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Silicon Valley Bank seized by FDIC after largest failure since the Great Recession - Page 2
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Silicon Valley Bank seized by FDIC after largest failure since the Great Recession

245

Comments

  • FatGrizzlyFatGrizzly Member, Host Rep

    @Tony40 said:

    @FatGrizzly said:
    I don't understand American stuff. Isn't bank something like where you deposit money to be safe since it won't be safe in your home, but then you have to protect (insurance) for the money in Bank?.

    India has insurance for bank lockers, but never heard of insurance for a bank account

    Hello, yes they do. every country have bank deposit insurance.

    Frequently Asked Questions - Reserve Bank of India
    Reserve Bank of India
    https://www.rbi.org.in › Scripts › FAQView
    Each depositor in a bank is insured upto a maximum of ₹ 5,00,000 (Rupees Five Lakhs) for both principal and interest amount held by him in the same right and ...

    Deposit Insurance (DICGC)

    https://www.rbi.org.in/Scripts/FAQView.aspx?Id=64

    I thought it was something you buy in Murica to protect your dollars

  • HostEONSHostEONS Member, Patron Provider

    SVB was providing bank accounts to all Stripe Atlas users hence a tons of startups were using SVB a huge number of non-US residents were using SVB as SVB opens bank account without the need for the founder to even visit US

    Thanked by 1vimalware
  • MaouniqueMaounique Host Rep, Veteran
    edited March 2023

    Guys, insurance schemes all over the world are designed to keep the regular populace safe, people who don't know how the economy works, NOT companies or investors who are supposed to know what they were doing.

    Keep piles of cash for more than a few days in inflationary times when you could invest it? That's beyond stupid for a company or an investor, I am sorry.

    Thanked by 2greentea vimalware
  • edited March 2023

    There is absolutely no excuse if a company loses over the $250k insured by the FDIC, Silicon Valley Bank offered sweep accounts. This is a case of bad management all around.


    Thanked by 2greentea vimalware
  • raindog308raindog308 Administrator, Veteran

    @Arkas said: Isn't each account auto insured for $250K by the FDIC? Surely they didn't put all their money in 1 account?

    If you've got $500m, it's probably not practical to manage 2,000 accounts.

    If you've got $500m, you can afford to hire people to do due diligence that will tell you that JP Morgan is probably not going to go out of business tomorrow but the EZ Lending Bank of West Toenail, Ohio might.

    Roku reported $1.962 billion in cash on hand at the end of December 2022.

    @FatGrizzly said: I don't understand American stuff. Isn't bank something like where you deposit money to be safe since it won't be safe in your home, but then you have to protect (insurance) for the money in Bank?.

    India has insurance for bank lockers, but never heard of insurance for a bank account

    In the US, if you put your money in a bank, the US government (Federal Deposit Insurance Corporation aka FDIC) insures you against the bank's failure up to $250,000 (or $500,000 if it's a joint account). The banks pay an insurance premium to the government, but the consumer is the beneficiary. It's a simple insurance setup: if thousands of banks pay in, then there's money for consumers when there is a rare bank failure.

    This was started in the 1930s after the Great Depression when some banks failed and people lost their money.

    Brokerage accounts are separate - there you are insured by the gov't against the brokerage failing, but not against investment losses.

    Bank failures are very rare these days, because usually when a bank gets in trouble it is seen a long way off and another bank acquires them. And the FDIC aren't idiots - banks that are faltering get close scrutiny. If the FDIC grades your bank as weak, they can change management, force mergers, or even close the bank. A bank failure also raises rates for other banks, so someone playing loose will have 5,000+ angry fellows bank to deal with.

    Had SVB been trending down for months, the FDIC would have stepped in - this was notable for its suddenness.

    So @FatGrizzly what do you mean by "bank lockers"? Are those what we call safety deposit boxes in the US - you can go into the bank and they have a locked box they keep safe for you? In the US, those contents are not insured...the gov't has no way of knowing what you put in them.

    @Tony40 said: bc those funds are in a money market mutual fund, they’re not FDIC secured

    The FDIC says money markets are insured...?

    https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/

  • raindog308raindog308 Administrator, Veteran

    Looks like depositors will get access to their insured funds on Monday:

    https://www.fdic.gov/news/press-releases/2023/pr23016.html

  • edited March 2023

    Basically this "VCs are corner cutting grifters" and they will all be made whole from the taxpayer

  • Do not wear yourself out to gain wealth.Stop and show understanding.
    When you cast your eyes on it, it is not there, For it will surely sprout wings like an eagle and fly off into the sky. Proverbs 23:4,5

  • MaouniqueMaounique Host Rep, Veteran
    edited March 2023

    This is the "regulation" issue all over again. We want trumpistani deregulation to make more profits, we want lower rates and less scrutiny for the same purposes, more money for wall street to show record indices, but then we are too big to fall and need bail-out.

    That being said, after the disastruous Bush management of the wall-street, Obama salvaged what could have been and put in place regulations to reduce that kind of "creativity", we must not forget that the bail-outs were a success, the taxpayer took a hefty profit from the resale of the assets, however the damage on the economy has been done.

    Under Trump we again "deregulated", "helicoptered" money over wall-street and now we are paying the price of high inflation and bad infrastructure.

    Also, that being said, US is in an unique position for growth. Forget China, they built all the needed infrastructure and then some, built whole towns without people just to spend and grow the GDP, when they ran out of viable project in China started to lend to various failed dictatorships and when they ran out, even not so much dictatorships, in order to build there infrastructure but allt hat giant scheme is now collapsing into itself at the worst moment possible, when the whole world is waking up and attempting to cut long supply chains and dependences on various warmongering dictatorships due to the Putlerist wars.

    US could start another New Deal, not only Green, but in general, like FDR's one, revamp rail, roads, cities, even agriculture, but most importantly, revamp the energy sector, the grid is in dire need of repairs, let alone modernization and resizing to meet the new demand of energy as well as balancing the renewables from one side of the country to the other.

    The basis for economic development is the solvent demand, the best combo is the rational demand, couple with sustainable solvency, one pushing the other up, like when demand is being satisfied, that generates income and more demand could be satisfied, the only condition is that the demand does not become unreasonable or artificial, thus generating no income, like in China, building ghost cities and roads to nowhere, or like in US, consumption for the sake of consumption or for the garbage dumps.

  • crunchbitscrunchbits Member, Patron Provider, Top Host

    @vyas11 said:
    SNF and now SVB.

    Which three letter combo involving the letters S and B is next to cause a financial storm?

    Weirdly enough it might just be "S and B" next: Signature Bank

    Thanked by 1vyas11
  • MaouniqueMaounique Host Rep, Veteran
    edited March 2023

    I have looked into this and it seems they were taken down because have been sitting on too much cash and bought bonds. Inflation comes, interest rates go up, bonds go down, people want to withdraw money, the end.

    This was not a scam or some nefarious thing, it is a consequence of the steep rates increases.

    Normally, higher rates are great for banks, their spread increases, but these were not traditional banks, the whole ecosystem of startup thrives in large money supply conditions and suffocates in high interest rates situations.

    As any crisis is an opportunity for smart people, I would wait for shares in banks to hit rock bottom and buy in banks with lots of retail banking, lower exposure to a few businesses and bonds. Those should be doing well in the near future.

  • edited March 2023

    SVB paid out bonuses ahead of FDIC seizure

    This is starting to make sense now

  • MaouniqueMaounique Host Rep, Veteran

    @johnnyquestion said: This is starting to make sense now

    Yep, they were probably the bonuses for last year.

  • varwwwvarwww Member
    edited March 2023

    250,000 USD sounds great for individuals.

    In India, Each depositor in a bank is insured upto a maximum of 5,00,000 (Rupees Five Lakhs) (about 6100 USD) by DICGC for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force. Here, people open multiple bank accounts for this reason.

  • If there is no bailout the unsecured funds would be valued at around 78 cents to the dollar. So it is not Armageddon by any means, more like a 20% stupid tax.

    Thanked by 1Maounique
  • suutsuut Member
    edited March 2023

    But SVB just said the other day:

    Proud to be on Forbes' annual ranking of America's Best Banks for the 5th straight year and to have also been named to the publication's inaugural Financial All-Stars list.

    Sure enough, it is the best. Its bankruptcy appears to have a big impact on tech startups outside of the United States.

  • Andrew Yang warns of 'mass layoffs,' calls for government intervention after Silicon Valley Bank collapse https://finance.yahoo.com/news/andrew-yang-warns-mass-layoffs-212323735.html

  • Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.

    Why are you surprised that the biggest tech bank has no money?

  • MaouniqueMaounique Host Rep, Veteran
    edited March 2023

    @inland said: Why are you surprised that the biggest tech bank has no money?

    They had too much money, that was the problem. In order to get some income they bought bonds, then the inflation pushed interest rates higher, the bonds lost value. That means that, when people wanted their money back, the bank had to sell the bonds at a loss so they lost a lot of money in the process.

    This is not a scam, not pump and dump, just collateral damage of the economic readjustment post globalization.

    Many more businesses will fail due the winding down of the globalization, many countries will fail, the far right railed against globalization, now they are getting their dream coming true and trying to profit from the economic woes of the transition phase.

    At first glance, the big trading blocks will insulate some areas from the worst effects of the collapse of the long supply chains, EU, NAFTA and smaller or looser ones will shine for a while, the transatlantic bonds will strengthen, China will buy up the failed Russia, conquer Taiwan and other areas near, but ultimately will have the fate of the Japanese Empire, wars are not fought with guns, but money and economic power.

  • VoidVoid Member
    edited March 2023

    @FatGrizzly said:

    @Tony40 said:

    @FatGrizzly said:
    I don't understand American stuff. Isn't bank something like where you deposit money to be safe since it won't be safe in your home, but then you have to protect (insurance) for the money in Bank?.

    India has insurance for bank lockers, but never heard of insurance for a bank account

    Hello, yes they do. every country have bank deposit insurance.

    Frequently Asked Questions - Reserve Bank of India
    Reserve Bank of India
    https://www.rbi.org.in › Scripts › FAQView
    Each depositor in a bank is insured upto a maximum of ₹ 5,00,000 (Rupees Five Lakhs) for both principal and interest amount held by him in the same right and ...

    Deposit Insurance (DICGC)

    https://www.rbi.org.in/Scripts/FAQView.aspx?Id=64

    I thought it was something you buy in Murica to protect your dollars

    It was just ₹1 lac till 2020. That means if you had ₹7 lacs in a bank and the bank deadpooled, you can only hope to get ₹1 lac back. DICGC is mandatory for all banks in India but you’d never know if summer banks like local cooperative/society banks etc will honor it.

  • raindog308raindog308 Administrator, Veteran

    @Maounique said: We want trumpistani deregulation

    If you think any of this was better regulated under Obama, Bush, Clinton, Bush Sr., Reagan, Carter, Ford, Nixon, Johnson, Kernnedy, Eisenhowever, Truman, FDR, Hoover, Coolidge, Harding, or Wilson, you're high as a kite.

    You can make a case for Taft.

    Thanked by 1DBA
  • MaouniqueMaounique Host Rep, Veteran
    edited March 2023

    @raindog308 said: If you think any of this was better regulated

    It depends, the markets evolved in time, what was good regulation in 1930s or 80s is not good today. It can be argued that the regulations introduced after 1929 were disastruos and the main cause of the big depression. We have learnt from that, still, from strangling the economy to letting VCs running wild with everyone's money is a very long way and a middle ground has to be found, same, tightening the money supply during structural inflation which has little to do with the money supply is also a mistake.

    Fortunately, the economy of today is so vast and diverse that would find ways to adapt. Sudden deglobalization 20 years ago would have plunged the world into depression, today is a mere blip, an inconvenience. Yes, China was not cut off yet, but, de facto, many countries have been, through bankruptcy, the world is losing hundreds of millions of people in Pakistan and many other smaller countries, in a couple of years 1-2 billion people would be, more or less, cut off the international markets, reverting to subsistence and that will happen without much pain for the "global west", only when China would start the wars, another round of inflation and cut backs would come, but if we are smart and use this couple of years to prepare, the shock would be way smaller.

    Also, regulations are supposed to be technical, they became ideological under Trump and that is bad for any period. Just look at the ideological regulations mushrooming in China.

  • edited March 2023

    Tarp 2.0 just introduced, too big is now too small to fail. FDIC insurance is now unlimited and everyone will be made whole!

    Thanked by 1greentea
  • crunchbitscrunchbits Member, Patron Provider, Top Host
    edited March 2023

    @crunchbits said:

    @vyas11 said:
    SNF and now SVB.

    Which three letter combo involving the letters S and B is next to cause a financial storm?

    Weirdly enough it might just be "S and B" next: Signature Bank

    And here it comes.

    Supposedly the feds will cover all depositors regardless of balance at both SVB and SB and "not borne by the taxpayer" (except, they'll just print so yes we all will).

    Thanked by 1OhJohn
  • vyas11vyas11 Member
    edited March 2023

    @crunchbits said:

    @crunchbits said:

    @vyas11 said:
    SNF and now SVB.

    Which three letter combo involving the letters S and B is next to cause a financial storm?

    Weirdly enough it might just be "S and B" next: Signature Bank

    And here it comes.

    Supposedly the feds will cover all depositors regardless of balance at both SVB and SB and "not borne by the taxpayer" (except, they'll just print so yes we all will).

    So they will continue
    Printing more money ? Which means more inflation and if I recall it was inflation that pause this issue in the first place. They had to raise the interest-rate to cool things down. Makes a nice downward spiral in my opinion.

    Now speaking of initials S an and B for banks, the largest consumer bank in India i.e State bank of India also shares two of the three.

    Thanked by 1greentea
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    Thanked by 1crunchbits
  • Breaking: Regulators close crypto-focused Signature Bank, citing systemic risk

    U.S. regulators on Sunday shut down New York-based Signature Bank, a big lender in the crypto industry, in a bid to prevent the spreading banking crisis.

    https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

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