Biggest Bank Failure Since 2008 as Regulators SHUT DOWN Silicon Valley Bank
Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago.
The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.
According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under the control of the regulator.
According to the press release, SVB’s official checks will continue to clear.
This was breaking news as I got up this morning.
I shall leave you with Hal Turner’s report and leave it to later to determine where this is going.
Ed Dowd says it’s serious but not the end of the world
Financials getting destroyed. Silvergate Capital, SVB Financial down 70%, rumors of bank runs. Credit Suisse Winding Down?
Silicon Valley Bank online banking system and mobile services are now unavailable for business clients. The stock is down over 80% yesterday alone.
In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021.
As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!) in mortgage backed securities (MBS) with these deposits for their hold-to-maturity (HTM) portfolio.
97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%.
The issue is that as the Fed raised interest rates in 2022 and continued to do so through 2023, the value of SVB’s MBS plummeted. This is because investors can now purchase long-duration “risk-free” bonds from the Fed at a 2.5x higher yield.
This is not a liquidity issue as long as SVB maintains their deposits, since these securities will pay out more than they cost eventually.
However, yesterday afternoon, SVB announced that they had sold $21bn of their Available For Sale (AFS) securities at a $1.8bn loss, and were raising another $2.25bn in equity and debt. This came as a surprise to investors, who were under the impression that SVB had enough liquidity to avoid selling their AFS portfolio.
Here’s what happened to the banks stock price:
This is big, a woman I spoke to is an MBA at a small tech company. She said her company was freaking out and was trying to pull money out all day and all the transactions are still “pending”. There are so many of these smaller tech companies out there that aren’t even profitable yet and they could easily go belly up over this.
This goes way beyond just some banking contagion.
401-K Withdrawals being Delayed MONTHS!
Word from money giant VANGUARD is that people with 401-k’s who have been trying to make “Hardship withdrawals” for the past two months, have been stymied by VANGUARD.
According to one customer, he has been trying to take money out of his 401-K to pay down some medical debt. People with 401-K’s can make what are called “Hardship Withdrawals” to get some cash during troubled finances, and minimize the tax impact.
Instead of giving this one man his money, VANGUARD demanded to see the Explanation of Benefits (EOB) from his health insurance! The guy sent it, showing exactly the medical procedure he had done, the charges, what the Insurance paid, and what his portion is. That was two months ago. According to the man, VANGUARD has still not sent his money and each time he calls or writes, he is told either “We need the EOB” or “The transaction is still pending.”
Result: No money from VANGUARD!
banks are hurtin..
SIVB -60.41%
BKX -7.70%
GS -2.06%
MS -3.86%
CUBI -8.93%
FRC -16.51%
SASR -7.13%
NYCB -6.33%
FFWM -8.80%
ALLY -7.00%
DCOM -2.15%
PPBI -7.50%
PB -4.51%
CLBK -3.54%
CMA -8.01%
FHN -1.97%
Moreover, BCS -3.60%
Watch Barclay’s.
Deutsche Bank collapse 10% before slightly recovering in opening trading
CREDIT SUISSE WINDING DOWN???
The Depository Trust & Clearing Corporation is an American post-trade financial services company providing clearing and settlement services to the financial markets. The organization posted THIS NOTICE about Credit Suisse yesterday:
This has left many people wondering if Credit Suisse is dead?
WELLS FARGO ISSUES?
Reports are coming in as of 7:46 AM EST of money missing in wells Fargo accounts this morning.
They are claiming a direct deposit issue. we will see.
STOCKS TOO!
Stock markets across Asia down 3%, German and French exchanges just open down 1.8% in minutes, London down 1.6%
Hold on to your hats!
Fed might be forced to reverse monetary policy next week!!
Black Friday …Black Monday??
Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago.
The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.
According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under the control of the regulator.
This story is an UPDATE to a story I published about 7:30 this morning showing that bank in particular has seen its share price plunge upwards of 70% overnight, and looked to be in trouble. That earlier story is HERE
UPDATE —
A Silicon Valley Bank branch in Manhattan today called the cops on tech investors trying to pull their cash out as a run on the bank today forced regulators to seize its assets.
Police were called after ‘about a dozen’ financiers, including former Lyft executive Dor Levi, showed up outside the building on Park Avenue as investors scrambled to get their money out in the biggest collapse since the Great Recession.
The bank failed today as depositors – mostly technology workers and venture capital-backed companies – began withdrawing their money following a shock announcement of a $1.8bn loss. The bank took a hammering in pre-market with its price plunging by 66 percent before trading was halted.
But with investors only protected up to $250,000, there have already been horror stories. Ashley Tyrner, CEO of Boston wellness firm FarmboxRx, said she had at least $10m deposited with SVB and has been frantically calling her banker. She called it ‘the worst 18 hours of my life.’
With around $209bn in assets, SVB is the second-largest bank failure in US history after the 2008 collapse of Washington Mutual. It is the first FDIC-insured bank to fail in more than two years, the last being Almena State Bank in October 2020.
***** FLASH UPDATE *****
As of 1:51 PM EST, I am being told the following:
“The FDIC noted that SVIB had $175BN in deposits as of Dec 31, note that some $151.5BN of these are uninsured, which means they get exactly ZERO back.
They get a COUPON that can be redeemed for whatever is left after wind-down and the government gets paid back.
For the collapse of Lehman Brothers in the year 2008, it was 1/2 cent on the dollar, paid out ten years later.”
UPDATE 2:15 PM EST —
I am told “There is CONTAGION” in this Bank trouble . . . .
Central banks have been dumping billions and billions in the bond market to try to stabilize the 10 year and they failed miserably. They have no liquidity.
. . . seems like a good time to start WWIII and head for the bunkers before anyone starts asking awkward questions.
