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

[lustylad]

Originally Posted by eccieuser9500

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

From the FDIC website. Looks like a busy weekend for the boys & gals at the FDIC.

https://www.fdic.gov/news/press-rele...3/pr23016.html

Yes, the FDIC has created a new bank, but solely to assist in liquidating the old one (SVB). This new bank will stand ready to pay out insured depositors immediately, and uninsured depositors over time as SVB's assets are evaluated, then sold or otherwise disposed of. Interestingly, the FDIC calls those payments to depositors "dividends" rather than withdrawals. Hmm...

Btw - the name of this new bank is "Deposit Insurance National Bank of Santa Clara" (not Santa Clarita).

[lustylad]

Originally Posted by VitaMan

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

No one is forcing you to be so unhelpful either. Are you having fun?

Originally Posted by VitaMan

Plus there is private deposit insurance. How do you think Warren Buffett stores his billions of cash ?

Care to tell us where/how/through whom Warren Buffett insures Berkshire Hathaway's mountain of cash against losses caused by bank/financial institution failure?

We'll wait...

[bambino]

Originally Posted by lustylad

No one is forcing you to be so unhelpful either. Are you having fun?




Care to tell us where/how/through whom Warren Buffett insures Berkshire Hathaway's mountain of cash against losses caused by bank/financial institution failure?

We'll wait...

I asked him that on the first page of this thread. I’m still waiting.

[Texas Contrarian]

My take on this is that the biggest reason for SVB's sudden blowup was an almost complete lack of the sort of risk management practiced by almost all banks.

Post-GFC, regulators have required banks to hold high quality liquid assets (HQLA) in sufficient quantity as to have the ability to meet a stressed outflow of deposits and to meet a required liquidity coverage ratio. These assets can be Treasury notes, MBSs, or even high-quality corporate bonds.

But here's the interesting thing, and from what I have seen so far, I'm not sure it's been well covered in the financial press.

HQLA can be booked under either Available for Sale (AFS) or Held to Maturity (HTM) accounting regimes.

AFS unrealized losses don't appear in the bank's P&L, but do show up in the capital accounts.

But booking the assets in an HTM regime prevents them from showing up at all! Convenient for those who want to delay the day of reckoning, isn't it?

This appears to be exactly what SVB did, at least to a large extent.

Further, it appears that SVB didn't hedge its asset portfolio against interest rate risk at all! Banks generally do this with interest rate swaps and any of several other types of derivative assets, thus reducing the risk of facing crises with tanking bond portfolio market values.

And, since there's been a little back-and-forth on the following statement, I'll address it as well.

Originally Posted by VitaMan

Plus there is private deposit insurance. How do you think Warren Buffett stores his billions of cash ?

No, he doesn't need to purchase any sort of private deposit insurance. Berkshire Hathaway buys Treasury assets similarly to how you might do so through TreasuryDirect.

https://www.barrons.com/articles/war...nt-51660580408

Key excerpt:

Warren Buffett parks most of Berkshire Hathaway’s cash in ultra-safe U.S. Treasury bills, and individual investors may want to consider following Buffett’s lead now that they are yielding as much as 3%.

Treasury bills, which are U.S. government securities maturing in less than a year, are a good alternative to money market funds and bank certificates of deposits. Interest is exempt from state and local taxes, a contrast with bank CDs.

Investors can buy them directly from the Treasury through the TreasuryDirect program or through banks and brokers.

Buffett, the long-time Berkshire Hathaway (ticker: BRK.A , BRK.B) CEO, prefers T-bills to such other short-term debt as commercial paper (a corporate IOU) because he never wants to worry about the safety of Berkshire’s cash trove, which totaled $105 billion on June 30. About $75 billion of that total is held in Treasury bills. Buffett regularly refers to the T-Bill holdings in his annual shareholder letter.

(Note: This Barron's piece was published a few months ago; interest rates are markedly higher now.)

[Jackie S]

Just my opinion, but if the FDIC reneged on giving the regular depositors their money, the peasants would be storming the castle with torches and pitchforks.

[bambino]

Another bank, Signature Bank in NYC closed this weekend

[bambino]

PNC Financial will not be acquiring SVB

[Texas Contrarian]

It was reported a little while ago that Yellen instructed the FDIC to cover all SVB deposit accounts, not just those under the $250K threshold.

SVB is an unusual case, since such a large percentage of its deposits are held by small tech companies that are also borrowers. In many cases, loan covenants require these borrowers to hold bank balances of a specified range in SVB.

Since many of these companies are very small, losses would be likely to hurt many of their employees who could lose jobs very quickly. For that reason, I have a bit more sympathy for these account holders than I might under a more usual set of circumstances.

And, by the way ...

In remarks by the FDIC chair this last Monday, it was related that unrealized losses on assets held by banks now total about $620 billion.

https://www.fdic.gov/news/speeches/2...ce=govdelivery

That's why it's so important for banks to hedge interest rate risks, as I noted in my previous post.

[The_Waco_Kid]

[eccieuser9500]

Originally Posted by VitaMan

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

Got it. I still don't get it.


Fed announces emergency lending facility to shore up US banks

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.

I'm good with the condescending post. I've done it. I'll do it. I can take it. I'm not one for etiquette.

Originally Posted by 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.

Originally Posted by lustylad

From the FDIC website. Looks like a busy weekend for the boys & gals at the FDIC.

https://www.fdic.gov/news/press-rele...3/pr23016.html

Yes, the FDIC has created a new bank, but solely to assist in liquidating the old one (SVB). This new bank will stand ready to pay out insured depositors immediately, and uninsured depositors over time as SVB's assets are evaluated, then sold or otherwise disposed of. Interestingly, the FDIC calls those payments to depositors "dividends" rather than withdrawals. Hmm...

Btw - the name of this new bank is "Deposit Insurance National Bank of Santa Clara" (not Santa Clarita).

Originally Posted by bambino

Another bank, Signature Bank in NYC closed this weekend

Originally Posted by Texas Contrarian

It was reported a little while ago that Yellen instructed the FDIC to cover all SVB deposit accounts, not just those under the $250K threshold.

SVB is an unusual case, since such a large percentage of its deposits are held by small tech companies that are also borrowers. In many cases, loan covenants require these borrowers to hold bank balances of a specified range in SVB.

Since many of these companies are very small, losses would be likely to hurt many of their employees who could lose jobs very quickly. For that reason, I have a bit more sympathy for these account holders than I might under a more usual set of circumstances.

And, by the way ...

In remarks by the FDIC chair this last Monday, it was related that unrealized losses on assets held by banks now total about $620 billion.

https://www.fdic.gov/news/speeches/2...ce=govdelivery

That's why it's so important for banks to hedge interest rate risks, as I noted in my previous post.

[eccieuser9500]

Originally Posted by Jackie S

Just my opinion, but if the FDIC reneged on giving the regular depositors their money, the peasants would be storming the castle with torches and pitchforks.

[Redhot1960]

Main thing is the BAND KEEP PLAYING, fuckers

[bambino]

https://t.me/QNEWSPATRlOT/2038

That’s a lot of cash. And only a portion of deposits.

[VitaMan]

This thread topic is about SVB.


Lustylad and Bambino want to play their little game of “I gotcha” while ignoring the thread topic. There will be plenty of additional news on this topic and other banks Monday. I’ll try this one more time, and hopefully this thread can move on.


I posted this: “Plus there is private deposit insurance. How do you think Warren Buffett stores his billions of cash ? “
Lustylad posted this in reply: “In other words, you don't know the answer to your own question, do you VM?”


The original post is asking Bambino how he thinks Buffett (Berkshire Hathaway) stores its cash.
There are many types of questions, they usually fall into 1 of 3 categories:

1) - a question to be answered, such as “How many miles it is from downtown Pittsburgh to Schenley Park ?” The person asking is asking someone to provide the answer for them.

2) - a rhetorical question that is not meant to be answered, but as basis for thought

3) - a question for which the person asking the question already knows the answer, often to intimidate a debate


Somehow Lustylad and Bambino think I should know the answer to the original question. Why is that ?
Are they playing their little game of “I gotcha” ? Or can’t they understand what type of question it is ?


Then they continue on:

Lustylad “I'm asking you to elaborate on what you said below”

Lustylad “forcing others to spend unnecessary time googling”

Lustylad “Care to tell us where/how/through whom Warren Buffett insures Berkshire Hathaway's mountain of cash against losses caused by bank/financial institution failure? We'll wait..”

Bambino “I’m still waiting”


The original question is in the category of # 1 or # 2. But not # 3.
Either they don't understand that, or just want to play their little game.

If they are really interested about private insurance for bank depositors, there are several fine educational institutions in Pittsburgh that may be able to help them, such as the University of Pittsburgh and Carnegie Mellon University.

If they are interested in seeing if Berkshire Hathaway carries private deposit insurance on cash they have at various banks, likely that would not be a disclosure made in an annual report, not even in a footnote. You many have to attend one of their annual meetings and ask that question, or send in a letter to Berkshire Hathaway.

[VitaMan]

A footnote that may interest some, since mark to market of securities is part of this topic:

What was the unrealized loss Berkshire Hathaway had on its investments in 2022 ?

And the answer: easily found by googling