Let’s try to consolidate all the info on banking insecurities here. Some discussion had been under the stock thread as well, where I warned about this a day early 
Meanwhile, feel free to post general stuff here.
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Good color on the market and SIVB situation half way thru
Signature Bank, 1st Republic, Pac West and SVB have been hit incredibly hard. SVB (15th largest US bank by deposits) announced a $1.8bn loss on recently sold securities and the need to raise capital which sent the stock -60% Thursday and another -60% over night which forced the FDIC to take over the bank. Customers withdrew $42bn on Thursday. Don’t forget about Silvergate Capital liquidating which further hurts sentiment and crypto. The regionals have been hit harder than the major banks. I put together a chart below to show the moves. Bank stocks are important to watch. As rates rise, fears of recession grow, and banks will be taking reserves on future losses. Commercial R/E fears, especially office markets are adding to pressures. Additionally, banks are pulling back lending which further exacerbates the situation for consumers and corporates. Roku had $480mm deposits with SVB. Others listed include: BlockFi, Roblox, Ginkgo Bio, iRythm, Rocket Lab, and others. Etsy warns sellers of delay in processing payments due to Silicon Valley Bank collapse. This Market Watch article lists other banks sitting on large security losses.
- I am told (not confirmed) that approximately 50% of SVB assets have been sold as of Saturday. I believe the depositors will get the $250k FDIC insured amount Monday and another approximately 50% by mid-week given the asset sales if the color I got proves true. The remainder is likely to take months and I am not convinced they get 100% back. Additionally, I was told (not confirmed) that your borrowings are allowed to offset your deposits. If you borrowed $10mm from SVB and had $15mm in deposits, you are now only owed $5mm. I am hearing some SVB deposit claims may have traded in the 70s for perspective. Need to confirm.
- Venture is under pressure and getting funding is extremely challenging in the start-up world. One of SVB’s businesses was to fund start -ups through loans partially based on the amount of equity raised. With funding for start-ups harder to come by today and SVBs troubles, it will be even more challenging to get funding. See “Mass Extinction” story. 50% of US Venture bank Tech or Health Science start ups bank with SVB according to the website. The ramifications of this are major. There will be many companies unable to make payroll due to the SVB collapse as deposits and undrawn loans were with the bank. There is a story going around on Harry & Meghan having a lot of money in SVB as well.
- I feel contagion is real, and the chart tells you a good deal about regional banks. I got dozens of calls from people/companies pulling a billions of deposits from regional banks. As an aside, there is a CNBC story which suggested SVB employees received bonuses hours before the government takeover. First Republic is not the only other one of concern.
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Might be time to update that $250k (fixed) FDIC limit for all the inflation we’ve been having recently.
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Discussion elsewhere, especially the later posts. Some ex bankers posting good info there on how these things have gone in the past.
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See the discussion on the woke thread. The Biden regime cannot resist dumping money into it.
https://www.washingtonpost.com/us-policy/2023/03/12/silicon-valley-bank-deposits/
U.S. officials weigh protecting all deposits at Silicon Valley Bank
Extraordinary step eyed if plan to sell SVB to another institution fails. Lawmaker says Democrats are ‘praying for a buyer.’
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I mean, it begs the question - should all deposits at FDIC/NCUA insured institutions be backed by the full faith and credit of the feds, with no limit? Why do the feds get to pick and choose which banks are “too big to fail”?
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Done! It’s $250K now. 
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I suspect that those average people may be too ignorant about FDIC insurance and how efficient the FDIC takeovers are. It’s a Wonderful Life needs to come with a big flashing FDIC update on the screen during the bank run scene.
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There goes SBNY
Signature Bank, New York, New York, which was closed today by its state chartering authority.
They also talk about how SIVB and SBNY depositors will be made whole, but not shareholders or creditors.
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Stabilization fund
will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.
The Federal Reserve is prepared to address any liquidity pressures that may arise.
The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par.
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Too big to fail is based on a lot more than a bank’s deposit base.
Has there been any data regarding how many customers actually lost their deposited funds when a bank failed during the financial crisis? Or even how much the FDIC actually paid out in insurance claims?
TARP 2?
So we should be expecting a string of strategic defaults next winter? It’s not like mortgages 15 years ago, which was an immediate problem with performance; unless rates drop significantly, these pledged assets are going to remain depressed indefinitely.
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headlines
- US FEDERAL RESERVE AND TREASURY: WE ARE TAKING DECISIVE STEPS TO PROTECT THE US ECONOMY BY INCREASING PUBLIC TRUST IN OUR BANKING SYSTEM.
- FED: READY TO ADDRESS ANY LIQUIDITY PRESSURES THAT MAY ARISE
- US FEDERAL RESERVE AND TREASURY: THE BOARDS OF THE FDIC AND THE FEDERAL RESERVE, AFTER CONSULTING WITH BIDEN AND US TREASURY SECRETARY YELLEN, APPROVED ACTIONS THAT WOULD ALLOW THE FDIC TO COMPLETE ITS SILICON VALLEY BANK RESOLUTION.
- US FEDERAL RESERVE AND TREASURY: THE TAXPAYER WILL BEAR NO LOSSES ASSOCIATED WITH THE RESOLUTION OF SILICON VALLEY BANK.
- US FEDERAL RESERVE AND TREASURY: WE ARE ALSO ANNOUNCING A SIMILAR SYSTEMIC RISK EXCEPTION FOR NEW YORK’S SIGNATURE BANK, WHICH WAS CLOSED TODAY BY ITS STATE CHARTERING AUTHORITY.
- US FEDERAL RESERVE AND TREASURY: WHILE ALL DEPOSITORS OF THIS INSTITUTION WILL BE COMPENSATED, SIGNATURE SHAREHOLDERS AND CERTAIN UNSECURED DEBT HOLDERS WILL NOT BE.
- FDIC: NO LOSSES FOR SVB WILL BE BORNE BY THE TAXPAYER
- FED: TREASURY TO BACKSTOP EMERGENCY LOANS WITH $25BFED: NEW PROGRAM TO OFFER EMERGENCY LOANS OF UP TO ONE YEAR
- FED ANNOUNCES NEW EMERGENCY BANK TERM FUNDING PROGRAM
- SAYS SVB DEPOSITORS WILL HAVE ACCESS TO ALL MONEY MONDAY
- FED TO MAKE ADDITIONAL FUNDING AVAILABLE TO BANKS
- TREASURY, FED, FDIC ANNOUNCE ACTIONS IN WAKE OF SVB
- FED WILL USE FULL RANGE OF TOOLS TO SUPPORT H/HOLDS, BUSINESSES
- US FEDERAL RESERVE AND TREASURY: THE SIGNATURE SENIOR MANAGEMENT HAS BEEN REMOVED.
- BREAKING: FED: ALL DEPOSITORS OF THIS INSTITUTION WILL BE MADE WHOLE.
- US SAYS SIGNATURE BANK CLOSED TODAY BY STATE AUTHORITY
- US FEDERAL RESERVE AND TREASURY: THE FEDERAL RESERVE BOARD ANNOUNCED ON SUNDAY THAT IT WILL PROVIDE ADDITIONAL FUNDING TO ELIGIBLE DEPOSITORY INSTITUTIONS TO HELP ENSURE THAT BANKS CAN MEET THE NEEDS OF ALL THEIR DEPOSITORS.
- US FEDERAL RESERVE AND TREASURY: THE BANKING SYSTEM REMAINS RESILIENT AND STABLE.
- US FEDERAL RESERVE AND TREASURY: ANY SIGNATURE BANK LOSSES TO THE DEPOSIT INSURANCE FUND TO SUPPORT UNINSURED DEPOSITORS WILL BE REPAID THROUGH A SPECIAL ASSESSMENT LEVIED ON BANKS.
- US FEDERAL RESERVE AND TREASURY: TO ENSURE THAT BANKS CAN MEET DEPOSITORS’ NEEDS, THE FED WILL MAKE ADDITIONAL FUNDING AVAILABLE TO ELIGIBLE DEPOSITORY INSTITUTIONS.
- FED: COLLATERAL PLEDGED AT NEW FACILITY WILL BE VALUED AT PAR
- US FEDERAL RESERVE: TO PROVIDE LIQUIDITY TO US DEPOSITORY INSTITUTIONS, EACH FEDERAL RESERVE BANK WOULD MAKE ADVANCES TO QUALIFIED BORROWERS, USING CERTAIN TYPES OF SECURITIES AS COLLATERAL.
- US FEDERAL RESERVE: USING THE EXCHANGE STABILISATION FUND, THE TREASURY DEPARTMENT WOULD PROVIDE $25BLN IN CREDIT PROTECTION TO THE FEDERAL RESERVE BANKS IN CONNECTION WITH THE BANK TERM FUNDING PROGRAMME.
- US FEDERAL RESERVE AND TREASURY: TODAY’S ACTIONS DEMONSTRATE THE UNITED STATES’ COMMITMENT TO TAKING NECESSARY STEPS TO PROTECT DEPOSITORS’ SAVINGS.
- US FEDERAL RESERVE: ANY COLLATERAL THAT IS ELIGIBLE FOR PURCHASE BY THE FEDERAL RESERVE BANKS IN OPEN MARKET OPERATIONS IS CONSIDERED ELIGIBLE COLLATERAL.
- US FEDERAL RESERVE: THE RATE FOR TERM ADVANCES WILL BE THE ONE-YEAR OVERNIGHT INDEX SWAP RATE PLUS 10 BASIS POINTS; THE RATE WILL BE FIXED ON THE DAY THE ADVANCE IS MADE FOR THE TERM OF THE ADVANCE.
- US FEDERAL RESERVE: THE COLLATERAL WILL BE VALUED AT PAR, AND THE MARGIN WILL BE 100% OF THE PAR VALUE.
- US FEDERAL RESERVE: ADVANCES UNDER THE PROGRAMME CAN BE REQUESTED UNTIL AT LEAST MARCH 11, 2024.
- BANK REGULATORS: US BANKS REMAIN RESILIENT, ON SOUND FOOTING
- US FEDERAL RESERVE: ADVANCES MADE UNDER THE PROGRAMME ARE MADE TO ELIGIBLE BORROWERS WITH RECOURSE BEYOND THE PLEDGED COLLATERAL USING THE EXCHANGE STABILISATION FUND, THE TREASURY DEPARTMENT WOULD PROVIDE $25BLN IN CREDIT
- NEW YORK DEPARTMENT OF FINANCIAL SERVICES: WE NOW HAVE POSSESSION OF $SBNY
- FED SAYS DISCOUNT WINDOW FOR BANKS IS OPEN AND AVAILABLE
- FED: DISCOUNT WINDOW TO APPLY SAME MARGINS AS NEW FACILITY
- SENIOR US TREASURY OFFICIAL: MEASURES REGARDING SVB WERE TAKEN TO STABILISE THE FINANCIAL SYSTEM AND PROTECT DEPOSITORS.
- SENIOR US TREASURY OFFICIAL: US TREASURY SECRETARY YELLEN DECIDED ON SVB AFTER RECEIVING RECOMMENDATIONS FROM THE FED, THE FDIC, AND AFTER CONSULTING WITH BIDEN.
- SENIOR US TREASURY OFFICIAL: US TREASURY SECRETARY YELLEN AND OTHER OFFICIALS ARE CLOSELY MONITORING THE SITUATION, AS WELL AS THE OVERALL HEALTH OF THE BANKING SYSTEM.
- SENIOR US TREASURY OFFICIAL: WE WILL CONTINUE TO TAKE STEPS TO ENSURE THE FINANCIAL SYSTEM’S STRENGTH.
- US TREASURY OFFICIAL BRIEFS ON REGULATORS’ ACTIONS SUNDAY
- SAYS ACTIONS WILL ENSURE DEPOSITORS NEED NOT WORRY
- TO KEEP TAKING STEPS TO ENSURE SYSTEM STAYS STRONG SIGNATURE BANK DEPOSITORS WILL BE MADE WHOLE
- TREASURY OFFICIAL BANK SECTOR MORE RESILIENT THAN PRE-CRISIS
- SENIOR US TREASURY OFFICIAL: WE WILL COLLABORATE WITH CONGRESS AND FINANCIAL REGULATORS TO CONSIDER ADDITIONAL STEPS TO STRENGTHEN THE FINANCIAL SYSTEM.
- SENIOR US TREASURY OFFICIAL: THE SYSTEMIC RISK EXCEPTION WAS USED FOR SVB AND A SIMILAR ONE USED FOR SIGNATURE BANK
- SENIOR US TREASURY OFFICIAL: THE COSTS OF THE SIGNATURE BANK RESOLUTION WILL NOT BE BORNE BY TAXPAYERS.
- SENIOR US TREASURY OFFICIAL: THE DEPOSIT INSURANCE FUND’S FUNDS ARE FULLY SUFFICIENT.
- SENIOR US TREASURY OFFICIAL: IN TIME, WE MAY LOOK BACK AND DETERMINE WHETHER CHANGES TO THE DEPOSIT INSURANCE FUND ARE REQUIRED.
- SENIOR US TREASURY OFFICIAL: THE ACTIONS TAKEN BY THE UNITED STATES WERE FOR SILICON VALLEY BANK, NOT THE ENTIRE HOLDING COMPANY.
- US TREASURY OFFICIAL SAYS 'THERE ARE CONCERNS ABOUT DEPOSITORS
- 'TREASURY: PERHAPS SEE SOME INSTITUTIONS SIMILAR TO SIGNATURE
- FDIC’S DEPOSIT INSURANCE FUND HAS MORE THAN $100 BILLION
- TREASURY SEES SOME INSTITUTIONS WITH ISSUES SIMILAR TO SVB
- SENIOR US TREASURY OFFICIAL: THE FIRMS ARE NOT BEING BAILED OUT, INSTEAD THE DEPOSITORS ARE BEING PROTECTED
- US TREASURY OFFICIAL SAYS THIS SITUATION `IS NOT 2008’
- US TREASURY SAYS WILL LOOK BACK TO SEE WHETHER NEW RULES ARE NEEDED
- NY GOV HOCHUL ISSUES STATEMENT ON SIGNATURE BANK
- HOCHUL: WORKING W/ DFS, FED TO STABILIZE BANKING SECTOR $SBNY
- BIDEN ADMIN TO BRIEF CONGRESS TONIGHT ON SVB RESOLUTION: WAPO
terms / details on the bank bailout/stabilization fund
- FED OFFICIALS BRIEF MEDIA ON NEW BANK TERM FUNDING PROGRAM
- ACTING AS LENDER OF LAST RESORT, NO ONE GETTING BAILED OUT
- NEW FACILITY DESIGNED TO PREVENT TREASURY FIRE SALES
- SAYS EMERGENCY FACILITY WAS APPROVED UNANIMOUSLY BY BOARD
- BTFP IS BIG ENOUGH TO COVER ALL US UNINSURED…
- FEDERAL RESERVE OFFICIALS: THE PRIMARY GOAL OF THE NEW PROGRAMME IS TO REASSURE BANK DEPOSITORS THAT THEIR FUNDS ARE SECURE.
- FEDERAL RESERVE OFFICIALS: THE NEW FACILITY TO ALLEVIATE THE TYPE OF NEAR-TERM PRESSURE THAT BANKS FACE AS A RESULT OF RUN DYNAMICS.
- FEDERAL RESERVE OFFICIALS: THE TWO FAILED BANKS’ OWNERS WILL LOSE THEIR INVESTMENTS.
- FEDERAL RESERVE OFFICIALS: THE PROGRAMME WILL SIGNIFICANTLY REDUCE ANY INCENTIVE FOR DEPOSITORS TO WITHDRAW THEIR FUNDS.
- FEDERAL RESERVE OFFICIALS: THERE IS NO DEFINITIVE FIGURE FOR WHAT WILL BE AVAILABLE IN FACILITY LENDING; THE GOAL IS TO MEET BANK LIQUIDITY DEMAND AS IT ARISES.
- FEDERAL RESERVE OFFICIALS: SYSTEMIC RISK WAS PERCEIVED AS A THREAT IN TODAY’S FRAGILE FINANCIAL MARKETS.
- FEDERAL RESERVE OFFICIALS: THE FACILITY IS INTENDED TO KEEP BANKS FROM HAVING TO SELL SECURITIES AT A LOSS IN ORDER TO MEET WITHDRAWAL DEMANDS.
- FEDERAL RESERVE OFFICIALS: THE FACILITY DOES NOT COMPENSATE FOR UNREALIZED LOSSES. SECURITIES WILL CONTINUE TO APPEAR ON BANK BALANCE SHEETS.
- FEDERAL RESERVE OFFICIALS: BANKS INTEND TO HOLD THE MAJORITY OF THE SECURITIES IN QUESTION UNTIL MATURITY.
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How can they lose money on rates? Don’t banks routinely try to keep their book flat for rates in the derivatives market?
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Probably, but I never looked into it. I just remember reading about how a few bank failures were handled in 2007-8, notably WaMu and IndyMac.
Suppose I bought a 10 year bond in June 2020 when they were yielding, 0.6%. They are now yielding about 3.7% which means the bond has taken a huge cut in its principal value.
Here’s a graph of 10 year rates over the years
Then, suppose I need the money from the bond to pay a bill. The Fed says they will step in and lend me money using the bond as collateral for the full face value of the bond.
That is quite a deal. I guess the Fed can claim they are not using taxpayer money since the loan will be paid off in seven years when the bond matures.
From the long list of statements posted, they claim that they will make sure bank stockholders will lose all their money. It’ll be interesting to see what the details are.
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The FDIC limit over the years
| Date | FDIC Insurance Limit |
|---|---|
| 01/01/1934 | $2,500 |
| 07/01/1934 | $5,000 |
| 09/21/1950 | $10,000 |
| 10/16/1966 | $15,000 |
| 12/23/1969 | $20,000 |
| 11/27/1974 | $40,000 |
| 03/31/1980 | $100,000 |
| 10/03/2008 | $250,000 |
Edit. Source
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