And now for something really important...SVB failure.

[the_real_Barleycorn]

Wait for the idea of bailout to hit mainstream sometime next week. They've been hinting about it all weekend to see how it is received.

[eccieuser9500]

Originally Posted by the_real_Barleycorn

Wait for the idea of bailout to hit mainstream sometime next week. They've been hinting about it all weekend to see how it is received.

Common Questions Regarding Access to Funds After Failure of an FDIC-Insured Bank

The following is intended to provide a general overview of the treatment of assets in different types of accounts for informational purposes only; it does not constitute legal, business or financial advice. You should contact your lawyer, financial adviser or other professional advisers to advise you on your specific situation before you take any action, rather than relying on this alert.

You make it seem like this is a new concept. I remember watching this show as a kid and understanding basic concepts as Wall Street and Main Street. I guess you are talking to the younger generations.

[eccieuser9500]

[bambino]

Yellen said there will not be a bailout for this bank. FWTW

[the_real_Barleycorn]

Right... (and thus, it begins.)

[VitaMan]

Some are even floating the idea the FEd will announce an interest rate cut this week. Which seems far fetched.

Good to see the above Bambino posts and others that are getting this thread back on topic.

It is always the same few right wingers that try to interject drifting pejorative posts in almost every discussion. Still don't know what they are hoping to accomplish.

[eccieuser9500]

Originally Posted by VitaMan

The FDIC announced it will establish a new bank to protect insured depositors and will open no later than Monday. Clients with no more than $ 250,000 are protected by FDIC, and the agency said it will pay an advance dividend to uninsured accounts over the course of next week. It's unclear when those accounts will be able to retrieve all of their money, if at all.

SVB had insurance on corporate sweep accounts for up to $ 125 million.

Originally Posted by the_real_Barleycorn

Wait for the idea of bailout to hit mainstream sometime next week. They've been hinting about it all weekend to see how it is received.

Originally Posted by bambino

Yellen said there will not be a bailout for this bank. FWTW

Originally Posted by the_real_Barleycorn

Right... (and thus, it begins.)

So the Fed creates a new bank? Not saving the old one?

[Tiny]

I don't think depositors are going to lose any money. From press reports, SVB invested mostly in treasury and government-backed mortgage securities. It didn't have so much in the way of conventional loans. Bad loans I believe are the most common reason for a bank failure, and that's not much of an issue here.

Unless they invested in a lot in really long dated securities, 30 year bonds and the like, you'd think the money would mostly be there to pay off the depositors.

And in any event a takeover of their deposits by another bank is the likely scenario. That's what usually happens.

Here are bank failures back to 2001 and what happened to the deposits:

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

Click on the year and you'll see details about the "Acquirer and Transaction" for each failure.

In most, but not all instances, the acquiring bank agreed to take over all deposits, or all deposits excluding certain brokered deposits.

I'd expect most of those brokered deposits were insured by the FDIC. My stock broker has a brokered deposit program. If you've got, say, a $1 million cash balance, they'll break it up into $250,000 increments (the maximum amount of FDIC insurance per bank per depositor) and place it with four banks. The brokered deposits typically pay a higher interest rate than nonbrokered deposits. So I'd guess the acquiring banks don't want to be saddled with those high interest rate deposits.

[the_real_Barleycorn]

Whent the mega rich start to whine, Biden will fetch.

You pays your money, you takes your chances. Poor judgement, mismanagement, and a woke philosophy should not require a taxpayer bailout.

[VitaMan]

Originally Posted by eccieuser9500

So the Fed creates a new bank? Not saving the old one?

Do some reading on it and then you will understand the procedure

[Tiny]

Originally Posted by the_real_Barleycorn

Whent the mega rich start to whine, Biden will fetch.

You pays your money, you takes your chances. Poor judgement, mismanagement, and a woke philosophy should not require a taxpayer bailout.

Yellen said this morning the investors (shareholders) likely would be wiped out.

Making the depositors whole would make sense. Otherwise you could see runs on other mid-sized and small banks, where uninsured depositors jerk their money and put it in T-bills or large banks. LustyLad and Texas Contrarian would know better than we do, but I suspect that could have a very negative effect on the economy. And the FDIC potentially would have to pony up a lot more money to pay off insured depositors in other banks. Best to put out the fire before it gets out of control.

[lustylad]

Originally Posted by VitaMan

New Bank is Deposit Insurance National Bank of Santa Clarita.

It will begin paying its insured depositors starting Monday.

Originally Posted by eccieuser9500

So the Fed creates a new bank? Not saving the old one?

Originally Posted by VitaMan

Do some reading on it and then you will understand the procedure

Dude, what is wrong with you?

Proper etiquette on ANY discussion board is to post links along with your comments, not to talk down to anyone who is curious enough to ask you follow-up questions. You seem to take pleasure, not in sharing your news sources, but rather in forcing others to spend unnecessary time googling them.

[VitaMan]

"My back of the envelope review of SVB's balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits."

Bill Ackman

[VitaMan]

Originally Posted by lustylad

Dude, what is wrong with you?

Proper etiquette on ANY discussion board is to post links along with your comments, not to talk down to anyone who is curious enough to ask you follow-up questions. You seem to take pleasure, not in sharing your news sources, but rather in forcing others to spend unnecessary time googling them.

You are saying you are being "forced" to spend time googling ? No one is forcing you to do anything.

[Tiny]

I pulled the year end financials for SVB. They had 91.3 billion in held to maturity securities, carried at cost on their balance sheet. The majority were mortgage backed securities, and the average yield on the portfolio (based on the purchase cost) was 1.66%. The average duration was 5.7 years.

The fair value of the $91.3 billion portfolio was $76.2 billion. The securities are worth less because yields are higher, maybe more than 5%, instead of the 1.66% when they bought them.

So that's a difference of 91.3 billion - 76.2 billion = 15.1 billion.

At 12/31/2022, shareholders equity was $16 billion, of which $3.6 billion was attributable to preferred shareholders. If SVB had to mark their portfolio of held to maturity securities to market, they'd wipe out most of their equity. They were about to do a capital raise, where they'd sell more shares, but that was before the bank run last week.

If they were just able to hold the securities to maturity would they have been OK? I'm not sure. They had 80.7 billion in noninterest bearing demand deposits. But they also had $92 billion in interest-bearing deposits. And I see they were heavily marketing a business money market fund that paid around 4.5%. On the asset side, in addition to the interest bearing securities, they also had loans out to customers of 74 billion. I'm not sure what the average interest rate was on those. In any event I bet at some point they would have breached capital adequacy ratios, if they hadn't already.