I think FRB might be fine but the VCs are trying to start a run to force the fed to get involved in a bigger way at SVB (e.g. backstop guarantee or a bailout). I saw two very very prominent VCs both quote retweeted this tweet and added scare to it… both within 3 minutes of each other.
Total and complete speculation but just a thought.
Completely agree with this hypothesis. Since early Friday I have seen the entire silicon valley VC class instantly aligned behind a singular message that if the feds don't immediately bail out every customer of SVB – who are not big tech but "small tech", they are quick to add – this will cause a run in every other bank in the country and collapse the economy. I listed to the all-in podcast today and yup, exact same points repeated over and over again by all of them. Coincidentally these VCs are the ones who benefit most from such a bailout. Pull up a list of short sellers of these banks and I wouldn't be surprised if the same names are on it (like the person who sent the Tweet). It's like a bunch of SV billionaires all got in a group chat and decided on a single plan of action to save their asses. And the ironic part is that it was this group chat that caused the bank run in the first place.
FED's recent higher rates for longer policy is death sentence for VC's and personal wealth of many people... So they are trying to create moral panic in order to reverse FED policy..
They will not succeed.. Rates will stay higher but a discount window will be made available for banks like SVB....
I mean, isn't it obviously true that, in hindsight, every tightening cycle for the last 40 years has ended in the Fed going a little too far, whoops? That's not to say there weren't underlying problems with the economy and financial sector, but the Fed manifestly never knows where to stop.
Populist criticism of the Fed cannot identify the point that is "too far", but surely like a stopped clock they eventually have to be right.
Isn't an inverted yield curve a warning signal that can't be dismissed as economically illiterate populism?
They were shut down because they were insolvent to the tune of $950M. It's not just that liquidation wasn't fast enough; liquidating assets also meant they needed to mark-to-market their 1.5% debt notes which they could previously account as hold-to-maturity. This transitioned them from kinda insolvent (but not in an accounting sense) to fully insolvent.
This is completely false and, to borrow from Matt Levine, definitely securities fraud.
This is crypto Twitter excited to find some reason to justify digital assets as an alternative store of value, and then trying to bolster it by causing panic at another bank.
Either that, or as another poster said, forcing the hand of the Fed to bail out SVB.
This tweet thread has many obvious falsehoods, such as:
"Also by the end of the day today (Saturday) they stopped processing wires altogether."
Banks never process wires over the weekend. In fact, the following tweet in the thread admits this.
"The previous wording when trying to wire out of First Republic on Saturday is 'wire will be sent first thing Monday'. Now the wording changed to 'thank you for your transaction we'll get back to you'"
That was not the previous wording, and the wording did not change. (I just verified this myself.) If this was true, a screenshot proof would be easy to provide, but none was given.
"FRC's business model depends on a gentleman's agreement. Essentially, you deposit close to 30% of the loan value with FRC in a deposit account with a 0% interest rate in return for large (mostly) real estate loans at below market interest rates."
This makes no sense. For real estate loans, which the tweet specifically mentions, you would not just keep the loan amount sitting around in a bank account. You'd use it to buy the real estate that you got the loan for.
Etc.
This person is very confused, at best. Do not believe this tweet thread.
So prior to this week, the last real US bank runs -- in the classic sense, a Type 3 caused by information-fueled panic -- were between 2007 and 2008. In chronological order: Countrywide Financial (2007-08), Bear Stearns (2008-03), IndyMac Bank (2008-07), Washington Mutual (2008-09) and Wachovia (2008-09). Wachovia specifically was a, "silent run".
Before that? Basically you have to go back to the 1930s. There were some issues during the Savings and Loan Crisis (ex. Ohio), but none are considered to be Type 3s.
All the billionaire VCs who got on a group chat and caused the SVB run and are now retweeting this nonsense are going to find themselves in front of Congress in a few weeks time having to explain their role in this round of market panic.
Bank runs are a tragedy of the commons, trampling people in panic and naked greed, burning down the system of the world on the way out. Don't believe the hype.
I’m a first republic member. Just sent a wire to my other account at another institution. Nothing seemed out of the ordinary. I did it on the phone app as usual. It said the funds would be in the other account 3/13.
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[ 3.1 ms ] story [ 45.5 ms ] threadThey're citing "their friend" and posting other stuff from the daily mail. Like... No.
Total and complete speculation but just a thought.
But why would a bailout be needed? Where are people getting the idea that they don't have more than enough assets for all their customers?
What I read last week was that they had a classic bank run, where they couldn't liquidate long term bonds fast enough when everyone panicked.
Is there something else going on?
FED's recent higher rates for longer policy is death sentence for VC's and personal wealth of many people... So they are trying to create moral panic in order to reverse FED policy..
They will not succeed.. Rates will stay higher but a discount window will be made available for banks like SVB....
Populist criticism of the Fed cannot identify the point that is "too far", but surely like a stopped clock they eventually have to be right.
Isn't an inverted yield curve a warning signal that can't be dismissed as economically illiterate populism?
https://news.ycombinator.com/item?id=35104326
Not to say it isn't necessarily untrue, but some guy on twitter saying "my friend says so" isn't very convincing. Bigly if true though!
This is crypto Twitter excited to find some reason to justify digital assets as an alternative store of value, and then trying to bolster it by causing panic at another bank.
Either that, or as another poster said, forcing the hand of the Fed to bail out SVB.
"Also by the end of the day today (Saturday) they stopped processing wires altogether."
Banks never process wires over the weekend. In fact, the following tweet in the thread admits this.
"The previous wording when trying to wire out of First Republic on Saturday is 'wire will be sent first thing Monday'. Now the wording changed to 'thank you for your transaction we'll get back to you'"
That was not the previous wording, and the wording did not change. (I just verified this myself.) If this was true, a screenshot proof would be easy to provide, but none was given.
"FRC's business model depends on a gentleman's agreement. Essentially, you deposit close to 30% of the loan value with FRC in a deposit account with a 0% interest rate in return for large (mostly) real estate loans at below market interest rates."
This makes no sense. For real estate loans, which the tweet specifically mentions, you would not just keep the loan amount sitting around in a bank account. You'd use it to buy the real estate that you got the loan for.
Etc.
This person is very confused, at best. Do not believe this tweet thread.
Before that? Basically you have to go back to the 1930s. There were some issues during the Savings and Loan Crisis (ex. Ohio), but none are considered to be Type 3s.
We have managed to go backwards 90 years.
Bank runs are a tragedy of the commons, trampling people in panic and naked greed, burning down the system of the world on the way out. Don't believe the hype.