The Lemon Fool

https://www.bbc.co.uk/news/business-64915616

US regulators have shut down Silicon Valley Bank (SVB) and taken control of its customer deposits in the largest failure of a US bank since 2008.

The problem seems to be that the US economy appears to be doing rather well - so much so that there have been hawkish remarks from the Federal Reserve Chair on March 7th which indicates that there will likely be a need to raise interest rates more than expected to avoid overheating. And this has been compounded by Friday's faster than expected growth in non-farm payrolls. So further interest rate rises and consequent falls in bond prices seem almost certain.

The collapse came after SVB said it was trying to raise $2.25bn (£1.9bn) to plug a loss caused by the sale of assets, mainly US government bonds, which had been affected by higher interest rates.

So a major US Bank (16th in US size) has had a very large sneeze. How far will the infection spread?
(PS - I was not sure where to post this note - if it is already covered elsewhere - apologies.)
Later addition - its also covered in Company Analysis and Macro and Global Topics

Another bank in trouble

Authorities said they were also extending protection to depositors of a second bank, Signature Bank of New York, which state regulators closed on Sunday as unease in the financial sector appeared to spread. Separately, the Federal Reserve announced that it was creating a new lending facility for the nation’s banks, designed to buttress them against financial risks caused by Friday’s collapse of SVB.

https://www.washingtonpost.com/us-polic ... -deposits/

bruncher wrote:Another bank in trouble

Authorities said they were also extending protection to depositors of a second bank, Signature Bank of New York, which state regulators closed on Sunday as unease in the financial sector appeared to spread. Separately, the Federal Reserve announced that it was creating a new lending facility for the nation’s banks, designed to buttress them against financial risks caused by Friday’s collapse of SVB.

https://www.washingtonpost.com/us-polic ... -deposits/

The going is firm today at New York Race track. With Silicon Valley Bank taking the lead, we have Signature bank at second place, but coming up fast is an outsider, Silvergate bank........

Silvergate Bank, which had been a cornerstone in the crypto world, announced it’s closing and returning deposits. In a press release, the bank’s holding company, Silvergate Capital Corporation, said it made the decision to shut down “in light of recent industry and regulatory developments.”

It’s been clear for a while that the company was struggling along with some of its most high-profile clients like FTX and Genesis. In January, its earnings report revealed that it lost a billion dollars in one quarter after its customers withdrew $8.1 billion. Then, on March 1st, it filed a document saying its financials were even worse than the quarterly report had shown.

https://www.theverge.com/2023/3/8/23631 ... nouncement

Steve

I think the VC investors played a blinder they managed to get a bank that was light touch regulated because it wasn't deemed systemic retrospectively reclassified as systemic and therefore get 100% of their funds guaranteed. They did this by scaremongering.

The bit that still freaks me out is that the way it was casually also mandated that the prudent banks would bear any losses over the 250K that was agreed, by increasing their FDIC deposit payments. That is a blank cheque, are American banks with that sort of liability investible anymore?

ayshfm1 wrote: are American banks with that sort of liability investible anymore?

Mrs Yellen has stated, effectively, that banks run by her pals will be OK. Country banks in Oklahoma, though, will be paying for the extra guarantee but not befitting from it. At least that's what she seemed to say - it's hard to be certain, she's not very articulate.

So the big financial institutions and now Silicon Valley will be fine.
It is like they had a straw poll for where all of their children work.
Coal mines and car factories, nah.

Economics doesn't stray far from base human instincts really does it.

W.