Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments

[dragontamer5788]

I think you're more worried than it's worth about this. They lost the value as interest rates increased and will get it back once they start to come down in about a year or so

The Fed is literally threatening another +0.50% increase because inflation is stubbornly staying at 6% YoY. If anything, my expectation is that TLT will continue to decline until inflation is fixed. 50 BPS x 20 year duration == devaluation of another 10%. You know how to valuate bonds, right?

And given what has happened over the last year on Treasuries, the market agrees with my assessment. 10Y and 20Y, and 30Y bonds are permanently going to be devalued. Its the only way we can fix the inflation issue. And we have more rate-hikes to go before inflation is fixed.

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What I find insane about this whole SIVB situation, is that they're watching this massive devaluation of 10Y and 30Y notes, and they stupidly decide to hold onto them? Without thinking about what the Fed is doing or how inflation is ruining the country right now? As the FFR continues to increase, 10Y and 30Y will necessarily devalue. Its just how the mechanics of this entire situation work.

So yes, I'm worried. Because if the Fed stops the rate hikes, we're going to be stuck with 6% inflation. If we continue the hikes, we're looking at this banking problem. We're beginning to look trapped between a rock and a hard place here.

For now, I'm hoping this is a one-off banking issue isolated to SIVB. But the issue warrants further investigation and discussion.

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New post:

Silicon Valley Bank had no official chief risk officer for 8 months while the VC market was spiraling

SVB's former CRO stepped down in April 2022, and the next CRO was appointed earlier this year, according to the bank's regulatory filings.

fortune.com

Laura Izurieta stepped down from her role as CRO of SVB Financial Group in April 2022, and formally departed the company in October, according to an SVB proxy filing. The bank appointed her permanent successor as CRO, Kim Olson, in January of this year.

Well, this answers my question I posed earlier. The "Chief Risk Person" was non-existant between April 2022 through January 2023, during the time when these epic rate-hikes hit the economy.

 

[mechtech]

And then there's this ...

https://twitter.com/x/status/1634555021487480834

Golden Parachute

 

[InhaleOblivion]

--------------

New post:

Silicon Valley Bank had no official chief risk officer for 8 months while the VC market was spiraling

SVB's former CRO stepped down in April 2022, and the next CRO was appointed earlier this year, according to the bank's regulatory filings.

fortune.com

Well, this answers my question I posed earlier. The "Chief Risk Person" was non-existant between April 2022 through January 2023, during the time when these epic rate-hikes hit the economy.

Good find. No CRO for 9 months yikes.

Oh, this is rich. The Chief Administrative Officer at SVB Securities is Joseph Gentile who served as the CFO of Lehman Brothers' Global Investment Bank when it collapsed.

Seriously, you can't make this shit up.

Then this guy being the CAO. No wonder they're in this caca. All in the name of profit. Their Lord and savior.

 

[trparky]

This has nothing to do with the housing bubble. They weren't doing synthetic products with insane leverages without any account for possible risks. They were dumb but not nearly that dumb. Completely different things.

I'm simply referring to how we once again are playing stupid games and once again winning stupid prizes. We did it back in 2008, we're doing it again; stupid games, stupid prizes that is.

I swear to God that every ten or so years we have another financial crisis. What? Is ruining two generations not enough for these people? Do we need to ruin Gen-Z too?

Then this guy being the CAO. No wonder they're in this caca. All in the name of profit. Their Lord and savior.

Exactly. Seriously, how did someone not know that if you hire the same guy that was instrumental in the fall of Lehman Brothers, bad things will happen.

Golden Parachute

Where's my golden parachute? Oh crap, someone didn't pack it.

Avoid a big financial crash only local trouble or is it financial crisis 2.0 or even worse. Hold on to your hat and glasses, this can potentially be a wild ride.

That's what I think as well. This is just the start of a long series of dominos that will result in nothing good for the rest of us.

I just hope to God that the government doesn't bail out these fools. Free market capitalism states that if you're stupid enough to make stupid mistakes, you're stupid enough to fail. That's what needs to happen, but we all know that's not going to happen. The wealthiest people in the country are going to get a bailout on the backs of those of us that can't afford it. God, we're screwed.

 

[mb194dc]

Doesn't look like they will but you never know. Banks that are essential to the functioning of the financial system are a different story.

Those banks should also be mega profitable during the good part of the economic cycle though, so government can get money back. It's just executive pay that should also be clawed back too...

On Tech, I really think some dark times ahead. There hasn't been any real big innovation for about 15 years... Massive and insane speculation since 2020 covid stimulus. Boom and the bust coming.

The products of the big boys have gone backwards, Microsoft, Windows and Office, Google / Ads, Facebook etc. They've lost the plot.

Hardware got inflated, no way do $1000 graphics cards sell much in tough economic times. Will round trip to pre covid stimulus price level and probably some more eventually.

 

[erek]

SVB was the highest-paying publicly traded bank in 2018, with employees getting an average of $250,683 for that year
SVB bonuses range from about $12,000 for associates to $140,000 for managing directors

 

[mama]

It's because SIVB was a venture capital / tech startup focused bank.

Tech startups got billions of dollars in 2021 as the pandemic hit and work from home accelerated the consumption of computer services and equipment.

Startups then used Silicon Valley bank to hold their deposits. It's looking like $100+ Billion in deposits flooded into Silicon Valley bank at this time.

For reasons unknown, SIVB put a huge chunk of that money into 10Y or 30Y treasuries, as well as mortgages around Silicon Valley.

Two years later, in 2023, on Thursday, the tech startup ecosystem undergoes a collective panic attack and withdraws $46 Billion from SIVB. This has likely forced SIVB to sell those 10Y or 30Y treasuries and mortgages on the open market.

Note: long dated bonds are worth 20%+ less today than they were worth in 2021. That is, SIVB needs to sell $1200 worth of mortgages and bonds to make $1000 of customer withdrawals.

Come Friday, yesterday, FDIC was forced to take over the bank. They are suffering from a classic bank run and have collapsed.

I understand the run on the Bank was linked to public calls for investment/lending in the 2 billion range.

 

[Assimilator]

There is nothing to see here, just a poorly-managed bank with a unique risk profile that couldn't survive when a run came. It's happened before, it will happen again, and there's zero reason to be concerned as to the health of the US banking industry overall (over and above the fact that it's still built on sand).

These so called 'focused banks' are making this ESG thing a requirement on who does and who doesn't get loans as far as businesses go so yes I see a problem with it.

I bet you don't see a problem with all the other criteria banks use to determine who they do or don't lend to. Why is that, I wonder?

 

[R0H1T]

Greed is good

 

[dragontamer5788]

I understand the run on the Bank was linked to public calls for investment/lending in the 2 billion range.

SVB Financial Group Announces Proposed Offerings of Common Stock and Mandatory Convertible Preferred Stock

/PRNewswire/ -- SVB Financial Group ("SVB") (NASDAQ: SIVB), announced today that it intends to offer $1.25 billion of its common stock and $500 million of...

www.prnewswire.com

It was more than just asking for money. They also announced a $1.8 Billion loss.

Additionally, earlier today, SVB completed the sale of substantially of its available for sale securities portfolio. SVB sold approximately $21 billion of securities, which will result in an after tax loss of approximately $1.8 billion in the first quarter of 2023.

So they came out, said "We lost $1.8 Billion last quarter, and are raising money tomorrow (Thursday) to cover for the shortfall". And then all their customers decided to bank-run instead while their stock price collapsed. The rest is history.

 

[Why_Me]

I bet you don't see a problem with all the other criteria banks use to determine who they do or don't lend to. Why is that, I wonder?

I never said that but with that said a bank giving loans based on the amount of females a company employees or how many non white people a company employees is beyond normal thinking. People should be hired based on their skills, not their sex and race. The same goes for the environment part of ESG. Oil & gas companies here in the US who owned leases in the Arctic were denied loans when these hypocritical banks didn't have a problem bankrolling Russian oil & gas companies performing Arctic oil & gas exploration.

UK News | Breaking news & latest updates | Daily Mail Online

All the latest breaking UK news with in-depth comment and analysis, pictures and videos

www.dailymail.co.uk

 

[dragontamer5788]

https://www.benzinga.com/news/23/03/31311341/fdic-reportedly-holds-auction-for-silicon-valley-bank-with-final-bids-due-by-sunday

Auction for SIVB on the way.

I bid... $1.

Even though the FDIC is aiming for a quick deal, the winner may not be known until late Sunday, stated the report, citing a person who requested to remain anonymous because the matter isn’t public yet. According to the Bloomberg's sources, no final decision has been made, and it’s possible that an agreement may not be reached, stated the report.

 

[Vayra86]

SIVB, despite all of its deregulation over the past decade, was still subject to Dodd-Frank (the signature law passed in 2010 to prevent 2008-style crashes from happening again). And that's why it was investing in "safe" Treasury Bonds. It very well could have been worse without the current regulation scheme.

Honestly, I'm not seeing any similarities between today and 2008, aside from the obvious "an 11+figure bank has collapsed". Heck, 11-figures ($100,000,000,000) is still smaller than the issues facing 2008 (which was closer to 13-figures, or $10,000,000,000,000) in terms of size and scope.

So hold your horses on the 2008 comparisons. We're no where close to that yet. We're just witnessing a major bank collapse of the Dodd-Frank era. Albeit with some bits of Dodd-frank chipped away, but that's what happens in a Democracy where laws are malleable. Laws will change over the years. The bulk of the protections are still in effect.

That, but, perhaps this is just the next Internet bubble bursting, I mean honestly, we can chalk it up to post pandemic among other things, but I think the main reason was 'free money'. The sky was the limit - and in that sense, we didn't learn shit. Previously the housing market was overvalued; now the tech market is overvalued.

 

[lemonadesoda]

Oh, I see those Executives were essentially insider trading. Trying to cash in, on their privileged insider information. SLAMMER FOR THEM. Seriously. They need jail time.

BTW, CRO (Chief Risk Officer) in a bank is focused in the main on the bank's lending activities, ie customer side business. CFO is responsible for what the Treasury is up to, with, in some circumstances, the CRO playing a reporting role of that the Treasury is doing. But it is always through the rear mirror to provide an info update as to what was done. The CFO is fully responsible for what his team were up to. Don't let him try to abscond responsibility.

 

[TumbleGeorge]

Oh, I see those Executives were essentially insider trading. Trying to cash in, on their privileged insider information. SLAMMER FOR THEM. Seriously. They need jail time

It was mentioned that even this is legal in the US. More interestingly, is it legal under all circumstances, or are there listed circumstances where it is not legal?

 

[lemonadesoda]

I don't understand how it is legal in the US. SEC Rule ? Insider trading and SEC Rule 10b-5 . The only "get out" is if SEC regulation FD ("Fair Disclosure") is in effect, meaning that they fully disclosed to the market at least 48 hours prior to their trades, as I understand it, under SEC Rule 10b-5. I am not a lawyer.

And the fact that ALL the execs sold just before collapse provides no defence that it is coincidental. It was deliberate. It means SEC regulation FD ("Fair Disclosure") applies or does not apply. The public release of information relating to the dire state of the company 48 hours prior to their trading is key.

Or did they use the sale proceeds and inject it as cash into the company to help keep it afloat? If yes, then they are good as gold.

Otherwise, They need to go to jail. Although it seems that in the US, there is often out-of-court settlements.

 

[dragontamer5788]

https://home.treasury.gov/news/press-releases/jy1337

Depositors will be made whole, guaranteed by FDIC.

Also, Signature Bank has been taken over by FDIC. Holy crap. Apparently this was spreading, so Treasury + FDIC decided to get ahead of the game and takeover another bank while no one was looking.

Hmmm, this suggests that the problem is more serious that I expected.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

 

[trparky]

Hmmm, this suggests that the problem is more serious that I expected.

Um… yeah.

 

[Why_Me]

https://home.treasury.gov/news/press-releases/jy1337

Depositors will be made whole, guaranteed by FDIC.

Also, Signature Bank has been taken over by FDIC. Holy crap. Apparently this was spreading, so Treasury + FDIC decided to get ahead of the game and takeover another bank while no one was looking.

Hmmm, this suggests that the problem is more serious that I expected.

So who is covering the tab. The US taxpayers?

 

[trparky]

The US taxpayers?

Of course, we are!!! The US taxpayers are always screwed like this.

 

[Why_Me]

Of course, we are!!! The US taxpayers are always screwed like this.

I knew this would happen.

 

[dragontamer5788]

So who is covering the tab. The US taxpayers?

FDIC insurance. Not really "taxpayers", as much as all of the insurance $$$ that our bank deposits pay into implicitly.

So slightly different group than "taxpayers", but still basically "The American People" so to speak. The agreement is for FDIC insurance to be used on $250,000 and smaller accounts. But the Treasury has the capability to use it in circumstances like this.

I definitely get feelings of "moral hazard" out of this one. But it really depends on what the chances of a widespread catastrophe were. This is obviously one way to stop any further bank runs, since it proves that FDIC will be used to make people whole in other banks (even above-and-beyond the insured amounts).

 

[Why_Me]

FDIC insurance. Not really "taxpayers", as much as all of the insurance $$$ that our bank deposits pay into implicitly.

I thought FDIC insurance had a $250,000 ceiling.

 

[dragontamer5788]

I thought FDIC insurance had a $250,000 ceiling.

They invoked the "systemic risk exception", so they're ignoring the ceiling for this case.

Yeah. I dunno what to think of that. EDIT: Signature Bank also being seized today proves that there is real systemic risk here, unfortunately. So that's a 2nd bank that needed to be rescued already.

Note: this also means that the auction failed. No buyers found, and the Treasury had no reason to believe that a buyer would be found. That also suggests that Silicon Valley bank (and Signature Bank) were not just illiquid... but also insolvent.

 

[Why_Me]

They invoked the "systemic risk exception", so they're ignoring the ceiling for this case.

Yeah. I dunno what to think of that. EDIT: Signature Bank also being seized today proves that there is real systemic risk here, unfortunately. So that's a 2nd bank that needed to be rescued already.

Note: this also means that the auction failed. No buyers found, and the Treasury had no reason to believe that a buyer would be found. That also suggests that Silicon Valley bank (and Signature Bank) were not just illiquid... but also insolvent.

We are going to eat this loss once again and when I say 'we' I mean 'we' the taxpayers.

Signature Bank Down 22.87% as 2 Banks Collapse in as Many Days | Investing.com

Market Analysis by covering: JPMorgan Chase & Co, Signature Bank, SVB Financial Group, USD Coin. Read 's Market Analysis on Investing.com

www.investing.com

Signature Bank Down 22.87% At Friday’s Close​

The crypto-friendly Signature Bank saw its shares decline 22.87% in Friday trading and drop to $70. The day’s decline, along with the greater fall of 37.30% since Monday, is reflective both of the current concern for digital asset-friendly banks, and the worries for banks more broadly stemming from recent events.