Silicon Valley Bank today was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver.
The Federal Deposit Insurance Corp. took control of the Santa Clara-based tech-focused lender following a run on deposits and a plummeting stock price.
“To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB),” the FDIC announced. “At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.”
All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, according to the FDIC. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. CNBC estimated that 95% of the bank's deposits were uninsured.
As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.
Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday. The new banking entity, DINB, will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear.
The FDIC reported that as of Dec. 31, Silicon Valley Bank had approximately $209 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the FDIC determined that the amount of deposits exceeded insurance limits
Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959. The agency said SVB loan customers should continue to make their payments as usual.
Silicon Valley Bank is the first FDIC-insured institution to fail this year. The last FDIC-insured institution to close was Almena State Bank, Almena, Kansas, in October 2020.
The regulators' move came less than two hours after a decision by tech funding giant SV Financial Group, parent company of Silicon Valley Bank, to halt trading shortly after markets opened this morning on NASDAQ – after its stock collapsed in 24 hours from $176.55 to $39.25 per share – sent shock waves across financial markets worldwide.
Barrons called the Silicon Valley Bank stock collapse – down 60% at the close of markets Thursday and as much as another 69% in pre-trading today – “the largest percentage decrease ever.”
The stock trading (ticker symbol SIVB) was halted at 10:43am EST “for news pending.” The Wall Street Journal reported the bank is seeking a buyer after the lender canceled a plan to shore up its finances by selling off assets following a decline in deposits. On Thursday, the bank had reported $212 billion in assets. Silicon Valley Bank has been reported as the largest in Silicon Valley, based on local deposits.
Barrons reported the bank’s actions Thursday and the NASDAQ reaction caused traders to take a closer look at all bank stocks—particularly their deposits—causing the KBW Nasdaq Bank Index to fall 7.7%. The New York Times reported that this $52 billion sell-off was the worst in three years.
The stunning development that continued to rattle all bank stocks prompted an impromptu comment from Treasury Secretary Janet Yellin today as she was testifying on President Joe Biden’s proposed budget at a House Ways and Means Committee hearing.
“There are recent developments that concern a few banks that I'm monitoring very carefully. When banks experience financial losses, it is and should be a matter of concern,” Yellen told the House panel.
Analysts said the Santa Clara-based lender was forced to sell securities to realign its portfolio in response to higher interest rates while it manages lower deposit levels from clients, many of whom are local venture capitalists.
This morning’s Wall Street Journal headlines online tell the tale:
- Banks Lose Billions in Value After Tech Lender SVB Stumbles
- SVB Stock Halted After Sharp Selloff; Bank Exploring Possible Sale
- SVB Financial Explores Sale After Failing to Raise Capital
- Silicon Valley Bank Crisis Unsettles Bank Investors
One Twitter comment picked up by financial media called the collapse of the SVB Financial Group “a Lehman Moment for the start-up world,” a reference to the 2008 bankruptcy of global investment bank Lehman Brothers that triggered a worldwide financial crisis.
The New York Times reported that prominent venture capitalists – led by Peter Thiel’s Founders Fund – “recommended companies withdraw their money from the lender, sparking further worries over its financial health and liquidity in the wider banking sector.”
Business Insider reported that Silicon Valley Bank’s rivals were already pouncing on the news as a business opportunity, “pitching startups on moving their money away from the struggling bank.”
Silicon Valley Bank had surprised the market by announcing late Wednesday it needed to raise $2.25 billion in stock.
CNBC reported that SVB’s CEO Greg Becker held a call with clients Thursday afternoon in an attempt to calm their fears.
Meanwhile, on svb.com there was no mention of the developments.
The bank reports that 44% of U.S. venture-backed technology and healthcare IPOs year-to-date banked with SVB.
The bank touts that Forbes' 13th annual look at America's Best Banks ranks SVB 15th out of the 100 largest publicly-traded banks based on growth, credit quality and profitability.
Until this week, investors had believed financial stocks were insulated from the turmoil caused by continued inflation and rising interest rates.
Today’s news was felt around the world.
The London Times reported that “UK banks slide after Silicon Valley Bank triggers sell-off in financial stocks.”
The New York Times reported that “Contagion concerns spooked the global markets on Friday, rattling stocks from Tokyo to London.”
“Bank stocks were the hardest hit, but smaller lenders like SVB, which has funded start-ups worldwide, are viewed as being particularly vulnerable — and now face potentially serious threats to their survival,” the Times reported.
SVB Financial Group provides loans and financial services to startups, private equity, and venture capital firms. The bank, with headquarters on Tasman Drive in Santa Clara, has four segments: Silicon Valley Bank, SVB Private, SVB Capital, and SVB Securities. In addition to providing loans to venture-capital-backed startups, the company invests in private equity and venture capital funds. The bank operates throughout the United States and maintains offices in Canada, the United Kingdom, Israel, China, India, Germany, Denmark, and Ireland.
Just an Observation,
Oh Boy, this is going to do a lot of damage, most likely these guys had Commercial and Residential Mortgages that were collapsing.
The real damage is going to occur where borrowers are going to be forced to pay higher interest rates, and make payments to adjust for lost property values, of the new lenders will CALL the mortgage and simply kick them out.
This is just beginning, there have been hundreds of banks closed in the last 1.5 years according to the FDIC. Their getting bigger and bigger. And this time there will be NO BAILOUT regarding the financial system, the FED RESERVE has too much debt, and the U.S. Government cannot do anything either.
JAFO AKA Steven G:
Everything you just posted is false — what else is new?
No, the bank’s problems are not related to residential or commercial real estate loans. Here is a good explanation from the Guardian:
“Wednesday Silicon Valley Bank sold a $21bn bond portfolio consisting mostly of US Treasuries. The portfolio was yielding it an average 1.79%, far below the current 10-year Treasury yield of about 3.9%. This forced SVB to recognize a $1.8bn loss, which it needed to fill through a capital raise.”
Try reading about a topic before you post. I realize that Progressives hate facts but at least make some effort least you make a fool of yourself.
You went on to say, “(borrower will be forced to) make payments to adjust for lost property values, of (sic) the new lenders will CALL the mortgage and simply kick them out.” This is complete nonsense. Residential borrowers cannot be forced to make higher payments because of a reduction in the value of the real estate. And, lenders cannot simply “kick them out” — the terms of the loan must be honored by any lender that were to acquire a loan from SVB (now FDIC as receiver). The lender cannot simply “Call” the loan due.
You went on to tell a bold face lie — are real whopper, “This is just beginning, there have been hundreds of banks closed in the last 1.5 years according to the FDIC.” The FDIC has closed ZERO banks in the past two years with the exception of SVB. Here is the actual data:
https://www.bankrate.com/banking/list-of-failed-banks/
Your pants are literally on fire ??
? ? ?
As with most of your posts, you have an agenda (that of an angry, failed, bitter man) and if that is not bad enough, you don’t know what you are talking about. Please stop posting about things you know nothing about.
BTW, all depositors with accounts under $250,000 are fully insured and will lose NOTHING! The rest will receive their funds when the receiver sells the assets, which could occur within days. A quick look, after accounting for the NPV of the assets in a rising interest market and the feds willingness to make some guarantees to the buyer, suggest that a complete payout is not unlikely.
Just an Observation,
The problem with “honoring existing mortgages” will be the FDIC will have to insure them. But given that more banks are going to die, the FDIC funding will go into debt.
We are about to see a federal default due to the GOP congress not extending the debt ceiling. Which means the FDIC cannot insure bad mortgages. Thus so called “bail ins” cannot provide any “protection” regarding underwater mortgages. Thus when this bank goes to auction, it is likely going to wind up having to let go of ALL Mortgage Backed Securitas, since they are now not worth the money they are claimed at this time.
Then these underwritten mortgages wind up back on the market, remember contracts can be BROKEN for a lot of just causes. And this situation is one of them
Cannot Perform Obligations
It is possible to get out of a contract without being sued if you can no longer perform your obligations due to a particular circumstance or event. “Impossibility of performance” is grounds for contract termination because circumstances beyond the control of the contractual party prevent performance. Death or incapacity of a key player involved in the contract can cause such an impossibility.
Natural disasters or destruction of something necessary to perform the obligations can also lead to impossibility. If you can prove that you cannot remain in the contract due to circumstances beyond your control, it is possible to end the contract without a breach.
So you better get ready for the storm coming.
Just an Observation,
What also is likely is publications like this one are going to lose a lot of donations, which is putting pressure on this publications ability to remain operational.
Just look FOX NEWS is going to be put out of business from the Dominion and other lawsuits. META is dying as we speak. Alex Jones is going to eventually have to close InfoWars. So many publications invovled with carrying misinformation and potentially contributing to threats and hate speech.
I wonder if by 2024 this web page is still going to be here? Since it depends on donations right? How will there be any if the majority of the donors are losing money?
JAFO,
Impossibility of Performance permits the non completion of a contract. Merely having to wait for a counter-parties performance (in accordance with the contract) is never considered impossible even if that person can wait–it’s not the counterparty’s problem. Even in impossibility of performance is proffered as a defense for breach, it is for a breach, not a recission, reformation, or void.
Mortgages can not be “called.” Only non-mortgage loans can be “called.” A “calling of a loan” is done unilaterally by a creditor when a debtor is otherwise fully compliant with the loan terms. If the debtor is in breach, collateral can be seized (foreclosed, repossessed, etc). But when a debtor is “paying as agreed” a creditor cannot do anything but wait.
The FDIC is not even the regulator who would seize a bank…..get your regulators straight. In SVB’s case, the Ca Dept of Financial Protection took over the bank and installed the FDIC as a receiver….(a very normal thing). But, the FDIC is nothing but an insurance company……not technically a regulator at all.
Mortgage Backed Securities have nothing to do with SVB’s problem’s……If anything SVB’s problems have to do with the banking regulator’s requirement to by “safe assets” like treasury bills. What would be nice is if a bank can redeem any treasury from the Treasury Dept. and not have to sell them on the open market. This would allow banks obtain liquidity without a takeover or forced sale. It is somewhat ironic that the Treasury Dept. unilaterally raised rates creating higher paying TBILLS than ones issued over the past 10 years and thus created the very losses SVB suffered. Simply put, the treasury dept should repurchase at face value any TB held by any bank at any time. In exchange banks should only be allowed to purchase the shortage-period TB’s offered by the Treasury at any particular time (could be month, 3-month, 6-month, etc…). There……problem solved….
Just an Observation,
You should not make arguments that can be proven wrong as far as calling mortgages You can read from here
https://www.investopedia.com/terms/c/callloan.asp#:~:text=A%20call%20loan%20is%20a%20type%20of%20loan%20where%20the,future%20ability%20to%20make%20payment.
“KEY TAKEAWAYS
A call loan is a type of loan where the lender can demand full payment of the loan at their request.
A lender will call a loan if the BORROWER’S CREDIT HAS DETERIORATED, the BORROWER’S COLLATERAL AS LOST VALUE, or if the lender IS WORRIED ABOUT THE BORROWER’S FUTURE ABILITY TO MAKE PAYMENT.
A call loan is MOST OFTEN USED BETWEEN BANKS AND BROKERAGE FIRMS, as brokerage firms often secure short-term financing for client margin accounts.
INDIVIDUAL BORROWERS WILL MORE LIKELY BE OFFERED INSTALLMENT PAYMENT LOANS OR REVOLVING CREDIT (I.E., CREDIT CARDS) INSTEAD OF CALLABLE LOANS.
THE INTEREST RATE ON A CALL LOAN IS RECALCULATED EACH DAY AND IS HIGHLY CONTINGENT ON PREVAILING MARKET RATES, SUPPLY AND DEMAND OF FUNDS, AND MACROECONOMIC CONDITIONS.”
The REAL problem here is the ORIGINAL lender is OUT OF BUSINESS and a loan is actually NOT INURED by anyone. It is not a deposit, it is a debt. So wherever you are getting your information it might be very incomplete.
Face this, if a mortgage has any elevated risk to any lender, they WILL require a CALL OPTION. And non-primary residences are going to fall into that category. So you might as well check the mortgages you have, if there is any callable provision, which is likely, you are in high risk of having your lender review your loan for maintained property values, if they drop as little as 5%, then you are on a list for a called mortgage. So time to get yourself together.
Given that the ORIGINAL lender does not exist, then the contract is in fact IMPOSSIBLE TO PERFORM.
Sorry trying to blame regulations is also a non starter, and believe me, this could wind up just being the first of many cases of the same thing. The Government is not responsible for a private companies losses, so you are NOT going to gain anything by trying to get the Government to pay up. The whole point of the great recession was to give a FINAL warning that it was a ONE TIME event, it cannot happen again.
Mr Logic
If I may suggest you do not engage with Goldie as he is the village stalker who will follow you around the internet arguing some nonsense or another forever. He has been commenting unreadable nonsense for years to mollify his latent guilt for freeloading on rent and burning every single bridge he has ever had in his life. You are not educating nor helping him through debate as his cognitive dissonance is so think it might as well be peanut butter. You are only instigating a manic state that will take him hours if not days to unwind from and really it is not good for his health.
Be kind and just ignore him.
Just an Observation,
The REAL reality will hit on Monday, But CNBC is already reporting that the investors in SVB are asking for a bail out. https://www.cnbc.com/2023/03/11/silicon-valley-bank-failure-has-investors-calling-for-government-aid.html
Wait, these guys a PRIVATE VC’s so they have no insurance protections, hahahha!
KEY POINTS
Voices from tech and finance are increasingly calling for the federal government to push another bank to take over the failed Silicon Valley Bank to protect uninsured deposits.
Their main concern is that a failure to protect deposits over $250,000 could cause a loss of faith in other mid-sized banks.
Some observers called out the irony of the venture capital community calling for government aid after many VCs spurred their portfolio companies to withdraw money after SVB released a surprise statement about its financial situation on Wednesday night.
This is going to be a lot of fun to watch. Sorry but I have no mercy on those that played the tune “FAKE IT TILL YOU MAKE IT”
THis news said:
“But the vast majority of SVB’s customers were businesses that had more than that on deposit at the bank. As of December, more than 95% of the bank’s deposits were uninsured, according to regulatory filings. Many of these depositors are startups, and many are concerned that they will not be able to make payroll this month, which in turn could spark a wide wave of failures and layoffs in the tech industry.”
Too many dumb businesses, Anyone with a high school diploma should have known that accounts should have been segmented at the $250,000 limits. That is what a degree in Buisness would have taught you. So these guys are screwed.
“Investors are concerned that these failures could reduce confidence in the banking sector, particularly mid-sized banks with under $250 billion in deposits. These banks are not deemed “too big to fail” and do not have to undergo regular stress tests or other safety valve measures passed in the wake of the 2008 financial crisis.”
and
“Venture capitalist and former tech CEO David Sacks called for the federal government to push another bank to buy SVB’s assets, writing on Twitter, “Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.”
Great, they want the government to bail them out again. Sorry but you fools are not getting a third chance, you got the second chance in 2008.
We’re continuing to learn details as recently as this past hour, but please don’t let everyone with accounts at that bank be bailed out completely. The $250,000 limit should be applied to pay the owners of the insured accounts, and nothing should be provided to the owners of any, of all, uninsured accounts. What I’m now learning refers to “systemic risk exception” (ahem) and bailing out of what’s not insured, repaid by a levy on banks.
Done. Dem vote purchases remain sound before the next elections. And with all the money that got put into the system since 2008-9, it’s no surprise about more money.
“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.”
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm
Just an observation,
Just understand that deposits are safe but loans and mortgages are trash. That means those loans are going to be rebuilt by other lenders, but they will likely only cover 80% of the original vale, demanding a 20% down payment, and have to pay the market interest rate. Thus many are at a good risk of not getting any new loans. And again any risky loan or mortgages will have the call provisions. If SVB had them, they may have to call them to pay off deposits. Which means you are likely to see some debt resolved against borrowers.and by the way another bank just went bust.
Signature Bank in New York just got grabbed by FDIC as well. If you think any bank is safe, stop that dream now.
Borrowers are likely going to lose their provisional titles on any property in the near future
Just an Observation,
By the way, do not think you are protected, any PRIVATE interest can seize anything. There is NO CONSTITUTIONAL PROTECTION. And there is NO STATUTORY PROTECTION either.
This is going to be fun to watch, a chain of train wrecks
Face this, if a mortgage has any elevated risk to any lender, they WILL require a CALL OPTION. And non-primary residences are going to fall into that category. So you might as well check the mortgages you have, if there is any callable provision, which is likely, you are in high risk of having your lender review your loan for maintained property values, if they drop as little as 5%, then you are on a list for a called mortgage. So time to get yourself together. You can read from here: https://dumbwaystodie.io
Thanks for sharing this article.