Silicon Valley Bank is shut down by FDIC Regulators

Venture capital backed tech hit hard

[Sgt_Kickaxe]

Almost a month ago I sensed Silicon Valley glory days were over, mostly because the economy (State, Federal and Global) made keeping it alive as a startup tech hub impossible. I even asked in which country people thought the NEW Silicon Valley would emerge (There is always a place to be for startups, it's just not in California anymore) in this thread - [webmasterworld.com...]

I had no idea just how bad it was. This is bad - [msn.com...]

- Silicon Valley Bank Collapses and Enters FDIC Receivership
- The FDIC will protect the insured amount for depositors, which is typically 40k max.
- The bank reportedly holds $173 billion in deposits.
- According to its website, the bank provided funding to 44% of all venture capital-backed tech and healthcare companies that publicly listed on a stock exchange last year.

The crash could cause a recession, and the CEO was selling his shares in the week before it crashed. Once banks are not seen as safe, nothing good happens. This is actually huge news... the ripples will affect everyone in the coming weeks and months.

[Sgt_Kickaxe]

Elon Musk, being a fan of startups and innovation, said he is open to the idea of buying the bank. A financial function to Twitter was already in the plans, and this purchase would instantly advance those plans.

It would also bail out the second-worst bank failure in American history.

[not2easy]

The FDIC will protect the insured amount for depositors, which is typically 40k max

It is my understanding that the FDIC typically covers up to $250,000 for depositors since 2005, before that it was $100K. A 40K limit would hurt a lot of those depositors.

That bank was particularly vulnerable due to their financing of a high number of tech startups. It is not seen as a contagious issue.

[Marshall]

Part of this is the fault of the last administration rolling back Dodd-Frank regulations, though done with bipartisan support.
"The measure eases restrictions on all but the largest banks. It raises the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to plan for financial disaster."
[cnbc.com...]

[phranque]

tech sector meets bond market.
they were overinvested in bonds and with yields approaching 5% they had to bail out, leading to a $1.8B loss.
meanwhile their deposits were down due to the dearth of IPOs in the tech sector.
none of this was helpful when the eventual bank run started ramping up.

[Sgt_Kickaxe]

Runaway Inflation (at all-time record levels) driven by spending (all-time record debt) is the current problem.

As far as banks go, the fed tax rate is 4.5% which decimates interest in borrowing, and causes guaranteed bank securities only paying 1.5% to be ignored. They NEED to drop the rate by 100 basis points minimum right now to stave off a run on banks, yet they also NEED to raise the rate by 500 basis points immediately to keep up with inflation.

It's an impossible situation because the divide is too big. Things have begun to give.

[tangor]

The give must happen. Called a market reset. Batten down the hatches and ride it through. As long as the electricity is turned on. :)

[Sgt_Kickaxe]

The give must happen. Called a market reset. Batten down the hatches and ride it through. As long as the electricity is turned on. :)

It's called something alright, but no need to batten down the hatches because what is going on is rather predictable, :)

Besides, electricity is highly unreliable these days.

[Sgt_Kickaxe]

*Update* - ETSY sent out a message to their 7.5 million sellers.

“We wanted to let you know that there is a delay with your deposit that was scheduled for today. This delay was caused by the recent developments regarding Silicon Valley Bank, who Etsy uses to facilitate disbursement to some sellers. We are working with our other payment partners to issue your deposit as soon as possible.”

“We apologize for any inconvenience or disruption this may have caused. We know that you count on us to help run your business, and we understand how important it is for you to receive your finds when you need them. Please know that our teams are working hard to resolve this issue and send you your funds as quickly as possible.”

“No further action is needed from you at this time. Please feel free to reach out to our Help Center 24/7 with any questions you might have.”

[martinibuster]

The crash could cause a recession

That's overstating what's going on.

These are tech startups affected by one elite boutique bank, not the entire banking sector.

The entire banking sector does have some issues, which were ignored in this discussion. That's the real news.

[Sgt_Kickaxe]

The entire banking sector does have some issues, which were ignored in this discussion. That's the real news.

This discussion was about SVB, before the thread got squelched to logged in member only anyway :)

I did say the economy is in bad shape which is going to be claiming more banks, businesses, jobs...

Runaway Inflation (at all-time record levels) driven by spending (all-time record debt) is the current problem.

As for the SVB, good riddance, IMO, the CEO and partners have some legal answering to do now.

While I would never presume to give financial advice to anyone despite a life in finance, it's clearly time to become self-sufficient.

P.S. martinibuster - I don't give news, it gives itself, I give opinion.

[topr8]

the british arm of the company has been bought/rescued by HSBC so i imagine there is some relief in the UK.

[bbc.co.uk...]

[LifeinAsia]

the british arm of the company has been bought/rescued by HSBC

For 1 Pound...