There is talk about having the FDIC giving protection over the normal $250k limit so the contagion doesn't spread. I mean after a few trillion during covid what's another 10 billion for market stability? I think it may set a bad precedent but, then again the Fed has proven me wrong when it comes to breaking tradition. But they need to act and act fast, the best thing would've been to keep SVB solvent....but it's too late for that now.

question because i'm not clear on what i've read. Did the tech bank go under before the withdrawal run yesterday or partly because of it? The amount stated that was taken out was staggering for 1 day.

Bank bailouts has horrible optics right now especially with welfare getting cut and student loan payments coming back. USDC is depegging right now due to Circles exposure to SVB.
Credit Suisse is also rumored to be in trouble too.

Buckle up Buttercups

Vix 28 touch - check

Top 20 U.S. bank getting liquidated - check

Is anyone shorting anything? How are you playing svb?

It's not necessarily too late for anything to happen. If another bank takes over SVB all could be well next week.

Not sure if other banks were leveraged in a similar manner but Janet Yellen had mentioned they were concerned about "a group of banks". Definitely worrisome but ya, FDIC would cover $250k. After that $ is lost.

Best to stay out IMO unless you really understand what is going on and even then...

Scotiabank has been a laggard for many decades. Only reason you would buy is if you get a rally in banks it can be argued its valuation is discounted too much and the gap may tighten up. Latin America is always a risk but so is SVB apparently lol.

I will comment on other things later, but just a thought - if the government wants higher unemployment to slow the economy and lower inflation why doesn’t it just lay off its own workers then?

Yeah...but now it will cost 10x (maybe 100x) as much for the economy. We'll see, they do have smart people at the helm.

Not only would it be "bad optics", but more importantly it would be the wrong thing to do. To make a supposed "free market" work, sometimes you just have to let it burn. Clear out the dead wood and give someone else a shot at rising up through the ashes. Don't bail out the failures and incompetents. What incentive will they have to be competitive?

Buy out from a third party would be best outcome but who would want to buy it with all that liquidity locked in 5 and 30 year bonds with Jpow raising rates.

Hasn’t stopped them before. Going to be an interesting week.

Yes, very true. And that's because bad government has to keep chasing more bad government.

Aren’t bank runs fun everyone?

What bank out there can handle 25%+ outflows in under 48 hours?

Do we really want to see that tested (again) in real life?

Which banks (large or small) have an outsized percentage of uninsured deposits? (Rumor I saw was svb was over 90%) Because they will really get it in the keister if the feds don’t sort this out quick.

Another thought: I suspect the fed will be reviewing their rate hike calculus in light of recent events.

Wrong.

As much as I want to see "free markets" work, the reality is the consequences of doing nothing are far worse and potentially catastrophic. A loss of confidence in banks is the last thing any economy needs.

Indeed. The mistake was allowing them to become too big to fail in the first place… but now that it is reality, letting reality crash and burn will only leave the powerful with options. Think they will want to share them with you if that happens? Zero chance.

Also, there are a lot of nefarious forces in the underbelly of the finance world nowadays, they can use bots and misinformation to fan panic while shorting or using puts to make billions on the backs of investors. It's always cheaper and safer to keep things contained even if Joe taxpayer doesn't like or understand it.

If there is help coming for svb or regional banks hopefully its announced before markets open monday. Probably doubtful

Big is ok but with all the regulations that were added after the financial crisis they still got it wrong.

I think there will be some news flow tomorrow or Monday morning. No idea what though.

It’s not just SVB…

First Republic Bank is not looking good either…

Maybe I don’t understand it…please tell me why we should save fractional reserve banking?

Spoken like Richie Rich. Capitalize the wins, socialize the losses. Bail outs are simply seen as expected over the last 15 years. "Free markets" aren't working because they're constantly being meddled with. Pain comes with the territory and we're all better for it in the long run.

The silly folk that are well within the insured amount panic and go to the atms. The amounts they withdraw do not really directly affect anything, but the hysteria feeds off it.

The contagion risk is a wee bit different this time around. Now it’s over the limit savers (aka businesses) realizing that they are at risk.

The smaller and regional banks will feel it the most and the soonest I suspect. Also doesn’t help that they play by different rules and perception is the feds may not have the same urgency to help them as they do the too big to fail ones.

That being said, I am not overly concerned about many more failures, but throwing sand in the financial gears is never a good thing.

For those “let it all burn” folks: How is preventing a company from making payroll or killing their corporate credit cards that are serviced by these banks a helpful lesson for society to learn? Guess they should have 55 different accounts all under the insured limits to be safe? The accountants will love the extra fees heading their way. Or they should suck up all their funds and put it in short term tbills, corporate safes, etc…and hand it out on paydays like the good old days? Again the accountants send their regards.

Is it a bailout when equity gets nothing and savers are made whole?

There are no "free markets" and there never have been. If you want another great depression then by all means let banks, markets and industry fail and see how it goes!

Domino effect...the catch 22 of our economy.

The reason for the automotive and banking bailouts was because of the number of people that it would destroy if was allowed to fail. Sure, the people who benefit the most from it are the people who put us in that predicament to begin with...but that's the 'trickle down' that we always get told about in action.

Now, is it right or wrong? It's always going to depend on who you talk to and what they stand to lose if things went south. You aren't going to get an unbiased opinion. In our fantasy letting the world burn always sounds like a good thing because we mentally think 'we' are safe because we made all these protective plans. However, I think the reality is that true chaos would ensue though that would make the last few years look like a vacation.

Ultimately, what is worse, bailing people out with fake money, or living without running water, electricity, in fear of being mugged/murdered by people looking for food? etc.

If you question if any of that is possible...think back to the riots, Jan 6th, or what happens if someones favorite team loses the world cup.

Having said that, I'm looking at this craziness as a buying opportunity. I keep hearing doom and gloom and I still do not see it happening. Lay offs sure, but not to the extent you would expect.

Well said. People lose their minds over the most trivial **** today as if the next apocalypse was looming…

“Don’t Tread On Me” license plate on a $125,000 Mercedes-Benz AMG 63 waiting in line at Chick-Fil-A honking at the window because they didn’t get extra honey mustard sauce.

Sweets, ain’t nobody treading on you. Real hardship is a thousand miles away in your rear-view mirror.

https://watcher.guru/news/us-treasury-secretary-rules-out-a-bailout-for-silicon-valley-bank
Best outcome is buyout from third party.

Government picking winners and losers only props up incompetency. Regulations should be in place for sure to stem corruption, not to ensure success. When you're declared as "too big to fail" or "essential" that gives you license to operate in any careless manner you wish.

Where I am stuck in my disagreement with your stance in an example:

Etsy used SVB to process payments to the individual sellers on their site. Due to the shitstorm, their funds were frozen and they weren’t able to pay out on Friday.

Now the funds, or at least enough of them, will be released eventually for Etsy to make payments, but for now…That’s a lot of small mom and pop types that didn’t get paid on Friday and are freaking out right now.

Explain to me how if you were Etsy, you would have played this differently. How about if you were an Etsy seller.

Sure, the investors IN the bank should be wiped out…but the customers? I just don’t see how that is helpful or how businesses were supposed to reasonably protect themselves.

I know I've heard this guy's name and I guess he's at least somewhat controversial from what I understand, but I just watched this doomsday scenario and it all sounds pretty logical.
All you knowledgeable folks in here, what do you think? I guess that's in line with what I've been reading here - get out of growth, into value, and non-US value at that.

Governments have been picking winners and losers for as long as I've been alive. Nothing new to see here.

Shareholders should get nothing I agree but SVB is likely to be bought out or taken control of by another financial institution with government consessions.

100%

The way the system is intended to work is to have people get wiped out every so often..... that's the natural order of things (and I'm talking the rich and powerful too). Recessions & depressions are meant to happen just as frequently as bull markets.

Burn up the dead wood, allow new growth and a chance for new blood to have their time in the sun.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm

Nobody bit on the auction…FDIC says they will back debtors. Also NY just closed Signature bank at the exact same time saying they will cover the debtors.

The incident is probably isolated. Banks are stronger then 2008 when they weren’t strong………at all. Chart below

Fed blew it on inflation. But now may be the time where they “pause” on rate hikes and let the world reopen when few care about Covid anymore and want to travel and spend in the real world again ?? Give things some time. Adjust later.

And to be honest few care about inflation now. But most are worried about the folks who thought inflation wouldn’t be a problem then realized it was too late and think they can fix it. Our world.

Banks are stronger sure but why not have your money in a stronger bank? Here is a list of some of the best banks in the country from my banking service which has analysts go over the balance sheets regularly and scores them for safety. All FYI
D6DCB3DC-6D25-45FB-9DB2-550FDB721503 (resized).png9EC5E57D-27C4-40B8-B896-4160CBB6DEDF (resized).jpeg35E93E72-649B-4B75-863E-0E4B8595E11F (resized).jpeg

But what makes them top? Banks for the most part are banks...I stick to credit unions myself, but I'm also not dropping millions in an account. Banks are in it to make money, and clearly that leads many to make poor decisions. With all the regulation and oversight, how do things like this even happen and no one know about it until after it's too late?

They go over and review all the stuff no one looks at. The stuff you and I don’t really understand. Here is a follow up summary on one bank after their q4 2022 disclosure. Boring stuff until you bank at a bank like SVB.

Cumberland Security Bank (CSB)
Balance Sheet Strength -
While the share of securities is lower, CSB still has a higher share of loans than its peer group.
With a high percentage of demand deposits (41% as of the end of 2022), CSB continues to have a favorable deposit structure, which is very encouraging for the bank's margin.

Margins & Cost Efficiency-
The bank's NIM increased even more and now stands at 4.33%, which is higher than the 3.85% average for its peers. The key reason for CSB's higher margin is its lower funding costs, which for FY2022 were 21 bps, lower than the 51 bps peer average.
The bank's CIR for 12M22 was 45%, which is lower than the peer average of 62%. On a quarterly basis, CSB's CIR has also increased

Asset Quality
The bank's cost of risk grew on a quarterly basis and was 31 bps, which was more than the peer average of 6 bps. The loan loss reserve as a percentage of gross loans was 2.88%, and the NPL ratio decreased to zero. These are really impressive stats, particularly when compared to the 1.31% and 34 bps respective peer averages.

Capital & Profitability
CSB's capital position still appears to be robust, and its leverage ratio of 12.9% is larger than the 10.2% of its competitors. The ROE for FY2022 was a very strong 21%.

Bottom Line
The bank's 4Q22 performance was good. CSB maintains its favorable margin, low funding expenses, and high operational effectiveness. The bank's profitability levels continue to be high. The main drawback is higher provisioning fees, but it's still too early to tell if this is a trend worth following or a one off.

Just reading a bunch of comments here. I want to say that I have been following the Fed balance sheets (money in and out) daily for the last 9 months, but also looking at economies over the last 50 years and learned a lot. Money has to do with…….a lot.

The main point I have learned is they want it to be us against each other but it really should be us against them. Not go get your pitchforks and muskets and stuff no! Just realize this and you will have some clarity on how the world works. They are leaders and media.

Pdxmonkey I didn’t post here but other places about how on the $30 Billion cut annually in Snap payments was coming. After I have gone over the balance sheets for months my conclusion is stuff like this is ridiculous. It’s not much money if you see all that goes on and out. It should be a blip in the radar to just continue but they want it to be front and center to debate about. It’s divisive and not good. Mean while people wait to see what will happen. Sad.

Like usandthem you are a teacher I believe? My parents were also. So I look at how much the Federal Dept of Education gets and Last fiscal year they received $250 Billion but I don’t think they employ teachers? I looked up how many students there are and came up with 50 Million. That’s $5000 per student. Seems high. And each year we go over how teachers can only get a little raise? I don’t get it? Where does the money go? I just don’t know?

5B08E3E1-1E6D-4B19-B471-2BF316800BA0 (resized).jpeg

I’m curious why Signature Bank got shut down today.

Sorry I don’t agree with the fiat currency is not good idea. Think that was you? The gold stands held us back and getting off of it was part of the 1970’s problems but since then we have had a good run with amazing technology and innovations. World hunger and poverty down. I don’t know how the gold standard would have done but can’t imagine any better. Sorry if that wasn’t you or I misinterpreted. The whole world is forced to use the dollar. For better or worse and sure we in the US get some extra control because of this. We do. It is what it is.

But you are onto something with natural order of higher highs and lower lows helping and hurting folks. We ignore the bad during the good times and ignore the good during bad times. We are emotional creatures as human beings we are not always logical even though we think we are.

Like ROKU at $475 or folks flipping $500k homes on stated income loans to try to make $25k, folks tend to not see the bad right in front of them.

I am curious Pinny how they historically rated a certain talk of the town west coast bank.

I hope this is confirmed....uninsured deposits protection is again something out of the norm, but if you ask me it was the right move.

Hmm, where do I start without writing a novel. Just look at the posts above with Etsy....that's just one example of the spillover effect. I don't have access to the balance sheet or deposit ledger of SVB but if you have 1000 if not multi thousands of Silicon Valley (and TX and AZ) companies, startups, incubators etc..etc. losing their deposits because of the $250k cutoff and not being able to cut checks tomorrow you will have chaos in one of our economy's most important growth engines. This will surely then spread to other banks, either because of they ran with the same bad risk management as SVB or maybe due to twitter lies and rumors by people who are waiting to profit from that panic, this is could cause a trillion dollar run on the banks. So yeah, sometimes it is cheaper to settle these crowd sourced panics before it gets too ugly. Remember this lifeline is for depositors, over $250k....the bank stock and bond holders will be zeroed out, they will not be bailed out.

https://www.thestreet.com/markets/fed-unveils-massive-loan-plan-to-stem-contagion-from-svb-collapse

looks like it's also spilling over to other countries already
https://techcrunch.com/2023/03/11/svb-contagion-uk-arm-shuts-down-government-scrambles-and-startups-brace-for-the-worst/

Powell may have to stop rate hikes because of the pressure on the banks...so it maybe a blessing in disguise. I don't have a lot of confidence in Powell, so this unforeseen road bump in his inflation fight maybe a good thing.

No, that wasn't me.

I'm very mixed on fiat vs gold standard. I'm happy with paper money so long as it holds it's purchasing power...... and to me that means we have to have periods of serious deflation and allow wealth to be wiped out. Nonstop inflation is a terrible policy and completely unsound. There are no free rides, no matter what the crook politicians say.

I believe those that act responsibly should be rewarded, and those that are reckless and irresponsible should be wiped out. No bailouts!!! That is the natural order of things. I also believe that forced participation in systems where the value you have earned is gradually eroded is completely wrong. I feel terrible that savers are always the ones to be screwed over. This needs to stop.
Now how does someone protect themselves? Well, that's a great question. Some think that's gold. I think gold/silver/whatever is a racket too..... but at least it's a lesser racket.
I know that since I was a child, money has lost 75% of it's purchasing power: and that's extremely concerning. What to do about that? I don't know. Buy pinball machines?

I do think if the financial system was allowed to properly crash and reset.... things would be much better. That's what I believe. Prices would decrease dramatically. The supply of money would disappear. People would be forced to produce durable and useful goods domestically. People would also be forced to live within their means and credit would be greatly curtailed. These are all good things. Maybe that would also force countries to not spend what they don't have. I can dream..... but I look at the national debt with absolute horror: it can't be paid back. In the old old days cash was worth something and conserving it was always a way to ride out a storm..... now it's worth less and less. How do you sidestep that? The thing about Gold is: you can't eat it, and someone has to buy it. When there's no cash, there's no one to buy..... thus it's just as problematic as fiat.

The true problem is the destruction of the currency, and every country is doing it. I don't know how a global depression is resolved this next time. The Euro destroyed so many potential safe havens...... I can't really think of any that are left. As usual, the regular people are left holding the bag while the policy markers who create these disasters are bailed out by robbing us. I think these people should be put in prison and held accountable for their bad decisions. Every politician who deals with financials should be made a fiduciary and held personally liable for their actions and decisions. Then you would see some fiscal responsibility from these people who throw around billions or trillions as if they had no consequences to the economy or the wellbeing of the citizens.

Not sure if this was rhetorical, but if you want a real answer, most big players and companies do business with a place like SVB or First Republic or so many others because they’re “relationship banks” that offer very favorable lending terms, credit lines, and other perks. A “stronger bank” is meaningless and doesn’t factor into the calculation. Even you, I’m sure, would prefer a half point discount on your mortgage or whatever rather than keep your money somewhere that doesn’t do any risky lending or has a 100% deposit ratio or whatever.

When did we start talking about pinball?

Western Alliance Bank down 70% premarket...
First Republic 60%...
Ooof...

Market is open..

Let the continue upward pressure on inflation continue, I guess. Because another way for government to "control" inflation is to NOT stimulate.

Hmmm wonder why gold and silver are up so much since Thursday?

Forgot the other half of the flight to safety (treasuries, certain bonds, etc).

Metals aren’t the only salve to a panicked investor base.