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The Second Largest Bank Failure in U.S. History Has Many Worried

Another ghost of past economic woes appeared on Friday afternoon when assets held by Silicon Valley Bank were seized by California regulators and the Federal Deposit Insurance Corporation (FDIC) appointed their receiver in what is now the largest bank failure to take place since the financial crisis of 2008 — as well as the second-largest bank failure in U.S. history. The largest was 2008's failure of Washington Mutual.

https://townhall.com/tipsheet/spencerbro...Dl6u17v_u4

An odd look of pleasure on Nero's face as he watched Rome burn..

This is a weird one as a lot of companies have cash holdings there. People will be OK as long as they stay under the limits for backed accounts but something like 97% are uninsured accounts because they have more than the limit in the account.

Sent from my SM-T970 using Tapatalk

It's weird how these cryptocurrency firms have deposits in banks. I thought the whole idea of cryptocurrency was to stay out of the banking system.

https://www.cnbc.com/2023/03/11/crypto-f...-bank.html

Space sector reacts to collapse of Silicon Valley Bank - SpaceNews

...“It’s a very serious situation,” said a space sector entrepreneur who asked not to be identified. “Our balance is suddenly only $450. There has been no communication from SVB even after the event became known.  Our primary SVB liaison, who has been very attentive in the past, is unreachable by any means. It’s appalling.”

The company in question maintained a balance below the $250,000 FDIC insurance limit, but “I don’t know when or how I will really regain access or how any of the [Know Your Client] regulatory processes will be coordinated, which is critical for international aerospace work,” the entrepreneur said by email. “I can only imagine the state of mind for startups that had their equity fundraising or revenue monies in SVB. That’s likely well over the outdated $250,000 FDIC limit.  How will they even make payroll this week, much less, carry-on operations?”...

This raises an interesting question: should business deposits be insured for more than they are now, which is $250,000?

Businesses have to have cash deposits to make payroll and pay bills.  Many businesses are large enough that they would need more than $250,000 on deposit in order to operate.  A business would have no way to know a bank was in danger of failure.

A free market ideally would operate in such a way that, as much as possible, companies are responsible for their own gains and losses.  But this is not something the depositors in SVB could have anticipated.

(03-10-2023, 06:57 PM)The Drifter Wrote: [ -> ]The Second Largest Bank Failure in U.S. History Has Many Worried

Another ghost of past economic woes appeared on Friday afternoon when assets held by Silicon Valley Bank were seized by California regulators and the Federal Deposit Insurance Corporation (FDIC) appointed their receiver in what is now the largest bank failure to take place since the financial crisis of 2008 — as well as the second-largest bank failure in U.S. history. The largest was 2008's failure of Washington Mutual.

https://townhall.com/tipsheet/spencerbro...Dl6u17v_u4

From the article: "...some large banks that had scooped up expensive Treasuries and other bonds when interest rates were very low, are sitting on losses as borrowing costs have risen and bond prices have gone down.... Banks heavily exposed to the tech sector, like SVB, are particularly at risk as cash-hungry startups withdraw their deposits..."

The Fed has raised interest rates in order to raise the cost of borrowing money, and slow down the economy.   When interest rates go up, the value of bonds goes down.  As the economy slows, and borrowing costs rise, business start to draw down their deposits in banks in order to pay their bills.  This means the banks have to sell the bonds they hold in order to pay out customer deposits.  They have to sell them at a loss because the market value of those bonds has gone down because of rising interest rates.  Suddenly the bank doesn't have enough value in the bonds they are holding and the regulators come in to prevent a total meltdown.  

So the Fed seems to have jacked up interest rates so far and so fast that many perfectly good businesses will fail, for no fault of their own, because the deposits they hold in banks have disappeared.  

Which brings us to the question, will this happen in other banks?  And since we don't know the answer to that, will Monday see total chaos in the banking system as business scramble to protect themselves?  

As for who's the blame for this, there are many candidates, from the politicians who pumped money into the economy and ran big deficits, to the Federal Reserve, who kept interest rates too low for too long, and now have the jack up interest rates to stop inflation.  Too much easy money for too long, and now innocent people are getting hurt.  

  

(03-12-2023, 07:17 AM)The Real Marty Wrote: [ -> ]

(03-10-2023, 06:57 PM)The Drifter Wrote: [ -> ]The Second Largest Bank Failure in U.S. History Has Many Worried

Another ghost of past economic woes appeared on Friday afternoon when assets held by Silicon Valley Bank were seized by California regulators and the Federal Deposit Insurance Corporation (FDIC) appointed their receiver in what is now the largest bank failure to take place since the financial crisis of 2008 — as well as the second-largest bank failure in U.S. history. The largest was 2008's failure of Washington Mutual.

https://townhall.com/tipsheet/spencerbro...Dl6u17v_u4

From the article: "...some large banks that had scooped up expensive Treasuries and other bonds when interest rates were very low, are sitting on losses as borrowing costs have risen and bond prices have gone down.... Banks heavily exposed to the tech sector, like SVB, are particularly at risk as cash-hungry startups withdraw their deposits..."

The Fed has raised interest rates in order to raise the cost of borrowing money, and slow down the economy.   When interest rates go up, the value of bonds goes down.  As the economy slows, and borrowing costs rise, business start to draw down their deposits in banks in order to pay their bills.  This means the banks have to sell the bonds they hold in order to pay out customer deposits.  They have to sell them at a loss because the market value of those bonds has gone down because of rising interest rates.  Suddenly the bank doesn't have enough value in the bonds they are holding and the regulators come in to prevent a total meltdown.  

So the Fed seems to have jacked up interest rates so far and so fast that many perfectly good businesses will fail, for no fault of their own, because the deposits they hold in banks have disappeared.  

Which brings us to the question, will this happen in other banks?  And since we don't know the answer to that, will Monday see total chaos in the banking system as business scramble to protect themselves?  

As for who's the blame for this, there are many candidates, from the politicians who pumped money into the economy and ran big deficits, to the Federal Reserve, who kept interest rates too low for too long, and now have the jack up interest rates to stop inflation.  Too much easy money for too long, and now innocent people are getting hurt.  

  

Flashback to 2008.  And here we are 15 years later.

(03-12-2023, 12:17 PM)NewJagsCity Wrote: [ -> ]

(03-12-2023, 07:17 AM)The Real Marty Wrote: [ -> ]
From the article: "...some large banks that had scooped up expensive Treasuries and other bonds when interest rates were very low, are sitting on losses as borrowing costs have risen and bond prices have gone down.... Banks heavily exposed to the tech sector, like SVB, are particularly at risk as cash-hungry startups withdraw their deposits..."

The Fed has raised interest rates in order to raise the cost of borrowing money, and slow down the economy.   When interest rates go up, the value of bonds goes down.  As the economy slows, and borrowing costs rise, business start to draw down their deposits in banks in order to pay their bills.  This means the banks have to sell the bonds they hold in order to pay out customer deposits.  They have to sell them at a loss because the market value of those bonds has gone down because of rising interest rates.  Suddenly the bank doesn't have enough value in the bonds they are holding and the regulators come in to prevent a total meltdown.  

So the Fed seems to have jacked up interest rates so far and so fast that many perfectly good businesses will fail, for no fault of their own, because the deposits they hold in banks have disappeared.  

Which brings us to the question, will this happen in other banks?  And since we don't know the answer to that, will Monday see total chaos in the banking system as business scramble to protect themselves?  

As for who's the blame for this, there are many candidates, from the politicians who pumped money into the economy and ran big deficits, to the Federal Reserve, who kept interest rates too low for too long, and now have the jack up interest rates to stop inflation.  Too much easy money for too long, and now innocent people are getting hurt.  

  

Flashback to 2008.  And here we are 15 years later.

https://twitter.com/BaapofOption/status/...WCSIQ&s=19

^^^ lolol

(03-10-2023, 06:57 PM)The Drifter Wrote: [ -> ]The Second Largest Bank Failure in U.S. History Has Many Worried

Another ghost of past economic woes appeared on Friday afternoon when assets held by Silicon Valley Bank were seized by California regulators and the Federal Deposit Insurance Corporation (FDIC) appointed their receiver in what is now the largest bank failure to take place since the financial crisis of 2008 — as well as the second-largest bank failure in U.S. history. The largest was 2008's failure of Washington Mutual.

https://townhall.com/tipsheet/spencerbro...Dl6u17v_u4

It's interesting that you want to link Biden to this.

I would point to Trump and the federal reserve as the culprits with a sprinkling of Republican legislator intransigence thrown in.

First Trump had his fed chair run things like the economy was in recession when it wasn't which put tons of cheap money into the market and led to the current inflation problems created by way too much cheap money in the economy.

Then, when Biden came into office the nation was down millions of jobs after Trump's pandemic disaster. It wasn't the time for dramatic tightening of fiscal policy.

Now that Biden helped the economy recover the fed has gone way too hard into inflation reduction mode, and had been trying to create a recession by quickly increasing interest rates because the divided government (mostly republican representatives) won't allow for legislative solutions to the problems facing the country.

The fed actions are what led directly to the liquidity problem that svb went down from.

I wouldn't have a problem with the government backstopping accounts for legitimate small businesses (less than 100 employees or revenue under $3,000,000 per year, or something like that). Crooks running crypto schemes or giant businesses that should have their own rainy day fund can eat the loss, as far as I'm concerned.

This thread is already turning into "How to spot a Biden Cultist 101"..

(03-12-2023, 03:50 PM)SeldomRite Wrote: [ -> ]

(03-10-2023, 06:57 PM)The Drifter Wrote: [ -> ]The Second Largest Bank Failure in U.S. History Has Many Worried

Another ghost of past economic woes appeared on Friday afternoon when assets held by Silicon Valley Bank were seized by California regulators and the Federal Deposit Insurance Corporation (FDIC) appointed their receiver in what is now the largest bank failure to take place since the financial crisis of 2008 — as well as the second-largest bank failure in U.S. history. The largest was 2008's failure of Washington Mutual.

https://townhall.com/tipsheet/spencerbro...Dl6u17v_u4

It's interesting that you want to link Biden to this.

I would point to Trump and the federal reserve as the culprits with a sprinkling of Republican legislator intransigence thrown in.

First Trump had his fed chair run things like the economy was in recession when it wasn't which put tons of cheap money into the market and led to the current inflation problems created by way too much cheap money in the economy.

Then, when Biden came into office the nation was down millions of jobs after Trump's pandemic disaster. It wasn't the time for dramatic tightening of fiscal policy.

Now that Biden helped the economy recover the fed has gone way too hard into inflation reduction mode, and had been trying to create a recession by quickly increasing interest rates because the divided government (mostly republican representatives) won't allow for legislative solutions to the problems facing the country.

The fed actions are what led directly to the liquidity problem that svb went down from.

I wouldn't have a problem with the government backstopping accounts for legitimate small businesses (less than 100 employees or revenue under $3,000,000 per year, or something like that). Crooks running crypto schemes or giant businesses that should have their own rainy day fund can eat the loss, as far as I'm concerned.

Stop already. Money has been artificially cheap since Obama took office. Dems have been in the WH 10 of the 14 years since 2008. There's your problem.

(03-12-2023, 04:56 PM)NewJagsCity Wrote: [ -> ]

(03-12-2023, 03:50 PM)SeldomRite Wrote: [ -> ]It's interesting that you want to link Biden to this.

I would point to Trump and the federal reserve as the culprits with a sprinkling of Republican legislator intransigence thrown in.

First Trump had his fed chair run things like the economy was in recession when it wasn't which put tons of cheap money into the market and led to the current inflation problems created by way too much cheap money in the economy.

Then, when Biden came into office the nation was down millions of jobs after Trump's pandemic disaster. It wasn't the time for dramatic tightening of fiscal policy.

Now that Biden helped the economy recover the fed has gone way too hard into inflation reduction mode, and had been trying to create a recession by quickly increasing interest rates because the divided government (mostly republican representatives) won't allow for legislative solutions to the problems facing the country.

The fed actions are what led directly to the liquidity problem that svb went down from.

I wouldn't have a problem with the government backstopping accounts for legitimate small businesses (less than 100 employees or revenue under $3,000,000 per year, or something like that). Crooks running crypto schemes or giant businesses that should have their own rainy day fund can eat the loss, as far as I'm concerned.

Stop already.  Money has been artificially cheap since Obama took office.  Dems have been in the WH 10 of the 14 years since 2008.  There's your problem.

There's certainly an argument to be maid that Yellen left rates too low for too long, but the difference between Obama/Biden and Trump is Obama and Biden inherited economies that had been driven into a ditch by the previous administration (both Republicans), while Trump inherited a healthy economy and started making idiotic remarks about driving massive GDP growth. He should have been talking about getting into a position for sustainability.

It's so weird, solve people actually think Republican administrations are somehow better at managing the economy, but every Republican admin for decades has run the same bad playbook of tax cuts for the rich and deregulation and ended their admin in an economic swoon.

(03-12-2023, 06:43 PM)SeldomRite Wrote: [ -> ]

(03-12-2023, 04:56 PM)NewJagsCity Wrote: [ -> ]Stop already.  Money has been artificially cheap since Obama took office.  Dems have been in the WH 10 of the 14 years since 2008.  There's your problem.

There's certainly an argument to be maid that Yellen left rates too low for too long, but the difference between Obama/Biden and Trump is Obama and Biden inherited economies that had been driven into a ditch by the previous administration (both Republicans), while Trump inherited created a healthy economy and started making idiotic remarks about driving massive GDP growth and was hamstrung by knee jerk and mismanaged policy by NIH and local Dem mayors and governors regarding COVID policy. He should have been talking about getting into a position for sustainability.

It's so weird, solve people actually think Republican administrations are somehow better at managing the economy, but every Republican admin for decades has run the same bad playbook of tax cuts for the rich and deregulation and ended their admin in an economic swoon.

FTFY

(03-12-2023, 06:57 PM)NewJagsCity Wrote: [ -> ]

(03-12-2023, 06:43 PM)SeldomRite Wrote: [ -> ]There's certainly an argument to be maid that Yellen left rates too low for too long, but the difference between Obama/Biden and Trump is Obama and Biden inherited economies that had been driven into a ditch by the previous administration (both Republicans), while Trump inherited created a healthy economy and started making idiotic remarks about driving massive GDP growth and was hamstrung by knee jerk and mismanaged policy by NIH and local Dem mayors and governors regarding COVID policy. He should have been talking about getting into a position for sustainability.

It's so weird, solve people actually think Republican administrations are somehow better at managing the economy, but every Republican admin for decades has run the same bad playbook of tax cuts for the rich and deregulation and ended their admin in an economic swoon.

FTFY

Thanks for giving it your best shot.

There's a nugget of truth to what SeldomRite is saying. Trump's tax cut was ill timed. It would have been better timed if they found a way to cut spending so the cut didn't end up being pure debt. But it's not Congress's job to try to time the economic cycle, so I can't be too mad at them about that. They had been wanting to do those tax cuts for 4 years with Obama blocking them. They did what they could when they could do it.

And there's plenty of blame to go around. The fuel for the recent inflation started building up under Bush 43, and neither 44 nor 45 were able to stop adding to the pile.

(03-12-2023, 07:54 PM)mikesez Wrote: [ -> ]There's a nugget of truth to what SeldomRite is saying.  Trump's tax cut was ill timed.  It would have been better timed if they found a way to cut spending so the cut didn't end up being pure debt.  But it's not Congress's job to try to time the economic cycle, so I can't be too mad at them about that.  They had been wanting to do those tax cuts for 4 years with Obama blocking them.  They did what they could when they could do it.

And there's plenty of blame to go around.  The fuel for the recent inflation started building up under Bush 43, and neither 44 nor 45 were able to stop adding to the pile.

Don't worry, we already knew about you being a cultist, so you don't count.