Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments

[erek]

I don't think the doomsday hype is warranted no.

Ratings agency Moody's on Monday downgraded the debt ratings of collapsed New York-based Signature Bank (SBNY.O) deep into junk territory and placed the ratings of six other U.S. banks under review for a downgrade.

Moody's, which rated Signature Bank's subordinate debt 'C', said it was also withdrawing future ratings for the collapsed bank.

The banks placed under review for downgrade are First Republic Bank (FRC.N), Zions Bancorporation (ZION.O), Western Alliance Bancorp (WAL.N), Comerica Inc (CMA.N), UMB Financial Corp and Intrust Financial Corporation, Moody's said.

 

[R0H1T]

I don't think the doomsday hype is warranted no.

Not every doomsday has to be as bad/worse than the last one! And 2008, or 1929, will be hard to usurp in that sense.

 

[Solaris17]

Not every doomsday has to be as bad/worse than the last one! And 2008, or 1929, will be hard to usurp in that sense.

That is true! what an excellent perspective! You are certainly right.

 

[dragontamer5788]

I don't think the doomsday hype is warranted no.

Doomsday no. This is a problem for the Fed and the Treasury though. In particular, these banking failures are taking away our tools to try and fix inflation.

Inflation is bad. Bank failures are bad (as is unemployment, and all sorts of other issues related to higher rates). Now we have to worry about threading the needle. I hope that these loans + FDIC backstops will strengthen bank positions so that we can continue our fight against inflation. We've got a long way to go still.

 

[erek]

Doomsday no. This is a problem for the Fed and the Treasury though. In particular, these banking failures are taking away our tools to try and fix inflation.

Inflation is bad. Bank failures are bad (as is unemployment, and all sorts of other issues related to higher rates). Now we have to worry about threading the needle. I hope that these loans + FDIC backstops will strengthen bank positions so that we can continue our fight against inflation. We've got a long way to go still.

First Republic Rebounds 60% As Bank Fears Ease​

 

[Why_Me]

First Republic Rebounds 60% As Bank Fears Ease​

And then there's this.

Moody's cuts outlook on U.S. banking system to negative, citing 'rapidly deteriorating operating environment'

The firm, part of the big three rating services, said it was making the move in light of key bank failures.

www.cnbc.com

 

[Octopuss]

I am economically retarded, so please someone explain to me how can a bank suddenly collapse into thin mist of dog shit.

 

[Why_Me]

I am economically retarded, so please someone explain to me how can a bank suddenly collapse into thin mist of dog shit.

The bank had more debt than assets.

 

[dragontamer5788]

I am economically retarded, so please someone explain to me how can a bank suddenly collapse into thin mist of dog shit.

On Monday, everyone (especially depositors) thought there was $200 Billion in the bank, matching the $200 Billion in deposits. (Rough, round numbers. I'm not bothering to look up the real numbers, but hopefully $200 Billion gives you an idea of what happened here).

On Wednesday Night, it turned out that Silicon Valley Bank only had $180 Billion or so (estimated: 50%ish long-term bonds, 20%ish decline in value). This has been true for some time, but it was "revealed" on Wednesday night.

Thursday, when the stock markets opened, shareholders dumped their shares. As the shares collapsed, the depositors began to notice that maybe their money wasn't safe. So they withdrew $40+ Billion on Thursday, which was all the cash Silicon Valley Bank had on hand (The other $140B remaining is harder to sell and turn back into cash). By Friday, FDIC was forced to take over.

-------------

This "loss" of money, from $200B in deposits down to $180B (or so) happened over the last two years gradually... as the bank made bad bets in the bond market. But this was so gradual that most people didn't notice. What happened on Wednesday was it being "revealed" and everyone recognizing the problem at the same time. This decline in value happened because the Fed has been raising interest rates in an attempt to stop inflation over the past year. As people realized that the bank was in trouble, they sold shares + took out their money, making the problem worse-and-worse until FDIC stepped in and stopped the panic attack.

TL;DR: The bank didn't collapse suddenly. The conditions of collapse were setup over 2 years. What happened "suddenly" was everyone realizing that the bank was in an insolvent / collapsed state. That is one of the dangers of banking, you don't actually collapse when problems (ex: losing money) occurs. You collapse when people notice the missing money. The money could have gone missing last year, or even a decade ago, but if people don't notice, then you can keep chugging along.