Saturday, March 11th 2023
Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments
Technology Companies, Venture Capitalists and Startups are in panic after the collapse of Silicon Valley Bank on Friday, March 11, 2023. In the short term it will be a mess - customers of SVB have no access to FDIC insured deposits until Monday (March 13). Customers with investments below a $250,000 cap have been advised to make claims before a strict Monday deadline. The FDIC is forming plans to pay depositors, with investments greater than the aforementioned cap, a special dividend next week.
US Regulators have swooped in to recover assets from Silicon Valley Bank. This is the first failure of a North American banking group since the Great Recession of 2007 to 2009. Whispers of SVB's oncoming financial troubles were heard earlier this week, which prompted a run of withdrawals from the bank by worried customers. Regulators stated that they took swift action in order to "protect insured depositors." On Wednesday 8, SVB Financial Group, the bank's parent company, revealed plans of a sale of shares totalling $2.25 billion. This followed a reported loss of $2 billion, from the selling off of $21 billion of securities from its portfolio. The banking group had experienced slowdown from its investments in bonds.
Entertainment Streaming company Roku has revealed, via an SEC filing on Friday, that it has $487 million deposited with the crumbling Silicon Valley Bank. That sum represents roughly 26% of Roku's total cash reserves and equivalents. The company also mentioned that its investments with Silicon Valley Bank are mostly of an uninsured status. Roku said. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB." A spokesperson for Roku told Business Insider by email, "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions."
It remains to be seen how many more companies will be affected by the collapse of Silicon Valley Bank. News outlets are today reporting that Roblox Corporation, Rocket Lab and Vice Media are SVB customers. Financial analysts are keeping an eye on the resulting fallout, and predictions have been posited regarding the fragile status of certain banking groups. The US Federal Reserve, as well as other international central banks, have sharply raised interest rates and borrowing costs in attempts to dampen the effects of inflation. This has had a knock-on effect on the bond market - portfolios decline in value as interest rates rise.
Sources:
BBC News, Business Insider
Entertainment Streaming company Roku has revealed, via an SEC filing on Friday, that it has $487 million deposited with the crumbling Silicon Valley Bank. That sum represents roughly 26% of Roku's total cash reserves and equivalents. The company also mentioned that its investments with Silicon Valley Bank are mostly of an uninsured status. Roku said. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB." A spokesperson for Roku told Business Insider by email, "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions."
133 Comments on Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments
The problem of SVB all things considered is relatively simple to solve, they just need cash to ensure deposits because they have their "own" irresponsibly tied in long term bonds that can't be cashed out now.
Oh yeah, we'll just add it to the national debt that our great, great, great, great grandchildren will still be paying off in the distant future.
Again, I'm not sure if its a very direct line to "American Taxpayers". FDIC insurance is paid for by banks directly. By being generous to your perspective, I can argue that these costs are passed onto the depositors (ie: anyone with a bank account). But personally speaking, my bank account balance is high enough that I don't pay any fees, though I can imagine that a number of people do pay banking fees.
So what paid for this, were the various fees that you paid to your bank. (Which in my case, is $0 directly, though banks like Bank of America obviously skim off of the interest rates, at least a little bit).
So I can see the argument that Americans (who by and large own bank accounts) are at least in the pool of money that goes into FDIC insurance. But the direct payments are from the banks themselves, and its only an indirect fee at best that ties the typical American to this whole process.
However, make be it's an opportunity to tech-wash the banks hidden reserves from
First Republic Bank stock plunges 60% as regional bank fears continue
We're overdue a major crash any way & this might be it.
So shareholders are still speculating on whether or not various banks will "make" it. Even with FDIC backing up depositors, there's no guarantee that shareholders will be anywhere near whole.
Why would there be any interest in protecting crypto? It isn't something that the Federal Reserve would normally be interested in. Seems like there might be political leanings on what's going on - not just banking issues. When you look at www.circle.com/en/ , and you speculate how much "black assets" are now tied up in crypto - you can imagine a lot of geopolitical activities unravelling if payments systems stutter, and if black assets vapourise. This is very different from normal small-bank liquidity crises that we have had in the past.
We have a new fiscal management problem. In the past, altering interest rates and bond yields was a fabulous monetary policy for managing the economy. Now, the financial system is so leveraged (again), and the off-balance sheet effects (leveraging, derivatives, crypto, start up banks relatively poorly capitalised) are so large, that there is massive contagion risk, and normal macroeconomic steering can have massive unintended consequences.
politicalrulers' money!Given the current set of banks in hot water, I think everyone should sell any stocks in a bank beginning with the letter "S". (But maybe the cryptocoin rumor is also true, who knows?)