stanford 😆

      “I remember that one fateful day when Coach took me aside. I knew what was coming. "You don't have to tell me," I said. "I'm off the team, aren't I?" "Well," said Coach, "you never were really ON the team. You made that uniform you're wearing out of rags and towels, and your helmet is a toy space helmet. You show up at practice and then either steal the ball and make us chase you to get it back, or you try to tackle people at inappropriate times." It was all true what he was saying. And yet, I

    • #6948
      LegendLegend
      Keymaster

      I’m not for a bailout. The moral hazard aspect is already a huge problem. As I look at the press releases, it looks like the bank is/was solvent and so I would hope a lot of the uninsured deposits should be recovered over time.

      I wonder if the receivership certificates are tradable.

      ____________________________________________________________
      Sic transit gloria mundi (so shut up and get back to work)

      • #6950
        AvatarMick
        Participant

        And yet, for 17 years, DeBerg collected NFL paychecks in the era of cable/satellite revenues. I’m actually attending a roast for him in Kansas City the end of this month… he’s not afraid to have a cocktail, or ten… LOL. I do remind him we kicked his ass at Stanford 😆

        And everywhere else. He had a losing season 13 of those 17 years. Three pretty good seasons with the Chiefs, though.

        Steve DeBerg Stats, Height, Weight, Position, Draft, College | Pro-Football-Reference.com

    • #6951
      AvatarMick
      Participant

      The demise is shocking in its simplicity. I am hoping that given its crucial importance to the tech sector someone in the valley will do a buy out and keep the main business alive. They don’t need to be in investment banking, wine and other corollaries they expanded into. if they don’t make it, the world of tech banking will change forever and not for the best. I still remember when Wells Fargo, BoA et al wouldn’t work with my Start ups.

      I completely agree. Banks are extraordinarily leveraged entities. Washington Mutual didn’t go bankrupt because of the 60% of its business that was a retail bank, or the 21% of its business that was credit cards. It went bankrupt because 14% of its business was from home loans, which were a complete disaster.

      A good friend of mine was an SVP at Countrywide, the mammoth lender. Late in 2006, he told me there was going to be a bloodbath in residential real estate, extending throughout California and probably throught America. I asked him why. He said “You know that house, midway between us?” (we live four blocks apart). I did. He said “that house is owned by a house painter.”

      I said “you mean a guy who owns a painting business, with 30 painters, right?”

      He said “No…a house painter. And he owns a condo in Mountain View and a house in Gridley.”  I asked how a man of limited means could afford all of that, and he replied “Have you heard of liar loans?”

      I said, “Sure, they’re for people with uneven incomes. But you need close to pristine credit, like 760 FICO. You need a 20% down payment and the rate is 200 basis points over a normal mortgage.”

      He replied “What if I told you that you could get that loan with a 640 FICO score, a 5% down payment — and you could borrow 3% of that — and the loans were made at market rates, not 200+ basis points above market?”

      I was speechless. “But…that would be a disaster.” And so it was.

      I’m very curious to see the quality of their credits, and the other decisions made when holding instruments that pay so little in interest in such an inflationary environment.

    • #6952
      AvatarMick
      Participant

      9. A billionaire VC is calling for an SVB bailout, with a soft landing led by warrants; e.g., a situation in which the Feds could benefit. He correctly perceives SVB’s tanking as having far-reaching implications not just in the technology ecosystem, but in the American economy.

      10. Unfortunately, American politicians will not want to bail out SVB. Politicians on the right hate technologists and their ground-zero bank, who almost exclusively support Democrat causes. They’ll relish the opportunity for payback, and viscerally enjoy the hit on California. Dems may like tech, and they love rich people even more than Repubs, but they will proceed cautiously here.

      UPDATE: Janet Yellen says no bailout, but that the American banking system is resilient, well-capitalized and there will be no domino effect.

      Yellen: No federal bailout for collapsed Silicon Valley Bank | AP News

      On the other hand, Michael Burry says it’s just the tip of the iceberg:

      ‘Big Short’ Michael Burry Warns of Another Major Bank Collapse – TheStreet

       

      • This reply was modified 1 year, 1 month ago by AvatarMick.
      • This reply was modified 1 year, 1 month ago by AvatarMick.
    • #6956
      Genuine RealistGenuine Realist
      Participant

      Bailout, no, but buy out very possible. There’s a lot of undervalued assets there.

      This isn’t 2008. This apparently is a very conventional bank run, albeit on a massive scale by very wealthy people. James Stewart and Bedford Falls it ain’t.

      I wouldn't give you two cents for all your fancy rules if, behind them, they didn't have a little bit of plain, ordinary, everyday kindness - yeah, and a little looking out for the other fella, too.

    • #6957
      AvatarMick
      Participant

      Bailout, no, but buy out very possible. There’s a lot of undervalued assets there. This isn’t 2008. This apparently is a very conventional bank run, albeit on a massive scale by very wealthy people. James Stewart and Bedford Falls it ain’t.

      You are correct, of course. As bad a job as Greg Becker, CEO did, it isn’t and shouldn’t be considered to be a disaster. I rather suspect they’ll get bought out. J. P. Morgan has wanted to boost their Technology portfolio for a very long time…my suspicion is that JPM will walk away with the winning bid.

    • #6958
      Avatarrogpodge
      Participant

      One of these banks’ risk management program, as shown by their assets w/ unrealized losses, was not like the others. Also, BAC, what are you doing?

      Signature Bank was just closed by New York. Not a surprise, based on Friday’s stock trends (and other action last week). Buckle up, everyone. Inflation numbers drop next week. With some of the worst fiscal policy of the last fifty years, I don’t think the Fed will be in a position to stop raising rates.

    • #6959
      LegendLegend
      Keymaster

      Aaaaand, the backstop is in.

      Hope you bought the dip, because the punch bowl just got put back in place and spiked.

       

      https://www.zerohedge.com/markets/svb-latest-developments-live-blog-fdic-auction-failed-svb-assets-underway

       

       

      ____________________________________________________________
      Sic transit gloria mundi (so shut up and get back to work)

      • #6961
        rjnwmillrjnwmill
        Participant

        After receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, Treasury Secretary Yellen, after consultation with the President, approved actions to enable the FDIC to complete its resolution of Silicon Valley Bank in a manner that fully protects all depositors, both insured and uninsured.”

        Bailout indeed. And the article is correct about about obvious implications for the Fed’s battle with inflation.

        Here's a toast with one last pour, may it last forever and a minute more;
        Good fortune seems to you have sung, to live and love way past long

    • #6962
      AvatarMick
      Participant

      At least taxpayers won’t be affected directly. Supposedly the funds will come from the FDIC’s Deposit Insurance Fund, which had over $128 billion in assets as of 12/31/22. In other words, the cost to cover both insured and uninsured depositors will be covered directly by the banks. And technically speaking, SVB has enough assets to cover their liabilities, so…here’s hoping.

      If the bank finds a buyer shortly, they might be able to continue as an operating entity.

      Live updates: Silicon Valley Bank collapses

      • This reply was modified 1 year, 1 month ago by AvatarMick.
    • #6965
      AvatarBeeg_Dawg
      Participant

      [quote quote=6964]

      Let’s not forget we’ve had 15 years to get this right. Regulators have been securing our banking system since 2008 with reflated balance sheets, untold capital infusions and stress tests.

      Stress tests were indeed put in place via Dodd-Frank. But they were subsequently removed for banks under $250 billion, like SVB, under the Trump administration (bill S.2155), when Republicans controlled Congress. Diane Feinstein had a prescient warning at the time. The vote was:

      • Republicans: 50 voted in favor, 0 voted against.
      • Democrats: 16 voted in favor, 31 voted against.

      Paul Volker warned against the repeal, as well, among many others. Maybe we should repeal the repeal.[/quote]

      If legislation were judged on length and complexity, Dodd‐​Frank would be a clear winner.   849 pages long and estimated to have introduced 27,278 new regulatory restrictions lets start by repealing Dodd Frank.  It’s crushing regulatory weight has eliminated small to medium size banks and made it difficult for small businesses to borrow money.

      At best Dodd Frank has not accomplished what is was supposed to. It is an obstacle, not an enabler for economic growth.

    • #6966
      AvatarMick
      Participant
    • #6967
      AvatarNeodymium60
      Participant

      [quote quote=6965][quote quote=6964]

      Let’s not forget we’ve had 15 years to get this right. Regulators have been securing our banking system since 2008 with reflated balance sheets, untold capital infusions and stress tests.

      Stress tests were indeed put in place via Dodd-Frank. But they were subsequently removed for banks under $250 billion, like SVB, under the Trump administration (bill S.2155), when Republicans controlled Congress. Diane Feinstein had a prescient warning at the time. The vote was:

      • Republicans: 50 voted in favor, 0 voted against.
      • Democrats: 16 voted in favor, 31 voted against.

      Paul Volker warned against the repeal, as well, among many others. Maybe we should repeal the repeal.[/quote] If legislation were judged on length and complexity, Dodd‐​Frank would be a clear winner. 849 pages long and estimated to have introduced 27,278 new regulatory restrictions lets start by repealing Dodd Frank. It’s crushing regulatory weight has eliminated small to medium size banks and made it difficult for small businesses to borrow money. At best Dodd Frank has not accomplished what is was supposed to. It is an obstacle, not an enabler for economic growth.[/quote]

       

      Pretty Good Dog.

      I look at SVB and see an X $Billion failure that is well earned by the Officers and directors. They will face no penalty.

      Then I look around the corner and see some guy named Biden throwing X Billions at a far flung war in Ukraine which I really think can go nuclear.  Biden will face no penalty.

      Then I see the home state of X Billion failure SVB sign on to a $560 Billion reparations gambit dwarfing whatever SVB did and Governor Handsome just nods in approval.

      We all know what going on but we don’t know what to do.  What I know is that none of these saps will ever get a standing ovation.

       

    • #6968
      cardcrimsoncardcrimson
      Participant

      “This is one of those situations where the Progressives (who have taken over) really only care about the bottom 10%, maybe the bottom fifth of American society.”

      Mick, if only that were true. Look at the inner cities, the homeless, the rural poor, the state of immigration. Progressives don’t give a hoot about the bottom 10% and never have. Progressives care about agendas, and have their agendas helped the bottom 10? Not in generations.

    • #6969
      AvatarBeeg_Dawg
      Participant

      [quote quote=6968]

      “This is one of those situations where the Progressives (who have taken over) really only care about the bottom 10%, maybe the bottom fifth of American society.”

      Mick, if only that were true. Look at the inner cities, the homeless, the rural poor, the state of immigration. Progressives don’t give a hoot about the bottom 10% and never have. Progressives care about agendas, and have their agendas helped the bottom 10? Not in generations.[/quote]

      Yep.  Libs have ruled Oregon for the last 40 years and they continue to blame Republicans for all that is wrong.  A current talking point is Reagan is the root cause of mental health problems because he closed the mental institutions. Without getting into the weeds, one simple question ends the conversation. Ok, Reagan caused the problem, what are libs doing to fix it?  No response is typical.

    • #6974
      AvatarMick
      Participant

      “This is one of those situations where the Progressives (who have taken over) really only care about the bottom 10%, maybe the bottom fifth of American society.”Mick, if only that were true. Look at the inner cities, the homeless, the rural poor, the state of immigration. Progressives don’t give a hoot about the bottom 10% and never have. Progressives care about agendas, and have their agendas helped the bottom 10? Not in generations. Yep. Libs have ruled Oregon for the last 40 years and they continue to blame Republicans for all that is wrong. A current talking point is Reagan is the root cause of mental health problems because he closed the mental institutions. Without getting into the weeds, one simple question ends the conversation. Ok, Reagan caused the problem, what are libs doing to fix it? No response is typical.

      Reagan didn’t cause the problem. The Carter administration passed the Mental Health Systems Act of 1980. One year later, the 96th Congress, with a Democratic majority in both houses, repealed the act. All Reagan did was agree with the desires of the Democratic majority to return control to the states.

      What Reagan did do, as governor of California, was to sign the Lanterman-Petris-Short Act in 1972. That bipartisan legislation made mandatory institutionalization of mental health patients by family members and civil courts illegal. That way a bad judge or vindictive relative couldn’t have you locked up indefinitely at a state hospital. Seems like an okay thing to do. The result of that humanitarian legislation was that populations in state hospitals dropped, but Reagan didn’t directly oversee, direct or cause any hospital closures.

      The majority of mental hospitals in California were actually closed in the late 1990s, when Pete Wilson formed a task force to examine state hospital operations. The task force found that the populations of many state hospitals had dropped dramatically and the per-capita costs had skyrocketed to $114,000 per year. The Democratic-led California assembly agreed.

      Agreed with both of you re: Progressives, but I’m also correct in that I was referring to orientation and noise versus action. We’re all men of action. Progressives, typically, are not. They whine, kvetch, criticize. But at the end of the day, they depend on the poor and dispossessed to support them. So they don’t really want to fix those problems.

      But circling back to the main SVB point, Silicon Valley libertarians are hypocrites about regulation. They never wanted it when it “restrained” them, because they knew better. Then, Becker & Co. screwed up and screwed up big. All of a sudden, they needed the government.

      Hiltzik: Silicon Valley libertarians’ hypocrisy over SVB bailout – Los Angeles Times (latimes.com)

      • This reply was modified 1 year, 1 month ago by AvatarMick.
    • #6976
      AvatarBeeg_Dawg
      Participant

      Danger – Thread drift
      The last piece of legislation JFK signed was the Community Mental Health Act.  The intent was to establish over 1500 community based health care units for the mentally ill.  His vision never materialized, and today a large portion of the homeless would be better served in a supervised setting.

      Surprising no one, New York, Hawaii, California, Oregon and Washington are the top 5 (or bottom) states for homelessness.

    • #6977
      cardcrimsoncardcrimson
      Participant

      Great knowledge, from Mick and Beeg, as usual. Thanks. Dug a little into the Reagan info, and during his first three terms, the Republicans had control of both the House and the Senate. It was his Omnibus Budget Bill that pushed funding of the mentally ill to the states. Allegedly. As always, there is a lot more to what really transpired than what is conveniently put forth as fact.

       

       

    • #6979
      AvatarMick
      Participant

      Dug a little into the Reagan info, and during his first three terms, the Republicans had control of both the House and the Senate. It was his Omnibus Budget Bill that pushed funding of the mentally ill to the states. Allegedly. As always, there is a lot more to what really transpired than what is conveniently put forth as fact.

      Well, we’re each half correct. You’re correct on the Senate: Republicans had a 53-46 majority in the 97th Congress (1981-1983), but the Dems owned the House, 242-191.

      In the 98th Congress (1983-1985), the Dems increased their advantage in the House to 269-164, typical for mid-term elections, they usually go against the party in charge in the White House. Republicans still owned the Senate, 55-45.

      In the 99th Congress (1985 – 1987), the Republicans owned the Senate, but the majority tightened to 52-48, and they would lose the Senate in the 100th Congress. The Dems kept the majority at 252-181.

    • #6988
      AvatarBeeg_Dawg
      Participant

      https://thefederalist.com/2023/03/14/silicon-valley-bank-pledged-nearly-74-million-to-black-lives-matter-causes/?utm_source=newsletter&utm_medium=email&utm_campaign=the_disaster_of_woke_capital&utm_term=2023-03-17

      Will there be consequences for SVB management  failing to act as a fiduciary? From SVB’s Corporate responsibility report-

      With our 2021 acquisition of Boston Private, we announced our five-year, $11.2 billion Community Benefits Plan that will begin in 2022 and focus
      on community philanthropy and investments in affordable housing and the financial needs of low- and middle-income residents in California and
      Massachusetts. These programs are designed to expand access to small business and entrepreneurship, homeownership and innovation economy
      careers to those who may not have had such access in the past.

      Looks like SVB might have survived a run had they not “invested” in projects that are inclusive and equity based over those projects showing a higher chance of success.  Is there a lesson for other banks who value inclusivity  over returns? Unlikely.

      • This reply was modified 1 year, 1 month ago by AvatarBeeg_Dawg.
    • #6990
      AvatarHurlburt88
      Participant

      and now CS sold for a pittance.  ONe common thread, I believe:

      “The real challenge is the rundown of the investment banking activities,” UBS Chief Executive Ralph Hamers said on a call with analysts Sunday evening.

    • #6991
      AvatarMick
      Participant

      Two items: first, it is notable that Gavin Newsom lobbied the Federal government (White House and Treasury) like crazy to support Silicon Valley Bank…all while at least three of his wineries (and who knows how many other companies) were SVB clients, including Plumpjack, Odette and Cade.

      Kimberly Guilfoyle slams Newsom on Silicon Valley Bank, California ‘nightmare’ (mercurynews.com)

      The Fed had raised concern about Silicon Valley’s risk management profile back in 2019, upgraded their concern in 2020, put them on a watch list in 2021 and met directly with the bank in July, 2022 with their concerns. What’s interesting to me is that SVB was allowed to triple in size less than four years after the Fed’s warnings.

      Fed Raised Concerns About SVB’s Risk Management in 2019 – WSJ

       

      • This reply was modified 1 year ago by AvatarMick.
    • #7001
      AvatarMick
      Participant
      • As you know, even non-FDIC guaranteed depositors were made whole. Predictably, other financial institutions with similar problems are clamoring for a two-year “holiday” to improve their balance sheets. Fed is unlikely to make it happen.
      • To gpn’s earlier point about the bankers with enough vision and competence to become the 16<sup>th</sup> largest bank in the U. S. with a niche strategy…they tripled in size between 2019 and 2023. AND, please note that the Fed was issuing warnings and demanding a risk management plan to SVB in that same year, 2019. They also did it in 2020 and 2021, and in July 2022, they expressed serious alarm. WTF? Why was SVB allowed to triple I nsize, especially with their “niche” strategy?
      • No bailout for bank investors, shareholders, bondholders.
      • Even with that wind in their sales, no buyer was found. Silicon Valley Bank is in worse shape than I thought. They are trying to sell parts of it.
      • Greg Becker and the former CFO were sued last Friday in NorCal District Court. Their legal defense team is from Orrick, two very highly-rated, highly thought of litigators.
      • No domino effect…yet. First Republic Bank is teetering.
      • This reply was modified 1 year ago by AvatarMick.
    • #7002
      AvatarBeeg_Dawg
      Participant

      I don’t believe Liz Warren is a stupid person, but she deserves an Oscar for convincingly playing the part.

      https://www.cbsnews.com/news/elizabeth-warren-fdic-insurance-cap-lift-silicon-valley-bank/

      The gist of latest batch of gibberish is because banks are under-regulated, we need to raise the FDIC limit.  Huh?  Rather than take steps to tighten controls and banking rules, she proposes a fix that will cost taxpayers even more?

      Nice work Liz.  So much for looking out for the little guy! Protecting millionaires is now a priority.

    • #7003
      AvatarNeodymium60
      Participant

      Was SVB holding crypto deposits or providing services to crypto firms under the guise of the safety and security of the banking system?    Do banking and de-centralized blockchains go together?

    • #7019
      AvatarMick
      Participant

      BTW, begun drawing Social Security yet?

      As noted, I won’t be drawing Social Security for five seven more years. I did mention that, not only do I have to wait two more years longer than the generation before, but I also paid in at higher rates.

      What I neglected to mention was that, actuarially speaking, our live expectancy is considerably — considerably — shorter than that of our forbears. And here’s proof. In just a few years, the average American life expectancy has dropped by nearly three years. So in sum:

      1. My generation and I have to wait two years longer to get Social Security.
      2. We are paying in at a higher rate, and
      3. We will get it for three years less than the generation before us.

      Scientists warned a decade ago American lives were shortening. Then it got worse : Shots – Health News : NPR

       

    • #7021
      AvatarBeeg_Dawg
      Participant

      [quote quote=7019]

      BTW, begun drawing Social Security yet?

      As noted, I won’t be drawing Social Security for five seven more years. I did mention that, not only do I have to wait two more years longer than the generation before, but I also paid in at higher rates. What I neglected to mention was that, actuarially speaking, our live expectancy is considerably — considerably — shorter than that of our forbears. And here’s proof. In just a few years, the average American life expectancy has dropped by nearly three years. So in sum:

      1. My generation and I have to wait two years longer to get Social Security.
      2. We are paying in at a higher rate, and
      3. We will get it for three years less than the generation before us.

      Scientists warned a decade ago American lives were shortening. Then it got worse : Shots – Health News : NPR[/quote]

      Well, when the secretary of Health and Human services calls out states that allow sales of “assault weapons” and and never mention the load 37.5 million diabetics have on health care and life expectancy, its not hard to see where the problem is.

      No one wins an election campaigning for healthier food choices.

    • #7022
      AvatarMick
      Participant

      No argument here.

    • #7083
      AvatarMick
      Participant

      HSBC Bought the UK arm of Silicon Valley Bank for 1 pound:

      HSBC buys Silicon Valley Bank’s UK business, ending ‘nightmare’ for British tech

      Here’s how Big Tech’s predatory culture fuels failures like Silicon Valley Bank:

      Opinion: How Big Tech’s predatory culture fuels failures like SVB (mercurynews.com)

       

    • #8156
      AvatarBeeg_Dawg
      Participant

      [quote quote=8147]Surprising precisely no one, SVB Financial (Silicon Valley Bank’s former parent company) sued the FDIC when the FDIC seized $1.93 billion in cash during its takeover of the bank. That was 10 months ago, about two weeks after the failure. The FDIC is acting as a receiver for the bank, and is gathering the bank’s assets to repay SVB’s creditors. SVB Collapse: FDIC Removed $2 Billion Cash From Parent Company – TheStreet Just recently, however, the Internal Revenue Service made a $1.45 billion claim against the FDIC re: SVB for taxes due between 2020 and 2023. The FDIC has denied the entire tax claim. The IRS says the court should overrule the FDIC’s decision to deny the tax claim and make a new determination on the validity and amount of taxes owed. https://www.msn.com/en-us/money/companies/irs-sues-fdic-over-silicon-valley-banks-14-billion-tax-debt/ar-BB1ieuRl[/quote]

      Oh, goodie! This will be fun to watch.

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