To The Moon

When I posted my original piece on $SVB Financial Group(SIVB)$ Silicon Valley Bank (SVB), the main objective was to pose the question whether the saga presented an opportunity to pick up any banking stocks at possible “bargain” prices.

US banking sector was at a “tipping point” courtesy of SVB, like it or not. The bank’s assets are fine to put it mildly, its just that they are having a possible “cash flow” problem (on their loss-making bond portfolio) that the bank is trying to nip at its bud stage. ( Click here to read orig post, if interested ! )

However when financial gurus started instigating “withdrawals”, the urgency snowballed into “chaotic panic en-mass withdrawals”, resulting in a sudden “suction / vacuum” being created.

I did not plan to write another post on Silicon Valley Bank.

However with everyone jumping onto the band wagon with both true & click-bait posts, I thought I give an update based on what I have read so far (in chronological time sequence).

Baseline is Mon (13 Mar) 12 noon Singapore time.

3 Days Ago - Friday

• One of many distractors seizing opportunity to draw attention unto himself is Bill Ackman - hedge funds owner, founder and CEO of Pershing Square Capital Management,

• Media attention was diverted to him when market’s focus should be on the bank & how its managing the crisis

• As a qualified fund manager, isn’t he aware which govt body would be handling such crisis ?

• What’s with all these “demand” that the Fed should stepped up to handle the situation ?

• What made him so sure that the regulators are not working at the crisis ? Think again !

• Came across “clickbait” post/s attempting to link SVB and $SoFi Technologies Inc.(SOFI)$ etc..

• What are the repercussions (to SoFi) as a result of SVB’s fall from grace ?

• For a start, there is no link between these 2 entities

• SoFi is a full fledge bank (offering a host of banking products & services)

• SVB is what US analysts termed as “Silicon” bank; where its customers base is mainly startups.

• Aware because of research done on SoFi for the 03 Nov 2022 post . ( Click here to read about it if interested !).

• For readers who did not know better, likely that they would be misinformed as a result of reading such post/s. Scary prospect ?

2.5 Days Ago - Fri midnight / Sat midday

• To minimize chaos, US regulator FDIC decided to “freeze” SVB operations

• Federal Deposit Insurance Corporation (FDIC) is a US govt corporation supplying deposit insurance to depositors in American commercial banks & savings banks

• When there is a framework put in placed to handle a crisis like SVB, its important that media and the financial institutions co-operate and work constructively with the US regulators

• This include (a) keeping quiet when you are not involved (b) do not provide unsolicited opinion [on any social media platform] and most importantly (c) allow the govt body in charge of crisis management to carry out its duties without unwanted background noises.

1 Day Ago - Sunday

• Its been confirmed that SVB failed to find a white knight to rescue the bank

• It will be “challenging and difficult” given the current geo-political & economic situation both in (a) US internally and (b) world-wide. Things have not dialled back to just before the pandemic’s on set.

• Mr musk has jumped into the fray as well; “expressing” interest in SVB’s license and “morphing” $Twitter(TWTR)$ into a “digital” bank.

• As long as there is nothing concrete coming out of this, its just another distraction thats all.

• Summary (review) on how Twitter is managed - (a) not paying rental of offices regionally (b) selling off company’s fixtures (c) convert office into sleeping quarters (d) mass retrenchment to the detriment of running the company properly (e) no Compliance staff & department (f) frequent Twitter’s outages

• Assuming Twitter did successfully acquire SVB, would you dare to trust Twitter as your digital bank when it operates in such “un-regulated” manner ?

• A decisive remark by US Treasury Secretary Ms Janet Yellen setting the overall tone

• With the boundary clearly demarcated, all relevant authorities (FDIC & Fed) could work within the permitted perimeters on (1) what’s to be done immediately and (2) what could be planned and put into action in the coming days after careful considerations.

• This should calm the market for the moment as rescue plans are being mapped & executed progressively.

• Hedge funds’ daylight robbery offers to buy startup deposits stranded (at SVB) for as little as 60 cents on the dollar

• The “excuse” offered reflected “weak” expectations on ow much of uninsured deposits could eventually be recovered once SVB’s assets are sold or wound down.

• Oaktree Capital Management, known for investing in distressed debt have reached out to startups after SVB's seizure by FDIC. They sure worked fast, don’t they !

• Investment firm $Jefferies Financial Group Inc.(JEF)$ have also contacted startup founders with money stuck at SVB, offering to buy their deposit claims at -30% steep discount, offering at least $0.70 on the dollar for deposit claims.

• Hopefully, a more equitable solution could be found soon !

• Many have said that its a dog-eat-dog world in the financial sector. Witnessing. Now we know why.

4 Hours Ago - US Govt Stop Gap Plan

• Federal regulators said steps are being taken to ensure SVB’s depositors will have access to their money come 13 Mar 2023 (Mon - US time).

• In a joint statement by the 3 Regulators (Fed, FDIC & US Treasury Dept) - they have taken the unusual step to “guarantee deposits”

• Intention is to jam-brake SVB’s escalating troubles from snowballing into a systemic risk to the US financial system.

• This also ensures US banking system continues to perform its roles of protecting deposits & providing access to credit, to households and businesses in a manner that promotes sustainable economic growth.

2 Hours Ago - Swing Action In The UK

• $HSBC Holdings PLC(HSBC)$ announced on Mon (13 Mar 2023), its acquiring UK subsidiary of stricken SVB for 1 British pound; rescuing a key lender for technology start-ups in Britain.

• This is what a “genuine” rescue plan looks like executed swiftly and decisively.

• It is not about “Tweeting” about it on Twitter and “basking” in the limelight when all eyes were on you.

In his released statement, HSBC UK CEO Noel Quinn said "This acquisition makes excellent strategic sense for our business in the UK”.

• SVB UK is ringfenced from the US group.

• Assets & liabilities of US parent company were excluded from the UK transaction.

• The UK deal brings to an end to frantic talks amongst the UK govt, UK regulators, and prospective buyers for SVB UK’s business over the weekend.

• Do you think mr musk is really keen to acquire SVB ?

• Do you think the 3 regulators (FDIC, Fed & Treasury Dept) will succeed in finding a buyer to bail SVB out ?

With a plan set for SVB-US’s depositors to withdraw their funds from 13 Mar (Mon) onwards, the banking sector should remain calm when trading begins this week.

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