Silicon Valley Bank Fallout

[SB Shock]

Silicon Valley Bank in California failed on Friday after a run on cash. Part of the problem was the bank invested in U.S. Treasury and now is being hurt by rising interest rates. This is the 2nd largest bank failure in U.S. History.

The question will this be a precursor to like what happened in 2008? Supposedly there are 2 or 3 other banks in California who are in similar shape. So watch and see what happens on Monday at opening.

Fallout from the bank failure is also being felt around the world

The fallout from the collapse of Silicon Valley Bank is beginning to spread around the world. Startup founders in California’s Bay Area are panicking about access to money and paying employees. Fears of contagion have reached Canada, India and China. In the UK, SVB’s unit is set to be declared insolvent, has already ceased trading and is no longer taking new customers. On Saturday, the leaders of roughly 180 tech companies sent a letter calling on UK Chancellor Jeremy Hunt to intervene.

“The loss of deposits has the potential to cripple the sector and set the ecosystem back 20 years,” they said in the letter seen by Bloomberg. “Many businesses will be sent into involuntary liquidation overnight.”

This is just the beginning. SVB had branches in China, Denmark, Germany, India, Israel and Sweden, too. Founders are warning that the bank’s failure could wipe out startups around the world without government intervention.


“This crisis will start on Monday and so we call on you to prevent it now,” UK startup founders and chief executive officers said in the letter to Hunt.

https://news.yahoo.com/svb-fallout-s...154331383.html

[SB Shock]

There is some sources saying there maybe a full bailout of the bank beyond the normal limits.

[Kung Wu]

Got a notice from one of my vendors 30 minutes after it happened ... DO NOT WIRE OR SEND MONEY TO OUR SVB ACOOUNT.

Kiss your tech stocks goodbye Monday.

[WstateU]

[DwShock]

2008 here we come. A local computer shop in Omaha said on his radio show yesterday that the payroll company he uses had an account with SVB and that’s who handles the direct deposit. He had to write payroll checks Friday and is hoping he gets his funds back.

[WuDrWu]

I'm not sure what kind of setup the local computer shop guy has but it's hard to imagine he's going to be out anything more than his time. The FDIC is going to protect the first 1/4 mil for everyone (at least). If you're a small business and you've got more than 250K in a bank in California then shame on you. If you bank with Signature Bank, a bank who's heavily invested in crypto, then again, shame on you for not doing your homework.

Keep your CD purchases not only under 250k but calculate what the interest will be so that's protected as well.

It's just a reminder to diversify. Lots of good CDs out there short term so there's no reason to have more than 250K in any one bank.

[ShockerPrez]

Just remember that these are the smartest and brightest running these banks.

[DwShock]

Oh I have no doubt he’s going to be fine. To me it’s just a sign of things to come

[Kung Wu]

The problem is this bank is heavily tied to venture capitalists who have funded a crap ton of small businesses via Silicon Valley Bank (SVB). The venture capitalists transfer well over $250k in "loving spoonfuls" to the small businesses they have funded to assist with expenses. Those small businesses may need to hold, for example, $500k to cover their payroll. And to have a buffer to cover other expenses they might be sitting on another $100k. So depending on timing that SMB is out anywhere from $0 to $350k (subtracting $250k of insurance). There will be SMBs with a LOT more money tied up in that bank for payroll a lot larger than $500k too. The reality is SMBs don't have many accounts they use to make payroll. You'd think that the VCs would have tipped off their investments, but more than likely they were more concerned on clearing out their own much larger accounts.

What a wreck.

[Shockm]

The Silicon Valley Bank has ties to the Chinese Government and Beijing Business Start ups

The Silicon Valley Bank fallout has ripple effects on Chinese startups, particularly those backed by U.S. dollar-denominated funds.

U.S. regulators shut down the bank Friday in what has become the country’s second-biggest banking failure. Silicon Valley Bank had built its business on supporting tech startups, including those from China.

The online system for opening an account at SVB had allowed the use of a Chinese mobile number for verification, according to one Chinese tech startup founder who requested anonymity due to the sensitive nature of the situation. The source highlighted that they once had tens of millions of U.S. dollars at SVB.

He’s since moved most funds out, but he said he still had more than $250,000 at SVB.

Along with the backing of a mainstream venture capitalist, a startup could open an account at SVB within a week, the source said in Mandarin, according to a CNBC translation. “Mainstream traditional banks, such as Standard Chartered, HSBC, Citi have strict compliance and it takes a long time to start a bank account with them. It can take up to 3-6 months,” he said.


https://www.cnbc.com/2023/03/13/sili...-as-china.html

[Shockm]

More Inflation increases, or at least no drop in Inflation Rate?

Because of the SVB issues, the Feds will no longer have any rate hikes in the next week as they had promised before.

Fed Rate Bets Crumble Amid SVB Fallout, 2-Year Note Yields Plunge, As Bank Sector Trembles

https://www.kansas.com/news/business...nk=moresection

[SubGod22]

WBJ - Feds say all deposits at Silicon Valley Bank will be protected

U.S. regulators invoked a provision of banking law that allows the government to insure all deposits — not just the initial $250,000 typically insured by the Federal Deposit Insurance Crop. — citing a systemic risk to the banking system if they do not. The Washington Post reported earlier Sunday the plan was under consideration.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Fed Chairman Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chairman Martin J. Gruenberg. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.” (Read full statement at end of this story.)

[Kung Wu]

Tech stocks seem completely unaffected so far. Weird, but I'll take it.

[Downtown Shocker Brown]

Tech stocks seem completely unaffected so far. Weird, but I'll take it.

Really? All the money is gone. Someone took it.

But somehow everyone gets their money back.

Just out of thin air.

[Kung Wu]

I didn't do it.