Posted on 03/10/2023 4:04:21 PM PST by marcusmaximus
Silicon Valley Bank was aptly named: It held the funds of hundreds of U.S. tech companies and was a crucial player in the valley’s economy. But on Friday, it became the second largest bank failure in U.S. history after a rapid run on its deposits. Some $175 billion in customer accounts were taken over by the Federal Deposit Insurance Corporation (FDIC), which is now tasked with returning money to the bank’s customers.
But more than 85% of the bank’s deposits were uninsured, according to estimates in a recent regulatory filing. That’s because FDIC deposit insurance is meant for everyday bank customers and maxes out at $250,000. Many Silicon Valley startups had millions, or even hundreds of millions of dollars deposited at the bank—money they used to run their companies and pay employees. Right now, nobody’s sure how much of that cash is left.
(Excerpt) Read more at time.com ...
According to some reports, there was run on the bank so SVB had to sell part of their bond portfolio at 10% loss.
Since they couldn’t find a private investor to bail out that loss, and the run was continuing, they were shut down since they couldn’t keep selling their remaining bond portfolio at 10% losses (or higher).
But who knows really what happened.
Never trust your money in banks! I have a Credit Union that I use for personal expenses. The rest of our cash assets are with a trusted financial advisor who has been doing business for many years.
🤣🤣🤣🤣🤣🤣🤣 no chance in hell
“If you put $250,000 in four banks that are FDIC insured, is all the money safe from failures?”
From what I understand, with even 250,000 in one bank, the insurance is a scam. Yes you will get money if your lucky. But you will get it over the next 50 years or so. Big frigen deal. I’m a septuagenerian. Even if you were 35 you’d likely be dead by the time it was due.
This is my understanding... if anyone can confirm this jump in.
Somebody once said something to the effect, if the American people a actually understood how banks operated there would be a revolution before tomorrow morning.
Banking (and Savings and Loan) used to be fairly staid, before the government squeered everything. “Borrow at 4, lend at 6, on the course by 5”.
They took deposits and bought 10 year T-Bills in 2021, since then bonds yields have gone up, up and up, causing huge losses for the bank and increasing the cost of their money (customer deposits). they tried to raise money to fix the mess but no one wanted to underwrite them which caused the stock to drop more which caused a run on the bank deposits which are not there.
Other banks to watch: Zion, First Republic, Charles Schwab
But I’m just wondering was there a severe mismatch between assets
/\
The beauty of
Fractional Reserve ( Google that )
Fiat banking.
yes, you should be.
It is 250,000 per institution
See my post #25. I thought it was 50 years, but you might be right with 100 years. The simple fact is that the FDIC has only a fraction of what would be needed to cover the whole ball of wax. So, depending on how bad it gets, you could get close to nothing.
Well, from reading that the answer is “no”, not “yes”. Only half the amount would be covered, assuming there is a spouse involved.
In any sort of serious overall banking debacle, the FDIC would be tapped out, they only have a relatively small amount of assets.
Ironically FDIC coverage means nobody hardly pays any attention to what bank they use.
I guess we will have a chance to see how this plays out with the Silicon Valley bank customers. Whether or not they get the money promptly... or not.
Schwab is more of a custodian than a bank, I believe.
“I guess we will have a chance to see how this plays out with the Silicon Valley bank customers. Whether or not they get the money promptly... or not.”
Silicon Valley depositors are the lucky ones. The FDIC has enough reserves for them. And to not make them whole would ripple through the banking system.
It’s my informal understanding that banks operate under special rules.
A bank is not required to hold 100% of depositors’ money at any given time. It is more like 10%.
If you deposit $100 at a bank, the bank can loan out a certain percentage of that money and make interest on it. I’ve heard 90%.
The concept is that the banks help to make money “work.”
The banks rely on probability. With most banks, most of the time, there is only a small probability that all the customers will suddenly want all of their money at once. But in theory it could happen, especially in bad economic times. When this happens, it is called a “bank run.” Bank customers hear about a problem (a “panic”), and then run to the bank to get their money out before the next customer can get his money out.
In the old days, banks were not insured. Gradually, regulations were passed. Now, at least most big banks are federally insured. This means that “small” customers are protected from bank panics, up to $100000 (lately I have started to hear that the amount has been increased to $250000).
Evidently large customers are considered “big boys” and as such are not protected, at least over $250000.
As to how this is accounted for in a bank’s accounting practice, I do not know. There might for example be special bookkeeping mechanisms banks. I would not be surprised. The rates are all important. Also, at least in theory, the regulatory maximum and minimum rates can be changed. So the bookkeeping I imagine should reflect the rates in addition to the actual amounts on hand and amounts owed.
Yes.
I dont know the weighting but they do both.
The depositors at Silicon Valley Bank are not putting money in savings. They are mostly fairly large businesses that have a bank account that they use to pay their bills from. If you have 5,000 employees in your company on payroll day you may need to send out 10 million dollars in direct deposits and payroll checks. To do that you need a bank account with a lot more than $250,000 in it.
The banks invest deposits. As long as those deposits return well, it works. If they don’t, then depositors’ money is lost “out there”, and is not in customers’ accounts. Hence, panic, then a run.
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