The second bank to fold...

New York State regulators took over Signature Bank today, the second financial institution to fold in less than a week as the FDIC and Treasury, however, assured depositors at both that they would be made whole in an attempt to stem the growing crisis.

Signature was a banker to crypto clients. It recently indicated plans to retreat from that business, but customers grew concerned recently given its high share of uninsured deposits — especially in the wake of Friday’ collapse of Santa Clara, Calif.-based SVB, or Silicon Valley Bank, which housed assets of Roku and many other tech companies and startups.

  Deadline

I understand that the fallout from not making all these people and companies "whole" would be tremendous. But that means to me there should be some serious restructuring of banking regulations. 

And perhaps people shouldn't be allowed to put more than $250,000 (the insured limit) in any one bank without a signed agreement that they understand any more than that is not insured through FDIC, and therefore, they will not be getting it back in case of bank failure or bank runs. Or maybe they could purchase individual insurance - perhaps even through the FDIC - for higher amounts of deposits. Or maybe $250,000 just isn't high enough these days.

...but hey, do what you want...you will anyway.

UPDATE 03/16/2023:  

Justice Department’s offices in Manhattan and Washington were investigating whether the bank took enough measures to detect possible money laundering schemes orchestrated by clients.

[...]

Signature Bank was seized by The New York Department of Financial Services on Sunday “to protect depositors” after its customers withdrew billions from the bank after the Silicon Valley Bank collapsed on Friday. The bank had $89 billion in deposits end of last year, according to the department, but more than $79 billion of those deposits were not insured by the Federal Deposit Insurance Corporation (FDIC), The New York Times reported.

  

Shouldn't regulations prevent that kind of ratio? The answer is, yes. And they used to.

The pair of bank closures over the weekend has raised concerns in the banking industry, and has prompted some lawmakers to call for reform. Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) introduced a bill to repeal rollbacks in banking regulations that was enacted during the Trump administration.

If enacted, the bill would put banks with at least $50 billion in assets back under strict Federal Reserve oversight and make them subject to Dodd-Frank Act stress tests. This would reverse at the Trump-era banking regulation rollback that raised the limit to $250 billion that exempted dozens of banks — including Silicon Valley Bank and Signature Bank — from the strictest federal oversight.

Now is not the time

Ad nauseum.  That's also what they always say about talking about gun control after a mass killing.

...but hey, do what you want...you will anyway.

Speaking of regulating banks...

Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever.

Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.

  Guardian

Jesus, these fuckers. 2008 wasn't enough.  This is exactly what people were warning about back then when banksters got bailed out instead of serving prison time they deserved.

[Failed Silicon Valley Bank] reportedly did not have a chief risk officer in the months leading up to the collapse, while more than 90% of its deposits were not insured.

In 2015, SVB’s president, Greg Becker, appeared before a Senate panel to push legislators to exempt more banks – including his own – from new regulations passed in the wake of the 2008 financial crisis.

[...]

Touting “SVB’s deep understanding of the markets it serves, our strong risk management practices”, Becker argued that his bank would soon reach $50bn in assets, which under the law would trigger “enhanced prudential standards”, including more stringent regulations, stress tests and capital requirements for his and other similarly sized banks.

In his testimony, Becker insisted that $250bn was a more appropriate threshold.

[...]

Becker, who reportedly sold $3.6m of his own stock two weeks ago, in the lead-up to the bank’s collapse...

Of course he did. And will he go to jail?

Two months later, SVB added the former Obama treasury department official Mary Miller to its board, noting she had previously helped oversee “financial regulatory reforms”.

And what's her cut?

[T]he Systemic Risk Designation Improvement Act of 2015 [...] was the precursor to legislation ultimately signed by President Donald Trump that increased the regulatory threshold for stronger stress tests to $250bn.

Trump signed the bill despite a report from Democrats on Congress’s joint economic committee warning that under the new law, SVB and other banks of its size “would no longer be subject to nearly any enhanced regulations”.

That was the fucking point.

The bill was supported in the Senate by 50 Republicans and 17 Democrats, including the Democratic Virginia Senator Mark Warner, for whom Becker held a fundraiser at his Menlo Park, California, home in 2016. [...] The bank’s political action committee also donated a total of $10,000 to Warner’s campaigns in the 2016 and 2018 election cycles.

In 2019, when the Federal Reserve proposed regulations implementing the deregulatory law, financial watchdogs warned that its regulations on Category IV institutions – as SVB was later classified due to its size and other risk factors – were far too weak.

“The proposal to significantly weaken enhanced prudential standards for Category IV firms could be disastrous,” Better Markets, a non-profit advocating for stricter financial regulations, wrote in a comment on the Federal Reserve’s proposal. “Moreover, these are not small or insignificant firms. Recall that the smallest among this class of banks is over twice the size of the $50bn banks that automatically required enhanced prudential regulation under the Dodd-Frank Act as originally enacted.”

[...]

In 2021, SVB passed the threshold of $100bn under management, triggering some additional scrutiny as a Category IV bank but remaining exempt from the more frequent and detailed analyses that regulators perform to determine whether banks above $250bn of assets have sufficient capital to withstand a crisis.

[...]

SVB is the biggest bank to collapse since Washington Mutual failed in 2008 during the financial crisis, and the second-biggest bank failure in US history.

[...]

In 2019, Becker was elected to serve on the board of directors at the Federal Reserve Bank of San Francisco. Becker left the board on Friday.

No need to go to a country without an extradition treaty. Nothing will happen to him here.

Jesus Tapdancing Christ.

...but hey, do what you want...you will anyway.

UPDATE 03/12/2023:

And, yes, the deregulation was signed into law by Trump.

Just like the railroad regulations were rolled  back by Trump.  But the fallout on both happened in the Biden administration, so that's who will take the blame.

UPDATE 03/13/2023:

And she's right.

UPDATE 03/14/2023:

There goes another one.  Signature Bank in New York has folded.

We don't need another bank failure

But we got one. Let's hope it remains limited.  Makes you want to put your money in a mattress.

The Federal Deposit Insurance Corporation announced Friday that they had closed down the California-based Silicon Valley Bank, the 16th-largest federally insured bank in the country.

[...]

Its remaining assets were moved to the newly created Deposit Insurance National Bank of Santa Clara.

[...]

SVB's collapse represents the biggest bank failure since the 2008 financial crisis, which is notable because it appeared to be doing fine until recently.

[...]The emergency effort on Wednesday to save the bank failed, and it was declared dead on Friday.

[...]

The fact that most of SVB's assets were seemingly secure — they were mainly longer-term government bonds — led many investors to feel the bank was secure. [...] The bank suddenly announced Wednesday that it needed to raise over $2.2 billion, sending its stock plunging by more than 60% in a matter of days.

The government securities bought by SVB pay a fixed rate, so when market interest rates were raised, a gap began to grow between how much the securities were worth on the open market and what they were valued on the bank's books.

[...]

The effect of SVB's collapse was immediately felt among other large banks. First Republic Bank, PacWest Bancorp, Signature Bank, and Silvergate Capital Corp all faced significant hits from the fallout.

Though the true impact of the collapse may not be felt for some time, it raises questions as to which banks are misjudging the cost and lifespan of their deposits, as SVB did, and of the yield and duration of their assets.

  Washington Examiner

Maybe the banking industry needs to be overhauled? More highly regulated?

[Banking took a hit from] the fallout across the start-up ecosystem from the failure of Silicon Valley Bank. Entrepreneurs raced to get loans to make payroll because their money was frozen at the bank. Investors doled out and asked for advice in memos and on emergency conference calls. Lines formed outside the bank’s branches. And many in the tech industry were glued to Twitter, where the collapse of a linchpin financial partner played out in real time.

The implosion rattled a start-up industry already on edge. Hurt by rising interest rates and an economic slowdown over the past year, start-up funding — which had been supercharged by low interest rates for years — has shriveled, resulting in mass layoffs at many young companies, cost-cutting and slashed valuations. Investments in U.S. start-ups dropped 31 percent last year to $238 billion.

[...]

The bank, founded in 1983 and based in Santa Clara, Calif., was deeply entangled in the tech ecosystem, providing banking services to nearly half of all venture-backed technology and life-science companies in the United States.

[...]

Silicon Valley Bank was also a bank to more than 2,500 venture capital firms, including Lightspeed, Bain Capital and Insight Partners.

[...]

The bank was a “systemically important financial institution” whose services were “immensely enabling for start-ups,” said Matt Ocko, an investor at the venture capital firm DCVC.

  NYT

That does not sound good. Where does the fallout stop? We've seen bank failure recently, and it was ruinous for millions of people.

On Friday, Roku, the TV streaming company, said in a filing that roughly $487 million of its $1.9 billion in cash was tied up with Silicon Valley Bank. The deposits were largely uninsured, Roku said, and it did not know “to what extent” it would be able to recover them.

[...]

On Friday, the Federal Deposit Insurance Corporation took control of Silicon Valley Bank’s $175 billion in customer deposits. Deposits of up to $250,000 were insured by the regulator. Beyond that, customers have received no information on when they will regain access to their money.

[...]

Non-tech start-ups were also grappling with the fallout. Vox Media, the publisher of New York Magazine and The Verge, has a substantial concentration of cash at Silicon Valley Bank. [...] The company’s credit cards, which Silicon Valley Bank issued, stopped working on Friday.

[...]

Many venture capital firms had also used lines of credit with Silicon Valley Bank to make investments quickly and smoothly, Mr. Ocko of DCVC said. Those lines of credit are now frozen, he said.

[...]

Other start-ups were benefiting from the bank’s collapse. On Friday afternoon, Brex, a provider of financial services to start-ups, unveiled an “emergency bridge line of credit” for new customers migrating from Silicon Valley Bank.

[...]

To stave off any taint from Silicon Valley Bank, some venture funds blasted updates to their backers. Sydecar, a service that facilitates venture capital deals, shared a list of the banks it uses that were not affected. Origin Ventures promised to help companies “create contingency plans around working capital.”

[...]

Josh Butler, the chief executive of CompScience, a workplace safety analytics start-up, said he was unable to get his company’s money out of the bank on Thursday or before the bank’s collapse on Friday.

[...]

[He] said he had been prepared for a big crunch, given the doom and gloom swirling around the industry.

But “did I expect it to be Silicon Valley Bank?” he said. “Never.”

[...]

Mr. Ocko added that he did not foresee systemic collapse among start-ups and tech, but predicted “pain and friction and uncertainty and complexity in the middle of what’s already a painful macro environment for start-ups.”

I expect the Biden administration is all hands on deck right now. And I expect Trump is crowing that he alone can fix it.

UPDATE 09:21 am:  Speaking of regulating...Yes.  That could help.  Jesus, these fuckers.

UPDATE 03/12/2023:

UPDATE 03/14/2023:

And then we got another one.  Signature Bank in New York has folded.

UPDATE 03/16/2023:  The latest Republican talking point on SVB is that it failed because it's "woke".