I posted the following in one of the main SVB threads in response to a question:
What will probably happen:
- Regulators will sell SVB to a bigger bank at a greatly reduced price which makes it worthwhile for the buyer.
- Depositors will be able to withdraw up to $250k cash starting Monday (the FDIC insured amount).
- Funds above that will eventually be recoverable in phases with the first chunk available by the end of next week (because SVB does have billions in cash, the issue is with the long-term value of their investments not meeting regulatory requirements.)
- If the system works properly, it's highly likely depositors will get 100% back. It may just take a little longer.
- There will be an investigation of the bank and its board's Risk Committee. Things aren't looking great for the CEO and the former Chief Risk Officer who unloaded some of their stock but that's more of an 'insider trading' beef against those individuals (ie unrelated to the bank's failure). So far, in terms of risk management, it doesn't appear SVB did anything out of bounds or even unprecedented.
Arguably, as conditions changed last year they chose a particular investment strategy which would normally have worked out but instead hit a pretty unlikely perfect storm of external factors including the Fed raising rates really fast. We don't have all the info on who knew what and when but my guess is: if there's "wrongdoing" here, it's probably more stuff like not taking the corrective steps they took this week sooner. They may have been hoping to "play through" the rough patch and it could have worked - but this time it didn't because there was a run by their unusually close-connected depositors in the tech startup community.
(Note: some folks are arguing that the Fed itself created a volatile situation for this bank (and others) by doing pretty unprecedented things which rapidly impacted the bond markets and other securities tied to Fed rates. I find this argument not entirely unreasonable. We won't know root causes until regulators unwind this.)
"incompetence", "criminal negligence"?
It feels like you're ready to break out the torches and pitchforks to vanquish the evil-doers. Having spent a lengthy career in the tech business and having banked one of my startups at SVB several years back, I've learned the real world is far more complex and nuanced than the simple morality plays news headlines and social media prefer. There are surprisingly few pure black hat villains and white hat heroes. It's mostly just overlapping shades of gray and that makes for lousy stories because reality is complicated, boring and there isn't even anyone we're supposed to hate or cheer for.
Based on the partial facts currently in evidence, I can imagine a wide variety of plausible scenarios in which SVB did nothing illegal. We just don't know. As I mentioned, the recent personal stock sale by the CEO isn't a great look but that's separate because it happened after the fact and didn't cause the bank to fail. Also, it's possible the sale was the result of a preset automatic selling plan and the CEO did nothing wrong regarding the sale other than encountering lucky timing. We'll see...
I'm not a banker nor a lawyer but I've known lots of them over the years and have talked shop with them many times. Banks are supposed to take carefully measured risks. The nature of risks is that sometimes extreme outlier, black swan events can happen. The system is designed so that bank failures, while rare, are still possible. So far, the system appears to be working. The regulators are working right now to find a buyer for the bank. I wouldn't be surprised if a new owner is announced before Monday. Everyone (except the SVB shareholders) is going to get all their money. The SVB shareholders, like all public company shareholders, knew they were putting their money at risk to make more money.
Or... are you just spouting populism that sounds good but has no factual or legal basis? In fairness, I'll withhold judgement until your proof is posted.
They tried to maximize profits of the bank at the expense of their customers, prioritizing bank’s profit over customers’ interests.
We can argue all day about intentionality but the damage is clear and the source of the damage as well (SVB managers).
It’s not a fluke or hiccup or a typo, it’s someone’s decisions that had devastating consequences.
If a factory manager made some decisions that endangered livelyhoods of thousands of customers they’d be in jail I suppose? Or a construction company bought materials that cost less but are at risk of deteriorating ?
They were - for some reason - in need of some cash and they sold some bonds they had at a lower price than what they had bought them, losing some 2 billions (if I recall exactly the amount) which should represent around (again if I recall correctly) between 1.0% and 1.5% of their total deposits.
That - again for some reasons - triggered a "bank run" where customers took out (or attempted to take out) some 40+ billions or 20% to 25% of deposits.
Any bank, if 1/5th or 1/4th of deposits are withdrawn in the same day, is likely to become insolvent.
Now, that they had some issues in the way they communicated with their customers and that they might have better managed the emergency can well be opinated, but at face value it doesn't seem like there is much else.
An article that has more details:
https://nymag.com/intelligencer/2023/03/silicon-valley-banks...