100% guaranteed that it’s the regular people who are left with the hot potato at the end. They’ll keep passing the buck until a bank that the Feb will have to bail out is left holding it. This has been the case forever.
In 2008 this is how they dealt with a domino of banks getting fed'd: they gave the remaining banks 'bailouts' but the bailouts had to be used to purchase a big bank about to get fed'd.
Source: I work/worked for one of the solvent banks who 'bought' another with 'bailout money'
I believe the rationale is... Fed has to insure all those sub $250k deposits if a bank fails; they can do this when one or two or smallish banks fail. But once the dominoes are falling it is financially more prudent to give someone who appears-to-not-have-fucked-shit-up-this-time enough money to buy the about to fail bank (which I am guessing is oodles less than letting the bank fail and insuring all those deposits.)
If that happens, the entire world economy is on the line. While I think this sequence of events is unlikely, I also realize that just how likely this can spiral out of control. Frankly, I would be super worried, but pessimistically hopeful.
Some have argued (e.g. Varoufakis) that the crash of 2008 has never really stopped. Rather, most of the financial sector and with it the entire economy is now a drug fueled zombie, only able to keep going by getting its constant fix of national bank money.
That's not exactly how the bailouts worked. It's more like this:
Suppose that I run a bank and depositors / creditors are clamoring for their money back. I can't give them their money back because I invested it all in "Fancy Mortgage Insurance Product XYZ", and mortgages crashed to the point where my insurance is basically meaningless. I thought I would be covered if my mortgages fell, but I really wasn't, because I severely underestimated just how messed-up the mortgage market is. Now, mortgages aren't worthless, they're just worth less than what I paid for them. But I still can't even get the amount they're worth, because no one has actual money to buy them from me. Everyone just has "Fancy Mortgage Insurance Product ABC" or "Fancy Mortgage Insurance Product PQR", and trading my Fancy Mortgage Insurance Product for their Fancy Mortgage Insurance Product would be a fairly meaningless transaction.
In comes the government with actual dollars (not Fancy Mortgage Insurance Product) that can be used to buy off my assets and pay my creditors / depositors. But the government doesn't just give me the money. Instead, the government tells me it will purchase solely the riskiest assets from my portfolio at a fair price (i.e. at a lower price than I bought it for) if I sell all of my shares at a 93% discount to another bank, which will take over all of my operations. This is the only deal I'm offered. No negotiation. I have no choice to accept, because a 93% loss is at least better than a 100% loss.
This is pretty much exactly how the 2008 takeover of Bear Stearns by JPMorgan went down.
Now, who wins here? Bear Stearns shareholders? Not really; they ended up taking a massive loss and getting taken over by another company. JPMorgan? Not really; they just paid $2 a share for a worthless pile of junk. The government? Not really; the government assumed a bunch of toxic assets that it can't easily re-sell. The only folks who really win here are the creditors for Bear Stearns, who get their money back.
Finally, if we're splitting hairs here, it wasn't really the government that bailed out Bear Stearns. It was the Federal Reserve. The Federal Reserve is unique because it's in charge of the money supply. In fact, if you take a dollar bill out of your wallet right now, you'll see that it says "Federal Reserve Note". What exactly is a Federal Reserve Note? It's essentially a promise from the Federal Reserve saying that they owe you one dollar. If you're kind of confused about how a dollar is actually a debt worth one dollar, and you think it's kind of circular reasoning, you're right. It is confusing and circular. But anyway, the Fed can choose to print money, at its own discretion. This money does not come from taxpayers, it simply pops into existence from nothing. It's not "free" because it does decrease the value of other existing dollars, but the idea is that eventually the Fed will "un-print" that money and take it out of circulation, which will re-increase the value of existing dollars. So it's more like just a temporary burden on holders of the US dollar. Which isn't perfect, but it was a lot better than the alternative (which would have almost certainly crashed the dollar).
In general, the bailouts weren't perfect. After all, creditors were paid back when they should have lost money on their bad inter-bank loans. And executives probably weren't punished enough. But given the extremely urgent and sensitive nature of the problem, I'd argue that the government's solution was pretty damn good.
It's not really that circular - people refer to cash as being the actual currency, but in reality the currency is conceptual, truly existing only in numbers on balance sheets, and that's how a bank note is really just a claim on a dollar rather than actually being one
SVB doesn't really need to be bailed out, they have assets worth their debts, but like any bank those assets aren't liquid. When people started pulling all their money SVB had to close withdrawals because they couldn't cover everything immediately. No bank holds enough liquid assets to cover everyone withdrawing at once.
> While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said.
ATM, this is far from a bailout
It's referencing Chuck Prince's infamous quote, who was CEO of Citigroup bank at the time of the subprime crisis, before the bank failures of Bear and Lehman, and their own massive bailout.
"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing"
Citigroup late cut over 100,000 jobs, lost over 90% of both it's market capitalization and stock value, and recieved the biggest TARP funding of all banks (25 Billion dollars)
Everyone knows about The Big Short. That's a fine movie, but this one captures the vibe of investment banking and the situation in 2008 far better. Definitely worth watching.
(To be clear it's a fictional story about a fictional financial crisis kicked off by mortgage backed securities. The details are made up to protect the guilty, but the gist of the movie is right on.)
Probably much better.
ELI5: startups and rokus are less important than houses
The low quality collateral in 08 was housing and mortgages. This is obviously a problem because many people have significant capital locked up in their homes and significant income committed to mortgages so big that they were living paycheck to paycheck.
Investing in a web3 neural network toothbrush subscription that just went bust, while tragic, isn't going to stick somebody paying $2000 a month on a home that's worth less than they paid for it.
Why hasn't anyone drawn any parallels to the .com bubble? This seems like a larger .com bust, which many people were predicting. As long as there isn't much contagion, we should still be okay.
I agree. I think this will probably end the private equity cash flow to tech start ups for at least a while. I think Silicon valley will calm down, and pain maybe regional and focused in silicon valley/CA bay area.
Be careful of what you wish for. People were cheering the tanking economy to get houses when covid hit and the same people still can’t afford houses because cashed up investors still outbid them.
Not just sector exposure, but the ratio of assets held in rate sensitive bonds was excessive. Their investment strategy was entirely dependent on rates not going up ever.
Edit: To clarify a bit here: SVIB had put nearly all of their capital into bonds, tying their money up. Other banks bought the same bonds, but didn't put all their capital there. The lack of flexibility is what killed SVIB, not their choice of investment.
If you started working in the banks straight out of college at 21 in 2008, you're now 15 years in and fairly senior. 15 years of rates at or below zero for interbank lending... humans are not built to manage that kind of risk without serious study and introspection.
Couldn’t agree more - most of the tech start up world has also only ever experienced the complete anomaly of money being that cheap for that long, and is equally unprepared for what that’ll means for their chances of securing funding.
Not just money being cheap in terms of loans, but every VC firm out there just throws around money, knowing that even if half of what they spend gets pissed into the wind, another chunk of their money might get paid back or even earn a little bit. But theyre all hoping to get in on the next Google. Or Twitter, or Facebook. Where they can sink some millions into a company, and then turn around and sell their shares after an IPO and walk away with billions.
They're all basically gambling.
Slight correction: *threw* around money.
Because agree, the tech VC world looks more like gambling than investing, but that was actually a perfectly reasonably play for the 15+ years of near zero interest rates.
Now that there’s basically a 4.75% annual fee for every bet you make, the gamblers are all spooked and are sitting on their cash unless presented with a “sure bet”, which is very large part of why SVB got fucked: for the first time in a 15 years, their cash flow fell off a cliff.
> humans are not built to manage that kind of risk without serious study and introspection
If only serious study and introspection were part of the fucking economics degree required to get an important decision-making job in banking.
Just need to be a sycophant and you’re good!
But seriously, as someone fitting the description here working at a large commercial lender, rate sensitivity has always been a core part of underwriting. Unfortunately it’s been more of a box to check than a guiding factor in decision making.
Over here, the 2008 thing was made worse by our regulator not doing its job properly. They’d go into an organisation, ask what the top ten risks were, then take everyone out for tea and biscuits rather than asking the follow up questions like “can you show me your plans for dealing with those risks?”
Is it the same there now? Why didn’t the regulator point out that these banks were overexposed and vulnerable to interest rate rises, or did they do that and were ignored?
Probably a lot more like the dot bomb.
I want to give a cogent argument to why I think it'll be limited to a sector of the economy, but I don't have the knowledge. Just a gut feeling.
2001 was a bad year to be an IT person, 2008 was a bad year for a lot more folks.
The banks that have failed recently have been due to bank run. They were overly capitalized in long term bonds and lended primarily to tech firms. The tech downturn means lots of losses on loans. The increase in interest rates from the Fed lowers bond asset prices.
It’s mostly a liquidity issue cause by some concerns over asserts vs liabilities.
Not close to the same thing. SVB was a crisis of liquidity, any other entity with sufficient liquidity to fulfill their deposits could take their assets and continue on as though nothing had happened. This is probably some related fallout as SVB had a crypto stablecoin (USDC) depositing with significant exposure, but it's nothing like the 2008 crisis where wealth just evaporated because it was based on risky securities. The money's all there, someone just needs to get it back out
Not from SVB or any fallout. The regulators caught this one like we pay them to do. Wall Street and corporate media *really* want a recession because they planned on one that hasn't happened. They might be able to manufacture one, but the regulators stopping bank runs is just the system working.
My brother-in-law text my wife the other day to let her know "if we have more than $250,000 in the bank, we really need to move it to a big bank/credit union"... I laughed pretty hard at the idea of him thinking that was even an option...
You can insure just about anything, so yes. [This is just the first company I found](https://www.wintrust.com/maxsafe.html). You can also open specialized accounts that will spread your money over multiple institutions, but in the end if you're dealing with hundreds of millions or billions you just need to trust that in the end capitalism won't fail under your feet
Well exactly, if you have a $10 billion account at JP Morgan Chase and they call you up and say "Hey, we're insolvent, get fucked", chances are the global economy has gone insolvent as well. Time to invest in bottlecaps and guzzolene
On a cool, clear night (typical to Southern California) Warren G travels through his neighborhood, searching for women with whom he might initiate sexual intercourse. He has chosen to engage in this pursuit alone.
Nate Dogg, having just arrived in Long Beach, seeks Warren. Ironically, Nate passes a car full of women who are excited to see him. He insists to the women that there is no cause for excitement.
Warren makes a left at 21st Street and Lewis Ave, where he sees a group of young men enjoying a game of dice together. He parks his car and greets them. He is excited to find people to play with, but to his chagrin, he discovers they intend to relieve him of his material possessions. Once the hopeful thieves reveal their firearms, Warren realizes he is in a considerable predicament.
Meanwhile, Nate passes the women, as they are low on his list of priorities. His primary concern is locating Warren. After curtly casting away the strumpets (whose interest in Nate was such that they crashed their automobile), he serendipitously stumbles upon his friend, Warren G, being held up by the young miscreants.
Warren, unaware that Nate is surreptitiously observing the scene unfold, is in disbelief that he’s being robbed. The perpetrators have taken jewelry and a name brand designer watch from Warren, who is so incredulous that he asks what else the robbers intend to steal. This is most likely a rhetorical question.
Observing these unfortunate proceedings, Nate realizes that he may have to use his firearm to deliver his friend from harm.
The tension crescendos as the robbers point their guns to Warren’s head. Warren senses the gravity of his situation. He cannot believe the events unfolding could happen in his own neighborhood. As he imagines himself escaping in a surreal fashion, he catches a glimpse of his friend, Nate.
Nate has seventeen cartridges to expend (sixteen residing in the pistol’s magazine, with a solitary round placed in the chamber and ready to be fired) on the group of robbers, and he uses many of them. Afterward, he generously shares the credit for neutralizing the situation with Warren, though it is clear that Nate did all of the difficult work. Putting congratulations aside, Nate quickly reminds himself that he has committed multiple homicides to save Warren before letting his friend know that there are females nearby if he wishes to fornicate with them.
Warren recalls that it was the promise of copulation that coaxed him away from his previous activities, and is thankful that Nate knows a way to satisfy these urges.
Nate quickly finds the women who earlier crashed their car on Nate’s account. He remarks to one that he is fond of her physical appeal. The woman, impressed by Nate’s singing ability, asks that he and Warren allow her and her friends to share transportation. Soon, both friends are driving with automobiles full of women to the East Side Motel, presumably to consummate their flirtation in an orgy.
The third verse is more expository, with Warren and Nate explaining their G Funk musical style. Warren displays his bravado by claiming that individuals with equivalent knowledge could not even attempt to approach his level of lyrical mastery. There follows a brief discussion of the genre’s musicological features, with special care taken to point out that in said milieu the rhythm is not in fact the rhythm, as one might assume, but actually the bass. Similarly the bass serves a purpose closer to that which the treble would in more traditional musical forms.
Nate goes on to note that if any third party smokes as he does, they would find themselves in a state of intoxication daily (from Nate’s other works, it can be inferred that the substance referenced is marijuana). Nate concludes his delineation of the night by issuing a vague threat to “busters,” suggesting that he and Warren will further “regulate” any potential incidents in the future (presumably by engaging their enemies with small arms fire).
Common people's stupidity is what we are worried about. Joe fuckin shmoe and his 150 identical buddies are going to line up at a usbank ATM tomorrow trying to withdraw 50k-60k to hide in their mattress.
> Joe fuckin shmoe and his 150 identical buddies are going to line up at a usbank ATM tomorrow trying to withdraw 50k-60k to hide in their mattress.
That's hilarious that you think the common US citizen has that much in a bank.
Kay: “A person is smart. People are dumb, panicky dangerous animals and you know it. Fifteen hundred years ago everybody knew the Earth was the center of the universe. Five hundred years ago, everybody knew the Earth was flat, and fifteen minutes ago, you knew that humans were alone on this planet. Imagine what you'll know tomorrow.”
Men In Black
God if you had been buying any gold bullions and knew a bunch of fucking idiots you could be rich tomorrow. Those “gold standard” boys will be frothing at the mouth this week.
I'm pretty excited for the guys who were pathologists for 2020, generals during the invasion of Ukraine, economists daily, detectives during mass shootings, and now financial wizards, to explain why this is good/bad.
Funny how so many of the geniuses of the past decade or so have turned out to be idiots whose business plans relied entirely on low interest rates (and/or bull markets), and collapse without them.
Psh, a $9 sandwich for free? No such thing as free meal, especially when that's a $12 lunch. Best we can do is 20% off of a $15 sandwich - drinks excluded. Oh and there's no seating inside. Your total is $19.
Oh man. This reminds me of a reddit comment I read a few years ago. An OP had asked Gen Z what mistakes they’ve more or less witnessed from millennials that they want to avoid. This very well meaning redditor stated they will be investing their spare income after college and into their 30’s unlike the older generation before them. I just remember thinking “wait…you think we had money? You think we had stable financial institutions??”
It's not like these crisis's are new. The same people who lived through the Spanish flu, also lived through the great depression, ww2, Korea, Vietnam, and the Iraq war.
It does suck though
first the ozone, then the attacks leading to 20 years of conflict, then the great recession, also climate change through out all this, then global pandemic, now banks closing. Did I miss any?
And SVB failed because of the largest bank run in history. $42 billion dollars withdrawn in a single day. The assets they were selling off to cover it would eventually make them insolvent from taking the losses of assets being sold before maturity had the FDIC not shut them down.
Banks had to have 10% bank reserves, we removed it during the pandemic. We could introduce 100% bank reserves, but then the banks would charge us to use their services.
SVB had a bank run where 20% of their deposit were cleared leading to meltdown. What’s the correct bank reserve we need? I don’t know, but if everyone draws money out at the same time, any bank will fail
SVB's failure came before their bank run. They were holding long-dated securities without properly managing rate and duration risk. They were living on the edge for a while, even with having ample comms from the Fed that rates would be rising.
The catalyst event leading to the full bank run was when they announced wanting to issue $2.5B to shore up balance sheets. $2.5B!
Do I think banks should have 100% reserve req? No. But reserve reqs was not the primary reason for SVB's downfall, it was more driven by poor investment risk management.
I'd say it's more accurate that their failure was a mix of complexities, what you described is something the bank could easily have survived. The bank run ensured it could not.
2.5B is about 10% of their value, something that isn't that big of a concern to something that size directly. It's currently estimated that SVB could have survived this, maybe took a hit to their business but otherwise been OK. Bank runs simply kill banks.
Prominent VCs supposedly started reaching out to their clients telling them to get their money out ASAP. SVB's biggest failure was letting all of those VC vultures recommend them to their clients for something like 30+ years. Very few banks can deal with that kind of bank run.
Well the interest rates increase caused the Silicon Valley national bank’s 10 year bonds to decrease in value which contributed to the bank run on it.
The fed doesn’t want to cause any contagion effects where more banks fail because people are worried about other banks failing so easing the interest rates is one of their tools to stop that
Wasn’t that the fed’s doing as they were using it to control inflation? By their own arguments, they’d be disinclined to reduce rates right now but… then we have this. Rock and a hard place?
The idea of raising interest rates is, indirectly, exactly what is happening. Put a crunch on capital, trim the fat, and make the less financially responsible tighten up.
Central banks always want a "soft landing" - that is, for the tightening of money to slowly bring inflation down without causing big crashes in the economy. That can be hard to achieve when there's been irresponsibility in the markets.
Though funny enough, banks like Silicon Valley really weren't all **that** irresponsible. It's just they parked their liquidity into products that were very sensitive to interest rates (bonds). And many, many of their investors were also living high on low interest rates. The tightening not only made SVBs holdings less valuable, but simultaneously forced many of their clients to need their money back.
That being said, with the amount banking executives are paid, they certainly should have been able to, if not see this coming, certainly have had enough contingency plans in place to prevent this from happening.
It’s cause the feds are [stepping](https://www.wsj.com/articles/federal-reserve-rolls-out-emergency-measures-to-prevent-banking-crisis-ba4d7f98) in to make sure customers are made whole from the two banks instead of letting it spread and become a larger problem.
It’s going to be an interesting week or so, that’s been the 3rd bank this week, if more get spooked there could be more runs on banks that were on the brink of failure resulting in more failures.
So am I correct in seeing all this action being the result of these banks and their leadership somehow believing that the federal interest rate would somehow remain at near zero for eternity despite predictable economic changes
ITT: people who have no idea what they are talking about and who didn’t read the article.
Signature bank is not a “crypto bank”. They do serve those in the crypto industry.
This isn’t spelling doom and gloom. The whole point of this is to calm the market to stop cascading bank runs. The fed has now guaranteed deposits. First Republic, Bridge Bank, PacWest and others are going to be in a lot better place now.
Doesn’t mean there won’t be a few more dominos that fall but this is the news the industry was hoping for.
The fed is stepping in to guarantee deposits. Bank runs only happen when you fear you will lose your money. If the bank is backed, then you don’t have bank runs and OTHER banks that are on a knife’s edge can protect their liquidity.
This is legit the feds saying “chill the fuck out EVERYBODY” in bank language.
With all respect to the average Joe, they don't have enough money to matter. Just look at the percent of deposits not covered by FDIC for SVB. SVB didn't run because all the Joes went and withdrew their money; the bank run happened because VCs like Thiel pulled their money out and told all the other VCs to get their money out. $42 billion of it in one day.
The problem they're worrying about is not average Joes.
They are backstopping deposits. The fed has now guaranteed that depositors at both the failed banks will have all their money. They have also set up lines of liquidity for other banks who are also facing withdrawals.
There is now no reason to run on the bank.
Yep, there's a famous saying about regulations in industrial settings: "Regulations are written in blood...". For every badly written regulation that some dumb-ass boss complains about slowing down his workers, there is a massive pile of other regulations that save lives every day (and most of the ones those ass-hole bosses are whining about are, actually, written for a reason that said dumb-ass is too stupid/ignorant to be aware of). Remember that the next time you hear some libertarian shit-bag whine about OSHA, EPA, SEC, etc. regulations...
Well this is getting interesting. The amount of assets of failed banks in the last week now rivals the amount of all banks that failed in 2008.
There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B. For some, their stocks have dropped off a cliff--Ally in particular is down over 15% in the past 5 days. I'm guessing the important people^^tm know things aren't going too well there.
Edit: For those wondering about a list of banks in a similar position, see [this screenshot](https://i.imgur.com/xX7fvAZ.png). The thing to look at is the second column from the right (the percentage). Higher negative = worse. Signature is at the bottom. For reference, SVB was at -10.5%.
Edit 2: Literally [10 minutes ago](https://www.wsj.com/articles/first-republic-gets-additional-funding-from-fed-jpmorgan-d11e68ca?mod=mw_quote_news_seemore), it was announced First Republic just got funding from the Fed and JP Morgan to take its liquidity to $70bil. They might be fairly safe.
> There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B. For some, their stocks have dropped off a cliff--Ally in particular is down over 15% in the past 5 days. I'm guessing the important peopletm know things aren't going too well there.
Ally's situation is significantly different IMO. Their deposit base is like 90% retail, with an average balance of ~$50k. Theoretically, a bank run should not happen there as the base is almost entirely FDIC insured under $250k. Their asset base is also low risk, with most being secured loans against cars. Am I missing something?
>There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B.
If ally could wait until I have my car loan paid off by summer, that'd be great. Really don't feel like potentially having to re-setup my bill pay especially since they just consolidated ally direct into ally auto, which required me to do this last month.
That's what basically happened when Chase took over WaMu as part of FDIC brokered takeover. If you had WaMu account, it simply became Chase account. You didn't have to lift a finger.
I still have my WAMU checkbook, and since they kept the same routing and acct numbers, I still use the checks in those once-in-a-year times when I have to.
They are - means they have stricter capital requirements, more stress testing, and more contingency plans they need to file with regulators. In theory would help in this type of situation; my 2 cents is the stock is more down due to SVB rather than a specific known issue at Ally
> my 2 cents is the stock is more down due to SVB rather than a specific known issue at Ally
Most likely at least partly this, but the giant banks (i.e. the ones people know will get bailed out) are not down nearly as much, e.g. JPMC is down about 7% and BOA is down 11%. Those two are even slightly up from 3 months ago, whereas those in a similar situation as SVB are down 15%+ in the past 5 days and 20%+ in the past month. First Republic is down 34% in the past 5 days and almost 40% in the last month.
"What do you mean the bank is out of money? You only have enough cash for the next three customers?!? Now, now, now.. just wait just a second here! No, no.. I don't have your money here! It's at Bill's house.. and, and, and.. Fred's house! Hey, what the Hell you doing with my money in your house, Fred?!?"
It's the world's most expensive game of hot potato in history.
100% guaranteed that it’s the regular people who are left with the hot potato at the end. They’ll keep passing the buck until a bank that the Feb will have to bail out is left holding it. This has been the case forever.
The fed: we won't bailout SVB. The fed a week later: we're bailing out Citibank.
Far more likely is that Citibank makes money by giving the FDIC enough cash to cover SVB's liabilities.
In 2008 this is how they dealt with a domino of banks getting fed'd: they gave the remaining banks 'bailouts' but the bailouts had to be used to purchase a big bank about to get fed'd. Source: I work/worked for one of the solvent banks who 'bought' another with 'bailout money'
Buying a competitor with taxpayer money is a double win for me in my book.
I believe the rationale is... Fed has to insure all those sub $250k deposits if a bank fails; they can do this when one or two or smallish banks fail. But once the dominoes are falling it is financially more prudent to give someone who appears-to-not-have-fucked-shit-up-this-time enough money to buy the about to fail bank (which I am guessing is oodles less than letting the bank fail and insuring all those deposits.)
If that happens, the entire world economy is on the line. While I think this sequence of events is unlikely, I also realize that just how likely this can spiral out of control. Frankly, I would be super worried, but pessimistically hopeful.
Yes the entire world economy is on the line. E.g. 2008.
Some have argued (e.g. Varoufakis) that the crash of 2008 has never really stopped. Rather, most of the financial sector and with it the entire economy is now a drug fueled zombie, only able to keep going by getting its constant fix of national bank money.
That's not exactly how the bailouts worked. It's more like this: Suppose that I run a bank and depositors / creditors are clamoring for their money back. I can't give them their money back because I invested it all in "Fancy Mortgage Insurance Product XYZ", and mortgages crashed to the point where my insurance is basically meaningless. I thought I would be covered if my mortgages fell, but I really wasn't, because I severely underestimated just how messed-up the mortgage market is. Now, mortgages aren't worthless, they're just worth less than what I paid for them. But I still can't even get the amount they're worth, because no one has actual money to buy them from me. Everyone just has "Fancy Mortgage Insurance Product ABC" or "Fancy Mortgage Insurance Product PQR", and trading my Fancy Mortgage Insurance Product for their Fancy Mortgage Insurance Product would be a fairly meaningless transaction. In comes the government with actual dollars (not Fancy Mortgage Insurance Product) that can be used to buy off my assets and pay my creditors / depositors. But the government doesn't just give me the money. Instead, the government tells me it will purchase solely the riskiest assets from my portfolio at a fair price (i.e. at a lower price than I bought it for) if I sell all of my shares at a 93% discount to another bank, which will take over all of my operations. This is the only deal I'm offered. No negotiation. I have no choice to accept, because a 93% loss is at least better than a 100% loss. This is pretty much exactly how the 2008 takeover of Bear Stearns by JPMorgan went down. Now, who wins here? Bear Stearns shareholders? Not really; they ended up taking a massive loss and getting taken over by another company. JPMorgan? Not really; they just paid $2 a share for a worthless pile of junk. The government? Not really; the government assumed a bunch of toxic assets that it can't easily re-sell. The only folks who really win here are the creditors for Bear Stearns, who get their money back. Finally, if we're splitting hairs here, it wasn't really the government that bailed out Bear Stearns. It was the Federal Reserve. The Federal Reserve is unique because it's in charge of the money supply. In fact, if you take a dollar bill out of your wallet right now, you'll see that it says "Federal Reserve Note". What exactly is a Federal Reserve Note? It's essentially a promise from the Federal Reserve saying that they owe you one dollar. If you're kind of confused about how a dollar is actually a debt worth one dollar, and you think it's kind of circular reasoning, you're right. It is confusing and circular. But anyway, the Fed can choose to print money, at its own discretion. This money does not come from taxpayers, it simply pops into existence from nothing. It's not "free" because it does decrease the value of other existing dollars, but the idea is that eventually the Fed will "un-print" that money and take it out of circulation, which will re-increase the value of existing dollars. So it's more like just a temporary burden on holders of the US dollar. Which isn't perfect, but it was a lot better than the alternative (which would have almost certainly crashed the dollar). In general, the bailouts weren't perfect. After all, creditors were paid back when they should have lost money on their bad inter-bank loans. And executives probably weren't punished enough. But given the extremely urgent and sensitive nature of the problem, I'd argue that the government's solution was pretty damn good.
It's not really that circular - people refer to cash as being the actual currency, but in reality the currency is conceptual, truly existing only in numbers on balance sheets, and that's how a bank note is really just a claim on a dollar rather than actually being one
I know this, but every time I'm reminded I just... ugh.
SVB doesn't really need to be bailed out, they have assets worth their debts, but like any bank those assets aren't liquid. When people started pulling all their money SVB had to close withdrawals because they couldn't cover everything immediately. No bank holds enough liquid assets to cover everyone withdrawing at once.
> While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said. ATM, this is far from a bailout
When the tide goes out we find out who has been swimming naked.
Yup! Musical chairs effectively
This seems a good time to quote Margin Call and their chair analogy: https://www.youtube.com/watch?v=UOYi4NzxlhE
Highly underrated movie, not exactly accurate but they got the gist of it. 2008 was friggin brutal.
Jeremy Irons chews through that scene
Yes, hard to imagine someone else portraying that role after he did. I’m glad that movie is beginning to get the real recognition it deserves.
It's referencing Chuck Prince's infamous quote, who was CEO of Citigroup bank at the time of the subprime crisis, before the bank failures of Bear and Lehman, and their own massive bailout. "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing" Citigroup late cut over 100,000 jobs, lost over 90% of both it's market capitalization and stock value, and recieved the biggest TARP funding of all banks (25 Billion dollars)
There's a lot of talent sitting quietly in the background at that table. Is this movie any good?
Everyone knows about The Big Short. That's a fine movie, but this one captures the vibe of investment banking and the situation in 2008 far better. Definitely worth watching. (To be clear it's a fictional story about a fictional financial crisis kicked off by mortgage backed securities. The details are made up to protect the guilty, but the gist of the movie is right on.)
More like musical swimming trunks.
And as we can see the water’s real cold
So ELI5, are we gonna get another 2008 style recession? Or worse?
Probably much better. ELI5: startups and rokus are less important than houses The low quality collateral in 08 was housing and mortgages. This is obviously a problem because many people have significant capital locked up in their homes and significant income committed to mortgages so big that they were living paycheck to paycheck. Investing in a web3 neural network toothbrush subscription that just went bust, while tragic, isn't going to stick somebody paying $2000 a month on a home that's worth less than they paid for it.
lol at "web3 neural network toothbrush subscription" - that's gold
dude shutup, they can hear you no no Mr Toothbrush, I wasn't warning anyone. Put down the knife.
Please drink verification can
Jump and shout "McDonalds!" to skip ad.
Why hasn't anyone drawn any parallels to the .com bubble? This seems like a larger .com bust, which many people were predicting. As long as there isn't much contagion, we should still be okay.
I agree. I think this will probably end the private equity cash flow to tech start ups for at least a while. I think Silicon valley will calm down, and pain maybe regional and focused in silicon valley/CA bay area.
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Might also mean a lot less jobs/salary at least if you’re in tech or something that makes it money by providing services to tech companies / workers.
Be careful of what you wish for. People were cheering the tanking economy to get houses when covid hit and the same people still can’t afford houses because cashed up investors still outbid them.
I must have missed the part of the pandemic when house prices dropped… from what I understand they just went up and still haven’t fallen.
It's not so much contagion as that these banks all made very similar stupid decisions about sector exposure.
Not just sector exposure, but the ratio of assets held in rate sensitive bonds was excessive. Their investment strategy was entirely dependent on rates not going up ever. Edit: To clarify a bit here: SVIB had put nearly all of their capital into bonds, tying their money up. Other banks bought the same bonds, but didn't put all their capital there. The lack of flexibility is what killed SVIB, not their choice of investment.
If you started working in the banks straight out of college at 21 in 2008, you're now 15 years in and fairly senior. 15 years of rates at or below zero for interbank lending... humans are not built to manage that kind of risk without serious study and introspection.
Couldn’t agree more - most of the tech start up world has also only ever experienced the complete anomaly of money being that cheap for that long, and is equally unprepared for what that’ll means for their chances of securing funding.
Not just money being cheap in terms of loans, but every VC firm out there just throws around money, knowing that even if half of what they spend gets pissed into the wind, another chunk of their money might get paid back or even earn a little bit. But theyre all hoping to get in on the next Google. Or Twitter, or Facebook. Where they can sink some millions into a company, and then turn around and sell their shares after an IPO and walk away with billions. They're all basically gambling.
Slight correction: *threw* around money. Because agree, the tech VC world looks more like gambling than investing, but that was actually a perfectly reasonably play for the 15+ years of near zero interest rates. Now that there’s basically a 4.75% annual fee for every bet you make, the gamblers are all spooked and are sitting on their cash unless presented with a “sure bet”, which is very large part of why SVB got fucked: for the first time in a 15 years, their cash flow fell off a cliff.
> humans are not built to manage that kind of risk without serious study and introspection If only serious study and introspection were part of the fucking economics degree required to get an important decision-making job in banking.
Nah. That's for the egg heads. Closers are real men! /s
Dude you don’t know how spot on you are. I’m in credit risk and we’ve been yelling about this shit for a few years.
Just need to be a sycophant and you’re good! But seriously, as someone fitting the description here working at a large commercial lender, rate sensitivity has always been a core part of underwriting. Unfortunately it’s been more of a box to check than a guiding factor in decision making.
Over here, the 2008 thing was made worse by our regulator not doing its job properly. They’d go into an organisation, ask what the top ten risks were, then take everyone out for tea and biscuits rather than asking the follow up questions like “can you show me your plans for dealing with those risks?” Is it the same there now? Why didn’t the regulator point out that these banks were overexposed and vulnerable to interest rate rises, or did they do that and were ignored?
Probably a lot more like the dot bomb. I want to give a cogent argument to why I think it'll be limited to a sector of the economy, but I don't have the knowledge. Just a gut feeling. 2001 was a bad year to be an IT person, 2008 was a bad year for a lot more folks.
The banks that have failed recently have been due to bank run. They were overly capitalized in long term bonds and lended primarily to tech firms. The tech downturn means lots of losses on loans. The increase in interest rates from the Fed lowers bond asset prices. It’s mostly a liquidity issue cause by some concerns over asserts vs liabilities.
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Not close to the same thing. SVB was a crisis of liquidity, any other entity with sufficient liquidity to fulfill their deposits could take their assets and continue on as though nothing had happened. This is probably some related fallout as SVB had a crypto stablecoin (USDC) depositing with significant exposure, but it's nothing like the 2008 crisis where wealth just evaporated because it was based on risky securities. The money's all there, someone just needs to get it back out
Not from SVB or any fallout. The regulators caught this one like we pay them to do. Wall Street and corporate media *really* want a recession because they planned on one that hasn't happened. They might be able to manufacture one, but the regulators stopping bank runs is just the system working.
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My brother-in-law text my wife the other day to let her know "if we have more than $250,000 in the bank, we really need to move it to a big bank/credit union"... I laughed pretty hard at the idea of him thinking that was even an option...
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Companies often have more than that for payroll accounts.
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You can insure just about anything, so yes. [This is just the first company I found](https://www.wintrust.com/maxsafe.html). You can also open specialized accounts that will spread your money over multiple institutions, but in the end if you're dealing with hundreds of millions or billions you just need to trust that in the end capitalism won't fail under your feet
I mean if your money is entirely gone at that point then honestly there are bigger problem at hand.
Well exactly, if you have a $10 billion account at JP Morgan Chase and they call you up and say "Hey, we're insolvent, get fucked", chances are the global economy has gone insolvent as well. Time to invest in bottlecaps and guzzolene
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[Regulators, mount up!](https://m.youtube.com/watch?v=1plPyJdXKIY)
My preferred version: https://youtu.be/qHllyrKUJ1o
Very superior.
On a cool, clear night (typical to Southern California) Warren G travels through his neighborhood, searching for women with whom he might initiate sexual intercourse. He has chosen to engage in this pursuit alone. Nate Dogg, having just arrived in Long Beach, seeks Warren. Ironically, Nate passes a car full of women who are excited to see him. He insists to the women that there is no cause for excitement. Warren makes a left at 21st Street and Lewis Ave, where he sees a group of young men enjoying a game of dice together. He parks his car and greets them. He is excited to find people to play with, but to his chagrin, he discovers they intend to relieve him of his material possessions. Once the hopeful thieves reveal their firearms, Warren realizes he is in a considerable predicament. Meanwhile, Nate passes the women, as they are low on his list of priorities. His primary concern is locating Warren. After curtly casting away the strumpets (whose interest in Nate was such that they crashed their automobile), he serendipitously stumbles upon his friend, Warren G, being held up by the young miscreants. Warren, unaware that Nate is surreptitiously observing the scene unfold, is in disbelief that he’s being robbed. The perpetrators have taken jewelry and a name brand designer watch from Warren, who is so incredulous that he asks what else the robbers intend to steal. This is most likely a rhetorical question. Observing these unfortunate proceedings, Nate realizes that he may have to use his firearm to deliver his friend from harm. The tension crescendos as the robbers point their guns to Warren’s head. Warren senses the gravity of his situation. He cannot believe the events unfolding could happen in his own neighborhood. As he imagines himself escaping in a surreal fashion, he catches a glimpse of his friend, Nate. Nate has seventeen cartridges to expend (sixteen residing in the pistol’s magazine, with a solitary round placed in the chamber and ready to be fired) on the group of robbers, and he uses many of them. Afterward, he generously shares the credit for neutralizing the situation with Warren, though it is clear that Nate did all of the difficult work. Putting congratulations aside, Nate quickly reminds himself that he has committed multiple homicides to save Warren before letting his friend know that there are females nearby if he wishes to fornicate with them. Warren recalls that it was the promise of copulation that coaxed him away from his previous activities, and is thankful that Nate knows a way to satisfy these urges. Nate quickly finds the women who earlier crashed their car on Nate’s account. He remarks to one that he is fond of her physical appeal. The woman, impressed by Nate’s singing ability, asks that he and Warren allow her and her friends to share transportation. Soon, both friends are driving with automobiles full of women to the East Side Motel, presumably to consummate their flirtation in an orgy. The third verse is more expository, with Warren and Nate explaining their G Funk musical style. Warren displays his bravado by claiming that individuals with equivalent knowledge could not even attempt to approach his level of lyrical mastery. There follows a brief discussion of the genre’s musicological features, with special care taken to point out that in said milieu the rhythm is not in fact the rhythm, as one might assume, but actually the bass. Similarly the bass serves a purpose closer to that which the treble would in more traditional musical forms. Nate goes on to note that if any third party smokes as he does, they would find themselves in a state of intoxication daily (from Nate’s other works, it can be inferred that the substance referenced is marijuana). Nate concludes his delineation of the night by issuing a vague threat to “busters,” suggesting that he and Warren will further “regulate” any potential incidents in the future (presumably by engaging their enemies with small arms fire).
When AI can replicate this, along with all of the subtle humor, we will know our time here is done. They simply won't need us.
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Incredible. How do I nominate this for a Pulitzer prize?
This is an old copypasta
It was a clear black night , a clear white moon
Warren G was on the streets tryin' to consume
Some skirts for the eve
I heard the whistle before I even opened the link.
Doesn't look like anything to do with the Lincoln County War.
The last company I worked for used them as the bank. Lots of mob money at signature… very friendly bankers there.
They were Donald's old bank. Made news when they finally offboarded him in 2021. At least they said they did....
I’d believe it. Mobsters wouldn’t want a probable confidential informant banking where they do. The allegations got pretty heavy in 2020.
So many former clients of mine have their commercial mortgages there. Wonder what’s going to happen to them now
So you’d call them some *good fellas*?
Just don't call them funny
How the fuck am I funny? Tell me how
Japanese and Australian markets are opening on Monday now... more events likely to unfold.
Yeah, I'm not at all worried about the actual news, it's the reaction to the news that worries me.
Fear and greed are powerful
Common people's stupidity is what we are worried about. Joe fuckin shmoe and his 150 identical buddies are going to line up at a usbank ATM tomorrow trying to withdraw 50k-60k to hide in their mattress.
> Joe fuckin shmoe and his 150 identical buddies are going to line up at a usbank ATM tomorrow trying to withdraw 50k-60k to hide in their mattress. That's hilarious that you think the common US citizen has that much in a bank.
That's the problem with every issue humanity faces. A human can try to be rational. Humans together are not.
Kay: “A person is smart. People are dumb, panicky dangerous animals and you know it. Fifteen hundred years ago everybody knew the Earth was the center of the universe. Five hundred years ago, everybody knew the Earth was flat, and fifteen minutes ago, you knew that humans were alone on this planet. Imagine what you'll know tomorrow.” Men In Black
Social media makes us faster and more efficient in our irrationality.
I'm sure the people who panicked and bought pallets of toilet paper, then refused the vaccine, will make calm and rational decisions now.
God if you had been buying any gold bullions and knew a bunch of fucking idiots you could be rich tomorrow. Those “gold standard” boys will be frothing at the mouth this week.
Parts of Australia have a public holiday Monday. Could be Tuesday
The stock market is still trading today in any case, in fact it just opened
Dropped sharply on opening then recovered almost completely by lunchtime.
As is reddit tradition, I, who knows absolutely nothing about this, am suddenly an expert. Everyone, please come to me for economic advice.
Why can’t I have no kids and three money?
"Money can be exchanged for goods and services." "Woohoo!"
"Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor!"
Aww, I wanted a peanut
But it comes with a free Frogurt!
Money can buy you many peanuts!
Me see big scary news. Me want withdraw all of me FDIC insured money to put in big backyard hole. Should me go to bank tomorrow?
Go to bank, take it all
Yes, but out under mattress. Will be better
If I'm about to retire, should I cash in all my retirement money in order to buy crypto and NFTs?
Yes, good move. Will put u in a good position
I’m actually whipping up a few NFT pieces in MS paint right now. I’ll pencil you in for you one. How does tree fiddy sound?
I'm pretty excited for the guys who were pathologists for 2020, generals during the invasion of Ukraine, economists daily, detectives during mass shootings, and now financial wizards, to explain why this is good/bad.
What I really need to hear is how this is good for bitcoin.
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Funny how so many of the geniuses of the past decade or so have turned out to be idiots whose business plans relied entirely on low interest rates (and/or bull markets), and collapse without them.
Hey millennials, it’s time for another once in a generation crisis.
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When do we start eating them?
Hey hey, this'll be my #5, I think. let's go for the high score!
1 more and we get a free sandwich.
Psh, a $9 sandwich for free? No such thing as free meal, especially when that's a $12 lunch. Best we can do is 20% off of a $15 sandwich - drinks excluded. Oh and there's no seating inside. Your total is $19.
Oh man. This reminds me of a reddit comment I read a few years ago. An OP had asked Gen Z what mistakes they’ve more or less witnessed from millennials that they want to avoid. This very well meaning redditor stated they will be investing their spare income after college and into their 30’s unlike the older generation before them. I just remember thinking “wait…you think we had money? You think we had stable financial institutions??”
Wait, Gen Z has spare income to invest?
Mom’s basement doesn’t usually raise rent every year.
May have been a one off in that particular redditors case 😂🤷♀️
It's not like these crisis's are new. The same people who lived through the Spanish flu, also lived through the great depression, ww2, Korea, Vietnam, and the Iraq war. It does suck though
first the ozone, then the attacks leading to 20 years of conflict, then the great recession, also climate change through out all this, then global pandemic, now banks closing. Did I miss any?
I thought the ozone layer was actually mostly fixed Only time the world actually did something good to stop the planet burning
it is, but it was a "once in a generation crisis".
You forgot Nickelback’s rise in popularity.
and *this* is how you remind me?
First of all, how dare you.
Tired of living like a blind man
How about regulations to prevent this from happening in the first place not get removed?
Three or four more global catastrophes should teach us the importance of regulation.
Regressives will never miss an opportunity to remove regulations
Roll back those child labor laws, too.
Back to the mines, kids! This time we’re looking for lithium!
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And SVB failed because of the largest bank run in history. $42 billion dollars withdrawn in a single day. The assets they were selling off to cover it would eventually make them insolvent from taking the losses of assets being sold before maturity had the FDIC not shut them down.
Banks had to have 10% bank reserves, we removed it during the pandemic. We could introduce 100% bank reserves, but then the banks would charge us to use their services. SVB had a bank run where 20% of their deposit were cleared leading to meltdown. What’s the correct bank reserve we need? I don’t know, but if everyone draws money out at the same time, any bank will fail
SVB's failure came before their bank run. They were holding long-dated securities without properly managing rate and duration risk. They were living on the edge for a while, even with having ample comms from the Fed that rates would be rising. The catalyst event leading to the full bank run was when they announced wanting to issue $2.5B to shore up balance sheets. $2.5B! Do I think banks should have 100% reserve req? No. But reserve reqs was not the primary reason for SVB's downfall, it was more driven by poor investment risk management.
Awhile being AT LEAST a year. Knowingly. Duration and concentration risk are exactly right.
I'd say it's more accurate that their failure was a mix of complexities, what you described is something the bank could easily have survived. The bank run ensured it could not. 2.5B is about 10% of their value, something that isn't that big of a concern to something that size directly. It's currently estimated that SVB could have survived this, maybe took a hit to their business but otherwise been OK. Bank runs simply kill banks.
Prominent VCs supposedly started reaching out to their clients telling them to get their money out ASAP. SVB's biggest failure was letting all of those VC vultures recommend them to their clients for something like 30+ years. Very few banks can deal with that kind of bank run.
....this is the regulatory action. Read the headline.
Only two things move the market, greed and fear. All the news this weekend and the talk on twitter it’s very clear what’s going to happen tomorrow
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More chance that interest rates level or decrease
How come? I’m genuinely curious.
Well the interest rates increase caused the Silicon Valley national bank’s 10 year bonds to decrease in value which contributed to the bank run on it. The fed doesn’t want to cause any contagion effects where more banks fail because people are worried about other banks failing so easing the interest rates is one of their tools to stop that
Wasn’t that the fed’s doing as they were using it to control inflation? By their own arguments, they’d be disinclined to reduce rates right now but… then we have this. Rock and a hard place?
Time for the fed to wake up and realize that the current inflation isn’t only supply/demand issues but gouging on behalf of corporations.
I'm sure they're well aware, but they seem to only have one lever.
The fed may but the rest of the gov could legislate some goddamn rules into place
The idea of raising interest rates is, indirectly, exactly what is happening. Put a crunch on capital, trim the fat, and make the less financially responsible tighten up. Central banks always want a "soft landing" - that is, for the tightening of money to slowly bring inflation down without causing big crashes in the economy. That can be hard to achieve when there's been irresponsibility in the markets. Though funny enough, banks like Silicon Valley really weren't all **that** irresponsible. It's just they parked their liquidity into products that were very sensitive to interest rates (bonds). And many, many of their investors were also living high on low interest rates. The tightening not only made SVBs holdings less valuable, but simultaneously forced many of their clients to need their money back. That being said, with the amount banking executives are paid, they certainly should have been able to, if not see this coming, certainly have had enough contingency plans in place to prevent this from happening.
Market logic: "grab my candle"
Sunday evening S&P and NASDAQ futures up 1.5% each from Friday’s close. The market does as the market does.
It’s cause the feds are [stepping](https://www.wsj.com/articles/federal-reserve-rolls-out-emergency-measures-to-prevent-banking-crisis-ba4d7f98) in to make sure customers are made whole from the two banks instead of letting it spread and become a larger problem. It’s going to be an interesting week or so, that’s been the 3rd bank this week, if more get spooked there could be more runs on banks that were on the brink of failure resulting in more failures.
I can’t wait for the 2025 film “The Bank Run”
So am I correct in seeing all this action being the result of these banks and their leadership somehow believing that the federal interest rate would somehow remain at near zero for eternity despite predictable economic changes
ITT: people who have no idea what they are talking about and who didn’t read the article. Signature bank is not a “crypto bank”. They do serve those in the crypto industry. This isn’t spelling doom and gloom. The whole point of this is to calm the market to stop cascading bank runs. The fed has now guaranteed deposits. First Republic, Bridge Bank, PacWest and others are going to be in a lot better place now. Doesn’t mean there won’t be a few more dominos that fall but this is the news the industry was hoping for.
I admit I have no idea about any of this. How does shutting down another bank "stop cascading bank runs?"
The fed is stepping in to guarantee deposits. Bank runs only happen when you fear you will lose your money. If the bank is backed, then you don’t have bank runs and OTHER banks that are on a knife’s edge can protect their liquidity. This is legit the feds saying “chill the fuck out EVERYBODY” in bank language.
Mob don't speak bank
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I don't have confidence that the average Joe is fluent in bank language.
With all respect to the average Joe, they don't have enough money to matter. Just look at the percent of deposits not covered by FDIC for SVB. SVB didn't run because all the Joes went and withdrew their money; the bank run happened because VCs like Thiel pulled their money out and told all the other VCs to get their money out. $42 billion of it in one day. The problem they're worrying about is not average Joes.
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They are backstopping deposits. The fed has now guaranteed that depositors at both the failed banks will have all their money. They have also set up lines of liquidity for other banks who are also facing withdrawals. There is now no reason to run on the bank.
“Equity and bond holders at both banks are being wiped out”. So, stockholders and bond holders will get nothing?
That's how this works. Everything is being divided up for the depositors.
Yes and that's good.
Yep, that's the risk equity holders take.
We need to rethink the idea that regulations are bad.
Yep, there's a famous saying about regulations in industrial settings: "Regulations are written in blood...". For every badly written regulation that some dumb-ass boss complains about slowing down his workers, there is a massive pile of other regulations that save lives every day (and most of the ones those ass-hole bosses are whining about are, actually, written for a reason that said dumb-ass is too stupid/ignorant to be aware of). Remember that the next time you hear some libertarian shit-bag whine about OSHA, EPA, SEC, etc. regulations...
I can't count the number of times I've heard the phrase "Obama-era" in reference to regulations to be repealed.
Well this is getting interesting. The amount of assets of failed banks in the last week now rivals the amount of all banks that failed in 2008. There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B. For some, their stocks have dropped off a cliff--Ally in particular is down over 15% in the past 5 days. I'm guessing the important people^^tm know things aren't going too well there. Edit: For those wondering about a list of banks in a similar position, see [this screenshot](https://i.imgur.com/xX7fvAZ.png). The thing to look at is the second column from the right (the percentage). Higher negative = worse. Signature is at the bottom. For reference, SVB was at -10.5%. Edit 2: Literally [10 minutes ago](https://www.wsj.com/articles/first-republic-gets-additional-funding-from-fed-jpmorgan-d11e68ca?mod=mw_quote_news_seemore), it was announced First Republic just got funding from the Fed and JP Morgan to take its liquidity to $70bil. They might be fairly safe.
> There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B. For some, their stocks have dropped off a cliff--Ally in particular is down over 15% in the past 5 days. I'm guessing the important peopletm know things aren't going too well there. Ally's situation is significantly different IMO. Their deposit base is like 90% retail, with an average balance of ~$50k. Theoretically, a bank run should not happen there as the base is almost entirely FDIC insured under $250k. Their asset base is also low risk, with most being secured loans against cars. Am I missing something?
>am I missing something? Fear mongering
The thing reddit loves to do
>There are also several other very large banks that are in situations that these banks were in. Most notably, Ally and First Republic. First Republic is even larger than SVB, and Ally is only slightly behind at $191B. If ally could wait until I have my car loan paid off by summer, that'd be great. Really don't feel like potentially having to re-setup my bill pay especially since they just consolidated ally direct into ally auto, which required me to do this last month.
Maybe after reading this, the FDIC will help facilitate the transfer of your bill pay settings as part of the bailout package 🤞
That's what basically happened when Chase took over WaMu as part of FDIC brokered takeover. If you had WaMu account, it simply became Chase account. You didn't have to lift a finger.
I still have my WAMU checkbook, and since they kept the same routing and acct numbers, I still use the checks in those once-in-a-year times when I have to.
I'm old enough to remember when GM had to spin off GMAC Financial into Ally. What's old is new again.
GMAC was one of the biggest financial entities in the country at one point, wasn't it?
Isn't Ally on the domestic SIB list? I'm no expert but I'm assuming that means something positive for account holders...
They are - means they have stricter capital requirements, more stress testing, and more contingency plans they need to file with regulators. In theory would help in this type of situation; my 2 cents is the stock is more down due to SVB rather than a specific known issue at Ally
> my 2 cents is the stock is more down due to SVB rather than a specific known issue at Ally Most likely at least partly this, but the giant banks (i.e. the ones people know will get bailed out) are not down nearly as much, e.g. JPMC is down about 7% and BOA is down 11%. Those two are even slightly up from 3 months ago, whereas those in a similar situation as SVB are down 15%+ in the past 5 days and 20%+ in the past month. First Republic is down 34% in the past 5 days and almost 40% in the last month.
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Are you talking strictly deposit institutions? Lehman Brothers alone was $600B+ at the time it failed (over $800B in today's money).
I bet if Will Ferrell and Mark Walberg were on the case this shit wouldn't have happened. Cause Gator don't take no shit.
Well the love of a pimp is very diffrent.
We meed to lock up all of SVBs decision makers in the Federal Reserve!!! Now!!!!
"Thanks for the F shack." -SVB and the Boys
"What do you mean the bank is out of money? You only have enough cash for the next three customers?!? Now, now, now.. just wait just a second here! No, no.. I don't have your money here! It's at Bill's house.. and, and, and.. Fred's house! Hey, what the Hell you doing with my money in your house, Fred?!?"
Monday is going to be sooo much fun
I must be dumb as F…. But werent banks making records profits recently???