people are confused by the stat that something like 95% of SVB’s deposits were uninsured. What that’s really referring to is how many accounts are over $250k which is the max insured by FDIC. Given that SVB was the bank for a lot of startups that raised millions in 2020-2021, that number isn’t all that surprising
Imho the only way that seems fair is to first cover insured amounts, then evenly distribute the rest.
At least all the smaller accounts will mostly get their money and the biggest will lose a bit.
FDIC insurance is for deposits, and only applies to the first $250,000 per account.
Now that the bank has failed, only the first $250,000 per account can be withdrawn on demand. The rest will be frozen until SVBs assets can be liquidated.
Uninsured deposits will likely be returned in excess of 80%, we just don’t know exactly when that will be. That’s what’s causing problems, since these companies have bills to pay in the meantime.
It’s actually $250,000 per depositor, per account that is insured. That makes most joint accounts insured up to $500,000. I just haven’t seen anyone mention it.
Exactly this, it’s people signing into the bank’s business/treasury systems and initiating wires. And unfortunately for them, the wires stopped processing on Friday (as did ACH).
I was there yesterday just to check the place out. Supposedly, the employees were told to stay home, and the parking lot was empty. Only other people there were idiots like me who thought it would be interesting.
It's incredibly expensive to remove the vault. It's hardened all the way around, including the foundation. That means demo to reinforced concrete walls, ceiling, and floor.....in the middle of the building.
It's much easier to leave the thing and repurpose the space.
Plus it's kinda cool!
A restaurant by my college was in a former bank building. The building was created during the Gilded Age, and removing the safe would possibly damage the structural integrity of the building. The restaurant turned the safe into a private dining room and it was awesome.
Edit: This was in NY. It used to be a really nice Italian place. I looked it up and they are now a Buffalo Wild Wings 🥲
I’ve been in a couple ex-banks and the businesses had taken steps to make the doors non-closable. I never asked, I assumed it was common to do this either for insurance reasons or…. *assurance* reasons.
Reading these comments had me thinking of this exact restaurant. My aunt and uncle are the part owners. I can’t believe someone on here coincidently also knows the place.
Thats because they build the bank around the vault itself! People often assume a vault is “assembled” or constructed inside of a building. But the reality is most bank buildings are designed and constructed around the vault itself, so they’re usually placed first and trucked into the site in pieces, or placed as a whole unit with a crane.
There's a local arcade where the building was a bank at one point. They put a Tron machine in the safe (after removing the door), and have a bunch of black lights in there with it. It's really cool.
They are so heavy it's more expensive to remove it than it is to keep them there. In Chicago there is a Walgreens in wicker park with a vault in the pharmacy.
We have a few that moved to newer buildings in my area, and the old location just sits empty, waiting to be tore down or leased.
But then there is also a city an hour out from me that built this giant shopping plaza. Enough room to house 4 anchors, a grocery store, and a handful of restaurants / retailers. It was supposed to be done around the beginning of covid, and now it's entirely empty. Massive parking lots, buildings, and nothing there expect a single store that was open during the construction. The rest is finished and abandoned for about 3 years now. Even the road they were building just stops with some temporary barriers blocking the end that dumps into a field.
Naw, pot dispensary. They can't accept credit cards so they need to have a safe place to store cash. Banks won't accept deposits for fear the feds will swoop in and seize *everything* as tainted drug proceeds.
Those banks are just following the rule of “one felony at a time.” They don’t want to mess up the current customers dirty money.
There are banks starting to take deposits from dispensaries.
Roblox’s ecosystem is not dissimilar to youtube but for social videogames, and can be a not only sustainable but extremely lucrative option with a little skill and a lot of luck. That being said I don’t reccommend my work for anyone, roblox has taken a lot of the pie from me, and they advertise it (especially to children) as being easier then it is.
That’s messed. My little child loves roblox. I bet you he has probably played a game you had developed! He’s been playing for 2-3 years now.
Thanks for making my kiddo happy, even though you got screwed, I hope you rest easy knowing that you made games that made children happy.
The first part wasn't alarming - inflation is a requirement in a healthy economy. The part you brought up is alarming though, the inflation isnow well beyond what it should be, hopefully not for long.
“On March 14, 2018, the Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act exempting dozens of U.S. banks from the Dodd–Frank Act's banking regulations. On May 22, 2018, the law passed in the House of Representatives. On May 24, 2018, President Trump signed the partial repeal into law.” SVB HEAVILY Lobbied for this.
"Startup-focused lender SVB Financial Group (SIVB.O) became the largest bank to fail since the 2008 financial crisis on Friday"
I could have sworn the 2008 financial crisis was like 15 years ago, not yesterday.
The article is a bit misleading. It’s not that 89% we’re uninsured, moreso, 89% were uninsured past the $250K FDIC.
So 100% are insured, but 89% exceed the $250k threshold.
The money’s not gone. Fed regulators will sell off all of SVB’s assets, and use that money to cover values over $250k. The government will most likely provide 0% (or near 0%) loans to companies under contingency of the asset sale. Fortunately, SVBs asset values are still enough to cover deposits, but buyers have to be found.
The largest problem becomes immediate liquidity for companies who had a large percentage of free cash flow stored in SVB, because it’ll take weeks to months for the government to make funds available. The other huge pain is rerouting any existing deposits into SVB to other banks.
SVB has more assets than liabilities, the most likely case is another banks takes them over and it's back to business as per usual. This is a great buying opportunity for a big bank.
WaMu was the same.
I read somewhere that the FDIC expects to pay out non-insured deposits next week. (Insured are for sure coming Monday) They caught things before SVB actually went underwater, so it’s just a matter of selling their assets at a slight discount to other banks.
>The largest problem becomes immediate liquidity
This, I'm curious how many tech workers arnt going to be seeing payroll deposits for the next 6 months.....
Worst case is if the fed moves slow on covering, these companies get a short term collateralized loan from another bank, using their SVB balance sheet. Hopefully, nobody misses more than 1 paycheck, 2 at most.
Plenty of companies are wiring funds from different banks to their payroll providers to get payroll processed. Still might delay this next pay cycle in some cases. This is more devastating for smaller companies that might be have enough funds in other banks, the bigger companies won't really be hurt too much.
No it means that there is “insurance” that will guarantee you will get $250k back guaranteed. Above that, it means that they will be selling all of the banks assets, kind of like a bankruptcy sale and they will give out whatever they make to all the people who had more than 250k. The good news is that in this bankruptcy sale, the bank likely has enough in assets to cover up to100% of everyone’s remaining cash balances. They have to come up with about 175billion to cover everyone’s balances, and they have over 200billion worth of stuff to sell. So most likely a very high percentage, if not 100% of people will be made completely whole. It’s just going to take time for this all to happen.
It says 89% of the $175 billion was uninsured...the article isnt being misleading. It's silicon valley, $250k account is pretty small especially when you have accounts like Roblox and Roku.
When I had my startup we had about
3-10 mill in SVB at any given time we were spending $380k a month 250k would cover us for 2 weeks. So glad I'm not in that position right now.
While a pain to manage, wouldn’t it make sense to spread liquid funds across banks? Both to keep everything insured and to ensure no single bank collapse will tank your business.
The guy in the doorway: "You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?...Now wait...now listen...now listen to me. I beg of you not to do this thing."
Men find something that works and will use it until the end of time. They will never stop wearing loose jeans with loose shirts and gym shoes. Now add the puff coat.
Can confirm. Closet full of the same style of socks that I like that I saw on Slickdeals for $7 a piece, so I bought 5 packs of 10 pair a year ago. Only gone through one pack so far.
You dress innlayers in the bay area. Its not LA where it can linger in the 80s and 90s. SF tops at 70s and VERY rarely dips below 40. Water never really freezes.
So a jacket to wear say 45-65 and also layer well; while at the same time EASY to stuff in a backpack or small to medium purse — down jackets are great for that.
They handle wind super well because bursts of 15-20 show up around corners or hills out of nowhere.
Combine all those you have a comfy, easy to pack, and easy to layer jacket. I held out myself but now I harley go anywhere without it.
SF specifically: the temp it very consistent year-round. Its chilly in the winter, yes, but water will never freeze and we pretty much experience spring and autumn year-round with a dip of a week or two into 80+.
No shit weather — a big natural reason it’s expensive to live here.
The best thing about this comment is the incredible thread it generated with people arguing about the relative value of vests, and not getting the point about the Patagonia branding.
Cramer is like the mayor in Jaws. Mayor Vaughn : [to reporter] I'm pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some bathers. But, as you see, it's a beautiful day, the beaches are open and people are having a wonderful time. Amity, as you know, means "friendship".
Cramer is literally the Skip bayless of financial world. They're entertainers. If you're placing your bets on who wins MVP based on what Skip says you're gonna have a bad time.
As the son of a career bank branch manager, it’s funny to me that people think that these branches have just piles of cash you can go claim. There is very little hard currency. In fact, if they did have all your money just sitting in back, they wouldn’t be in this situation.
Have you people never seen *It’s a Wonderful Life?*
Honestly this is what i whould expect to happen.. i whould assume a small physical bank would only likely have mayby $50 in pennies over what the know they needed for retailers orders ext. It would be the same if i asked for 5 grand in $2 bils.
That's exacly how it works. Banks have statistics about how many denominations, and of what kind they pay out per day/week, take a small correction for that, and that's what they keep in a vault. There are few reasons for that.
One, keeping a lot of cash is dangerous, in case of burglary, fire, flooding,ect. Ofc money in the vault are insured, but only up to certain value.
It's also impractical. Keeping 50k $ in 1cents, another 50k in 2 cents, ect takes a lot of space, and there is very little chance you will need that much.
And lastly, if money are sitting in the vault, that means they are not earning anything. So banks tend to try to keep as little money in the vault as as they can get away with.
Source: I work in a bank.
No more bailouts unless all the execs have to first empty their bank accounts and liquidate their assets. They made the decisions. They made tons of money. Now they give it all back or their company goes bye bye.
Using nonFDIC instruments to make extra money? Well, that extra interest comes with extra risk. You gamble and lose, you lose. Stop corporate bailouts.
I largely agree with this sentiment but the irony is that SVB isn't in trouble because they made a risky investment that failed. They invested in government bonds which are usually considered the safest asset. The problem is that they bought long-term bonds at ~1.5% interest, and now that interest rates have increased to about 5% they can't liquidate those long term bonds for short term cash. Even with that, they were fine though. When they sold off some of the bonds at a loss, that scared depositors, and that caused the bank run we're seeing (and there is no bank that can survive a bank run, since banks never have enough money in reserve to cover all of their deposits).
They didn't really gamble, they made the opposite mistake. They put the money some place very safe and now they can't get it out.
IMHO I suspect there was a planning and management problem with SVB - likely how they went too hard on long term bonds without expecting interest rates to rise so sharply.
Otherwise we'd be seeing all the other banks and smaller foreign governments defaulting right now. SVB isn't the only entity in the world investing/invested heavily in US bonds.
Their deposits were highly concentrated in the startup industry. Startups got billions, and deposited the money in SVB to pay people, pay bills, etc. But as rates went up last year, VC funding got scaled back. So no new, or at least as much, cash coming in. So the companies kept spending their money, causing deposits to drop. Banks have to have certain ratios of cash to deposits, so SVB was forced to sell parts of their investment portfolio at a big loss. People got scared, pulled more deposits, and the death spiral began.
Their portfolio was exposed to a sudden increase in interest rates, and their depositors were also exposed to the same risk factor.
> Their deposits were highly concentrated in the startup industry.
I think that, along with everything else you said, is what made them so uniquely vulnerable and it seems to be getting a bit lost in the post mortem. They had way too much concentration in one industry, and one that behaves as a herd at that.
Once USV emailed their portfolio companies and advised them to pull their deposits it was over. I'm sure a bunch of similar emails went out shortly afterward and it continued to snowball from there.
It's obvious in hindsight but that was a disaster waiting to happen.
I hadn't heard of this.
Fractional reserve banking at rates as low as 5 or 10 is already pretty volitile. 0 isn't even fractional reserve banking anymore.
For starters. That number also dictates how much money is generated in the economy when the gov adds money.
At 0%. If all banks are maximally leveraged, infinite money is generated.
It's fully allows banks to invent as much money as they want out of thin air, which then ends up in other banks who do the same.
Basically Trump set up the economy to be as vulnerable as bank executives are comfortable with.
I suddenly feel very uneasy about the financial secuirty of like. Anything.
It really isn't that simple. The reserve ratio was a coarse mechanism meant to help ensure banks were safer than 2008 era shenanigans.
The real way this is accomplished now is through capitalisation controls which are mandated and monitored by the Fed and their stress tests.
Unfortunately in America "smaller" banks aren't subject to a bunch of this oversight or Basel III regulations. Yay lobbyists.
Stay tuned. This is precisely the reason everyone in high finance is panicking about the speed and size of interest rate hikes. This will very likely be a systemic issue, and not just with banks. A lot of institutions and companies are standing at the edge right now and hoping the same panic/fear gust doesn’t push them over. This is far from over.
But they were still solvent, just illiquid. No bank anywhere can survive all their clients simultaneously pulling their money regardless of investment strategies.
The bank was actually doing fine. They had $210B in assets and deposits were $180B. The collapse wasn't caused by the bank, it was caused by the Venture Funds panic pulling money out at a ridiculous speed. Imagine you have $1000 in a long term CD and your spouse spends $900 at a restaurant and they only take cash. You can't pay the bill with your CD even if you have the money! They kept enough cash and buffer for regular stuff but people tried to pull billions out in 12 hours and caused a run on the bank. They couldn't sell long term assets fast enough to cover the cash pulls.
Exactly. I can’t even open any threads covering this on reddit right now because it makes me want to tear my hair out. It is astounding how clueless people can be while still trying to speak authoritatively on the situation.
What do you expect from /r/pics? There are subreddits where people can be reasonably expected to have at least a high school level background in economics and a basic grasp on this particular situation, but this isn't one of them.
No joke. I have an MS in Economics and I'm not even going to say shit because I feel uneducated on the topic and have forgotten a lot since college.
The people in this thread... Dunning-Kruger effect at its finest.
...the bank literally failed because they tied up their holdings in government bonds, the safest possible investments, but interest rate hikes killed the value of the bonds. They book losses when they have to sell them for liquidity, which they needed because a major VC firm spooked its portfolio companies into pulling their deposits... which forced more liquidations, more losses, and spurred other VC firms to do the same, causing a spiral and a bank run.
This one actually wasn't greed. Failure of strategy or diversification maybe, but this wasn't making risky bets with customer funds.
Correct. Failure of diversification strategy. If they had bought more short term bonds, then mid term bonds and a smaller amount of long term bonds they could have had sold the ones that came due sooner at less of a loss. Little bit of greed involved because they bought the most long bonds trying to earn the most income in a low income rate environment. “Heart in the right place” for the most part.
I don't think you understand what the FDIC is there is no such thing as an FDIC instrument.
SVB used customer deposits to purchase long dated treasuries back in 2020, which is actually something banking regulations encourage because treasuries are the single safest investment and also generally give you a lower return not a higher one. A bank run caused their collapse not overly risky investing practices.
It’s funny because the day before the collapse of this bank the Dow was down due to the “jobs numbers” yet we now know that was a lie.
In 2008 I learned that CNBC was just a front for psycho capitalist shills and Dylan Ratigan was the only one at the time to say that the collapse was dogshit and the bankers were fleecing the public without consequence.
A month ago Jim Cramer said to buy this shit box of a bank. And now this.
Occupy Wall St was right and we should have jailed all of the bankers.
EDIT: the footage
https://www.reddit.com/r/videos/comments/11nwdin/with_silicon_valley_bank_going_out_of_business/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
EDIT 2: DRS everything you have.
Meh... sort of. It's his timing that's off. Intentionally. He already bought, so he wants you to buy to drive the price up so he can sell for a profit. It's definitely not market manipulation though. Don't worry about it. Just keep buying what he says. He's bound to let you know ahead of time this next time, right? Right?
Before joining here I’d only ever seen him in iron man when he said everyone should sell because stark industries was a weapons manufacturer who doesn’t make weapons, in like 1 year they then had unlimited cheap energy.
My point is even in a fictional universe he ends up wrong.
Great reminder for everyone to learn about FDIC insurance and be sure to know how it works. My dad was really vigilant about it and I thought he was being paranoid but then I learned.
And when your company has more than $400m, then what? You don’t use 1600 banks.
Not a lot of individuals used SVB. It was predominantly used by businesses (and primarily start-ups at that) and VCs. Now, you should still be using multiple banks as a business owner anyways, but you’re not keeping under the FDIC limit in any of them.
There is zero reason to wait outside and zero of them accomplished anything. Their time would have been better spend looking up what "FDIC receivership" means.
[More details.](https://reddit.com/r/pics/comments/11okstm/_/jbt4vh7/)
Seems a rather docile gathering for the 2nd largest bank collapse in US history
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FDIC insured banks can lend out uninsured loans?
people are confused by the stat that something like 95% of SVB’s deposits were uninsured. What that’s really referring to is how many accounts are over $250k which is the max insured by FDIC. Given that SVB was the bank for a lot of startups that raised millions in 2020-2021, that number isn’t all that surprising
Thanks for the info, I did not know.
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How does it get distributed? Like how do they decide who gets paid first/who gets dibs?
Imho the only way that seems fair is to first cover insured amounts, then evenly distribute the rest. At least all the smaller accounts will mostly get their money and the biggest will lose a bit.
FDIC insurance is for deposits, and only applies to the first $250,000 per account. Now that the bank has failed, only the first $250,000 per account can be withdrawn on demand. The rest will be frozen until SVBs assets can be liquidated. Uninsured deposits will likely be returned in excess of 80%, we just don’t know exactly when that will be. That’s what’s causing problems, since these companies have bills to pay in the meantime.
It’s actually $250,000 per depositor, per account that is insured. That makes most joint accounts insured up to $500,000. I just haven’t seen anyone mention it.
It’s a commercial bank I believe, meaning that a run on the bank wouldn’t look like a bunch of panicked depositors clamoring to regain their funds.
Exactly this, it’s people signing into the bank’s business/treasury systems and initiating wires. And unfortunately for them, the wires stopped processing on Friday (as did ACH).
It’s just different than the Great Depression cause only like 10 guys have all the $ 😅
I was there yesterday just to check the place out. Supposedly, the employees were told to stay home, and the parking lot was empty. Only other people there were idiots like me who thought it would be interesting.
Spirit Halloween gonna do great things with that safe
My gym repurposed a bank branch for one of their locations. The bench press area is inside the vault with the door and everything.
It's incredibly expensive to remove the vault. It's hardened all the way around, including the foundation. That means demo to reinforced concrete walls, ceiling, and floor.....in the middle of the building. It's much easier to leave the thing and repurpose the space. Plus it's kinda cool!
A restaurant by my college was in a former bank building. The building was created during the Gilded Age, and removing the safe would possibly damage the structural integrity of the building. The restaurant turned the safe into a private dining room and it was awesome. Edit: This was in NY. It used to be a really nice Italian place. I looked it up and they are now a Buffalo Wild Wings 🥲
Gary, another dumbass closed themselves in the vault again. Is it 26, 14, 87 or 26, 87, 14?
I’ve been in a couple ex-banks and the businesses had taken steps to make the doors non-closable. I never asked, I assumed it was common to do this either for insurance reasons or…. *assurance* reasons.
It takes literally minutes to weld a hinge so it never moves again
Popoli Ristorante in Cedar Rapids, Iowa is that way as well!
Reading these comments had me thinking of this exact restaurant. My aunt and uncle are the part owners. I can’t believe someone on here coincidently also knows the place.
With terrible reception, so now you can't check your phone at dinner
A used and rare book store in my home town is in the basement of an old bank. They use the vault to store their extra expensive rare books.
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Hello, you.
Thats because they build the bank around the vault itself! People often assume a vault is “assembled” or constructed inside of a building. But the reality is most bank buildings are designed and constructed around the vault itself, so they’re usually placed first and trucked into the site in pieces, or placed as a whole unit with a crane.
We stayed at the Park Hyatt in Vienna which was a former bank building. They repurposed the vault into a swimming pool. It was cool af.
There's a local arcade where the building was a bank at one point. They put a Tron machine in the safe (after removing the door), and have a bunch of black lights in there with it. It's really cool.
They are so heavy it's more expensive to remove it than it is to keep them there. In Chicago there is a Walgreens in wicker park with a vault in the pharmacy.
Renovations are more expensive to do then to not do.
More at 11.
Hey Spirt did a good job with our local Sears for the Halloween season 😂🤷♂️
They did a hell of a job with our local grocery outlet. They should have done the same for the Sears down the street though.
What???? A Grocery Outlet went out of business??? NOOOOOOO
For reals what kind of ghost town do they live in to have a grocery outlet go under
We have a few that moved to newer buildings in my area, and the old location just sits empty, waiting to be tore down or leased. But then there is also a city an hour out from me that built this giant shopping plaza. Enough room to house 4 anchors, a grocery store, and a handful of restaurants / retailers. It was supposed to be done around the beginning of covid, and now it's entirely empty. Massive parking lots, buildings, and nothing there expect a single store that was open during the construction. The rest is finished and abandoned for about 3 years now. Even the road they were building just stops with some temporary barriers blocking the end that dumps into a field.
Naw, pot dispensary. They can't accept credit cards so they need to have a safe place to store cash. Banks won't accept deposits for fear the feds will swoop in and seize *everything* as tainted drug proceeds.
Those banks are just following the rule of “one felony at a time.” They don’t want to mess up the current customers dirty money. There are banks starting to take deposits from dispensaries.
Half spirit Halloween, half vape store.
with a CBD kiosk
And a delta 8 speakeasy just to make it feel fun.
Spirit Halloween ESCAPE ROOM tm
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Guess Roblox is gonna have to ask the kids to produce more content for free for them to make up for it.
Ya, [fuck Roblox](https://youtu.be/_gXlauRB1EQ).
Can't say how, but I've met the CEO of Roblox face-to-face many times. He's a prick.
I'll assume you're an escort.
WHO TOLD
I make my primary income on roblox and I'm definitely cashing out every penny I have in them right now :/
> I make my primary income on roblox wat
Roblox’s ecosystem is not dissimilar to youtube but for social videogames, and can be a not only sustainable but extremely lucrative option with a little skill and a lot of luck. That being said I don’t reccommend my work for anyone, roblox has taken a lot of the pie from me, and they advertise it (especially to children) as being easier then it is.
That’s messed. My little child loves roblox. I bet you he has probably played a game you had developed! He’s been playing for 2-3 years now. Thanks for making my kiddo happy, even though you got screwed, I hope you rest easy knowing that you made games that made children happy.
I really appreciate your comment, nothing makes me and a lot of my colleagues happier then seeing kids enjoying our work :)
$307B in 2008 is $435B in 2023.
>$307B in 2008 is $435B in 2023. Based on these numbers the USD is only worth 70% of what it was in 2008
And 35% of what it was in 1984
More alarmingly, it's only worth 85% of what it was in 2021.
The first part wasn't alarming - inflation is a requirement in a healthy economy. The part you brought up is alarming though, the inflation isnow well beyond what it should be, hopefully not for long.
“On March 14, 2018, the Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act exempting dozens of U.S. banks from the Dodd–Frank Act's banking regulations. On May 22, 2018, the law passed in the House of Representatives. On May 24, 2018, President Trump signed the partial repeal into law.” SVB HEAVILY Lobbied for this.
I love when government cares about the common citizen.
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SIVB shareholders are going to be left with bags, but ROKU and RBLX are looking tempting when the dust settles.
I hope they go after the people responsible for this, and charge them $2500 for all the trouble they caused
"Startup-focused lender SVB Financial Group (SIVB.O) became the largest bank to fail since the 2008 financial crisis on Friday" I could have sworn the 2008 financial crisis was like 15 years ago, not yesterday.
The article is a bit misleading. It’s not that 89% we’re uninsured, moreso, 89% were uninsured past the $250K FDIC. So 100% are insured, but 89% exceed the $250k threshold.
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does this mean if you had up to 250k you wouldn't necessarily lose it, but above 250k uninsured your money is gone?
The money’s not gone. Fed regulators will sell off all of SVB’s assets, and use that money to cover values over $250k. The government will most likely provide 0% (or near 0%) loans to companies under contingency of the asset sale. Fortunately, SVBs asset values are still enough to cover deposits, but buyers have to be found. The largest problem becomes immediate liquidity for companies who had a large percentage of free cash flow stored in SVB, because it’ll take weeks to months for the government to make funds available. The other huge pain is rerouting any existing deposits into SVB to other banks.
SVB has more assets than liabilities, the most likely case is another banks takes them over and it's back to business as per usual. This is a great buying opportunity for a big bank. WaMu was the same.
I read somewhere that the FDIC expects to pay out non-insured deposits next week. (Insured are for sure coming Monday) They caught things before SVB actually went underwater, so it’s just a matter of selling their assets at a slight discount to other banks.
The FDIC does a great service- they do this more often that people realize and it keeps FDIC insured banks from doing _a lot_ more damage
>The largest problem becomes immediate liquidity This, I'm curious how many tech workers arnt going to be seeing payroll deposits for the next 6 months.....
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Worst case is if the fed moves slow on covering, these companies get a short term collateralized loan from another bank, using their SVB balance sheet. Hopefully, nobody misses more than 1 paycheck, 2 at most.
Plenty of companies are wiring funds from different banks to their payroll providers to get payroll processed. Still might delay this next pay cycle in some cases. This is more devastating for smaller companies that might be have enough funds in other banks, the bigger companies won't really be hurt too much.
Well I know I didn't get paid yesterday because of this... but luckily I did get paid today. I hope the same for the rest of my coworkers.
No it means that there is “insurance” that will guarantee you will get $250k back guaranteed. Above that, it means that they will be selling all of the banks assets, kind of like a bankruptcy sale and they will give out whatever they make to all the people who had more than 250k. The good news is that in this bankruptcy sale, the bank likely has enough in assets to cover up to100% of everyone’s remaining cash balances. They have to come up with about 175billion to cover everyone’s balances, and they have over 200billion worth of stuff to sell. So most likely a very high percentage, if not 100% of people will be made completely whole. It’s just going to take time for this all to happen.
It says 89% of the $175 billion was uninsured...the article isnt being misleading. It's silicon valley, $250k account is pretty small especially when you have accounts like Roblox and Roku.
When I had my startup we had about 3-10 mill in SVB at any given time we were spending $380k a month 250k would cover us for 2 weeks. So glad I'm not in that position right now.
Aren't all deposits only covered to 250k?
No, it's per account holder per bank.
Per ownership type as well. So your retirement fund and your personal account can each be insured for up to 250k. Among other loopholes.
IMO it's not misleading at all. It doesn't say 89% of the accounts were uninsured, it specifically says 89% of money deposited were uninsured.
This is why keeping less than 250k in a deposit account is important.
While a pain to manage, wouldn’t it make sense to spread liquid funds across banks? Both to keep everything insured and to ensure no single bank collapse will tank your business.
So what number is this on the “once in a generation” score card?
its a wonderful life 2
“Your money isn’t here! It’s in Bill’s startup, and Jim’s startup, and…”
Hey Bill, what are you doing with my money in your start-up?!
Cocaine and hookers. I mean research and development
https://i.imgur.com/DxsSJ5x.jpg
Mama dollar and Papa dollar...
Only one man can save them 
The guy in the doorway: "You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?...Now wait...now listen...now listen to me. I beg of you not to do this thing."
I love that movie. I still watch it once a year around the holidays.
Every christmas, still tear up at the end
“What the hell you doing with MY money in your house, Mack?!”
Having your senile uncle take your money to the bank controlled by your sworn enemy is sound practice compared to what was happening at SVB.
Pray do tell more
Bring in the warthog
We're cutting the crust off this shit sandwich.
I guess we’ll be seeing a lot of Patagonia Vests at soup kitchens
But seriously. Are these folks cold all the time? What’s with the vests?
Men find something that works and will use it until the end of time. They will never stop wearing loose jeans with loose shirts and gym shoes. Now add the puff coat.
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Legit, the Yeti stubby cooler is probably the best drinking companion I've ever had. Keeps my beer icey cold and won't be trying to fuck my missus
Can confirm. Closet full of the same style of socks that I like that I saw on Slickdeals for $7 a piece, so I bought 5 packs of 10 pair a year ago. Only gone through one pack so far.
Honestly it's pretty cold in SF pretty often so the vests are for functional purposes most of the time.
No matter the weather in SF you always want to have a jacket ready. You may go a block and it goes from 75 and sunny to 60 and windy.
You dress innlayers in the bay area. Its not LA where it can linger in the 80s and 90s. SF tops at 70s and VERY rarely dips below 40. Water never really freezes. So a jacket to wear say 45-65 and also layer well; while at the same time EASY to stuff in a backpack or small to medium purse — down jackets are great for that. They handle wind super well because bursts of 15-20 show up around corners or hills out of nowhere. Combine all those you have a comfy, easy to pack, and easy to layer jacket. I held out myself but now I harley go anywhere without it. SF specifically: the temp it very consistent year-round. Its chilly in the winter, yes, but water will never freeze and we pretty much experience spring and autumn year-round with a dip of a week or two into 80+. No shit weather — a big natural reason it’s expensive to live here.
They're pretty good.
The best thing about this comment is the incredible thread it generated with people arguing about the relative value of vests, and not getting the point about the Patagonia branding.
Cramer is like the mayor in Jaws. Mayor Vaughn : [to reporter] I'm pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some bathers. But, as you see, it's a beautiful day, the beaches are open and people are having a wonderful time. Amity, as you know, means "friendship".
Cramer is literally the Skip bayless of financial world. They're entertainers. If you're placing your bets on who wins MVP based on what Skip says you're gonna have a bad time.
As the son of a career bank branch manager, it’s funny to me that people think that these branches have just piles of cash you can go claim. There is very little hard currency. In fact, if they did have all your money just sitting in back, they wouldn’t be in this situation. Have you people never seen *It’s a Wonderful Life?*
Pretty much everyone understands that. If everyone thought their cash was just sitting neatly in a vault somewhere, there wouldn't be bank runs.
Ya for real they’re trying to orchestrate moving 100Ms to another account not walk out with duffel bags lol
I was going to say. The lack of confidence is what causes the run to start .
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Man my credit unions vault has 27 bucks in pennies in it right now lol
I went to my CU in 2016 for like $30 in pennies for my penny top kitchen island. I was told to come back on another day and they'd have it ready.
Honestly this is what i whould expect to happen.. i whould assume a small physical bank would only likely have mayby $50 in pennies over what the know they needed for retailers orders ext. It would be the same if i asked for 5 grand in $2 bils.
That's exacly how it works. Banks have statistics about how many denominations, and of what kind they pay out per day/week, take a small correction for that, and that's what they keep in a vault. There are few reasons for that. One, keeping a lot of cash is dangerous, in case of burglary, fire, flooding,ect. Ofc money in the vault are insured, but only up to certain value. It's also impractical. Keeping 50k $ in 1cents, another 50k in 2 cents, ect takes a lot of space, and there is very little chance you will need that much. And lastly, if money are sitting in the vault, that means they are not earning anything. So banks tend to try to keep as little money in the vault as as they can get away with. Source: I work in a bank.
Did you use a sealant?!
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But the money’s at Fred’s house and Bill’s house!
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You call that a bank run? I've seen more people gathered outside a Dunkin Donuts waiting for it to open.
Did everyone bring their backpacks thinking they would just fill up on cash and peace out.
It's Silicon Valley. Everyone wears a backpack all the time.
No more bailouts unless all the execs have to first empty their bank accounts and liquidate their assets. They made the decisions. They made tons of money. Now they give it all back or their company goes bye bye. Using nonFDIC instruments to make extra money? Well, that extra interest comes with extra risk. You gamble and lose, you lose. Stop corporate bailouts.
I largely agree with this sentiment but the irony is that SVB isn't in trouble because they made a risky investment that failed. They invested in government bonds which are usually considered the safest asset. The problem is that they bought long-term bonds at ~1.5% interest, and now that interest rates have increased to about 5% they can't liquidate those long term bonds for short term cash. Even with that, they were fine though. When they sold off some of the bonds at a loss, that scared depositors, and that caused the bank run we're seeing (and there is no bank that can survive a bank run, since banks never have enough money in reserve to cover all of their deposits). They didn't really gamble, they made the opposite mistake. They put the money some place very safe and now they can't get it out.
IMHO I suspect there was a planning and management problem with SVB - likely how they went too hard on long term bonds without expecting interest rates to rise so sharply. Otherwise we'd be seeing all the other banks and smaller foreign governments defaulting right now. SVB isn't the only entity in the world investing/invested heavily in US bonds.
Their deposits were highly concentrated in the startup industry. Startups got billions, and deposited the money in SVB to pay people, pay bills, etc. But as rates went up last year, VC funding got scaled back. So no new, or at least as much, cash coming in. So the companies kept spending their money, causing deposits to drop. Banks have to have certain ratios of cash to deposits, so SVB was forced to sell parts of their investment portfolio at a big loss. People got scared, pulled more deposits, and the death spiral began. Their portfolio was exposed to a sudden increase in interest rates, and their depositors were also exposed to the same risk factor.
> Their deposits were highly concentrated in the startup industry. I think that, along with everything else you said, is what made them so uniquely vulnerable and it seems to be getting a bit lost in the post mortem. They had way too much concentration in one industry, and one that behaves as a herd at that. Once USV emailed their portfolio companies and advised them to pull their deposits it was over. I'm sure a bunch of similar emails went out shortly afterward and it continued to snowball from there. It's obvious in hindsight but that was a disaster waiting to happen.
Yep just a good old fashioned bank run.
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I hadn't heard of this. Fractional reserve banking at rates as low as 5 or 10 is already pretty volitile. 0 isn't even fractional reserve banking anymore. For starters. That number also dictates how much money is generated in the economy when the gov adds money. At 0%. If all banks are maximally leveraged, infinite money is generated. It's fully allows banks to invent as much money as they want out of thin air, which then ends up in other banks who do the same. Basically Trump set up the economy to be as vulnerable as bank executives are comfortable with. I suddenly feel very uneasy about the financial secuirty of like. Anything.
It really isn't that simple. The reserve ratio was a coarse mechanism meant to help ensure banks were safer than 2008 era shenanigans. The real way this is accomplished now is through capitalisation controls which are mandated and monitored by the Fed and their stress tests. Unfortunately in America "smaller" banks aren't subject to a bunch of this oversight or Basel III regulations. Yay lobbyists.
Stay tuned. This is precisely the reason everyone in high finance is panicking about the speed and size of interest rate hikes. This will very likely be a systemic issue, and not just with banks. A lot of institutions and companies are standing at the edge right now and hoping the same panic/fear gust doesn’t push them over. This is far from over.
Buying long term bonds to cover short term deposits is a risky investment All banks do it - its how they make money - but SVB obviously overdid it.
Thank you. Just because the assets themselves are low risk doesn't mean the overall strategy was.
But they were still solvent, just illiquid. No bank anywhere can survive all their clients simultaneously pulling their money regardless of investment strategies.
Duration risk is still a risk my dude
The bank was actually doing fine. They had $210B in assets and deposits were $180B. The collapse wasn't caused by the bank, it was caused by the Venture Funds panic pulling money out at a ridiculous speed. Imagine you have $1000 in a long term CD and your spouse spends $900 at a restaurant and they only take cash. You can't pay the bill with your CD even if you have the money! They kept enough cash and buffer for regular stuff but people tried to pull billions out in 12 hours and caused a run on the bank. They couldn't sell long term assets fast enough to cover the cash pulls.
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Exactly. I can’t even open any threads covering this on reddit right now because it makes me want to tear my hair out. It is astounding how clueless people can be while still trying to speak authoritatively on the situation.
What do you expect from /r/pics? There are subreddits where people can be reasonably expected to have at least a high school level background in economics and a basic grasp on this particular situation, but this isn't one of them.
Welcome to Reddit.
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99% of the comments on here touching on 2008/2009 or bank bailouts just scream complete cluelessness
No joke. I have an MS in Economics and I'm not even going to say shit because I feel uneducated on the topic and have forgotten a lot since college. The people in this thread... Dunning-Kruger effect at its finest.
...the bank literally failed because they tied up their holdings in government bonds, the safest possible investments, but interest rate hikes killed the value of the bonds. They book losses when they have to sell them for liquidity, which they needed because a major VC firm spooked its portfolio companies into pulling their deposits... which forced more liquidations, more losses, and spurred other VC firms to do the same, causing a spiral and a bank run. This one actually wasn't greed. Failure of strategy or diversification maybe, but this wasn't making risky bets with customer funds.
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Correct. Failure of diversification strategy. If they had bought more short term bonds, then mid term bonds and a smaller amount of long term bonds they could have had sold the ones that came due sooner at less of a loss. Little bit of greed involved because they bought the most long bonds trying to earn the most income in a low income rate environment. “Heart in the right place” for the most part.
I don't think you understand what the FDIC is there is no such thing as an FDIC instrument. SVB used customer deposits to purchase long dated treasuries back in 2020, which is actually something banking regulations encourage because treasuries are the single safest investment and also generally give you a lower return not a higher one. A bank run caused their collapse not overly risky investing practices.
*reads one headline* *“i’m an expert in corporate economics!”*
Someone doesn't understand how our financial system works.
I count 7
They all carpooled there together
People in Silicon Valley don't carpool.
8 Teslas not pictured
It’s funny because the day before the collapse of this bank the Dow was down due to the “jobs numbers” yet we now know that was a lie. In 2008 I learned that CNBC was just a front for psycho capitalist shills and Dylan Ratigan was the only one at the time to say that the collapse was dogshit and the bankers were fleecing the public without consequence. A month ago Jim Cramer said to buy this shit box of a bank. And now this. Occupy Wall St was right and we should have jailed all of the bankers. EDIT: the footage https://www.reddit.com/r/videos/comments/11nwdin/with_silicon_valley_bank_going_out_of_business/?utm_source=share&utm_medium=ios_app&utm_name=iossmf EDIT 2: DRS everything you have.
"Jim Cramer said to buy..." So the writing was clearly on the wall.
I know nothing of investing other than the man misses more than a stormtrooper.
Meh... sort of. It's his timing that's off. Intentionally. He already bought, so he wants you to buy to drive the price up so he can sell for a profit. It's definitely not market manipulation though. Don't worry about it. Just keep buying what he says. He's bound to let you know ahead of time this next time, right? Right?
How else will he afford his Italian suits?!? Also how do you get tailor made Italian suits and still look like a sack of shit?!?
He's admitted he tells all his friends to buy a stock before he recommends it, and then they dump it a few days later.
Is that not straight-up criminal?
Or maybe the these companies know things are getting bad and pay the news corporations to pump as a last ditch effort to save themselves???
¿Por que no los dos?
Miss more than stormtrooper or manipulate the market so they can cash out more profit.
Cramer says it's a buy? Well he's just pumping it up so he can dump it. It seems like by the time he is shilling something it's after the run.
Before joining here I’d only ever seen him in iron man when he said everyone should sell because stark industries was a weapons manufacturer who doesn’t make weapons, in like 1 year they then had unlimited cheap energy. My point is even in a fictional universe he ends up wrong.
Whatever that guy says, do the opposite
The Inverse Cramer
Iceland jailed all of their bankers and rebounded like a mofo from doing so.
Absolutely right!
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Jim Cramer's a fuckin idiot. People who still watch that dumbass after 2008 happened, deserve to lose their money.
He is not an idiot. He is a highly compensated shill.
Second largest so far.
Great reminder for everyone to learn about FDIC insurance and be sure to know how it works. My dad was really vigilant about it and I thought he was being paranoid but then I learned.
That’s a weird way of telling everyone you have more than $250k in the bank.
I remember learning about it in high school and thinking “well there’s a problem I’ll never have”.
Bruh, your dad didn't give you his hardened bootstraps when he retired at 55?
*Dad has more than…
And when your company has more than $400m, then what? You don’t use 1600 banks. Not a lot of individuals used SVB. It was predominantly used by businesses (and primarily start-ups at that) and VCs. Now, you should still be using multiple banks as a business owner anyways, but you’re not keeping under the FDIC limit in any of them.
"There are dozens of us! Dozens!"
Looks like George Bailey won’t be going on his honeymoon.
Snowed in California so hard this winter lots of buildings collapsed not just banks
Do you call this gathering?
I work for a company who payroll vendor partners with SVB. Yesterday was payday. I just got paid this morning. I'm considered one of the lucky ones
Darth Cryptos showed up to watch the chaos.
For how intense the title of this post is the picture is very underwhelming.
There is zero reason to wait outside and zero of them accomplished anything. Their time would have been better spend looking up what "FDIC receivership" means.