D
Deleted member 28227
Guest
Just quoting the Cheeto and my mouth is outrageously dry RubioSettle down Elizabeth. You're getting over your skis here.
Other banks wouldn’t do the type of lending as SVB. It was high risk to start up techs with VC backing. Very industry specific. Conservative banks would try to diversify the industries in the portfolio and avoid startups.The number of silicon valley startups with connections to this bank is enormous. There are tons of threads that can be connected into a thousand different conspiracies. Look, I don't want to tell a professional how to do his job, but you have to find one with the Clinton's in it. Bill and Hillary add a certain legitimacy to any conspiracy.
Joking aside, I have asked the question of why so many went to this bank. Did other banks not take the money? Seems unlikely. I was told directly that "it was cool to be a customer of this bank". All I could do was laugh and asked if they got a free t-shirt or something. I still feel like there is something missing from this story, but I'm an aging Gen X'er with occasional time on my hands, so this is my hobby.
KPMG under scrutiny? Someone seriously doesn't know how bank accounting works and given how it has been explained in numerous articles over the last 5 days, they obviously don't care to know.
SAJ-99
Well-known member
Remember, "it's not a loss until you sell" (like my DFLI holding- but i digress). You can hold the bond to maturity and never see a loss. That is why there are difference accounting classifications - Held to maturity (HTM) and available for sale (AFS). The bank doesn't have to show the loss for everything classified as HTM. It is all unrealized. Then the depositors started asking for funds. SVB had to sell some of those securities and book the loss. The problem- once you sell one you have to classify them all as AFS and mark them to market. The realized loss on the part sold became a hit to the balance sheet on all the other securties. So, SVB said they were going to sell new equity to plug the gap. They got some interest in the equity, but the news scared more depositors resulting in more withdraws. Rinse and repeat. All within about 36hrs.
But yes, it was incompetence of management. Not the auditor though. Their job isn't to tell the bank what the duration of the treasury assets should be. Should they? I don't know.
Yes, they were very niche. They weren't alone in the business, but they were the leader (see previous post, I still can't figure out why). One thing I'm hearing is that they didn't have a lot of loans to these companies. That was part of the problem. In 2020-2021 investors throw money at VC ideas = Companies can't spend it fast enough so they deposit it = bank ends up with short term deposits with no high yield/risk loans = bank needs to make net-interest margin when rates are super low, so they buy "super safe" long duration treasuries and mortgage securities. It is incredible ironic (to me) that it's not the high-risk loans that did them in, but ultra-safe treasuries.
Your point about "conservative" banks is part of the question. A large bank by nature of size is diversified by region, businesses, some retail, some corporate, etc. I.e. too big to fail. What guardrails do we need make sure a bank diversifies. Seems like they should do this naturally. Although there might be some banks in Texas that have heavy oil exposure. But when oil went negative, those clients weren't all on Twitter coordinating a run on the bank. The reality is, any bank of any size can get run on and be put out of business.
There probably aren’t any guardrails. The Feds are in bank’s business very deeply if you are large enough but it won’t stop bad decisions.
The roll back of the auditing of some smaller banks in 2018 is going to be scrutinized heavily. Economic freedom isn’t so great if the Feds have to shut the bank down and pay its bill for ignoring its own people on deposit structure. Someone internal at SVB saw this deposit mess coming.
There is a large shift of dollars moving from small/regional banks to large banks. Had the Biden administration not guaranteed all deposits, a serious series of bank runs was about to occur. A few more banks are poised to go down anyways after Moody’s downgrades them.
The roll back of the auditing of some smaller banks in 2018 is going to be scrutinized heavily. Economic freedom isn’t so great if the Feds have to shut the bank down and pay its bill for ignoring its own people on deposit structure. Someone internal at SVB saw this deposit mess coming.
There is a large shift of dollars moving from small/regional banks to large banks. Had the Biden administration not guaranteed all deposits, a serious series of bank runs was about to occur. A few more banks are poised to go down anyways after Moody’s downgrades them.
BigHornRam
Well-known member
I've read that Bank of America has a high exposure to low yield long term bonds as well. Sounds to me like the banking industry as a whole is in a very dangerous place right now. Not at all a surprise.
SAJ-99
Well-known member
Can't make this stuff up.
noharleyyet
Well-known member
Must've had a "print by" issue date...much like Becker's trading plan
Smart fellas . . .
Through a rule 10b5-1 trading plan established on Jan. 26, the CEO sold 12,451 shares in four transactions on February 27 at an average price of ~$287.42 per share. On the same day, Becker had acquired the 12,451 shares through the exercise of derivatives at $105.18 per share. That implies he made ~$2.3M profit from the transactions.
Also on Feb. 27, Chief Financial Officer Daniel Beck sold 2,000 SIVB shares at $287.59 per share, or ~$575K, through a trading plan he entered on Jan. 24
SAJ-99
Well-known member
I would expect clawbacks on that. It will be interesting, to me at least, to see what the FDIC finds when it looks through the loan book.
BigHornRam
Well-known member
The numbers are disturbing. However, it’s only a loss if BOA has to sell bonds at a loss to pay for a liquidity run. BOA and all the big banks are taking in millions, if not billions, of dollars right now. Cash is king.
BigHornRam
Well-known member
That makes me all warm and fuzzy.....
BigHornRam
Well-known member
Did he take out any clawback insurance?
338win
Well-known member
- Joined
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SAJ-99
Well-known member
Not sure. Someone said it was created from a survey of employees. Wait a second...hmm. The conspiracy builds...
Like the song.
SAJ-99
Well-known member
Krystal clearly doesn't remember all the checks people during the pandemic. I'm not sure if she is asking to let banks fail or for the people of East Palestine to get more checks. I do sort of agree with her that we are walking this fine line between pure free-market capitalism and quasi-socialism and dancing with parts of both. Who knows if it works. I'm sure there are people in East Palestine with funds in Fifth Third Bank. So there was some benefit to them in the latest backstop.
Let's be clear. This wasn't a bailout. There are no taxpayer funds at risk. The shareholders got nothing, bond holders will get nothing and the FDIC insurance fund can cover the rest. What happens after this is to be determined.
npaden
Well-known member
Generally accepted accounting principles require that management’s intent and ability be considered in valuing certain securities; for example, whether—
- Debt securities are classified as held-to-maturity and reported at their cost depends on management’s intent and ability to hold them to their maturity.
- Consider whether management’s activities corroborate or conflict with its stated intent. For example, the auditor should evaluate an assertion that management intends to hold debt securities to their maturity by examining evidence such as documentation of management’s strategies and sales and other historical activities with respect to those securities and similar securities.
- Determine whether management’s activities, contractual agreements, or the entity’s financial condition provide evidence of its ability. Examples follow.
(1) The entity’s financial position, working capital needs, operating results, debt agreements, guarantees, alternate sources of liquidity, and other relevant contractual obligations, as well as laws and regulations, may provide evidence about an entity’s ability to hold debt securities to their maturity. (2) Management’s cash flow projections may suggest that it does not have the ability to hold debt securities to their maturity.
It's a pretty fine line with a lot of judgement required by the auditor here. Historical factors are easy to identify and hang your hat on. They haven't been selling them in the past so no real indication that they would need to sell in the future. Hopefully they at least have a blurb in their audit workpapers discussing the assertions above. Hard for an auditor to forecast a bank run causing liquidity problems that force them to sell at a big loss.
BigHornRam
Well-known member
The FDIC fund is just under $130 billion. We will blow through that quickly, especially after the Biden admin. is making all the SVB depositors whole. Then what?
The bank run and potential government loss would be much worse without the deposit guarantee by Biden. We’re dealing with 3 banks instead of 10 right now.
There will be more but hopefully at a reduced amount.
The underlying assets of the bank are fine - this is a liquidity crisis. Banks will buy the failed bank assets. The government lost no money during the 2008-2011 bank failures.
D
Deleted member 28227
Guest
Might be something you…I dk considered or maybe hedged against if, say you had been at Lehman brothers before the 08 crash…or worked with Andersen during En… oh wait
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BigHornRam
Well-known member
That's what they say, not buying it.
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