A crypto bank…what could go wrong?
Dem Mark Kelly called for social media censorship to prevent runs on banks. They’re at war with free speech.
Yesterday, some of the biggest banks in this country, Wells Fargo, Bank of America, JPMorgan, Morgan Stanley collectively lost more than $50 billion in market value in one day. That’s quite a hit. On the other hand, those banks still exist, and you can’t say that for Silicon Valley Bank. As of this morning, Silicon Valley Bank or SVB has gone under completely. That makes the second-biggest bank failure in the history of this country, and that’s significant.
SVB financed nearly half of all venture-backed health care and technology companies in the United States. It also apparently held significant cash reserves for some of the biggest cryptocurrencies, and it’s now gone. Federal regulators have renamed it and taken it over and that means an awful lot of people lost an awful lot of money and no, most of that money was not insured, no matter what they tell you. The FDIC only guarantees bank deposits up to $250,000, and according to some reports, more than 90% of all deposits at SBP exceeded that and it’s unclear whether those people will ever see their money again.
In fact, when customers showed up at SVB’s branch in Manhattan today to get their deposits back. Managers called the police. So, what we have here is a 1929 style bank run and that’s not a good sign for anyone. The question is whether the people who run SVB saw it coming. The CEO, a man called Greg Becker, apparently sold more than $2 million in bank stock over the last two weeks. According to the site, “Unusual Whales,” several other high-level employees of SVB, including Chief Marketing Officer Michelle Draper, Chief Operations Officer Phil Cox, General Counsel Michael Zuckert, all sold significant amounts of stock in SVB this year. Did those employees know their bank was in trouble? We don’t know and once again, where were the regulators? They’re supposed to prevent this.
……The problem was when interest rates went up as they were always going to, because they can’t stay at zero forever (Did you know that?). Well, when that happened, those bonds lost their value and that, of course, was a disaster for a ton of banks, but a true disaster for SVB and then a disaster for a lot of individuals who had their money there and companies that had borrowed money from SVB.
The SVB CEOs knew things were about to implode. They sold a massive amount of stocks before everything collapsed:
The CEO of Silicon Valley Bank sold $3.57m of stock in a pre-planned, automated sell-off two weeks before it collapsed – and the CFO ditched $575,000 the same day.
Greg Becker sold 12,451 shares at an average price of $287.42 each on February 27. The price plunged to just $39.49 in premarket Friday before the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets.
The day his sale went through, Becker bought the same number of shares using stock options priced at $105.18 each, according to filings with the Securities and Exchange Commission. The options, which allow you to buy a company’s stock at a set price, were due to expire May 2. The transactions were made through a trust that he controls, using a trading plan that he had set up on January 26, records show.
SVB’s CFO Daniel Beck sold 2,000 shares at $287.59 per share on the same day as his boss. He set up his trading plan on January 24.
……The FDIC rushed to seize the assets of SVB Friday after it experienced a run on the bank in the largest failure of a financial institution since Washington Mutual during the Great Recession of 2008.
Little known to the general public, SVB specialized in financing start-ups and had become the 16th largest US bank by assets: at the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits.
Its demise represents not only the largest bank failure since Washington Mutual in 2008, but also the second largest failure ever for a retail bank in the United States.
There’s probably a lot more to this story that involves an FTX – style mismanagement. Just wait.
And just like FTX, the investors are screwed.