Silicon Valley Bank Failure

[Kriegsspiel]

Ok, but is this enough for the Fed to stop raising rates, or do they need to keep going?

I liked Ben Carlson's thoughts: the Fed needs to keep raising the interest rate until they cause a recession, then they'll be able to lower the interest rate to save us from the recession

[Kriegsspiel]

Major Kudos to the treasury department intern that used the leet URL.

That was a good Noticing.

[Mark Leavy]

That was a good Noticing.

l33t supa h4x0r knows l33t supa h4x0r

[Mark Leavy]

Feds announce that all SVB depositors will be made whole. Even those above $250K. It seems like someone explained the situation to them.

Still, just a stop gap. This solution is a bit capricious and not a good foundation for future planning. Best to assume that any future failures won't be covered unless an explicit raise to the FDIC insurance is announced.

And... Signature also covered 100%.

So, does this mean that FDIC is now set at infinity? Some clarity needed.

[Maddy]

Vanguard is Silicon Valley Bank's largest shareholder.
https://investorplace.com/2023/03/5-inv ... ivb-stock/

VTI is among the funds affected, though minimally.
https://www.morningstar.com/articles/11 ... ank-stocks

[yankees60]

Does all that mean that all the losses I suffered last week will now be reversed?

I am now slightly negative for the year.

Last week's losses wiped out all (and then some) where I'd been year-to-date as a week ago Friday. And, Friday stood at 62% of my year-to-date peak that occurred on February 2, 2023.

But what stated last Monday was all before all this negative bank information?

As a percentage of that February 2, 2023 peak the losses for each of the loss days of last week were as follows:

Monday: 5%
Tuesday: 21%
Thursday: 25%
Friday: 26%

[boglerdude]

So I wont be able to fund my Juicero 2.0 :/

https://johnhcochrane.blogspot.com/2023 ... nders.html

[Mark Leavy]

So I wont be able to fund my Juicero 2.0 :/

I can hook you up bro. Send photo of wife and boat.

[yankees60]

So I wont be able to fund my Juicero 2.0 :/

https://johnhcochrane.blogspot.com/2023 ... nders.html

He asked the right question at the end:

How could this enormous regulatory architecture miss something so simple?

This is something we should be asking more generally. 8% inflation. Apparently simple bank failures. What went wrong? Everyone I know at the Fed are smart, hard working, honest and dedicated public servants. It's about the least political agency in Washington. Yet how can we be seeing such simple o-ring level failures?

I can only conclude that this overall architecture -- allow large leverage, assume regulators will spot risks -- is inherently broken. If such good people are working in a system that cannot spot something so simple, the project is hopeless. After all, a portfolio of long-term treasuries is about the safest thing on the planet -- unless it is financed by hot money deposits. Why do we have teams of regulators looking over the safest assets on the planet? And failing? Time to start over, as I argued in Towards a run free financial system

Or... back to my first question, am I missing something?

[Mark Leavy]

Or... back to my first question, am I missing something?

Of the companies that you advise, how many of them have over $1 million per month of cash flow? And of those companies, how many of them keep their working cash in more than ten bank accounts, or have a system to overflow into short term Treasuries?

That may be what is missing.

Plus malfeasance.

[yankees60]

Or... back to my first question, am I missing something?

Of the companies that you advise, how many of them have over $1 million per month of cash flow? And of those companies, how many of them keep their working cash in more than ten bank accounts, or have a system to overflow into short term Treasuries?

That may be what is missing.

Plus malfeasance.

Since I am down to working for only one business .... the answer is NONE!

At a prior company I worked for decades ago I had a system wherein I timed all the checks I sent out so that I could keep as much money in the money market account as long as possible and then moving the necessary amount back in when those checks would be coming back to the checking account.

I do not know what the regulations are now regarding this but back then you were only allowed three phone transfers a month between your money market account and your checking account. But you had unlimited tranfers if you came into the bank. Don't know why there was that distinction.

But I had a willing contact at the bank who allowed me to do the following. I'd go to the bank and sign 20 blank forms. Then when I wanted to make a transfer I'd call her and she'd fill in the amount and go to the counter to process them.

That worked out great for several years until one day she called me to tell me that the bank examiners had come by and discovered blank transfer forms signed by me.

[Mark Leavy]

That worked out great for several years until one day she called me to tell me that the bank examiners had come by and discovered blank transfer forms signed by me.

Nice work.

But it's a problem. The average business that wants to function and stay insured and stay legal has to hire deviants. Someone willing to skirt/bend the laws or willing to do a shitload of accounting that is completely unrelated to the business objectives.

Seems like a house cleaning of some sort is due.

[glennds]

Feds announce that all SVB depositors will be made whole. Even those above $250K. It seems like someone explained the situation to them.

Still, just a stop gap. This solution is a bit capricious and not a good foundation for future planning. Best to assume that any future failures won't be covered unless an explicit raise to the FDIC insurance is announced.

And... Signature also covered 100%.

So, does this mean that FDIC is now set at infinity? Some clarity needed.

I can't imagine what it was like for hundreds, maybe thousands of entrepreneurs and management who went through maybe the worst 24-48 hours of their careers through no fault of their own. Let's see what this week brings.

[Dieter]

https://heathercoxrichardson.substack.c ... dium=email

[Maddy]

Silicon Valley Bank's chief administrative officer, Joseph Gentile, was the CFO for Lehman Brothers Global Investment Bank.
https://mishtalk.com/economics/the-stun ... ks-failure

[glennds]

Feds announce that all SVB depositors will be made whole. Even those above $250K. It seems like someone explained the situation to them.

Still, just a stop gap. This solution is a bit capricious and not a good foundation for future planning. Best to assume that any future failures won't be covered unless an explicit raise to the FDIC insurance is announced.

And... Signature also covered 100%.

So, does this mean that FDIC is now set at infinity? Some clarity needed.

I can't imagine what it was like for hundreds, maybe thousands of entrepreneurs and management who went through maybe the worst 24-48 hours of their careers through no fault of their own. Let's see what this week brings.

Although the libertarian view (depending on your flavor of libertarian) might not be so sympathetic to the depositors. Those entrepreneurs and customers chose to do business with a private bank that chose to mismanage its risk.

Personally I think the government stepping in was the right thing otherwise panic would have spread throughout the system. And because it's obvious no private solution was available i.e. no other bank was willing to come forward and buy SVB. There were probably some discussion that they took the weekend to exhaust before making it a government solution. Remains to be seen what happens next.
Are demolished bond portfolios the new institutional toxic asset?

[yankees60]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

[yankees60]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

It is going to be on C-Span again now.

The remarks, though, are only 5 minutes.

[barrett]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

It is going to be on C-Span again now.

The remarks, though, are only 5 minutes.

Vinny, I didn't think that you could take five minutes of Biden even once!

[barrett]

So I wont be able to fund my Juicero 2.0 :/

https://johnhcochrane.blogspot.com/2023 ... nders.html

He asked the right question at the end:

How could this enormous regulatory architecture miss something so simple?

This is something we should be asking more generally. 8% inflation. Apparently simple bank failures. What went wrong? Everyone I know at the Fed are smart, hard working, honest and dedicated public servants. It's about the least political agency in Washington. Yet how can we be seeing such simple o-ring level failures?

I can only conclude that this overall architecture -- allow large leverage, assume regulators will spot risks -- is inherently broken. If such good people are working in a system that cannot spot something so simple, the project is hopeless. After all, a portfolio of long-term treasuries is about the safest thing on the planet -- unless it is financed by hot money deposits. Why do we have teams of regulators looking over the safest assets on the planet? And failing? Time to start over, as I argued in Towards a run free financial system

Or... back to my first question, am I missing something?

I didn't read the linked article yet but will in a minute.

To the bolded part though, no, far from the safest if what you need those funds for are short-term liabilities, withdrawals, etc.

I don't know who was looking at SVBs financials but big institutions would only seem to be as strong as their weakest link, right? I would also add that a big event like this makes it seem like the system is broken but that view tends to overlook that most of the time it works quite well.

Regarding the inflation point, I can only think that the Fed fears deflation way more than it fears inflation... that they'd rather err on the side of policies that are inflationary to ward off any possibility of a deflationary spiral.

[yankees60]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

It is going to be on C-Span again now.

The remarks, though, are only 5 minutes.

Vinny, I didn't think that you could take five minutes of Biden even once!

I take time for ALL the presidents. They ARE the president!

When Trump spoke at Mt. Rushmore I listened to it three times in a row. And, that was not just him speaking -- it was all the pre-speakers plus the closing ceremonies. Even though I did not believe in almost anything he had to say .. he was always extremely entertaining.

That said ...it recently a struggle to finish the Woodward Trump interviews book. Trump is so deadly dull on paper. He too oftentimes came across as a third grader. Again drove home how frightening it was to think of how many people thought he belonged anywhere near holding the office of the President.

The Woodward commentaries portion of the book were the only parts that held kept me interested in persevering to the end of the book.

I heard what Biden said today about three times. I was impressed with his six points, comprehensively covering all the questions and issues.

[Mountaineer]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

It is going to be on C-Span again now.

The remarks, though, are only 5 minutes.

Vinny, I didn't think that you could take five minutes of Biden even once!

I take time for ALL the presidents. They ARE the president!

When Trump spoke at Mt. Rushmore I listened to it three times in a row. And, that was not just him speaking -- it was all the pre-speakers plus the closing ceremonies. Even though I did not believe in almost anything he had to say .. he was always extremely entertaining.

That said ...it recently a struggle to finish the Woodward Trump interviews book. Trump is so deadly dull on paper. He too oftentimes came across as a third grader. Again drove home how frightening it was to think of how many people thought he belonged anywhere near holding the office of the President.

The Woodward commentaries portion of the book were the only parts that held kept me interested in persevering to the end of the book.

I heard what Biden said today about three times. I was impressed with his six points, comprehensively covering all the questions and issues.

Vinny, good for you on listening to our presidents. I know unsolicited advice is rarely appreciated, but I would suggest turning up your bullshit detector to 11 when listening to Biden. He has an absolutely abysmal record of truth telling in the First State going back to the 1970s. Don’t get suckered. You are way smarter than that.

[yankees60]

I am now watching / hearing on C-Span of Biden earlier this morning addressing all aspects of this.

Anyone see it?

It is going to be on C-Span again now.

The remarks, though, are only 5 minutes.

Vinny, I didn't think that you could take five minutes of Biden even once!

I take time for ALL the presidents. They ARE the president!

When Trump spoke at Mt. Rushmore I listened to it three times in a row. And, that was not just him speaking -- it was all the pre-speakers plus the closing ceremonies. Even though I did not believe in almost anything he had to say .. he was always extremely entertaining.

That said ...it recently a struggle to finish the Woodward Trump interviews book. Trump is so deadly dull on paper. He too oftentimes came across as a third grader. Again drove home how frightening it was to think of how many people thought he belonged anywhere near holding the office of the President.

The Woodward commentaries portion of the book were the only parts that held kept me interested in persevering to the end of the book.

I heard what Biden said today about three times. I was impressed with his six points, comprehensively covering all the questions and issues.

Vinny, good for you on listening to our presidents. I know unsolicited advice is rarely appreciated, but I would suggest turning up your bullshit detector to 11 when listening to Biden. He has an absolutely abysmal record of truth telling in the First State going back to the 1970s. Don’t get suckered. You are way smarter than that.

There are a lot of reasons why I have intensely disliked him for 30+ years. But I try to listen with an open mind and I was impressed with what he had to say today.

I'm sure all of you by now have seen those six points he addressed?

[glennds]

Vinny, good for you on listening to our presidents. I know unsolicited advice is rarely appreciated, but I would suggest turning up your bullshit detector to 11 when listening to Biden. He has an absolutely abysmal record of truth telling in the First State going back to the 1970s. Don’t get suckered. You are way smarter than that.

Mountaineer don't be so negative. Biden has been known for doing a fantastic Neil Kinnock cover.

[Maddy]

Long before its epic collapse, Silicon Valley Bank (SVB) was a darling of the left. It allied in cash and manpower with a liberal nonprofit run by California Gov. Gavin Newsom's wife and fully embraced the environmental, social and governance (ESG) platform now being banned in some red states, while celebrating its executives' involvement in the LGBTQ+ movement.

As SVB's investment failures mounted, the bank doubled down on its ideological commitments by pledging $5 billion in new green tech outlays, despite signs of rising interest rates negatively impacting that sector. Some institutional investors also began to raise concerns about the overall balance sheet.

The stark contrast between the liberal investment icon and what was in reality an underperforming bank, was on full display last July. SVB was boasting about its diversity, equity and inclusion (DEI) progress and a Pride Month forum, as J.P. Morgan official Steve Alexopoulos pressed for answers on an investor call about why its investments had lost 8% of value in a single quarter, according to the transcript of the meeting.
* * *
Greg Becker, the bank's president and chief executive officer, attempted to contain the concern by explaining what the bank was doing to offset potential panic. . . Despite these assurances, however, Becker has been sued and his institution placed under FDIC control in the largest bank failure since the 2008 Great Recession. Experts say the collapse is a warning sign to weed out woke investments.

"We knew it was financially mismanaged, but oh my gosh, this is probably the most woke bank in existence of mankind . . ." said Joel Griffith, a financial fellow at the Heritage Foundation. "We should recognize the primary cause of this bank going belly up was just gross financial mismanagement. . .

https://justthenews.com/accountability/ ... da-despite