Can someone explain to me how a deposit taking bank that tripped its stock price over a very short period of time recently did not raise all sorts of flags and ring alarm bells at the Fed? Why are they literally ALWAYS behind the curve? In an era of automation should there not be multiple alerts sent out when stocks of the systemically most important institutions suddenly start trading like penny stocks or startups?
Who Killed Silicon Valley Bank?
- Thread starter ETJ
- Start date
SVB collapse: Peter Thiel’s role scrutinized as spark of bank run
https://www.washingtonexaminer.com/news/business/svb-collapse-peter-thiel-silicon-valley-
Tech mogul and Republican campaign donor Peter Thiel is being accused of sparking the run on the bank that forced regulators to close down Silicon Valley Bank.
Journalists and critics have turned their focus on Thiel in the wake of SVB's collapse, accusing him of influencing businesses to withdraw their funding from the bank. His efforts are thought to be the first that eventually sparked the bank run, leading to California regulators intervening.
"To be clear, SVB did not properly hedge its risks against two threats, 1) concentration of influence by Peter Thiel, 2) rising interest rates," tweeted investigative journalist Dave Troy. "That was mismanagement, but it still wasn't fraud, and they still have sufficient assets to meet nearly all of the bank's obligations."
"There should be more scrutiny of Peter Thiel and Bill Ackman for yelling fire in a crowded theater in this SVB collapse," tweeted CNBC host Sara Eisen.
Others turned their focus to Thiel's promotion and subsequent profiting off of crypto investments after the market crashed as a reason to be suspicious of his withdrawals. "You mean the guy who was touting crypto and trashing critics while he was selling crypto? That guy? Shocker!" tweeted tech journalist Kara Swisher.
Thiel's venture capital firm Founders Fund had pulled all of its funding from SVB as of Thursday morning, according to Bloomberg. The company also advised its portfolio companies to withdraw their money from the bank, saying there was no downside to moving their money out of the bank. The timing has led some to conclude that the investor's actions may have led to mass withdrawals.
Founders Fund also hosted a capital call on Thursday, which venture capital firms do to ask investors to send them money to make investment startups. Founders Fund asked portfolio companies to begin moving funding to SVB. When Founders realized that technical problems were delaying the transfer, they implored investors to transfer money to other banks.
SVB, which was the 16th largest federally insured bank, was closed by regulators in the state Friday after attempts to raise capital failed. The bank failure is one of the largest since 2008. The bank scared investors earlier in the week when it announced that it sold off treasuries at a loss, causing a run on the bank. SVB customers withdrew $42 billion a day after the bank began falling underwater. The company quickly responded by selling $21 billion in bonds.
The Biden administration took measures on Monday to protect depositors at the bank.
Thiel is a notable Republican donor, providing campaign funds to J.D. Vance in the Ohio Senate race and Blake Masters in the Arizona Senate race in the 2022 midterm elections.
https://www.washingtonexaminer.com/news/business/svb-collapse-peter-thiel-silicon-valley-
Tech mogul and Republican campaign donor Peter Thiel is being accused of sparking the run on the bank that forced regulators to close down Silicon Valley Bank.
Journalists and critics have turned their focus on Thiel in the wake of SVB's collapse, accusing him of influencing businesses to withdraw their funding from the bank. His efforts are thought to be the first that eventually sparked the bank run, leading to California regulators intervening.
"To be clear, SVB did not properly hedge its risks against two threats, 1) concentration of influence by Peter Thiel, 2) rising interest rates," tweeted investigative journalist Dave Troy. "That was mismanagement, but it still wasn't fraud, and they still have sufficient assets to meet nearly all of the bank's obligations."
"There should be more scrutiny of Peter Thiel and Bill Ackman for yelling fire in a crowded theater in this SVB collapse," tweeted CNBC host Sara Eisen.
Others turned their focus to Thiel's promotion and subsequent profiting off of crypto investments after the market crashed as a reason to be suspicious of his withdrawals. "You mean the guy who was touting crypto and trashing critics while he was selling crypto? That guy? Shocker!" tweeted tech journalist Kara Swisher.
Thiel's venture capital firm Founders Fund had pulled all of its funding from SVB as of Thursday morning, according to Bloomberg. The company also advised its portfolio companies to withdraw their money from the bank, saying there was no downside to moving their money out of the bank. The timing has led some to conclude that the investor's actions may have led to mass withdrawals.
Founders Fund also hosted a capital call on Thursday, which venture capital firms do to ask investors to send them money to make investment startups. Founders Fund asked portfolio companies to begin moving funding to SVB. When Founders realized that technical problems were delaying the transfer, they implored investors to transfer money to other banks.
SVB, which was the 16th largest federally insured bank, was closed by regulators in the state Friday after attempts to raise capital failed. The bank failure is one of the largest since 2008. The bank scared investors earlier in the week when it announced that it sold off treasuries at a loss, causing a run on the bank. SVB customers withdrew $42 billion a day after the bank began falling underwater. The company quickly responded by selling $21 billion in bonds.
The Biden administration took measures on Monday to protect depositors at the bank.
Thiel is a notable Republican donor, providing campaign funds to J.D. Vance in the Ohio Senate race and Blake Masters in the Arizona Senate race in the 2022 midterm elections.
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THAT seems to be a persistent pattern
slow go with some govs.
But with that pattern in mind;
not sure they will get to keep thier bank bonuses\
+ stock sale profits.
Time will tell. Took them more years than most would have figured \to bust Bunker+ Bro Hunts attempted silver corner.The big fundraiser for Campus Crusade for Christ [CRU]said [on silver corner]='' it was a game;i dont have a plan i just do the best i can''
He did much better in the oil + gas business...............................................
For starters googling Silicon Valley Bank would have found reputable research on the Internet with negative opinions on the co.
By Andy Kessler
March 12, 2023 3:04 pm ET
165
Silicon Valley Bank’s headquarters in Santa Clara, Calif., March 10.PHOTO: NATHAN FRANDINO/REUTERS
That giant slurping sound on Friday was Silicon Valley Bank imploding. America’s 16th-largest bank had some $175 billion in deposits and disappeared by breakfast. It wouldn’t have happened if not for management mistakes. This was a 21st-century bank run—customers tried to withdraw about $42 billion, a quarter of all deposits. But what triggered the collapse?
Let’s go back. In January 2020, SVB had $55 billion in customer deposits on its balance sheet. By the end of 2022, that number exploded to $186 billion. Yes, SVB was a victim of its own success. These deposits were often from initial public offerings and SPAC deals—SVB banked almost half of all IPO proceeds in the last two years. Most startups had relationships with the bank.
That’s a lot of money to put to work. Some was lent out, but with soaring stock prices and near-zero interest rates, no one needed to take on excessive debt. There was no way SVB was going to initiate $131 billion in new loans. So the bank put some of this new capital into higher-yielding long-term government bonds and $80 billion into 10-year mortgage-backed securities paying 1.5% instead of short-term Treasurys paying 0.25%.
This was mistake No. 1. SVB reached for yield, just as Bear Stearns and Lehman Brothers did in the 2000s. With few loans, these investments were the bank’s profit center. SVB got caught with its pants down as interest rates went up.
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Everyone, except SVB management it seems, knew interest rates were heading up. Federal Reserve Chairman Jerome Powell has been shouting this from the mountain tops. Yet SVB froze and kept business as usual, borrowing short-term from depositors and lending long-term, without any interest-rate hedging.
READ MORE INSIDE VIEW
The bear market started in January 2022, 14 months ago. Surely it shouldn’t have taken more than a year for management at SVB to figure out that credit would tighten and the IPO market would dry up. Or that companies would need to spend money on salaries and cloud services. Nope, and that was mistake No. 2. SVB misread its customers’ cash needs. Risk management seemed to be an afterthought. The bank didn’t even have a chief risk officer for eight months last year. CEO Greg Becker sat on the risk committee.
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As customers asked for their money, SVB had to sell $21 billion in underwater longer-term assets, with an average interest rate around 1.8%. The bank lost $1.8 billion on the sale and tried to raise more than $2 billion to fill the hole.
The loss flagged that something was wrong. Venture capitalists, including Peter Thiel, suggested that companies in their portfolios should withdraw their money and put it somewhere safer. On Thursday the dam broke and there was no way to cover billions in withdrawal requests.
Mistake No. 3 was not quickly selling equity to cover losses. The first rule of survival is to keep selling equity until investors or depositors no longer fear bankruptcy. Private-equity firm General Atlantic apparently made an offer to buy $500 million of the bank’s common stock. Friday morning, I’d have offered $3 billion for half the company. Where was Warren Buffett? Or JPMorgan?
Before they could get a deal together, the Federal Deposit Insurance Corp. took over to protect up to $250,000 for each depositor. Larger, uninsured deposits are frozen. Since the bank took a 9% haircut on the $21 billion in bond sales, that could mean uninsured depositors might get 90 cents on the dollar, but it could take months or years. So venture capitalists are getting emergency funding requests.
Why did so many startups bank with SVB in the first place? Here’s a hint. Apparently, more than half of SVB’s loans went to venture and private-equity firms backed by the borrower’s limited-partner commitments, a legal but slippery way to goose venture funds’ all-important internal rate of return metric, IRR, by investing three to six months before calling investors for cash. VCs are very persuasive with startups.
Here’s an important lesson for companies in trouble: On Thursday, Mr. Becker told everyone to “stay calm.” That never works, ever since Kevin Bacon’s character in “Animal House” told everyone, “Remain calm. All is well,” as chaos ensued.
Was there regulatory failure? Perhaps. SVB was regulated like a bank but looked more like a money-market fund. Then there’s this: In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.
Management screwed up interest rates, underestimated customer withdrawals, hired the wrong people, and failed to sell equity. You’re really only allowed one mistake; more proved fatal. Was management hubristic, delusional or incompetent? Sometimes there’s no difference.
Write to kessler@wsj.com.
It had nothing to do with Bitcoin?
The blame game has started. Blaming everything from excessive transparency, to the management & BOD, to DEI, to regulations, to "hubris and greed". It's almost entertaining -- ignoring the billions lost.
‘Absolutely idiotic’. SVB insider says employees are angry with CEO
https://www.cnn.com/2023/03/13/business/svb-employees-angry-at-ceo
‘Big Short’ investor Michael Burry blames SVB crisis on ‘hubris and greed’
https://nypost.com/2023/03/13/investor-michael-burry-blames-svb-crisis-on-hubris-and-greed/
Was Silicon Valley Bank demise caused by Trump easing regulation, 'woke' efforts, or something else?
https://www.politifact.com/article/2023/mar/13/what-caused-silicon-valley-banks-downfall-rewritte/
Of course, the bank shut down it's social media channels as it went under so customers could not contact it and apparently to suppress discussion on its previous statements.
Silicon Valley Bank quietly deleted its social media channels as it went under
https://www.dailydot.com/debug/silicon-valley-bank-deletes-social-media/
‘Absolutely idiotic’. SVB insider says employees are angry with CEO
https://www.cnn.com/2023/03/13/business/svb-employees-angry-at-ceo
‘Big Short’ investor Michael Burry blames SVB crisis on ‘hubris and greed’
https://nypost.com/2023/03/13/investor-michael-burry-blames-svb-crisis-on-hubris-and-greed/
Was Silicon Valley Bank demise caused by Trump easing regulation, 'woke' efforts, or something else?
https://www.politifact.com/article/2023/mar/13/what-caused-silicon-valley-banks-downfall-rewritte/
Of course, the bank shut down it's social media channels as it went under so customers could not contact it and apparently to suppress discussion on its previous statements.
Silicon Valley Bank quietly deleted its social media channels as it went under
https://www.dailydot.com/debug/silicon-valley-bank-deletes-social-media/
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[1] LOL\ not sure if that is sarcasm; but i dont live in CA or bank with an ESG bank.
Warren buffet warned the EsG [BLK] = asinine
,To me\ that BLK- EsG+ most all EsG looks asinine X 9.I did buy + profit form an BLK ETF, no problem\ even though some got ripped off with panic sellin'LOL
[2]Actually i remember that bank from IBD charts /looked like good uptrend for a bank chart + mostly good on the fundaments + charts, years ago.
Looks like most all these post have some sort of a clue.
Sounds like a mixture of failure, even though i almost bought that bank off all ther iBD info some year ago, some+ many parts of it were above average, dont remember the volume. I
[666.666]Heard one Christian business man, in the know , say to much concentration on tech; but maybe hard not to in silicon valley??
[777] One bank analyst noted bond trouble/rise in rates;
but @ first glance a 10% loss on billions on bonds[gov bonds] is fairly close to 7-8% max loss IBD plans for.
888]But my dad was a banker so i maybe am too easy on them.Strange a regional CA bank =REAL STRANGE a CA big bank[ for a regional bank ]was in MA= sounds crooked like a political payoff, but cant prove that
[999]IF true, waaaaaaaaaaaaaaaaay to much loans on wine, even if was ''premium wine''??
Sounds a bit laughable running to a bigger bank that is ''heavy'' in fines + SEC fines ; pretend would be more safe than a conservative community bank.[part disclosure did brief trade on XLF never got filled on FAS, going up to much LOL
FAZ losing money today.
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The Justice Dept. has opened an investigation into the collapse of Silicon Valley Bank, two people with knowledge of the matter said.
Legal experts said a possible focus of the investigation could be insider sales by several bank executives in the weeks before the bank’s failure.
Tuesday, March 14, 2023 11:50 AM ET
https://www.nytimes.com/2023/03/14/business/silicon-valley-bank-investigation.html
Legal experts said a possible focus of the investigation could be insider sales by several bank executives in the weeks before the bank’s failure.
Tuesday, March 14, 2023 11:50 AM ET
https://www.nytimes.com/2023/03/14/business/silicon-valley-bank-investigation.html