Largest Bank Collapse Since 2008 Just Went Down

As someone that works in the banking industry I can tell you there are troubling numbers starting to show up for a lot of banks. I don't see it directly as much since I work in the fraud department, but my friends in the collections departments are seeing much higher than normal delinquency rates among both consumer and business accounts. Our customer service department has also seen an increase in loan and credit applications to the point that they are looking at tightening the qualifications.

I didn't start in banking until 2010 but a lot of them are saying the trends remind them of what they were seeing in 2007 right before everything went really bad in 2008.

Agreed lots of small tech firms going to get crushed having their assets tied up in this firm. In other words contagion will spread outside of banking. Watch close...this could be a market inflection point and a Fed pause.

PacWest Bancorp and Western Alliance Bancorp also took major drops in stock price. Like Silicon Valley Bank, both have a heavy presence in California.

It's expected that federal officials are going to be shopping SVB to potential buyers over the weekend. Good luck with that. Everyone remembers the lesson of Bank of America and Countrywide.

As a memory jogger, the Feds were cheering BOA on to acquire the failing mortgage lender during the 2008 financial crisis and even greased the regulatory skids, but that did not stop them from fucking BOA for $17 billion four years later for mortgage lending practices that pre-dated the acquisition. Nobody is going to touch SVB unless they have a back channel immunity agreement against future federal regulatory actions relating to SVB's defunct operations, which is a blank check I'm not sure federal regulators will want to issue.

It's interesting to hear from Whodey above reporting on what he is seeing in the banking industry. I knew someone in the early part of this century who worked in the mortgage industry for Countrywide and made a very high income doing so. She said she could see a lot of people were getting mortgages who should have been rejected for them and the roof would eventually fall in. She transitioned over to another job outside the mortgage industry that paid less but wasn't engaged in such risky practices. All bubbles eventually burst and that includes the one we've been in during recent years.

Yeah i think just a lot of Americans are tapped out with debt, the attrition of all this nonsense the last few years has to catch up at some point. I might lay off the strip clubs for a while and just keep building cash to do something with it whenever it does crash.

My company moved all our cash yesterday just in case there’s a withdrawal run. We’re pretty conservative but some of our big banks recommended it. Scary stuff. It’ll probably be fine but too much to risk.

There’s a rumor that Harry and Meghan had millions at SVB.

Oh boy. Her we go again.

Thank you Joe Biden and democrats.

Poor risk management by a financial institution, we've seen it before.

This probably is a buying opportunity for the overall market. There definitely was panic selling yesterday.

A head of risk assessment at the beleaguered Silicon Valley Bank has been accused of prioritizing pro-diversity initiatives over her actual role after the firm imploded on Friday.

Jay Ersapah – who describes herself as a ‘queer person of color from a working-class background’ – organized a host of LGBTQ initiatives including a month-long Pride campaign and implemented ‘safe space’ catch-ups for staff.

From someone who reviewed their website:

“In fact, the more I look at this site, the more I wonder if these guys actually did any banking business. Every corner of the website is devoted to values, diversity, and inclusion. Yet again, we get to learn about how empathetic, responsible, and diverse they are, and how they speak and act with integrity. Really? So how come almost $200 billion just went up in smoke? Asking for a friend.”

In January 2022, SVB made a $5 billion commitment to sustainable finance for what they call a climate-ready, healthier planet. Maybe it should have been left on their balance sheet.

Records show that Silicon Valley Bank, $SIVB, employees received large bonuses on Friday.

These bonuses were paid just hours before regulators seized the bank.

Just 2 weeks ago, executives at SVB sold over $5 million in stock.

SVB invested a lot of money in long term government bonds paying 2% interest. They were worth something when the inflation rate was 2% but are worthless with a 6% inflation rate. No one wants 2% bonds in such a situation so SVB couldn't go out and borrow money on their assets or find a bigger bank to buy them out.

The market has spoken and says it’s not 2008, while this isn’t a one of event, it’s pretty well contained to tech which has had a rough 2 years and start ups also mostly in the tech space. Have no fear this isn’t the event that the chicken littles of this board think it is, good news is short term treasuries are at 5% and long term the markets are still fundamentally sound.

About 25% of Roku’s cash reserves, $500 million of $2 Billion, is now stranded at SVB. Shouldn’t a large corporation know better ? Should the Federal government ( I.e. you and me ) bail Roku out ?

This episode should kill the insanity of making investment decisions based on Diversity, Equity, and Inclusion. I doubt it will, but it should.

^ I doubt that ESG is responsible for this debacle, just because their investments were diverse doesn’t mean their investments were intelligent or even fiscally responsible.
BTW they don’t deserve a bailout and if I were to make an educated guess they ain’t gonna get one.

At it's core it was a risk management issue. As doc rightly pointed out, they were using long-term bonds as collateral for short-term debts. Then a perfect storm happened, with their tech clients reducing their deposits due to industry-wide pressures while drawing more heavily on lines of credit, all while rising interest rates crushed the value of their long-term bonds. I'm not going to blame ESG for this as much as people who were asleep at the switch and just didn't adjust fast enough to changing market conditions.

As far as blaming any particular politicians for our current economic predicament, there's enough blame to go around. Yes Biden and the Dems ramped it all up by a factor of X, but Republicans are hardly blameless. Trump started the huge spending blowouts and was screaming for yet more on his way out of office. He also chastised the Fed during the time when they finally started to normalize interest rates during his presidency, which incidentally was the first time that the economy was finally strong enough to do so. Some Republicans also voted for that pork-barrel laden $1.2 trillion infrastructure bill that is just now finally starting to funnel into the system and is likely a serious contributor to prolonging the inflation problem.

Fuck Biden, fuck Trump, fuck the Dems and fuck every whore of a Republican who put buying votes over normalizing our economy.

^ if they we’re using long term bonds in the manner you’re suggesting that would point the finger directly at whoever allowed the regulators to relax the Dodd-Frank rules on midsize banks.
BTW Treasuries have value, even at 2% they will be sold at a deeper discount that all.

I’ve never bought into the concept of having a balanced portfolio of stocks and bonds. If it’s money that’s needed in the short term, keep it in cash equivalents. If it’s a long term investment, stocks always outperform.

I can't help thinking about the ESG factors that mark posted about. Clearly, organizing an LGBTQ event is a huge distraction to the real risk management work that should have been happening. Since ESG initiatives are common in large companies including major US banks, we could be headed for a complete financial meltdown. I'm sure mark will be moving all his assets to cash in preparation.

I'm no friend of ESG or anything woke, but I'm not seeing the causation here. This looks like old fashioned mismanagement of risk. We'll see if it ripples out--this bank was not particularly large, despite its huge share among startups.

Besides, everyone knows corporations go "woke" to cover up greater sins, like Nike signing Kaepernick to distract from use of Chinese slave labor. They won't go too woke for their bottom lines.

Just another sign of the great economhy the retards called progressives crow about.

“I'm sure mark will be moving all his assets to cash in preparation.”

I’m always 100% invested. In the long run, that’s always the best choice. No one is smart enough to consistently time the market. You might get lucky once or twice, but trying to time will eventually catch you.

I don’t trust ESG companies for the same reason I wouldn’t hire a plumber who advertised he was the
“ honest plumber”. If someone needs to proclaim their virtue, I doubt how real it is.

Peter Schiff tweeted this Friday: "The U.S. banking system is on the verge of a much bigger collapse than 2008. Banks own long-term paper at extremely low interest rates. They can't compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures."

@Mark
You don’t think you have exposure to ESG that’s so very I woke of you, according to what you’ve written here you maintain your accounts in index funds, if you hold The Dow or QQQ or SPI you have more exposure than you think, as a matter of fact I doubt you can avoid investing with ESG in your portfolio.

Thank Trump for weakening oversight. Under his deregulation of Dodd-Frank, financial institutions no longer need to submit to "stress testing" by the Federal Reserve and are no longer required to keep a certain amount of cash on hand to protect against the effects of financial shocks.

Signature Bank, the 33rd largest bank in the US by assets, was just shut down today.

Grab the popcorn. The recession is here!

The FDIC is fully guaranteeing all deposits at both banks even if the deposits were over the normal $250k limit. This could be an expensive precedent going forward.

https://www.cbsnews.com/news/silicon-val…

On February 8th, Jim Cramer was telling his viewers on Mad Money to buy Silicon Valley Bank stock.

https://www.foxnews.com/media/cnbcs-jim-…

You will never go broke betting against Cramer

moral hazard:

The risk that an individual or organization will behave recklessly or immorally when protected from the consequences.

There was a 1994 Simpsons episode where a bank with a sign on it saying "Silicon Valley Bank" crashes.

https://youtu.be/Rkqj_xXdCyQ

Nice find doc. :)

That was a great video. But here we go again another recession. Thanks to the dumb son of a bitch Joe Biden. And the ass hole democrats.

Rick Dugan provides an accurate depiction of what caused the decline of SVB.

Even though this should be an isolated incident, it will still have repercussions throughout the banking industry. The small businesses using SVB as a clearinghouse for their daily operations are feeling the pain already.

When examining the largest banks in the USA, there is a huge drop off from the total assets of the top 5, so it’s important to realize this is not a systemic failure, as we saw in 2008. There are still some banks where they don’t manage risk and duration properly, but this isn’t the same industry as it was 15 years ago.

For the record, 1) Republicans held congress when that Dodd-Frank bank deregulation bill was passed, it was supported overwhelmingly by Republicans and signed into law by Trump. Granted, it did get some Democratic support, but not a lot. 2) there are bank failures almost every year, including under Trump, while it’s certainly not ideal, it’s no reason to panic. Sorry for veering into politics.

https://www.fdic.gov/bank/historical/ban…

>Any of you twats that are blaming trump - remember in 2018 - the HOUSE (DEMS) and SENATE (DEMS) passed bills - trump merely signed what the DEM controlled congress wanted - it was a bipartisan bill.

desertscrub proves YET AGAIN why he has the lowest cred on TUSCL.
Republicans controlled both the House and the Senate under Trump in the 115th Congress from Jan. 2017 to Jan. 2019.

May 22, 2018
"WASHINGTON — A decade after the global financial crisis tipped the United States into a recession, Congress agreed on Tuesday to free thousands of small and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to prevent another meltdown."

https://www.nytimes.com/2018/05/22/busin…

From the NY Times article back in 2018:

"“It’s a bad bill under the guise of helping community banks,” Representative Nancy Pelosi of California, the Democratic minority leader, said during debate on the House floor on Tuesday. “The bill would take us back to the days when unchecked recklessness on Wall Street ignited an historic financial meltdown.”"

BTW this article explains how the Republican-led Dodd-Frank rollback in 2018 was a likely contributing factor to the failure of Silicon Valley Bank. And it dismisses as essentially ridiculous the idea that DEI / ESG policies, being peddled by the likes of Ron DeSantis, had any role. Republicans trying to connect this bank failure to "woke" policies are taking Americans for idiots.

Was Silicon Valley Bank demise caused by Trump easing regulation, 'woke' efforts, or something else?
https://www.politifact.com/article/2023/…

You guys are enjoying arguing so much, but you’re basically agreeing with each other. Dodd Frank was a target of Trump’s. There’s clip after clip of him in 2017 and before saying he was going to get rid of it. The law he signed rolling back the protections kn 2018 was also bipartisan. It was most all of the republicans and a few of the democrats (I think I saw 17 in the senate). There’s enough blame to go around, but mostly for the bank that left key positions unfilled and couldn’t see their risk when Powell was telling them for a year he was going to raise interest rates.

It is funny how woke is the four letter word that enters every conversation. It was just greed and stupidity.

It's simplistic to connect the bank failure to the Economic Growth Act. Their capital ratios according to annual reports were well over the minimum, even when its assets crossed into Dodd-Frank territory. Even if the EGA (aka the "rollback" of Dodd-Frank) were passed, SVB would not have been in breach of it. Of course Democrats are going to try and make hay over it--it's what politicians do.

This was a classic bank run. They were overexposed to tech, and Silicon Valley has the ultimate herd/FOMO mentality--when one withdraws, the others panic and do the same. They bought long-term treasuries and MBS with their deposits, and when the withdrawals started, were forced to sell them cheap. No risk officer worth their salt wouldn't hedge interest rate risk, especially when these rate increases surprised no one with an IQ greater than their shoe size.

At the same time, it's not about "woke." It's a bad look when your head of risk is more focused on being a lesbian than doing her job, but you can't say one caused the other.

Signature Bank--Barney Frank's (D-MA) Signature Bank--did similar, only with crypto. If there are any bigger herd animals than tech, it's crypto idiots. Crypto still relies on finding a bigger sucker.

US banks have $2 Trillion in hidden, unrealized losses just like SVB. This is a ticking time bomb. As information comes out, depositors will withdraw funds, accelerating each banks collapse.

https://www.dailymail.co.uk/news/article…

It's not all bad news. I got an email from my credit union yesterday congratulating me on my 35th anniversary of opening an account with them. They are paying 4% interest on my CD's. My 25 yo granddaughter who graduated from college 3 years ago just bought her first house last week and financed it through the same union. We are not going anywhere.

The large banks will be fine. They are much better capitalized than they were in '08 and the Fed has already made it clear that they will provide liquidity if there is a run on any bank.

I was at my local Bank of America branch yesterday and it was almost empty of customers. I'm seeing no rush of people trying to get their money out and stuff it under their mattresses. Indeed banks like BOA and JPM Chase will likely benefit if some of the smaller regional banks or local branches of European banks collapse because people have to put their money somewhere.

I'm just waiting for some more panic selling to push BAC under $25, at which point I intend to snatch up some shares. And if something crazy happens and it drops below $20, I'll keep adding more on the ride down. BAC and the other large banks aren't going anywhere and just have too many ways to earn money for their shares to remain depressed for too long. I may have to wait a couple of years to cash in, but I'm patient. I made a lot of money on BAC the last time we had a bank panic in '08 and I intend to do the same again if fear takes hold again.

Regional banks will have their ability to make loans severely limited, which will hurt small businesses, which will hurt employment.

Like Rick said, the large banks will be fine. The biggest issue for small to midsized banks is that people are getting nervous about their liquidity. That is causing individuals and small businesses to move funds to larger banks. I can't say that is a bad idea at all right now. Personally I always make sure to have at least a month to two months worth of funds in each of my two savings accounts at two different banks. That way I am prepared in case of unexpected expenses, unexpected job loss or even if one of the banks goes out of business.

My deposit accounts are each under the $250k FDIC limit since I don't want that much cash sitting around without being invested anyways. However now that the FDIC is guaranteeing the full deposit amount, even over 250k, at the banks that have failed I don't know if that is something for anyone to be worried about going forward or not.

As long as you have at least enough to cover your immediate expenses at a secondary bank in case your primary fails you should be fine. FDIC usually only takes a few days to make funds available when they have to take over a bank like they did with SVB.

As long as you are near retirement and won't need to sell stocks in the next couple of years I would highly suggest buying some major bank stocks in the next few months while the prices are down. If you look at what the stock price had done for major banks from after the 2008 fiasco until lately they all made major improvements and I'd expect that again going forward. The more issues small to mid tier banks have the more it will depress the stock price of large banks in the short term and that means bigger long term potential.

2008: 25 banks with $373 billion in combined assets failed

2023: 2 banks with $319 billion in combined assets failed

Tetra your last post was well-written and I agree with most of it. I also said 4 days ago this was about poor risk management.

But I'm not buying your quasi-dismissal that Dodd-Frank might have been a factor. Just the mere fact of being under increased regulation and scrutiny makes it plausible SVB might have done some things differently. For example, not going most of 2022 without a chief risk officer; having more compliance officers, lawyers and consultants who might have helped identify and manage risks better; more audits, etc. We can't know for sure, but it's not unreasonable to say that Dodd-Frank might have helped reduce the likelihood of the sequence of events that took down SVB.

The government will pick and choose which banks get bailed out and which ones are allowed to go under, until they have enough control over the industry to accomplish their goals.

For example, choke off all the gun and ammo manufacturers, except to supply the military and security details for politicians.

But they'll offer favorable terms to companies they have a personal financial interest in.

On the other hand:

Former Goldman Sachs CEO: Notion that SVB failed because of diversity is 'laughable'
https://www.cnn.com/business/live-news/s…

"We can't know for sure, but it's not unreasonable to say that Dodd-Frank might have helped reduce the likelihood of the sequence of events that took down SVB."

Whether or not you're "buying it," your ability to believe it or not has no bearing on the validity of the argument. Could it have? That's all speculation. What we do have are the numbers.

Politicians are going to try and make hay off this. Warren claims it was weakening of regulation, DeSantis claims it was woke. Neither appears to have merit.

When this all gets squared away, it’s going to be a regulatory issue as in not enough oversight, the biggest clue is the short sellers making bank.

Two related points:

No bank could have survived a run on deposits like SVB had. Yes, they were concentrated with a group of tech bros who were susceptible to a group chat saying “get your money out” but all banks hold about 15% of their deposits in liquid funds. This is true for any of the big banks as well as the small or regional banks. It’s just less likely that they’d got hit so fast.

Second, the term ‘bailout’ can mean two things. Here, we’re talking about all deposits being covered. In 2008, we were talking about some banks being bailed out so that even their stockholders didn’t lose their money. That is a huge difference. The former provides confidence in our banking system, intending to prevent runs on other banks. The latter protects stockholders against their investment decisions, which is a safety net investors in other businesses don’t get.

Scrubby you’re the biggest moron on the board no one pays any attention to you, you’re just a one trick pony
BTW pay nice spice the money from the bet you instigated and lost
You owe her 50K if it were me you’d have vig tacked on you yellow pussy.

^ Jimmy if they would have been paying attention they wouldn’t have had a run like that, their balance sheet shows exactly how lax they were with the depositors money.

^ get over yourself turd farmer. You’re less than nothing here, and a welsher to boot.

made a check deposit this morning, everytime it's give the teller the check and deposit slip and in return receive a receipt of that transaction. today in addition to that receipt i also received a printout for the very first time ever at that bank stating that i have X amt of dollars total in the account, with only a fraction available for withdrawal. i asked, "is this printout because of the what's been going on in the news?' reply was a nod from the teller.

We just had a brief of this at work. I largely agree with Jimmy and to some extent Desert Scrub. This bank and Signature Bank (where Dodd sits as a board member btw and also agrees that his bill wouldn't have prevented this from happening) were heavily invested in US T-Bills. What is safer than those, right? Technically, no losses would have occurred (and actually won't ever occur unless USA doesn't pay). However, this doesn't stop a run on a bank. No bank can defend against a run, they only have 10% of deposits on hand. What would happen would be a force liquidation of assets and borrowing against the fed to cover deposits. If there is failure after that, then the bank enters into some sort of bankruptcy.

However, the run would've happened eventually. All it would've taken is some combination of default on loans or investors wanting liquidity. SVB had no where to go with its T-Bills, they're at 2%. Liquidating them would have been at much lower rate of return.

At the same time, the Fed is pushing interest rates up making SVB's bonds look unattractive in the market. Biden's Inflation Reduction Act is pumping more and more money into the economy, causing inflation to go higher, causing the Fed to raise rates. This death spiral will take on any bank with SVB type holdings, meaning a lesser run or less liquidity is needed for bankruptcy conditions. Any bank that has shared holdings or investments in these regional banks are exposed.

Lastly, if the Fed bails out the account holders over the FDIC limit or any of the investors or shareholders, then they're creating a moral hazard. I'm of the opinion that banks should've failed back in 2009.

The question has been raised with the Fed, does this your policy is now to guarantee all deposits ? If yes, doesn’t this reward bad/stupid behavior ? If no, how do you justify picking and choosing some banks to be protected and some not ?

Frank was on the board of Signature Bank, not Dodd. He's biased because he supported the 2018 deregulation, so of course he's going to say it wasn't a factor in SVB's collapse.

It's a documented fact that Dodd-Frank increased costs for banks. Compliance costs involved increased numbers of compliance officers, lawyers, consultants and audit support. While speculation, it's very plausible this increased level of scrutiny and oversight could have led to better risk management and different decision-making, lowering the odds of a bank run. Tetra is pointing to capital ratio data as evidence that Dodd-Frank would not have mattered, but that's just speculation too.

Instead of relying on strip club board posters, we can look at what unbiased, independent experts in banking regulation have said: "While it is impossible to say categorically that legislative rollback equals the bank’s collapse, it does seem that it made it more likely." (https://www.politifact.com/article/2023/…)

Dodd Frank was also much more burdensome to smaller banks. The big banks could absorb the added compliance cost.

@wld, I have news for you if you consider Politifact (or any "fact check") to be authoritative. That label is just marketing from another opinionated media outlet. The capital ratios are real.

And yes, big institutions love compliance costs. They keep competition out of the market.

Politifact and similar sites base their assessments on published data and other publically verifiable sources, as well as opinions from experts in the field. They may or may not have a bias, but their assessments have far more value than most opinions on social media and discussion boards. Once again Tetra your dismissals are rather amusing.

That last one quoted Hilary Allen, a Professor of Law at the American University Washington College of Law who teaches courses in Banking Law and Securities Regulation.

^ I'm not placing my opinion against Politifact, I'm putting publicly available capital ratios against it, and a professor who used enough hedging language to make it sound like an opinion.

If you just have a compulsion to make this "Republicans bad," then be honest about it.

Sharon Stone was out there raising money for cancer research - good for her. That's doing more for the world than your dumb bullshit on TUSCL, scrub... as entertaining as it might be though.

Tetra I do believe there is merit to the opinion that the 2018 deregulation under Trump may have been a factor, but we can agree to disagree on that.

As far as Republicans I think my earlier comment was clear, and I hope you will agree with me on this: "Republicans trying to connect this bank failure to "woke" policies are taking Americans for idiots."

^ _May_ have been = don't be so sure, trying to score political points with it.

And yes, I said above multiple times that there's no connection between SVB's "woke" policies and going bankrupt. It's old fashioned piss poor risk management.

Those shitty fiat dollars in the bank are NOT YOURS. In fact, they're not even there.

Those BTC in your self-custodied Bitcoin wallet... those actually are yours. With great power, comes great responsibility.

@BitCoinHodler, @Tetradon, go fuck yourselves.

^ Hey, it's the Bitcoin incel again!

I would say we've missed you, but I don't want to lie to you.

@Tetradon, please take out a large short position on Bitcoin; as large as possible. Put your money where your mouth is, you coward.

PS, go fuck yourself.
PPS, I just noticed today that @Founder accepts Bitcoin payment for VIP Membership! "Buy a year long membership via BitCoin. Contact founder for more details. ($100)"
PPPS, seriously, SHORT IT!

^ Lol I didn't say anything about Bitcoin as an investment, dumbass. They say assume makes an ass out of u and me, but in this case, only u.

You go fuck yourself, with a nice fleshlight. Might take some of the edge off your incel rage.

If you're interested in a good explanation of it.

https://www.ft.com/content/f9a3adce-1559…

From KQED

“Nearly half of the country’s bio- and climate-technology companies, many of them headquartered in the Bay Area, banked with Silicon Valley Bank. Last year, SVB committed to investing at least $5 billion in the clean tech industry.”

That’s who we ( you and I ) are bailing out. It’s the climate change, woke elite.