Biggest Bank Failure Since 2008?

UPDATE: Biggest Bank Failure Since 2008

Hal Turner

Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago.

The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.

According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.

The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under the control of the regulator.

This story is an UPDATE to a story I published about 7:30 this morning showing that bank in particular has seen its share price plunge upwards of 70% overnight, and looked to be in trouble.  That earlier story is HERE

UPDATE --

A Silicon Valley Bank branch in Manhattan today called the cops on tech investors trying to pull their cash out as a run on the bank today forced regulators to seize its assets.

Police were called after 'about a dozen' financiers, including former Lyft executive Dor Levi, showed up outside the building on Park Avenue as investors scrambled to get their money out in the biggest collapse since the Great Recession. 

The bank failed today as depositors - mostly technology workers and venture capital-backed companies - began withdrawing their money following a shock announcement of a $1.8bn loss. The bank took a hammering in pre-market with its price plunging by 66 percent before trading was halted.

But with investors only protected up to $250,000, there have already been horror stories. Ashley Tyrner, CEO of Boston wellness firm FarmboxRx, said she had at least $10m deposited with SVB and has been frantically calling her banker. She called it 'the worst 18 hours of my life.'

With around $209bn in assets, SVB is the second-largest bank failure in US history after the 2008 collapse of Washington Mutual. It is the first FDIC-insured bank to fail in more than two years, the last being Almena State Bank in October 2020. 

 As of 1:51 PM EST, I am being told  the following:

"The FDIC noted that SVIB had $175BN in deposits as of Dec 31, note that some $151.5BN of these are uninsured, which means they get exactly ZERO back.

They get a COUPON that can be redeemed for whatever is left after wind-down and the government gets paid back. 

For the collapse of Lehman Brothers in the year 2008, it was 1/2 cent on the dollar, paid out ten years later."

UPDATE 2:15 PM EST --

I am told "There is CONTAGION" in this Bank trouble . . . 

Central banks have been dumping billions and billions in the bond market to try to stabilize the 10 year and they failed miserably. They have no liquidity.

. . . seems like a good time to start WWIII and head for the bunkers before anyone starts asking awkward questions.

Big Tech Banks Collapsing - Infection Spreading to Other Sectors

 Brian Shilhavy

The collapse of the banking industry has started, with FDIC-insured Big Tech Silvergate Bank announcing yesterday they were liquidating their assets and closing down.

Silicon Valley Bank also announced yesterday that they have lost $10 billion, while trying to reassure depositors to just “stay calm,” suggesting that their collapse is also probably imminent.

I don’t think there has been a more significant news event in the financial sector since the financial crisis of 2008, and yet at the time of my publishing this article, none of the corporate media is treating this as a headline story, unless it is a publication that focuses only on financial news.

This is the beginning of the storm that should have happened last year after FTX blew up, and probably did, but the infection that I have been calling The Big Tech Crash that started in 2022 has only just now begun to reveal how serious this crisis is, which can no longer be hidden from the public as the bank failures have now begun.

Bank runs that began last year, are only going to significantly increase in the days and weeks ahead. And this infection is not confined to Big Tech and their banks, but is spreading fast to other sectors of the economy.

It certainly is not surprising that Silvergate Bank was the first to go, as they were the bank most heavily invested in cryptocurrencies. They are the first U.S. FDIC insured bank to collapse since the COVID crisis in 2020.

The same day that Silvergate announced it was liquidating its assets and closing, Silicon Valley Bank made a surprise announcement that it would sell billions of dollars in stock to shore up its balance sheet and liquidate nearly all the securities it had available to sell so it could reinvest the proceeds.

The bank has suffered big losses on U.S. treasuries and mortgage-backed securities at the same time as its tech-heavy customers were burning through their deposits, according to The Information.

Things only got worse today (March 9, 2023), when Silicon Valley Bank CEO Greg Becker told top venture capitalists in Silicon Valley to “stay calm” amid concerns around a capital crunch that wiped nearly $10 billion off the bank’s market valuation.

I don’t know who wrote Becker’s script for this announcement, but having a bank CEO tell depositors and investors to “stay calm” is probably the WORST thing he could have said. It will probably have about the same effect as telling a crowded theater where a fire has just started to “just stay calm” and don’t leave the theater.

Too late Mr. Becker. The cat is out of the bag: Silicon Valley Bank IS in trouble.

And so is the rest of the financial system, as this Big Tech infection is not confined to just technology, as the U.S. society has spent decades now integrating technology into just about every other sector of our lives.

One of those sectors is the housing industry, as Better.com, a technology-based provider of mortgages, is also on life support, having laid off about 90% of their employees.

As The Information reported yesterday:

Better.com is staring into the abyss. The SoftBank-backed mortgage lender is fighting to survive amid high interest rates that have crushed its core refinancing business.

In an interview with The Information, its founder and CEO—who went viral in late 2021 when he sacked 900 employees on a Zoom call—didn’t rule out further staff cuts, even though previous layoffs have already shrunk Better.com’s headcount to 1,200 from 11,000 in 2021.

In the interview, Vishal Garg also described a multitude of rabbits he’s seeking to pull out of his hat.

Better.com faces deep challenges. In 2020 and early 2021, its business exploded thanks to low interest rates that drew a surge of mortgage refinancings. But refinancing interest has dried up as interest rates have soared. After posting a $172 million profit in 2020, Better lost $304 million in 2021 and another $328 million in the first quarter of 2022, according to securities filings by Aurora Acquisition Corp., a special purpose acquisition company that in 2021 proposed a merger with Better.com.

Other hurdles have arisen: Aurora disclosed last summer that the Securities and Exchange Commission was probing Better.com and the SPAC “to determine if violations of the federal securities laws have occurred.” (Read the full article at The Information – Subscription needed.)

Another sector heavily invested in technology is “healthcare.”

In a report published at Fierce Biotech yesterday, Johnson & Johnson announced that they were beginning layoffs in their “medtech division.”

Only a few weeks after Johnson & Johnson was reported to be planning global layoffs amid a restructuring of the infectious disease and vaccine groups of its Janssen pharmaceutical division—and just as a separate wave of layoffs hit the company’s consumer health group ahead of a planned spinoff—the job cuts have now reached J&J’s medtech division.

The bulk of the cuts—comprising nearly 300 jobs—will come from J&J’s Auris Health subsidiary, which makes robotic surgery systems for endoscopy procedures and which was acquired in 2019 for $3.4 billion. Another 47 layoffs will come from Verb Surgical, the robotic surgery startup that began life as a joint venture between J&J and Alphabet’s Verily offshoot but moved solely under the J&J umbrella in 2020. (Full article.)

Layoffs in their “robotics” businesses? But I thought robots were progressing to the point that they will soon replace humans?

As I have been saying for over a year now, the technology is not evolving, it is crashing.

And that is no longer a prediction. It is happening right now, before our eyes, and yet most of the public is still asleep and clueless.

But that won’t last much longer, as the day is probably fast approaching when they will go to their ATM or bank and will be unable to access their funds.

Make no mistake about this: this is a planned take down of the financial system that has been in the works since at least the 4th quarter of 2019. COVID was the first phase, the Ukraine war was another phase launched in 2022, and now we are apparently entering into the next phase.