Financial crash thread (2022-2024)

[Thomas More]

Today, the Fed announced a previously unscheduled meeting behind closed doors on Monday:

March 13, 2023 -- March 13, 2023 -- Closed Board Meeting

March 13, 2023 -- Closed Board Meeting

www.federalreserve.gov

Apparently SVB was the 15th largest bank in the US.

Wow! I heard about the failure but 15th largest is a far bigger deal! This can't be the last one. Bank runs are contagious.

At the very least I'd recommend against anyone having more than $250k in any one bank. The FDIC can always print money to replenish smaller depositors, but they might just let larger depositors take the loss.

Obviously the (((largest))) depositors will be safe too.

 

[Pointy Elbows]

Silicon Valley Bank Tanked, Dragging Down 500 Israeli Startups

Protesting Israeli hi-techs took their money out of Israeli banks and moved it to… SVB.

www.jewishpress.com

Jewish Press reports 500 Israeli firms are exposed to the SVB collapse. Some were recent depositors, moving funds from Israeli banks to SVB as some form of protest.

 

[budoslavic]

June 19, 2021...




A couple of years later...whoops...

 

[budoslavic]

 

[budoslavic]

Silicon Valley Bank’s Collapse Causes Start-Up Chaos

Young companies raced to get their money out of the bank, which was central to the start-up industry. Some said they could not make payroll.

www.nytimes.com

Edit.

 

[budoslavic]

 

[paternos]

Seems the FED is driving with 200 mph in a dead end street.

Bumping interest rates up uncontrolled from 0% tot 5% is deeply problematic. You can run a business on a certain predictability, this is the opposite, rampage. There is no adjustment time, businesses that have high loans, low margins and need to refinance can't handle this. These kind of abrupt moves, have consequences.

View attachment 55767
I'm curious what their game plan is. Because this has nothing to do with "fighting inflation" or stabilizing the labour market.

Probably there is something bigger at play here, because rationally from a monetary policy point of view this is ridiculous.

As a business owner it's impossible to make a financial planning today, as the FED is acting like a madman.

How do the elites profit from crashing the market? That's what I am wondering. Maybe they are all short, or in bonds. That's a likely scenario in my opinion.

But societal it's so risky, many normal business owners took on high debts as a strategy as it was cheap and rationally the best decision.

The question today is, why would you start a business? If you could just get 5.3% on your money from treasuries.

All in all I see a severe attack by the state on the free market. The amount of trade restrictions put up in the last year, the extreme rise in interest rates, the environmental regulations, the increasing taxes, the market distortions by subsidies, the wars.

It's breaking effective private entrepreneurship.

I don't know what to think: Is it a death cult? Is it stupidity? Bureaucratic failure? A move to higher state control over the private sectors?

To add to this, interesting with the SVB falling over yesterday.

This is exactly what's happening there.

Banks do fractional reserve banking, e.g. a depositor put down 1000 dollars at the bank and they can lend out 10.000 dollars.
They need to make it attractive for people to give them a 1000 dollars so they can lend out 10.000. This was easy as people had a lot of cash, bank gave 0% to the depositor and they could lend it out against 4% to silicon valley start ups.

What happened is that people and businesses now say, after the huge increases of the FED interest rates, I'll park my money at the government for 5.3%. Guaranteed income. No risk of defaulting and a higher return than at SVB.

SVB can not pull back their loans to the businesses at once. So they need to go on the money market for cash. They need to take loans at +5% which they before got for free.

Probably these government officials will blame the banks again. Or Putin. Or Covid. But the big problem in this is the state with it's distortive practices.

Pulling from 0% to 5% in a year gives no time to adjust.

But taking it one level deeper. The system is the problem. Where a state controls money supply, interest rates, bailouts. Fractional reserve banking, we are all just enslaved by some crooks. Being able to bust or boom at any moment in time. And they are playing with the savings of millions.

I think it is a criminal extortion racket.

 

[Pointy Elbows]

To add to this, interesting with the SVB falling over yesterday.

This is exactly what's happening there.

Banks do fractional reserve banking, e.g. a depositor put down 1000 dollars at the bank and they can lend out 10.000 dollars.
They need to make it attractive for people to give them a 1000 dollars so they can lend out 10.000. This was easy as people had a lot of cash, bank gave 0% to the depositor and they could lend it out against 4% to silicon valley start ups.

What happened is that people and businesses now say, after the huge increases of the FED interest rates, I'll park my money at the government for 5.3%. Guaranteed income. No risk of defaulting and a higher return than at SVB.

SVB can not pull back their loans to the businesses at once. So they need to go on the money market for cash. They need to take loans at +5% which they before got for free.

Probably these government officials will blame the banks again. Or Putin. Or Covid. But the big problem in this is the state with it's distortive practices.

Pulling from 0% to 5% in a year gives no time to adjust.

But taking it one level deeper. The system is the problem. Where a state controls money supply, interest rates, bailouts. Fractional reserve banking, we are all just enslaved by some crooks. Being able to bust or boom at any moment in time. And they are playing with the savings of millions.

I think it is a criminal extortion racket.

That Thursday post of yours aged well, and fast.

 

[paternos]

That Thursday post of yours aged well, and fast.

Well thursday SVB was already under stress , but I also didn't expect it to move this fast. It's a clear signal to anyone having large amounts of money in a bank account, that this is not a safe haven at the moment. As what happened here can happen to more banks, the problem is systemic. I would suggest to temporarily at least park your money in bonds, physical cash, gold, dividend stocks or multiple banks (to use the guarantees). If we hear about 2 banks in high stress coming week and the FED doesn't act swiftly and proportionally, a full blown bank run and panic is not impossible.

This is the biggest event since 2008 in banking land.

In the modern day, we don't see the physical bank run, so it's less visible, but I wouldn't be surprised that it is already happening (and they don't let us know). That many people are emptying their deposit accounts (digitally)



2008 was different because a lot of money still went cash so we could see scenes like above. A 2023 bank run is when 1000s of large depositors, with a tap on their smartphone transfer millions to their brokerage accounts to buy stocks, bonds or transfer to another bank

Nobody sees this happening, banks have no obligation to tell the public, no interest to tell the public, central banks won't tell you or politicians. This is similar to 2008 when everyone was using euphemisms for the crisis.

I wouldn't be surprised if we see more happening, that all accounts / stock markets will be temporarily frozen. Anyhow we will see some action next week. Whether it's interest rate decreases, guarantees, other banks about to fall over, bank run, huge decline or rise in stocks (rise not impossible if money if dollars are a risky asset), volatility ahead, or even when nothing is decided or flips, everyone will be at edge the coming period.

Very practical action everyone can take is to spread money over 2 banks for example, most European countries have EU protection up to 100.000 euro.

What stands above all is how sick the system is, how manipulated the markets, how corrupt the state, and how unsafe many of savings are that people collected over their lives. Turns out it is all just numbers in computers, and in the case of SVB they don't align anymore. I'm really curious as well what gold will do the coming weeks and bond prices.

 

[ivalyosha]

To add to this, interesting with the SVB falling over yesterday.

This is exactly what's happening there.

Banks do fractional reserve banking, e.g. a depositor put down 1000 dollars at the bank and they can lend out 10.000 dollars.
They need to make it attractive for people to give them a 1000 dollars so they can lend out 10.000. This was easy as people had a lot of cash, bank gave 0% to the depositor and they could lend it out against 4% to silicon valley start ups.

What happened is that people and businesses now say, after the huge increases of the FED interest rates, I'll park my money at the government for 5.3%. Guaranteed income. No risk of defaulting and a higher return than at SVB.

SVB can not pull back their loans to the businesses at once. So they need to go on the money market for cash. They need to take loans at +5% which they before got for free.

Probably these government officials will blame the banks again. Or Putin. Or Covid. But the big problem in this is the state with it's distortive practices.

Pulling from 0% to 5% in a year gives no time to adjust.

But taking it one level deeper. The system is the problem. Where a state controls money supply, interest rates, bailouts. Fractional reserve banking, we are all just enslaved by some crooks. Being able to bust or boom at any moment in time. And they are playing with the savings of millions.

I think it is a criminal extortion racket.

Great posts. In addition to the lost deposits as you explained well, SVB has had growing net unrealized losses on Treasuries and MBS purchased before the Fed started hiking rates which further exacerbated their balance sheet problems.

ZeroHedge explains this well.

The bank had a lot of fixed-rate TSY (and other) exposure that was underwater and carrying an unrealized loss, and having concluded that rates will keep rising, the bank decided to restructure its assets and flip its portfolio from a fixed-rate one (where rate hikes cause even more capital losses) to a short-term one (where they lead to modest NIM gains). Of course, the transition ended up costing the bank billions.

None of this is shocking, and yet the market was clearly surprised. Why?

For the answer we have to go all the way back to the immediate aftermath of the last financial crisis, when in early 2009 US regulators suspended Mark to Market, and instead of having banks hold debt securities on their books at price, they allowed them to split their asset holdings into two components: Available for Sale (or AfS), a bucket which would be marked to market and which could be sold to short up liquidity, and Held to Maturity (or HTM), a (far larger bucket) which allowed the banks to keep debt securities at cost.

This was created to avoid cross-selling contagion if one bank was forced to liquidate securities and infect other holders of the same security. In other words, it was purely a idiosyncratic feature, not one that was meant to offset macro conditions. And understandably so: in a time of raging deflation, and ZIRP and QE, when rates would seemingly never go up, virtually nobody even considered a scenario when it would be the Fed itself that would force rates higher to fight galloping inflation.

Sadly for SIVB, that's where we are now, and the Fed's rate hikes have manifested in two ways.

• First, rising rates afford depositors a completely risk-free way of parking your money at Treasuries without taking on company-specific deposit risk. This is a big issue for SIVB because as noted above it has $170BN in deposits.
• Second, rising rates force the bank to sweep ever bigger losses on its debt assets under the rug. And yes, while the bank can hide behind the "held at cost" basis afforded by Held to Maturity, the fact that the bank's HTB book was of relatively moderate duration meant that even if it held to maturity, it would still suffer losses, which is why it proceeded with the previously discussed balance sheet restructuring.

300 Billion Reasons Why SVB Contagion Is Spreading To The Broader Banking System | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[andy dufresne]

Very practical action everyone can take is to spread money over 2 banks for example, most European countries have EU protection up to 100.000 euro.

Also if you are earning little to no interest, remove the physical cash from the banking system and put it in a safe that you control.

Cash is ALWAYS king especially if you have immediate access to it. There is no law that says you need to keep the money in the banking system. Ok....I'm sure there are actually tons....

 

[Cortés]

To add to this, interesting with the SVB falling over yesterday.

This is exactly what's happening there.

Banks do fractional reserve banking, e.g. a depositor put down 1000 dollars at the bank and they can lend out 10.000 dollars.
They need to make it attractive for people to give them a 1000 dollars so they can lend out 10.000. This was easy as people had a lot of cash, bank gave 0% to the depositor and they could lend it out against 4% to silicon valley start ups.

What happened is that people and businesses now say, after the huge increases of the FED interest rates, I'll park my money at the government for 5.3%. Guaranteed income. No risk of defaulting and a higher return than at SVB.

SVB can not pull back their loans to the businesses at once. So they need to go on the money market for cash. They need to take loans at +5% which they before got for free.

Probably these government officials will blame the banks again. Or Putin. Or Covid. But the big problem in this is the state with it's distortive practices.

Pulling from 0% to 5% in a year gives no time to adjust.

But taking it one level deeper. The system is the problem. Where a state controls money supply, interest rates, bailouts. Fractional reserve banking, we are all just enslaved by some crooks. Being able to bust or boom at any moment in time. And they are playing with the savings of millions.

I think it is a criminal extortion racket.

That bit about turning a $1000 deposit into $10000 loaned out is wrong. Fractional reserve banking means they only need a fraction of deposits available at a given time for withdrawal. As an example, $10000 deposited, $8000 loaned out. Only 1/5 of the deposits are available for withdrawal.

Not saying its not a reckless criminal racket but just clarifying so people understand how it works

 

[budoslavic]

Tech CEO with at least $10M in Silicon Valley Bank: ‘Worst 18 hours of my life’​

The CEO of a Boston-based health and wellness company said she has been unable to log into her Silicon Valley Bank account, where she has at least $10 million in deposits.

Ashley Tyrner, the founder of FarmboxRx, told The Post on Friday that she has been frantically trying to reach her banker at SVB, the California-based lender that is teetering on the brink of collapse.

She told The Post that she’s been experiencing “the worst 18 hours of my life.”

On Friday, the Federal Deposit Insurance Corp. said regulators have shut the bank down to protect insured deposits after the bank’s parent, SVB Financial, had reportedly tapped outside advisers to facilitate a potential sale.

“It was pure and utter panic,” Tyrner said when asked about her state of mind after she read news reports that the bank’s stock price had plummeted, losing tens of billions of dollars of its market capitalization.

Tyrner, who heads a company of 63 employees, told The Post that her firm’s banking relationship with SVB stretches back two years.

“We were going to raise a round a venture financing,” she said, noting that SVB “is one of the go-to banks” for that purpose.

“We were looking to diversify and everybody told us that SVB is a great bank,” Tyrner said.

When asked how much she deposited with SVB, Tyrner told The Post: “We have eight figures.” She declined to specify the exact sum.

The Post has viewed a screenshot of FarmboxRx’s bank statement with SVB. The bank was not immediately available for comment.

Tyrner said that “all panic broke loose” on Thursday afternoon when senior members of her management team called her with an urgent request.

“My COO actually initiated a wire,” she said. “She immediately started texting me, telling me, ‘You gotta go approve this wire.'”

“When I went to log in to approve the wire, the system was completely crashed,” Tyrner said. “It would not let anybody in.”

Tyrner said she has repeatedly tried calling customer service as well as her personal banker at SVB.

“He wouldn’t answer the phone,” Tyrner said.

“He sent us a text that he’s very sorry. They’re trying to fix the issue to get us logged into the account.”

When the technical snafu still wasn’t resolved, Tyrner tried to reach the banker again.

“He won’t get back to anyone in my company,” she said. “Not even a text. We have no idea what’s going on.”

Tyrner, whose company generated $56 million in revenue last year, told The Post she was “thankful” that “we have cash diversified so it’s not all in one place.”

“We’re in a good place because we’re so diversified,” she said.

“We would not go out of business. That’s not true for a lot of other companies that bank with them.”

She said she’s waiting to see what fate awaits the bank, which is reportedly looking for buyers.

Tyrner added: “[Losing all of the company’s money] would be terrible but it wouldn’t be so detrimental that we couldn’t recover, so we’re thankful for that.

“Nobody wants to lose any amount of capital.”

Tech CEO with at least $10M in Silicon Valley Bank: ‘Worst 18 hours of my life’

“It was pure and utter panic,” Tyrner said when asked about her state of mind after she read news reports that the bank’s stock price had plummeted.

nypost.com

 

[Blade Runner]

If one has cash or a money market with the bigger banks, are those in jeopardy at all, would you all say? Lyn Alden on twitter recently said this was just smaller banks with more aggressive lending, although it isn't insignificant, of course.

 

[budoslavic]

"Diversity, Equity, and Inclusion" in action...



Screenshot can be found on page 10 of the SVB document called "Inclusion Ignites Innovation - Diversity, Equity and Inclusion at SVB".

https://www.svb.com/globalassets/library/uploadedfiles/diversity-equity-and-inclusion-at-svb_august-2022.pdf

Meanwhile...

 

[budoslavic]

 

[paternos]

That bit about turning a $1000 deposit into $10000 loaned out is wrong. Fractional reserve banking means they only need a fraction of deposits available at a given time for withdrawal. As an example, $10000 deposited, $8000 loaned out. Only 1/5 of the deposits are available for withdrawal.

Not saying its not a reckless criminal racket but just clarifying so people understand how it works

True it's simplified (and thereby wrong)

Though it comes down to the same, fractional reserve percentage is 10%. Bank A creates 9000 money from 10.000. Bank b creates 8100 from 9000. This leads to 10x more money flowing

She brings up the point of speed.

And that fractional reserve of 10% is maybe a safety margin in 1950, when everything went in cash and if you have 1.000.000 clients you can never help more than 100.000 people in a day.

But today it goes so fast. Think about those meme stocks. Those are a sort of inverted bank runs, the opposite way. And within a few hours a full blown company is up or down a 1.000%. Or how some companies last year lost 30% in a day.

I think the banking system is very fragile, I think more bank runs are likely, probably fed/government will ducttape it somehow. But it's good to prepare, anyhow for those having large sums in bank accounts, it good to have a plan now.

@Blade Runner I would say every bank is at risk, for the reason that most of us, including myself what the risk profile of my private bank is, we have seen too often that the most banks aren't frugal sweethearts. So there is insecurity, goal is too minimize risks.

E.g. a person has 1M in a bank account as a pension. That's far to risky in my opinion now.

 

[zoom]

Skip over to the section 'finding a good bank'. You don't want to hold deposits at a bank that is over-leveraged.

 

[Gimlet]

I would add the this discussion, have cash on hand that can support you and your family for a few weeks at minimum. I try to keep a month (and I have stockpiles of necessities too) FDIC insurance isn't going to cover your losses in a few days.

 

[andy dufresne]

That bit about turning a $1000 deposit into $10000 loaned out is wrong. Fractional reserve banking means they only need a fraction of deposits available at a given time for withdrawal. As an example, $10000 deposited, $8000 loaned out. Only 1/5 of the deposits are available for withdrawal.

Not saying its not a reckless criminal racket but just clarifying so people understand how it works

Partly true....it gets more complicated when banks figured out they can take your money, loan other banks that money and then the other banks do the same thereby creating a large pyramid of manufactured debt from a very small amount of cash.