I don’t know if folks have been actively following the drama with Silicon Valley Bank or not but it made for a wild ride from Thursday through the weekend when it was announced that all depositors money would be fully available today:
A joint statement from Yellen, Fed chief Jerome Powell and FDIC chair Martin Gruenberg said depositors will have access to all of their money today from Silicon Valley Bank. The same goes for Signature Bank, which was closed on Sunday. No losses will be borne by the taxpayer. Any losses to the Deposit Insurance Fund to make uninsured depositors whole will be recouped by a special assessment on banks, the statement said.
If you haven’t been following the drama went down like this, apparently on Thursday a bunch of VCs panicked and told their investment companies to start pulling their money out of SVB which then caused a run on the bank which then doomed the bank because they didn’t have enough liquid cash to service all of the people who wanted their money transferred out.
On Friday it was announced that the the government had shut down SVB which further panicked folks who didn’t get their money moved out because, you know, payroll needed to be run and stuff. I know there were quite a few people who were gleefully watching this and saying things like “welp you should have known that the FDIC only insurers $250K” but, like welcome to running a small business where sometimes it’s impractical to open accounts at five different banks just in case VCs cause a run on a particular bank.
Anyway, not that I had any money at SVB, I’m not a baller like that, but it was rather painful to see small company CEOs explain to folks that they weren’t all rolling around in VC cash and it was going to be all their employees and vendors that would be left in the lurch if they couldn’t access their money. Like, I get it that a lot of folks think that most VC backed companies are silly and deserving of failing, but the bigger problem isn’t that Widget to the Max or something goes under it’s that there are real people who work for these companies, even if they are silly and they’re the ones who didn’t deserve to be told that they should just suck up the loss of a paycheck because they knew the risks of working for a start up.
Blogging Bayport Alameda 
Last Thursday, the programmed trading at my brokerage decided that my IRA should buy three shares of Silicon Valley Bank. The next day the Feds took over the bank. I guess I can kiss that money good-bye.
Comment by Hey You! — March 13, 2023 @ 7:29 am
Second biggest bank failure in history. They had no Chief Risk Officer for 9 months until hiring one in January….and their employees all received bonuses hours before the Fed takeover, ranging from $12,000 for associates to $140,000 for managing directors.
First Republic shares down 70% and trading stopped on multiple banks. Biden? “Everything is fine.”
Comment by Error 503 — March 13, 2023 @ 9:14 am
Think they knew what was coming?
14 days ago CEO Greg Becker sold 11% of his shares. Daniel Beck, the CFO sold 32% of his holdings. CMO Michelle Draper sold 28% of her stock.
The stock price at sale was $285. Now it’s frozen at $106.
These sales should be clawed back….
Comment by Really — March 13, 2023 @ 12:34 pm
These must have been 10b5-1 sales. If so they were registered with the SEC well in advance precisely to avoid insider-trading issues, and just happened to be executed two weeks ago.
Comment by RJS — March 13, 2023 @ 9:21 pm
It has not been reported very well or accurately about who the customers of SIVB are/were. I can tell you first hand that there are plenty of well established “normal” companies that have been around for decades and not just startups and cutting edge technology companies that were clients too.
I am still thinking about this and conflicted that it seems our government now falls all over themselves to help/save banks of any size while allowing regular people and small business to fail every day. I just don’t think it is correct or helpful to classify the SIVB accountholders as any specific group that might somehow be “deserving” of the pain they narrowly missed. It makes it too easy to blame the victims.
Comment by bjsvec — March 13, 2023 @ 11:24 am
The whole point of backstopping the deposits was to prevent “regular people and small businesses” from failing.
I’m just one guy and I know several people whose small businesses were gonna miss their 3/15 payrolls without it. Their suppliers would have gone unpaid as well. Shareholders are wiped out, as they should be, and that includes executives’ stock/option grants. Deposits are another matter, and backstopping them is backstopping the NorCal economy.
Interestingly, the SIVB’s holding company debt, which ranks above shareholders but behind depositors and other bank level obligations, is trading between 40-45 cents on the dollar (volatile, changing constantly). Hard to say for sure yet, we’re only in the second or third inning, but that implies the bank is money good. We’ll know for sure after the 9th inning.
Comment by dave — March 13, 2023 @ 11:59 am