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

[T0@st]

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.

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[TumbleGeorge]

Please say that this is not due to crypto "currency" operations and that there is no evidence of criminal siphoning through Ponzi schemes.

 

[ThrashZone]

Hi,
Doubt it will be surprising why they really fell

 

[dragontamer5788]

Please say that this is not due to crypto "currency" operations and that there is no evidence of criminal siphoning through Ponzi schemes.

It's because SIVB was a venture capital / tech startup focused bank.

Tech startups got billions of dollars in 2021 as the pandemic hit and work from home accelerated the consumption of computer services and equipment.

Startups then used Silicon Valley bank to hold their deposits. It's looking like $100+ Billion in deposits flooded into Silicon Valley bank at this time.

For reasons unknown, SIVB put a huge chunk of that money into 10Y or 30Y treasuries, as well as mortgages around Silicon Valley.

Two years later, in 2023, on Thursday, the tech startup ecosystem undergoes a collective panic attack and withdraws $46 Billion from SIVB. This has likely forced SIVB to sell those 10Y or 30Y treasuries and mortgages on the open market.

Note: long dated bonds are worth 20%+ less today than they were worth in 2021. That is, SIVB needs to sell $1200 worth of mortgages and bonds to make $1000 of customer withdrawals.

Come Friday, yesterday, FDIC was forced to take over the bank. They are suffering from a classic bank run and have collapsed.

 

[dont whant to set it"']

Why does this remind me of this sketch, honestly idk.

 

[trparky]

And there's rumors that ten other banks are showing signs of taking on water (like the Titanic).

Customers Bancorp Inc. of West Reading, PA
First Republic Bank of San Francisco, CA
Sandy Spring Bancorp Inc. of Olney, MD
New York Community Bancorp Inc. of Hicksville, NY
First Foundation Inc. of Dallas, TX
Ally Financial Inc. of Detroit, MI
Dime Community Bancshares Inc. of Hauppauge, NY
Pacific Premier Bancorp Inc. of Irvine, CA
Prosperity Bancshares Inc. of Houston, TX
Columbia Financial Inc. of Fair Lawn, NJ

 

[dragontamer5788]

And there's rumors that ten other banks are showing signs of taking on water (like the Titanic).

Customers Bancorp Inc. of West Reading, PA
First Republic Bank of San Francisco, CA
Sandy Spring Bancorp Inc. of Olney, MD
New York Community Bancorp Inc. of Hicksville, NY
First Foundation Inc. of Dallas, TX
Ally Financial Inc. of Detroit, MI
Dime Community Bancshares Inc. of Hauppauge, NY
Pacific Premier Bancorp Inc. of Irvine, CA
Prosperity Bancshares Inc. of Houston, TX
Columbia Financial Inc. of Fair Lawn, NJ

Consumer banks, like Ally will be fine. Because $250,000 FDIC insurance is enough to cover most consumers.

The issue with SIVB is that $250,000 is worthless to sillicon valley startup types and companies. It is estimated that 97% of SIVBs deposits are uninsured (ie: over the $250,000 FDIC limit)

A round of $50 million raised for a company is considered small in the valley. It's just a different set of risks with regards to this region and environment. Companies and startups need full access to their funds to make things like payroll (yesterday, or the 15th)

 

[trparky]

Consumer banks, like Ally will be fine. Because $250,000 FDIC insurance is enough to cover most consumers.

True, but it's still not a good sign. I don't want to go all doom and gloom here but this is a sign of some very bad things to come. And to be honest, I've been predicting this kind of thing for the last ten years.

Does anyone remember the Great Housing Bubble of 2008? Yeah. We learned NOTHING!!! And here we are repeating the same damn mistakes. Those who do not learn from history are doomed to repeat it and here we are folks, repeating history. Alright everyone, time to stick your head between your legs and kiss your ass goodbye because man, we're in for a rough road here.

 

[ThrashZone]

Hi,
Sure they learned
They know now to large to fall exists

 

[TumbleGeorge]

Does anyone remember the Great Housing Bubble of 2008? Yeah. We learned NOTHING!!! And here we are repeating the same damn mistakes. Those who do not learn from history a

Because is possible this s not mistake but target which was reached.

 

[ThrashZone]

 

[trparky]

Hi,
Sure they learned
They know now to large to fall exists

Oh yes, too big to fail. Why bother to make good decisions when good ol' Uncle Sam will come along and save your ass?

Because is possible this s not mistake but target which was reached.

Are you referring to how maybe this was planned? I really don't want to go all conspiracy yet, I've only had one cup of coffee this morning.

 

[TumbleGeorge]

Are you referring to how maybe this was planned? I really don't want to go all conspiracy yet, I've only had one cup of coffee this morning.

Well, in this case( in terms of this thread), I would be interested in whether some of the big technological corporations have not tried to get rid of potential competitors by "killing" them in the bud.

 

[mb194dc]

Boom and bust. This will be a mega bust given how mega the boom was...

Tech going to get much cheaper again, yay.

Hopefully still have a job to buy stuff! Yug.

 

[the54thvoid]

Well, Elon Musk has allegedly said he's possibly interested in buying it. Would that not ring alarm bells for conflict of interest?

New customer: Hi, I've got an awesome concept that will eradicate wasteful electric batteries.
New SVB: Computer says no.

 

[dragontamer5788]

Does anyone remember the Great Housing Bubble of 2008? Yeah. We learned NOTHING!!! And here we are repeating the same damn mistakes. Those who do not learn from history are doomed to repeat it and here we are folks, repeating history. Alright everyone, time to stick your head between your legs and kiss your ass goodbye because man, we're in for a rough road here.

We did learn.

Silicon Valley Bank chief pressed Congress to weaken risk regulations

CEO Greg Becker personally led the bank’s half-million-dollar push to reduce scrutiny of his institution – and lawmakers obliged

www.theguardian.com

Then Silicon Valley Bank lobbied to remove regulations from 2008 from it, because as a "Startup Focused" bank, they wanted to be treated differently. They were apparently (lol) less risky, and the needs of the silicon valley startup community differed from the rest of banking... or some argument like that. Then Congress raised the limits of regulation from $50 Billion to $250 Billion or something like that, so that banks like SIVB wouldn't have to pass stress-tests.

15 years is a long time. Enough time to learn a lesson, and then unlearn the lesson. Fortunately, the larger banks remain under the "stress-test" scrutiny, and other such regulations. But smaller community banks managed to lobby and reduce their levels of scrutiny over the past decade.

 

[trparky]

We did learn.

I argue that we didn't, and your link is proof of that. If we had actually learned, that kind of dumbass crap wouldn't have happened and the regulations wouldn't have been rescinded.

 

[dragontamer5788]

I argue that we didn't, and your link is proof of that. If we had actually learned, that kind of dumbass crap wouldn't have happened and the regulations wouldn't have been rescinded.

SIVB, despite all of its deregulation over the past decade, was still subject to Dodd-Frank (the signature law passed in 2010 to prevent 2008-style crashes from happening again). And that's why it was investing in "safe" Treasury Bonds. It very well could have been worse without the current regulation scheme.

Honestly, I'm not seeing any similarities between today and 2008, aside from the obvious "an 11+figure bank has collapsed". Heck, 11-figures ($100,000,000,000) is still smaller than the issues facing 2008 (which was closer to 13-figures, or $10,000,000,000,000) in terms of size and scope.

So hold your horses on the 2008 comparisons. We're no where close to that yet. We're just witnessing a major bank collapse of the Dodd-Frank era. Albeit with some bits of Dodd-frank chipped away, but that's what happens in a Democracy where laws are malleable. Laws will change over the years. The bulk of the protections are still in effect.

 

[trparky]

So hold your horses on the 2008 comparisons. We're no where close to that yet. We're just witnessing a major bank collapse of the new era.

Except that we have ten other banks showing signs of collapse as well. Add that to the mix and things don't look good.

 

[dragontamer5788]

Except that we have ten other banks showing signs of collapse as well. Add that to the mix and things don't look good.

As someone who vividly remembers 2008... wake me up when the numbers at risk start hitting $10+ Trillion buckaroos. We ain't anywhere close to 2008 yet.

This will be a major challenge to the Silicon Valley startup scene. But a country-wide catastrophe, I'm not convinced of.

-----------

The main problem is that SIVB was handed $100+ Billion in 2021 due to the Tech Boom relating to COVID19 + Lockdowns. SIVB put that money into long-duration bonds (aka: a bad bet for 2023). I guess they didn't see how interest rates could change, or factor in interest-rate issues into their calculations or whatever. But as far as a lot of regulations go, they "did the right thing" and were "inside the regulations".

Despite being within the regulations (ie: buying "safe" 30Y bonds. That is, technically safe under regulations, but a HORRIBLE idea), they collapsed 2 years later, because it still was a bad idea to buy 30Y bonds.

When a bank makes a $100 Billion bet, and that bet goes sideways / bad, the bank will collapse. That's just how it happens. Its up to individual banks to make better decisions. That, combined with the excessively high account balances at SIVB (ie: 97%ish of deposits are above the $250k FDIC insurance level), created a problem that honestly, doesn't look like anything from 2008.

A regional bank of this size cannot afford to make mistakes with $100+ Billion mistakes. And I don't think any level of regulations can stop "Banker makes bad decision". At best, our regulations need to be aimed at preventing these bad-decisions from spreading to other banks.

---------

So we have a set of regulations saying "this pile of things is considered safe", and "that pile of things is considered unsafe". As a FDIC insured bank, we forced SIVB to "only buy things from the safe pile".

Because riskier things make more money, SIVB bought the riskiest things from the safe pile. And... bam. Friday happened.

 

[erek]

Please say that this is not due to crypto "currency" operations and that there is no evidence of criminal siphoning through Ponzi schemes.

There might be evidence

 

[trparky]

There might be evidence

I knew that nightmare wasn't over.

 

[dragontamer5788]

There might be evidence

USDC / Circle was keeping some money at SIVB. But I don't think that counts as "Siphoning money out". If anything, that was Circle depositing money at this bank (ie: putting money in).

This has huge implications to the USDC stablecoin that Circle-group maintains. And with Coinbase temporarily cutting USDC out this weekend, the cryptocoin world is definitely panicking over this event too.

 

[Daven]

Well, Elon Musk has allegedly said he's possibly interested in buying it. Would that not ring alarm bells for conflict of interest?

New customer: Hi, I've got an awesome concept that will eradicate wasteful electric batteries.
New SVB: Computer says no.

New SVB: cough

 

[Why_Me]

Check out the date of this article and look at #20 on that list.

America's Best Banks 2024

Forbes’ 15th annual America’s Best Banks list looks at 10 metrics measuring growth, credit quality and profitability for the 2023 calendar year, as well as stock performance in the 12 months through March 18, 2024.

www.forbes.com