airbnb and roku sound pretty fucked atm but I think the bigger deal is that this is affecting Stripe. they process payments for a lot of small to medium sized businesses and if this isn't resolved quickly, those businesses are going to have to either find another way to get paid or close down in the interim.
also it looks like there's more banks that while perhaps not quite in as dire straights as SVB, they're exposed to the same money fuckery that wrecked SVB. there's 20 banks that, after factoring in the current sales price of their assets, are significantly underwater. and even large banks like Wells Fargo that aren't underwater but are still looking at balance sheets where they have assets worth only 40% more than they would lose if something forced them to sell their "safe" investments right now. by way of comparison, SVB's ratio was more like 9000% - i.e. after accounting for the money they lost on their "safe" bets, they had $1B leftover in equity/cash and they had invested $90B of customer money. those banks that are underwater but haven't collapsed vary but their cash minus losses is either less than the amount of customer money they sunk into "safe" bets or about equal - i.e. if everyone tries to pull their money out, those banks could collapse without some kind of bailout, whether private or public.
why are all these banks sitting on "safe" investments that have are showing paper losses at billions of dollars? they bought bonds (mortgage backed securities included like back in 2008, hilariously enough), which are basically a loan but to institutions. unlike a loan, bonds pay their fixed interest rate to the bond holder but they don't make principal payments. instead, the whole amount of the principal is returned when the bond's term expires. regulations require banks that invest their customer deposits to buy long term bonds (ie like 10 years) and while they used to be required to maintain some amount of reserve cash for withdrawals, that rule was scrapped in 2020. so when the covid money printer turned on and inflation took off, businesses started depositing more and more cash. the banks saw that and went hey we need to make more profit on this and used basically all of it to buy bonds paying interest rates of like 1-2%. the money they sunk in can't be recovered until the bond matures. if you need the cash sooner, the only way to get it back is to sell the bond to someone else. normally, this is pretty safe. the US govt isn't likely to default on the debt. however...
in this environment, the fed raised interest rates. this means that if you went and bought a new bond, you'd be getting a 5-6% interest rate instead of 1-2%. so these banks are holding these bonds they can't recover the full amount they sunk in for another 9+ years AND who wants to buy a shitty old bond when the new ones pay so much better. that means if they sell these bonds now, they immediately lose 30% of the money they sunk in.
so the fed WANTED to crush increasing labor power and wages by forcing a recession. instead, the monkeys paw curled and they fucked the greedy banks instead.
obviously they don't lose any money if people don't try to withdraw too much but in SVB's case, they mainly held deposits for tech startups. the money printer turning off has meant that over the past year, they've been spending more money than they put in. so they tried to ask around for money so they could pay for those withdrawals without selling the bonds. no one gave them money for obvious reasons and word got back to the tech bros yesterday. they promptly went and tried to get all their money out. ie, a bank run.
now when this happens to you and me, the government has our back - the federal government will give you up to $250k worth of money you had deposited. these startups? they were holding nearly $200B in those accounts. the FDIC is only paying out a few percent of that. also the FDIC couldn't find anyone willing to buy this bank - it's fairly unprecedented for them to seize a bank as collapsed without finding a buyer first. but no one wants the turd so they sold all those bonds, taking the paper losses and making them real immediately. also the stock price dropped 70% so they can't get that much for the company even if they did find a buyer.
so this is a clusterfuck for this bank and there's indicators that most of the banking sector is unhealthy right now. if the businesses try to pull their cash out in a panic, they'll collapse more banks. but crucially, fdic insurance makes bank runs on consumer accounts basically impossible except for the uber wealthy.
tl;dr the fed accidentally fucked the banks by trying to fuck workers. the more they raise rates, the more fucked the banks are. they can bail the banks out but if they do, this same problem will reoccur in not very long and the fed knows it. congress and the banks themselves have really assisted this process along through sheer stupidity but... uhh... extremely critical support to the federal reserve?
also, like I said, you and I have FDIC insurance protecting literally all the money in our accounts. this is a capitalist-made capitalist problem. well, until the recession drives businesses out of the market and we all start losing our jobs. between here and there I'm going to enjoy some :antelope-popcorn:
Hopefully it stays that way. I don’t have anything close to that in savings I was just checking because I’m notoriously unlucky so I wanted to make sure I was safe.
As long as the US federal government exists, you should be good, they insure everything below that amount.
The top concern is if your company has their money in there (Roku, SV startups, etc...) And they can't withdraw enough to pay you, which you can't do anything about anyway and would definitely fuck you over.
Otherwise it's not worth the stress and you can :sit-back-and-enjoy:
yea I got suspicious a few months back of whether my "neo-bank" was really a real bank cause the wire transfers used a completely different bank's name. so I just moved everything over a month ago to a credit union. so seeing this and seeing the bank that was showing up on my wire transfers as one of the companies who's stock TANKED today, I feel like I really dodged a bullet. vibes based financial decisions worked!
unless you're/they're over the $250k fdic limit individually, the biggest immediate issue is that the bank might cease operating and it will take time to get a payout. so try to keep back up funds secured at some other bank just in case, especially if it's gonna hit your whole circle all at once if it does go sideways.
Bear Stearns went under what, 5 months before the rest of the economy caught up with the new reality? so who knows. maybe they'll do bailouts and kick the can down the road until next year.
airbnb and roku sound pretty fucked atm but I think the bigger deal is that this is affecting Stripe. they process payments for a lot of small to medium sized businesses and if this isn't resolved quickly, those businesses are going to have to either find another way to get paid or close down in the interim.
also it looks like there's more banks that while perhaps not quite in as dire straights as SVB, they're exposed to the same money fuckery that wrecked SVB. there's 20 banks that, after factoring in the current sales price of their assets, are significantly underwater. and even large banks like Wells Fargo that aren't underwater but are still looking at balance sheets where they have assets worth only 40% more than they would lose if something forced them to sell their "safe" investments right now. by way of comparison, SVB's ratio was more like 9000% - i.e. after accounting for the money they lost on their "safe" bets, they had $1B leftover in equity/cash and they had invested $90B of customer money. those banks that are underwater but haven't collapsed vary but their cash minus losses is either less than the amount of customer money they sunk into "safe" bets or about equal - i.e. if everyone tries to pull their money out, those banks could collapse without some kind of bailout, whether private or public.
why are all these banks sitting on "safe" investments that have are showing paper losses at billions of dollars? they bought bonds (mortgage backed securities included like back in 2008, hilariously enough), which are basically a loan but to institutions. unlike a loan, bonds pay their fixed interest rate to the bond holder but they don't make principal payments. instead, the whole amount of the principal is returned when the bond's term expires. regulations require banks that invest their customer deposits to buy long term bonds (ie like 10 years) and while they used to be required to maintain some amount of reserve cash for withdrawals, that rule was scrapped in 2020. so when the covid money printer turned on and inflation took off, businesses started depositing more and more cash. the banks saw that and went hey we need to make more profit on this and used basically all of it to buy bonds paying interest rates of like 1-2%. the money they sunk in can't be recovered until the bond matures. if you need the cash sooner, the only way to get it back is to sell the bond to someone else. normally, this is pretty safe. the US govt isn't likely to default on the debt. however...
in this environment, the fed raised interest rates. this means that if you went and bought a new bond, you'd be getting a 5-6% interest rate instead of 1-2%. so these banks are holding these bonds they can't recover the full amount they sunk in for another 9+ years AND who wants to buy a shitty old bond when the new ones pay so much better. that means if they sell these bonds now, they immediately lose 30% of the money they sunk in.
so the fed WANTED to crush increasing labor power and wages by forcing a recession. instead, the monkeys paw curled and they fucked the greedy banks instead.
obviously they don't lose any money if people don't try to withdraw too much but in SVB's case, they mainly held deposits for tech startups. the money printer turning off has meant that over the past year, they've been spending more money than they put in. so they tried to ask around for money so they could pay for those withdrawals without selling the bonds. no one gave them money for obvious reasons and word got back to the tech bros yesterday. they promptly went and tried to get all their money out. ie, a bank run.
now when this happens to you and me, the government has our back - the federal government will give you up to $250k worth of money you had deposited. these startups? they were holding nearly $200B in those accounts. the FDIC is only paying out a few percent of that. also the FDIC couldn't find anyone willing to buy this bank - it's fairly unprecedented for them to seize a bank as collapsed without finding a buyer first. but no one wants the turd so they sold all those bonds, taking the paper losses and making them real immediately. also the stock price dropped 70% so they can't get that much for the company even if they did find a buyer.
so this is a clusterfuck for this bank and there's indicators that most of the banking sector is unhealthy right now. if the businesses try to pull their cash out in a panic, they'll collapse more banks. but crucially, fdic insurance makes bank runs on consumer accounts basically impossible except for the uber wealthy.
tl;dr the fed accidentally fucked the banks by trying to fuck workers. the more they raise rates, the more fucked the banks are. they can bail the banks out but if they do, this same problem will reoccur in not very long and the fed knows it. congress and the banks themselves have really assisted this process along through sheer stupidity but... uhh... extremely critical support to the federal reserve?
:lenin-laugh:
Is there a list of which smaller banks are in hot water? Would like to get my shit out
also, like I said, you and I have FDIC insurance protecting literally all the money in our accounts. this is a capitalist-made capitalist problem. well, until the recession drives businesses out of the market and we all start losing our jobs. between here and there I'm going to enjoy some :antelope-popcorn:
if you have less than $250,000 in assets at a given bank, there's no point in going through the process right at the moment
Hopefully it stays that way. I don’t have anything close to that in savings I was just checking because I’m notoriously unlucky so I wanted to make sure I was safe.
As long as the US federal government exists, you should be good, they insure everything below that amount.
The top concern is if your company has their money in there (Roku, SV startups, etc...) And they can't withdraw enough to pay you, which you can't do anything about anyway and would definitely fuck you over.
Otherwise it's not worth the stress and you can :sit-back-and-enjoy:
What do you mean no point?
I thought we were doing a bank run =(
lol if you're doing it out of fun rather than any anxieties or concerns I'm all for it
https://www.marketwatch.com/story/20-banks-that-are-sitting-on-huge-potential-securities-lossesas-was-svb-c4bbcafa
Thank you. Looks like I’m good for now. Glad most of my stuff is in a credit union
yea I got suspicious a few months back of whether my "neo-bank" was really a real bank cause the wire transfers used a completely different bank's name. so I just moved everything over a month ago to a credit union. so seeing this and seeing the bank that was showing up on my wire transfers as one of the companies who's stock TANKED today, I feel like I really dodged a bullet. vibes based financial decisions worked!
o7 to the vibes
deleted by creator
unless you're/they're over the $250k fdic limit individually, the biggest immediate issue is that the bank might cease operating and it will take time to get a payout. so try to keep back up funds secured at some other bank just in case, especially if it's gonna hit your whole circle all at once if it does go sideways.
What weekend should I buy a train ticket to New York so I can go to Wall Street and shout "Come on, jump! Do a flip!"
Bear Stearns went under what, 5 months before the rest of the economy caught up with the new reality? so who knows. maybe they'll do bailouts and kick the can down the road until next year.