Most people don't realize how crucial Silicon Valley Bank is.
Billions of dollars in venture debt. Untold amounts of warrants and convertible notes in early-stage firms.
If SVB fails, this could be the Lehman moment for the startup world.
Bank run on SVB might be kicking off.
The one thing you DON'T DO as a bank CEO is telling everyone,
"We'll be fine, just don't pull out your money"
I've worked with SVB through my job. they fund a huge amount of startups in the United States- and have their tentacles in basically every large VC and PE fund out there.
Most of you have never heard of them, but in the startup world, they are huge.
The real risk is SVB is essentially a commercial bank- thousands of startups hold cash reserves at Silicon Valley Bank.
Provisions for Credit losses in 2022 were 3x as high as prior years. Management was getting worried.
AOCI figure was $1.9B as of year end 2022.
AOCI is the proxy for unrealized gains or losses on investment securities:
looks like mostly fixed income- they were holding a ton of Treasury and MBS paper going into 2022
they held $14B in Fed deposits and government debt as of YE 2022... Losing $1.8-$1.9B is a huge chunk of that
average yield achieved on these securities was 1.44%- likely they acquired most before or during covid when rates were extremely low
They have 2.3B in cash while total liabilities are 195B and customer deposits are 173B... putting reserve ratio at 0.01329479769
wow they have $13B of cash and cash equivalents, but as we can see on page 49 the only actual interest-bearing cash they have at the Fed and other commercial banks is 2.3B.
Like most banks, they call Treasury securities "cash equivalents"
looks like even though provisions for credit losses increased dramatically they still INCREASED net loans in 2022 from $65B to $73B
looks like this was likely due to greed. they made more in interest income in 2022 due to higher rates they were charging on venture debt
Statement of cash flows shows despite the bond market bloodbath in 2022 they continued investing MORE into AFS and HTM securities
for reference, AFS means Available for Sale and HTM is Held to Maturity...
these are all debt instruments, they appear to differentiate them based on what their intent is. Likely the Treasuries were held to maturity and mortgage backed securities, ABS, CMBS, and other types of… twitter.com/i/web/status/1…
WAIT THEY ASSUME THE CREDIT RISK FOR SOME OF THEIR HTM SECURITIES TO BE 0??
so all the MBS they bought they had no risk management or buffers in case this lost value? Are you fucking kidding me?
they are deep in MBS and CMBS across the spectrum. they even hold variable-rate collateralized mortgage obligations
fucking hell- they barely even invest in startups. looks like only $605M in private equity from startups and $14B in Agency issued CMBS
jesus. they hold $117.39 Billion in MBS, CMBS, Treasuries, ABS, CMO, Corporate bonds, Muni Bonds- and only $2.664B in equity valued securities (actual shares in startups, this is very illiquid)....
they're essentially plowing everything they have into debt instruments.
only 0.02219001449 , or 2% of all investment assets is in startups
$57 BILLION in residential MBS
all that for a drop of blood.
1.33-1.89% weighted average yield.
variable rate CMO yielding half of other CMO
here's what a CMO is. Jesus christ do we learn NOTHING from '08 ??!!
The Dollar as a World Reserve Currency has allowed the US to subjugate the entire world and become an Empire. However- our greatest weapon could turn into an existential risk. A Thread 🧵👇
Let us say you are the President of a country like Liberia, a small West African nation, looking to enter global trade. You go talk to the International Monetary Fund, whose economists tell you in order to be a modern economy you need to have your own currency.
Thus, you need a Central Bank to print your own currency (LD), which will be used as legal tender, enforced by your government. Your Central bank will act as a lender of last resort for all the banks in your country, and will be responsible for stabilizing monetary policy.
The Federal Reserve is responsible for far more of the evils in this world than you can possibly imagine. A thread: 🧵👇
For the last few decades, homelessness has been on the rise in virtually every major American city. Drug addiction and mental health issues are of course the driving factors- below is a graph of the amount of homeless using shelters in New York. We can see spikes in the
late 1980s due to the crack epidemic, but the rate stabilized until the aftermath of the 2008 financial crisis. Due to deflationary forces rippling through our economy, mass layoffs and home evictions, millions of people across the States lost their housing and became desperate.
Japanese Yen surged this morning as the BOJ undertook a surprising change in policy and raised the cap on the 10yr bond to 0.50%
They are battling a Godzilla. Can they win? A short thread 👇
Recall the policy trilemma faced by currencies from my earlier tweets. Countries must choose only two sides of the triangle and give up the third; there is no way to hold all three (long term)
Earlier this year in September, the BOJ embarked on their most aggressive currency intervention in over 20 years, as their Yen was rapidly weakening against the Dollar. These interventions began at a pace of $20B, but quickly grew to $48B as the
The Fed is trapped in a black hole of it's own design. There is no way out; only hard choices lie ahead. A Thread 👇👇👇
As the industrial economy expanded following the Civil War, the weaknesses of the nation’s fractional reserve banking system became more serious. Bank panics or “runs” occurred regularly. Many banks did not keep enough cash on hand to meet customer needs when withdrawals came.
In 1907, a particularly severe panic ended only when a private individual, the financier J.P. Morgan, used his personal wealth to arrange emergency loans for banks.
The Bank Panic of 1907 occurred during a six-week stretch, starting in October 1907.