The primary clients of Silicon Valley Bank (SVB) were technology startup firms.
These firms were strapped for cash and started withdrawing money from SVB.
To fund these redemptions, SVB sold a $21bn bond portfolio for a $1.8bn loss on Wednesday.
Silicon Valley Bank disclosed plans to sell $2.25bn in common equity
and convertible stock on Thursday to shore up its balance sheet.
This effort collapsed and the stock for the bank's parent (SIVB) lost 60% that day.
California's banking regulators shut down Silicon Valley Bank on Friday and put it into receivership
under the Federal Deposit Insurance Corporation (FDIC).
SVB did a poor job of matching assets to potential liabilities.
It invested in longer-term bonds which suffered significant losses as the Federal Reserve raised rates.
Under accounting rules, these bonds were classified as "held-to-maturity" securities.
Although there were large losses, SVB didn't have to recognize them since the bonds were carried at cost.
Regulators may consider changing the classification for bank's bond portfolios
to "available for sale" which represents the market value.

A very non scientific measure is how the normally non reactive, stay the course Bogelheads are reacting. On a day when the markets are down big time no Bogelhead would think of posting anything about it. They know that they would be blasted by the “stay the course
“ group think. But since Thursday night at 11;40pm the “Silicon Valley Bank fails” thread now has 564 posts. I would say that the fear meter is redlined.

You are right. I had taken the link off my favorites bar but went back today with the same curiosity. The long thread I found had the OP being belittled for simply asking about money markets on behalf of his mother (or aunt, I don't remember which).

Quick glance:
Informative interview and Bill Hence laid out First Eagle strategy well.
He previously managed Royce Small Cap Opportunity fund before co-managing this First Eagle fund (1.5 year old) with 2 other managers.
FESAX is a NTF at Fidelity (most likely at Schwab).
ER is at 1.42%. A bit high and there are alternatives with lower ERs
https://fundresearch.fidelity.com/mutual-funds/summary/32008F226

Wow! That’s big! Thanks @rforno.
I figured the Fed would be involved behind the scenes. Maybe even the possibility of an emergency meeting + some additional action. But it’s unlikely. Could spook markets more and also confirm publicly how irrational they’ve been.
Forsyth speculates in Barron’s that they’ll only hike 25 bp at their next meeting. 60% probability based on the futures markets. I’ll bet that probability has risen since he wrote. I’m thinking perhaps no hike at all. Then there’s the political heat that’s soon to reign down on them. Warren fired a salvo at Powell’s testimony last week.
It’s curious that Powell is an attorney by training - not an economist as most Fed chairs have been. :)

People saw that if HTM was market to market, SVB was operating with negative equity since September. All that needed was some trigger for the run, and some say that rumors of it going under spread like wildfire on Twitter this week. And it happened.
Worrisome thing is that this can happen to almost 2 dozen banks right now.

@yogibearbull, think that accounts for the financial sector that fell almost twice as much as the S&P500 this week. Value-oriented funds/ETFs having higher % exposure to financial sector are impacted more.

@LewisBraham
Why did you jump subjects? Local news never did longform journalism of the sort we're discussing, at least not small papers, even in their postwar heyday (to the 1990s or a bit before). Newsday maybe, if we call that 'local'.
Roger about their demise and vulture-capital evisceration, sometimes in that order. It's horrible. J-prof Dan Kennedy is an expert and historian in the field (also a successor to me at an alt-weekly looooong ago):
https://www.bostonglobe.com/2023/02/10/opinion/local-news-startups-are-overcoming-evils-corporate-chain-ownership/
@linter, I don't know if you are involved in any way, but RS sure as hell has stepped up its investigative / political / digging game the last year or three. A real surprise.
Your work on your great-aunt makes me think you might be at least a little interested in my slightly similar initiative (filmable bio-novel is the goal) of this grandfather:
https://davidrmoran.wordpress.com/
+++
As I type, PK has just tweeted a smart succinct summary of SVB, 8 parts thus far, comparing it w Madoff affinity fraud in the crypto-bogo era:
https://twitter.com/paulkrugman/status/1634908696806592518

After 5 pm, CST for FINVIZ , and for Global Indices, as their markets open around the globe.

Oh, darn it and I gave Bill Ray Valentine Friday off. (context FINVIZ 12:25PM PDT, I think)

That's okay, and while Randolph is in the hospital, Mortimer is still around to turn the machines back on....

After 5 pm, CST for FINVIZ , and for Global Indices, as their markets open around the globe.

Oh, darn it and I gave Bill Ray Valentine Friday off. (context FINVIZ 12:25PM PDT, I think)

BITCOIN UP 5% AFTER NEWS OF FED BACKSTOP ON SVB DEPOSITS

Hmmm, I always thought what yogi said is true. the cnn link you show says:
Last updated Mar 10 at 4:59 PM ET

After 5 pm, CST for FINVIZ , and for Global Indices, as their markets open around the globe.
ADD: Popular Global ETF's

Where do you see futures now? The US futures will start trading at 5pm CT/6pmET.

A very non scientific measure is how the normally non reactive, stay the course Bogelheads are reacting. On a day when the markets are down big time no Bogelhead would think of posting anything about it. They know that they would be blasted by the “stay the course
“ group think. But since Thursday night at 11;40pm the “Silicon Valley Bank fails” thread now has 564 posts. I would say that the fear meter is redlined.

Guys, Credit Unions are insured, same as banks, just a different federal agency.

The credit union version of the Federal Deposit Insurance Corp. is the National Credit Union Administration, or NCUA. The FDIC and NCUA are alike in that they insure all deposit accounts up to $250,000, per person and per ownership category, at participating banks and credit unions.

From Bloomberg via Yahoo Finance: Schwab Has Worst Drop in Years After SVB, Block Trade
From Barron's via Yahoo Finance: Why Charles Schwab Is Taking a Beating Along With Bank Stocks

@linter
I transcribed my grandfather's hand scribbled diaries from two business trips he took to Europe in 1938 and 1940
He was in Vienna March 15, 1938 (Anschluss ) and arguing with the desk clerk at the Hotel Imperial about why they had given his room away to the Nazis when Hitler Goering etc marched right by them, not ten feet away.
He couldn't fly out of Europe in 1940 and had to wait six weeks for a ship in Lisbon, along with hundreds of refugees and Gestapo He kept daily entries describing the faces and characters.
They are both amazing documents
These are accessible because they are limited in words and focused content. While today's world it seems like everyone puts there every thought online, how on earth is anybody going to find the gold among the dross in years to come?

Snippet of article written by ALFONSO PECCATIELLO (ALF) -substack
"banks with assets below $250 billion (and a few more requirements) are not subject to the tighter regulatory scrutiny like big banks: no liquidity ratios (LCR), no net stable funding requirements (NSFR) forcing you to diversify your funding base and light stress tests. This allowed SVB to run wild with its investment portfolio and funding base concentration.
SVB’s management repeatedly lobbied to increase the cap for lax regulatory scrutiny and conveniently remained 20-30 billion below the $250 billion threshold?
It is hard to deny a decent amount of moral hazard was at play here
SVB was not applying basic risk management practices, and exposing its investors and depositors to a gigantic amount of risk.
Economically speaking, a $120 bn bond portfolio with a 5.6y non-hedged duration means that every 10 bps move higher in 5-year interest rate lost the bank almost $700 million.
100 bps? $7 billion economic loss.
200 bps? $14 billion economic loss.
Basically the entire bank’s capital wiped out.
As the tech/IPO boom faded, deposits stopped coming in 2022.
Recently, depositors started taking their money away and forced SVB to realize this huge losses on bond investments to service deposit outflows.
The concentrated nature of the deposit base and awful risk management meant SVB went belly up real quick. Many people are now calling for a blanket bailout.
But the evidence that moral hazard was at play are too big to be ignored.
And we should not reward moral hazard."
Author speaks to incompetence and/or moral hazard. Notes that in DEC 21, SVB DID HEDGE their portfolio but NOT in DEC 22.
Oy Vey.
what other banks are being run like this? Whiskey Tango Foxtrot.

Team - I have to ask though, why did Schwab get hammered more so than most other financial instituitons last week?
I am more than nervous (although that is my nature...big propenent of Andy Grove Intel, only the paranoid survive)...what does the market know that we might not? Shoot first, ask questions later?
Schwab's capitalization ration was lower than both SVB and FRC...gives me pause..although SCHW likely has a more diverse deposit base...not sure, I just don't like to see the down 25% stock in a week...
Best,
Baseball Fan

For shorter term cash needs I was advised to put it into an FDIC insured bank deposit account. This should be insured up to 250K. I need to call Schwab tomorrow but I believe you can do this at Schwab. .... Joe and RForno I am curious— are you keeping your bank funds at Schwab for covering short term needs?

I keep maybe 10-15K in my credit union account at any one time for regular/routine expenses (and a cushion!) - which mostly is my paycheck and/or one-off payments/honoraria .....but anything above that, plus the rest of any idle cash goes into Schwab and t-bills. If I need to make a big purchase or payment I just sell the t-bills and ACH the proceeds back into my checking account.

In 2022, 34 banks were required to undergo the Fed stress-tests (pg 13). All passed. Top Category I has 8 banks. https://www.federalreserve.gov/publications/files/2022-dfast-results-20220623.pdf
2023 stress-tests are in progress.
One unintended consequence of the SVB Bank failure may be that uninsured US bank deposits may move soon to the these banks. The SVB Bank also had several overseas branches, and foreigners are confused how can their money have problems in a bank from the richest country in the world. I have only seen the UK move fast on containing the fallout in the UK.
It is also unfortunate that many startups (not just in CA, but across the US and several foreign countries) were required to hold substantial deposits at the SVB Bank as part of their startup funding through the VCs + SVB Bank. This even if they had concerns or reservations about the SVB Bank.
Scenes from First Republic Bank in CA on Saturday (lining up for deposits or withdrawals?), https://twitter.com/CitizenFreePres/status/1634691876178780160
https://twitter.com/DailyMail/status/1634701406761529344