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US Politics: They're Gunnin' 4 Us


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2 hours ago, Mlle. Zabzie said:

Also, I bet either a hedge fund with a credit arm or another bank acquires the assets pretty quickly.

Yeah that would be the best case scenario. Otherwise FDIC will be in the tough position of making an exception to cover uninsured deposits (this would need government approval) or trying to do a fast liquidation of SVB’s assets to make depositors as whole as possible. It looks like SVB has enough assets to cover maybe 30-50% of the deposit book in quickish time.

Meanwhile, on the systemic side of things, there is apparently talk of creating a special vehicle to backstop uninsured deposits at other banks. This would need to be announced soon, otherwise depositors of other regionals may run on Monday morning. 

ETA: Latest reporting seems to be that if the auction for sale of assets fails, FDIC will make an exception to cover uninsured deposits. Note that FDIC is not government funded. 

Edited by Paxter
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16 minutes ago, DireWolfSpirit said:

Yellen is insisting there will be no federal bailout.

Treasury secretary rules out bailout for Silicon Valley Bank

https://www.cnn.com/2023/03/12/politics/janet-yellen-bailout-silicon-valley-bank-cnntv/index.html

 

Yes but also sounds like they might be doing something for depositors…We shall see.  Honestly my weekend has been very, very lively.  Payroll deadlines are a real issue. 

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1 hour ago, DireWolfSpirit said:

Yellen is insisting there will be no federal bailout.

Treasury secretary rules out bailout for Silicon Valley Bank

https://www.cnn.com/2023/03/12/politics/janet-yellen-bailout-silicon-valley-bank-cnntv/index.html

 

No bailout (i.e using taxpayer funds to recapitalize the bank or sweeten a sale) is not the same as no government action at all. FDIC is in a position to cover uninsured deposits in extreme situations if it gets government support.

ETA: One likely bidder is already reportedly out (PNC). Really, it would be quite difficult for anyone other than the top dozen or so US banks to swallow SVB (plus a few of the big Canadian banks - but some of them are already in the midst of major takeovers).  

Edited by Paxter
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Oh dear. Another one bites the dust.

Quote

 New York state's Department of Financial Services said on Sunday it has taken possession of New York-based Signature Bank (SBNY.O) and appointed the U.S. Federal Deposit Insurance Corp as receiver, the second bank failure in a matter of days.

ThinkerX…I apologize!

Undoubtedly the Feds will have to provide some guarantees for the rest of the sector before 9am ET tomorrow.

Edited by Paxter
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18 minutes ago, Ran said:

Another bank that was "friendly" to crypto getting bitten, per reports, so not a huge surprise. 

Yeah Signature was the bank of choice for many crypto-centric companies. 

@Ser Scot A Ellison: This last week tells you more about the quality of US financial regulation than crypto specifically.

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42 minutes ago, Larry of the Lake said:

Turns out the govt will reach out and help those struggling most right now in these difficult times, provided you already have $250k or more at SVB.  

Want some more unscheduled sick days from your railroad employer?  Fuck you.  

The amount of tears that were unironically shed on Twitter about the poor startup employees who may have to sell their 1+ million $ San Francisco properties at slight financial loss was... nauseating.

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3 hours ago, Gorn said:

The amount of tears that were unironically shed on Twitter about the poor startup employees who may have to sell their 1+ million $ San Francisco properties at slight financial loss was... nauseating.

Hang on, I spent my weekend on this.  It's not just startups, and it isn't just the super wealthy executive types that were going to be hit.  Most of the payroll situations I was anecdotally aware of the company was going to allocate payroll dollars that were available from the bottom up.  And what was guaranteed was deposits.  Bondholders and equityholders are going to be wiped as best I can tell.  And, to be clear, this was having ripple effects to these entities' customers, suppliers, etc., many of whom did not bank with SVB.

SVB's internal controls sucked based on the reporting I have seen.  (And this might take down KPMG (not a Good Thing, actually) because they audited SVB and Signature.) But its short sighted to say this was just millionair tech bros.  Fed intervened for good reasons, not to bail out the wealthy as best I can tell.  Real answer is to tighten banking regulations.

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4 minutes ago, Mlle. Zabzie said:

(And this might take down KPMG (not a Good Thing, actually) because they audited SVB and Signature.)

Just in passing, and speaking as a layman; does anyone really still take auditing seriously? I certainly get the impression that numerous companies have failed despite having being audited, and that the audits essentially seem to prove nothing. They do rather feel like a convenient money-spinner for the big 4 accountancy firms, or perhaps a foot in the door.

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Biden and Yellen will make sure that equity holders and debt holders in both SVB and Signature are wiped out. 

So far it looks like the two major government actions (protection of uninsured depositors of SVB and Signature + new term funding facility) have stabilized the overall situation.

The problem is that other medium-sized banks are still under major pressure from deposit outflows and diving share prices. 

So far, the situation seems constrained to the US. Canadian banks are just trading down a couple of per cent, Europe slightly worse but nothing crazy. 

ETA: Lol that Barney Frank is on the board at Signature. 

ETA: I have a bad feeling First Republic is going to go as well this week. 

Edited by Paxter
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The former Nasdaq CEO describes what has happened as U.S. banking being nationalized.

 

"In the moment, that feels very good," Greifeld added. "Over a longer period of time, we have to recognize that we have nationalized banks. The genie is out of the bottle, and anytime a bank runs into trouble … the expectation is the feds will backstop that. And that has long-term implications."

 

 

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1 hour ago, A wilding said:

Just in passing, and speaking as a layman; does anyone really still take auditing seriously? I certainly get the impression that numerous companies have failed despite having being audited, and that the audits essentially seem to prove nothing. They do rather feel like a convenient money-spinner for the big 4 accountancy firms, or perhaps a foot in the door.

Based on the pain and suffering that auditors cause me on the regular, yes.  Also, I sit on some boards and am on the audit committee for every one (and chair an audit committee).  I will say, I take it pretty seriously with that hat on.  I think the gap (or GAAP?) is that a lot of auditors are pretty good at individual processes and procedures but some are better than other at identifying big picture systemic risk.  We need @Chataya de Fleury really, but the audit is only as good as what is being reviewed/requested and the auditor in question.  

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1 hour ago, Paxter said:

Biden and Yellen will make sure that equity holders and debt holders in both SVB and Signature are wiped out. 

So far it looks like the two major government actions (protection of uninsured depositors of SVB and Signature + new term funding facility) have stabilized the overall situation.

The problem is that other medium-sized banks are still under major pressure from deposit outflows and diving share prices. 

So far, the situation seems constrained to the US. Canadian banks are just trading down a couple of per cent, Europe slightly worse but nothing crazy. 

ETA: Lol that Barney Frank is on the board at Signature. 

ETA: I have a bad feeling First Republic is going to go as well this week. 

Unclear on First Republic.  They have a lot of backing from JPM/Chase because of a synergistic relationship between the two banks.  The Fed's expansion of emergency lending helps as well.  But agree, it could go.  The more people chatter about it, the more likely it is to happen.  So, we should stop chattering about it.

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