SIVB Bank Failure

[yesman182]

26 minutes ago, mike_3772 said:

Does anyone have an idea of the top 2 or 3 conservative, well-run, gold standard regional banks?

USB. But I would feel better if Berk still owed it. 

[Ross812]

Anyone seeing First Republic Bank (FRC) down 65% premarket? 

[dealraker]

5 hours ago, Parsad said:

 

I agree!  But you also want to create the right incentives.  The bank executives should have their bonuses and options scrapped.  Maybe even a partial clawback of the last year's salaries for the top executives, risk officers, etc.  Directors should have all their director's fees for the last year clawed back.  And probably tighter scrutiny of regional banks, brokerages, insurers, pensions on the same level as too big to fail institutions.  We've seen this movie too many times in the last 15 years!  Cheers!

Compensation should be delayed.  You're getting paid on your own estimation of profits years into the unknown.  If this is your chosen model then make it dependent on the outcome of that model not some make-believe self-serving garbage that just happens to exist for a few quarters.  

[pranay]

On 3/11/2023 at 3:48 PM, Sweet said:

Bill claims his fund is long only now and has stopped shorting stocks.  I wonder if that long puts counts as not being short.

Well, he is going long an investment...

 

On 3/11/2023 at 2:19 PM, Gregmal said:

I can’t imagine having that much money; and still feeling the need to be a self serving piece of shit like that, for the purpose of acquiring more money….

 

 

Its so strange but there really is nothing that gets these slimy finance guys hard like short selling and talking bank runs. 

Well if their entire life they've received positive reinforcement doing this, they cannot be expected to change now. 

 

Remember his Jan-Feb 2019 shenanigans?

Edited March 13, 2023 by pranay

[yesman182]

can someone explain to me why FRC is an important client of JPM? What services does JPM supply to FRC, or why are they offering the credit line?

[Spekulatius]

29 minutes ago, yesman182 said:

can someone explain to me why FRC is an important client of JPM? What services does JPM supply to FRC, or why are they offering the credit line?

The Fed may have asked JPM nicely. I think JPM will end up owning them.

[Dinar]

3 hours ago, Spekulatius said:

SBNY wasn’t technically insolvent. They had losses from treasuries of about ~$2.5B, if I see this correctly, with $6.4B in equity. They had issues with liquidity (mostly large business accounts that are uninsured) and a taint from their crypto involvement that lead to a bank run.

 

They have a liquidity problem, not a solvency problem. There are a lot of banks that can fail as well now, after SBNY fails.

 

What we are seeing here are large scale viral nature bank runs. Game stop time for banks.

Have you marked loans to market?  Being long a 30 year 3% mortgage is not the same as being long a T-bill.  I think if you mark to market the loan book, the bank is insolvent.

[DooDiligence]

10 hours ago, John Hjorth said:

Federal Reserve [March 12^th 2023, 6:15 P.M. EDT] Federal Reserve Board announces 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 .

 

To me, it reads like : If you need liquidity tomorrow monday, just give us all that crap you have on your balance sheet as collateral - we will value it at par and give you the money [..., and later we must  see if we by that have solved one problem by creating a new one - then we will to solve that, too].

 

A happily married man is one who understands everything his wife does not say.

 

The same could be said about FRB announcements.

 

[John Hjorth]

Jeff [ @DooDiligence],

 

So true! 

[Xerxes]

Arb play

[Mephistopheles]

It seems to me buying a basket of these regionals is a good bet, and the bet is that the government won't allow a run on them. If another one fails it's more likely the Feds explicitly guarantee all deposits and/or cut rates. 

 

Why not just buy a basket and assume that the authorities will act rationally as they already have hinted?

 

This was Dave Tepper's thought process in 09 when he loaded up on the (big) banks. 

 

Simple and straightforward thesis imo.

[Castanza]

3 minutes ago, Mephistopheles said:

It seems to me buying a basket of these regionals is a good bet, and the bet is that the government won't allow a run on them. If another one fails it's more likely the Feds explicitly guarantee all deposits and/or cut rates. 

 

Why not just buy a basket and assume that the authorities will act rationally as they already have hinted?

 

This was Dave Tepper's thought process in 09 when he loaded up on the (big) banks. 

 

Simple and straightforward thesis imo.

Personally I don't know enough about the regionals to jump in. I think buying KRE and then some of the big boys is the less risky way to play this. 

[Gregmal]

3 minutes ago, Mephistopheles said:

It seems to me buying a basket of these regionals is a good bet, and the bet is that the government won't allow a run on them. If another one fails it's more likely the Feds explicitly guarantee all deposits and/or cut rates. 

 

Why not just buy a basket and assume that the authorities will act rationally as they already have hinted?

 

This was Dave Tepper's thought process in 09 when he loaded up on the (big) banks. 

 

Simple and straightforward thesis imo.

If the issue for banks is MTM, doesn’t bind buying or rate cutting guarantee more or less a solution? Much of the craziness with bonds hasn’t even been directly related to the Fed, but people speculating on where the fed ends up. If they came out and said we are holding at 4.75% for a year at least, I’d guarantee many of these assets reprice. 

[changegonnacome]

3 minutes ago, Mephistopheles said:

It seems to me buying a basket of these regionals is a good bet, and the bet is that the government won't allow a run on them. If another one fails it's more likely the Feds explicitly guarantee all deposits and/or cut rates. 

 

Why not just buy a basket and assume that the authorities will act rationally as they already have hinted?

 

This was Dave Tepper's thought process in 09 when he loaded up on the (big) banks. 

 

Simple and straightforward thesis imo.

The Fed has created a two tier banking system…..GSIB’s and everybody else……FDIC deposit insurance should explicitly be doubled or tripled for these regionals and quickly…..the man on the street doesn’t understand MBS lending facilities……but he understands the credit and faith of the US gov.

[SHDL]

9 minutes ago, Gregmal said:

If the issue for banks is MTM, doesn’t bind buying or rate cutting guarantee more or less a solution? 

 

Yes which is why I think the fear is somewhat overblown. And even if the Fed doesn't do anything, people getting scared and rushing into Treasuries alone should fix the problem to some degree. 

[changegonnacome]

18 hours ago, Dalal.Holdings said:

I still need help understanding...why did Roku have half a billy in the bank and not in T-bills/some kind of sweep ? Especially with short term rates so high? 

Good thread below and kind of what we talked about before……sweetheart deals for your company loans…..and sweetheart personal banking deals for the execs at the company to buy homes, planes and boats

 

When people say this isn’t a bailout……they need to understand that SVIB was a Silicon Valley circle jerk/cookie jar where everybody made out like bandits using a banking license……..that turned out to be too big to fail…..people are saying bond holders and equity holders are getting wiped out….partially true…..what they don’t say is that Roku was an effective bond holder in SVIB and is getting made 100% whole!
 

They and lots of other ‘founders’ risked company cash for preferential personal and corporate lending benefits….and lost……these were not mom and pop depositors. I understand the greater good argument and on balance something had to be done here…..but man it sure feels like the well heeled gambled, benefited, lost and are getting bailed out again.

 

 

Edited March 13, 2023 by changegonnacome

[Xerxes]

Anyone remembers few years ago CharlesSchwab was advertised by the investment community as a large rate hedge and that it was going to do really well as the interest rate rise shoots up

 

it was no-brainer !!

[CorpRaider]

Yeah I listened to that podcast and came away convinced that it should be valued like a balance sheet user not amazon.

 

Here's hoping the feds will be forced to release Wells and TD to once again fully serve the public in a time of need and certain senators from MA will be left in stunned silence.

Edited March 13, 2023 by CorpRaider

[D33pV4lue]

This really highlights the fiction of GAAP accounting balance sheets for financial institutions. Non-Interest Bearing deposits are extremely valuable given the rate environment but look no different than CDs yielding 2.5% and the issues with AFS/HTM securities are well documented. Would argue that looking at Book Value and Tangible Book Value to identify "cheap" securities only leads to negative selection.  Furthermore, banks are punished for growing equity beyond what is required for regulatory capital, which is why you see an increase in dividends and share buybacks. 

[Dalal.Holdings]

3 hours ago, SHDL said:

 

Yes which is why I think the fear is somewhat overblown. And even if the Fed doesn't do anything, people getting scared and rushing into Treasuries alone should fix the problem to some degree. 

 

Yeah...ironically people rushed into the same securities that got SVB into trouble...the irony. At this rate, long term yields will go down enough that the banks holding these long dated securities will see unrealized losses shrink...

 

On the deposit side I am wondering how much of this is just "all the VC's moved deposits" and how much is "depositors realize T-bills/money markets are paying 4-5% so banks bleed deposits".

 

I've been told for a long time that non-interest bearing deposits are a good thing for a bank to have, but what if these non-interest bearing deposits are the quickest to take flight given how rapidly short term rates have risen. A lot of these non-interest deposits didn't care that they were earning 0.0001% in interest when rates were zero, but now they are re-evaluating the situation...

 

So now tell me--what deposit is stickier: a savings account paying 3.5 to 4% or a non-interest bearing checking account? My answer given how rapidly rates have risen is that the interest bearing deposit is probably going to be stickier if rates continue to rise...

Edited March 13, 2023 by Dalal.Holdings

[Castanza]

2 hours ago, CorpRaider said:

Here's hoping the feds will be forced to release Wells and TD to once again fully serve the public in a time of need and certain senators from MA will be left in stunned silence.

Damn completely forgot about that with Wells, has there been any discussion around the topic? 

[Dalal.Holdings]

1 minute ago, Castanza said:

Damn completely forgot about that with Wells, has there been any discussion around the topic? 

 

Seems completely asinine for Feds to continue Wells' asset cap and stymie the FHN acquisition given what's happening.

[lnofeisone]

11 minutes ago, Dalal.Holdings said:

 

Seems completely asinine for Feds to continue Wells' asset cap and stymie the FHN acquisition given what's happening.

No news on the asset cap. CFPB came out hot and spicy against WFC saying at any given time 1/3 of the US population is at risk of WFC's shenanigans and they are a habitual recidivist (language was that strong) of bad behavior. I think asset cap is here to stay with us for at least another year or two.  

[cubsfan]

Monetary policy explained..Treasury/Fed/Banks:

 

 

[Parsad]

The one thing I've realized between 2008 and now is that banking needs a hard-assed regulator to stand guard.  Politicians on both sides of the aisle should just stay the fuck out of the banking business and have zero say in its regulation!  A well-capitalized and regulated banking industry is essential to a functioning and growing economy and embodies the trust of its customers.  Cheers!

 

https://finance.yahoo.com/news/gop-senators-pushed-to-keep-banking-rules-loose-one-week-before-svb-collapse-152706948.html