Hello Hive!
The week started with a lot of interesting news that requires closer attention, but it's already clear that a collapse is coming and all the optimistic forecasts about the banking system being safe seem premature. In a couple of weeks, it will become clear how serious the problem is.
Some interesting developments include the bankruptcy of a second major American bank, Signature Bank, which wasn't on the evening news lists. Its assets were estimated at $110 billion in 2022. Additionally, First Republic is being actively buried.
All of this is happening against the backdrop of troubling details emerging about the last few months of work at Silicon Valley Bank. For almost a year leading up to its bankruptcy, the bank didn't have a risk assessment director. Instead, SVB was busy promoting the LGBTQ agenda by conducting a monthly "rainbow campaign" and "Lesbian Visibility Days".
Just like in 2008, rating agencies and financial regulators overlooked this again. They didn't raise the alarm until the end of February, when it was already clear to many insiders that SVB was on the brink of bankruptcy. The bank's management, aware of the sorry state of their brainchild, had already sold off their assets, leaving themselves with "golden parachutes."
The first effects of SVB's bankruptcy were felt by California companies, not just IT startups, but also winemakers who were closely tied to SVB. Hollywood film crews began experiencing pay delays since they also operated through SVB.
However, problems also arose in many other countries. Startups in the UK and Northern European countries were short of £30 billion that was held in SVB. The Bank of England has to urgently compensate them for at least some of their losses to prevent a wave of bankruptcies. 500 Israeli startups are on the verge of bankruptcy.
Panicked clients began withdrawing money en masse from other regional banks, such as First Republic Bank with assets of over $200 billion, and Signature Bank in New York with $115 billion in assets. This could lead to the fall of another California bank - First Republic Bank, with assets under $200 billion, and New York's Signature Bank, with $115 billion. The giants on Wall Street are not in danger yet - but the chain reaction of bankruptcies could bury many smaller banks.
Panic continues to spread - new lists of rumors are circulating in the market. In the analog era, during the crises of 1995 and 1998, it was the same: no one worked, they just exchanged gossip in the form of different lists, but back then they were sent to each other by fax. The truth in such lists is usually no more than a third, but even in this case the problem appears quite serious.
#CUBI #FRC #SARS #NYCB #FFWM #ALLY #DCOM #PPBI #PB #CLBK #CMA #ZION #BPOP #KEY #CBU #CBSH #CFR #FFIN #EBC #HTLF #FBNC #SI #BOH #SNV - banks with potential losses like SVB, 10 of these banks, as of 4Q 2022, have similar "red flags" as #SVB - Marketwatch
Billionaire Bill Ekman writes on his Twitter:
"The government has about 48 hours to correct the mistake that will soon become irreversible.
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By allowing SVB to go bankrupt without protecting all depositors, the world realizes what an uninsured deposit is - an unsecured illiquid claim on a bankrupt bank.
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Either by Monday, a buyer for the troubled bank will be found, or the government guarantees the return of all deposits at Silicon Valley Bank.
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Otherwise, within a day, all uninsured deposits will be withdrawn from US banks.
Mass withdrawals will deplete the liquidity of local, regional, and other banks, leading to a banking system collapse."
In the next couple of weeks, we will see how effective the actions of the Fed will be and how large-scale the consequences of this crisis.
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