Banking crisis starting?

Shares nose diving as the highly leveraged banking sector in the US ‘wobble’. I suspect the problem really lies in the derivative sector (interest rates probably)

Interest rate rises are crippling banks in Europe as well:

I’m glad I’ve been stacking the yellow stuff :slightly_smiling_face:

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Dealbook NYT column by Andrew Ross Sorkin. The column has no link.


Blame interest rates for the mess. As the Fed has raised rates to combat inflation, the value of bonds that banks hold as assets has fallen. That’s normally not a problem, until banks need to sell those holdings to cover customer withdrawals.

In SVB’s case, the bank disclosed late on Wednesday that it had sold $21 billion of its most easily sellable investments — crystallizing a $1.8 billion after-tax loss — and borrowed $15 billion. It also announced plans to raise $2.25 billion through an emergency sale of stock. That news spurred customers to start pulling deposits; investors, already unnerved by the collapse of the crypto-focused lender Silvergate, followed suit, driving SVB’s stock down 60 percent yesterday. It’s down about 40 percent in premarket trading this morning.

This hasn’t helped:

Peter Thiel’s Founders Fund and several other high-profile venture capital firms advised their portfolio companies to pull money from Silicon Valley Bank on Thursday, responding to panic about the bank’s financial situation in tech startup circles.

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And now regulators have shut down Silicon Valley Bank. This is a heavily used bank in the VC arena. This is not a small potatoes thing.

KBW Nasdaq Bank Index is currently down 4% after dropping by over 10% earlier today:

No, I don’t see a banking crisis starting. I’m not surprised that a bank was depositing long and trying to withdraw short, we see that sort of thing all the time. The question for me is how dumb were they not to see where interest rates were going and what that would do to bonds?

I meant it’s only been on the telegraph wires for about a year.

And this is a bank, although large, which specializes in a niche area of banking: servicing VC and “new” companies which are not important players in the (financial) world today. Tomorrow, yes, but a recession always puts that on hold for a while.

It’s possible, I suppose, that some kind of contagion happens, but frankly I don’t see it outside a minor inconvenience for regulators and a bunch of lost dough for the VC industry, which is pretty used to losing money here and there.

{edited to include this Barron’s piece I just ran across)


I am sure they sold shares so their $,$$$,$$$ could spend time with their family.


Clawback might be the word–and action–taken by FDIC.

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I hope that you are right.

Both Silvergate and SVB were in a niche market. SVB in particular was cash rich and forced to seek out the best returns which, unfortunately, turned out to be long dated bonds.

However, any bank that was forced to liquidate assets to pay back depositors would face similar problems at the moment.

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