# Have you checked your bank account today? You better, Silicon Valley Bank is crashing **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [March 10, 2023, 10:58pm UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997 "2023-03-10T22:58:31Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Roderick\_Femm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/roderick_femm/32/14875_2.png) [@Roderick\_Femm](https://boards.straightdope.com/u/Roderick_Femm)\ **Post date:** [March 11, 2023, 4:52am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/41 "2023-03-11T04:52:14Z")
> [@Voyager](#): > > the assets of the bank is substantially in bonds, and they have been falling in value due to high interest rates (snip). > Side effect of the Fed raising interest rates. Nothing crooked going on, for once. Nothing crooked, but arguably something incompetent, to be so heavily into bonds in an inflationary market. This stuff didn’t happen overnight. Also, the bank recently announced it wanted to move its position substantially out of bonds, and that caused more nervousness on the part of the bigger depositors. Not a smart move. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 4:56am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/42 "2023-03-11T04:56:40Z")
> [@Riemann](#): > > Here’s what Genevieve said Without some extra sourcing on the chart, it’s hard to know exactly what is meant by “Deposits less than $250k as a percentage of total deposits”. It’s something of a nonsensical statement, because what’s relevant for the FDIC is accounts, or rather the combination of depositors and ownership categories. It’s hard to believe that “deposits” is being used as equivalent to “accounts” here. There’s no way that only 30.8% of accounts for _Bank of America_ are under $250k. BofA is used by a huge swath of the public and it’s in no way reasonable that 69% of accounts have \>$250k in them. The only reasonable interpretation is that if you add up all the deposits in accounts (combined by depositor) with \<$250k in them, and divide by the total amount across all accounts, you get 2.7% (or 30.8% in the case of BofA). ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:05am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/43 "2023-03-11T05:05:14Z")
> [@Dr.Strangelove](#): > > it’s hard to know exactly what is meant by “Deposits less than $250k as a percentage of total deposits” I honestly can’t think of a clearer way to express an obviously relevant figure. The sum of the insured portion of deposits divided by the total value of all deposits. > [@Dr.Strangelove](#): > > what’s relevant for the FDIC is accounts What’s relevant is the FDIC’s total $ liability, expressed here as a percentage of total deposits. (The latter total will be shown on the balance sheet somewhere.) There may be a slight _over_statement of the FDIC’s total liability if multiple accounts are held by the same owner, but that hardly matters when the emphasis is already on the fact that only a tiny amount is insured. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 5:11am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/44 "2023-03-11T05:11:40Z")
I think the problem is the ambiguity of the statement: > Meaning, 97.3% aren’t FDIC insured That very much sounds like it’s talking about _people_. It’s odd phrasing if it’s talking about “deposits” in the bulk-noun sense. > [@Riemann](#): > > What’s relevant is the FDIC’s total $ liability That’s not the only relevant figure. The number of people who have lost their savings is also relevant. It matters if we’re talking about everyone having $9.26M in their account, or a bunch of people with $250k and a small number with billions. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:14am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/45 "2023-03-11T05:14:39Z")
> [@Dr.Strangelove](#): > > That very much sounds like it’s talking about _people_. It’s odd phrasing if it’s talking about “deposits” in the bulk-noun sense. I don’t agree. In context, it is obviously talking about “deposits” in the prior sentence. Any ambiguity about that is surely removed by the fact that 97.3% is obviously obtained by subtracting the 2.7% in the prior sentence from 1. The table doesn’t mention depositors/people anywhere, her comments don’t mention depositors/people anywhere. You’ve really got to be working hard to ignore the obvious and correct interpretation of what she wrote, stating the very relevant fact taken directly from the table that 97.3% of deposits by $ value are uninsured. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 5:21am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/46 "2023-03-11T05:21:25Z")
> [@Riemann](#): > > The table doesn’t mention depositors/people anywhere It has to, implicitly. Otherwise, it makes zero sense. The $250k limit is per depositor (per account category). I agree that the meaning is in fact “97.3% of the money deposited at SVB is not FDIC insured.” That seems likely to be correct. But I maintain that the phrasing is awkward at best. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:25am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/47 "2023-03-11T05:25:29Z")
> [@Dr.Strangelove](#): > > It has to, implicitly. It was an input into calculating the totals in the table, sure. But the table is perfectly clear that it is talking about total deposits, not number of depositors. > [@Dr.Strangelove](#): > > I maintain that the phrasing is awkward at best. Completely out of context, sure. But it wasn’t out of context. The table is unambiguous, and there’s her prior sentence - she’s simply repeating what’s in the table and subtracting it from 1, that being a perfectly sensible and highly relevant statistic to cite. ---
**Author:** ![PastTense](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pasttense/32/14550_2.png) [@PastTense](https://boards.straightdope.com/u/PastTense)\ **Post date:** [March 11, 2023, 5:32am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/48 "2023-03-11T05:32:44Z")
What’s interesting is that Silicon Valley Bank was putting so much of its funds into no-risk, low interest rate government bonds. I would have expected it to be making lots of loans to Silicon Valley tech entrepreneurs. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:32am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/49 "2023-03-11T05:32:58Z")
I haven’t caught up on the press, but an obvious inference from the very low FDIC liability is that it will be difficult to find a buyer. I don’t know what has happened in the past, but I assume that the FDIC liability can be used to “subsidize” the purchase for a potential buyer, to make a purchase that takes on all remaining liabilities vs the value of assets and goodwill a viable economic proposition. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 5:36am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/50 "2023-03-11T05:36:37Z")
Why the “Ouch”, then? If the total deposits at SVB are dominated by large business accounts–as it seems to be–it makes little sense to make a pointed remark about something that would be as true of a business at BofA as it would of SVB. The difference with BofA is that they _also_ have a large number of small investors who _would_ be made whole with FDIC money. That shows up as a larger percentage on the chart. I suppose, as implied with your other comment, that perhaps the “ouch” is more about SVB’s likelihood in finding a buyer than about the pain inflicted on their depositors. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:43am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/51 "2023-03-11T05:43:41Z")
> [@Dr.Strangelove](#): > > Why the “Ouch”, then? It’s “ouch” simply because most of the deposits obviously _aren’t_ small investors who would be protected by insurance. It’s surely still an “ouch” if a startup loses $5 milllion. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 5:49am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/52 "2023-03-11T05:49:59Z")
> [@Leaper](#): > > The gap between Silicon Valley and the previous number 2 in 1984 is $160 billion. The league table is by total assets. The more relevant figure is the shortfall between assets and liabilities. Unless something _really_ untoward was going on at SVB, I suspect that figure is an order of magnitude smaller. All that has been said is that it’s a function of duration mismatch with the recent rise in interest rates - and while that has been fairly dramatic, is has been “within normal parameters” - not a total dislocation like 2008. You can have a liquidity squeeze that takes you out even if the likely value of your assets _exceeds_ your liabilities. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 5:55am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/53 "2023-03-11T05:55:06Z")
> [@Riemann](#): > > It’s surely still an “ouch” if a small startup loses $5 milllion. Right, but that’s true no matter what the overall fraction is. No matter what the clientele mix, the businesses/high-net-worth people are going to lose everything, and the small individual investors will get most of their money back. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 6:02am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/54 "2023-03-11T06:02:43Z")
> [@Dr.Strangelove](#): > > Right, but that’s true no matter what the overall fraction is. No matter what the clientele mix, the businesses/high-net-worth people are going to lose everything, and the small individual investors will get most of their money back. The individual account holders already know the status of their own accounts, of course. No total statistic changes that. But I don’t understand why you think the overall proportion that is insured is unimportant, or why the fact that it is a tiny number is not an obvious “ouch” in terms of it showing that the total potential losses to Silicon Valley businesses is large. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 6:14am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/55 "2023-03-11T06:14:40Z")
> [@Riemann](#): > > or why the fact that it is a tiny number is not an obvious “ouch” in terms of it showing that the total potential losses to Silicon Valley businesses is large. I don’t know anything about the potential losses in absolute terms, so the percentages are not that meaningful on their own. $100B of deposits lost with 1% insured is surely better than $500B of deposits with 50% insured. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 6:17am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/56 "2023-03-11T06:17:24Z")
On the one hand, the low FDIC coverage might imply difficulty finding a buyer. On the other hand, unless SVB was doing something illegal, it’s difficult to see how the mismatch between assets and liabilities could be anywhere near so large as the kind of losses incurred in the dislocations of 2008. Recent market moves just haven’t been that dramatic. Also on the positive side, although SVB may have been hammered by taking on foolish interest rate risk, the fact that interest rates are decisively away from zero just fundamentally improves the prospects for banking as a business. It’s much easier to capture a spread between borrowing and lending rates when rates are at 5% than when they are at zero. I would bet that somebody buys them over the weekend. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 6:22am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/57 "2023-03-11T06:22:21Z")
> [@Dr.Strangelove](#): > > I don’t know anything about the potential losses in absolute terms, so the percentages are not that meaningful on their own. $100B of deposits lost with 1% insured is surely better than $500B of deposits with 50% insured. Total deposits is known, at least approximately. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 11, 2023, 6:27am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/58 "2023-03-11T06:27:06Z")
Certainly, but that information wasn’t in the tweet. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 6:31am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/59 "2023-03-11T06:31:31Z")
I’m honestly perplexed that you want to manufacture criticism of a tweet that states a highly relevant statistic, in a manner that is only unambiguous if you ignore context - the prior sentence and the cited attached table. The hyperbolic comments in this thread calling this person an idiot are wildly off base. ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [March 11, 2023, 6:37am UTC](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997/60 "2023-03-11T06:37:37Z")
Doing a bit of digging, this article says that mark-to-market losses on its long term bond portfolio were about $15 billion at year end. And that was after the market move - interest rates today are almost exactly the same as year end. So the ultimate sums involved at SVB are probably nothingburger, consistent with the reports that a $2 billion capital raise would have solved their issues if there had not been a run on deposits before they got their act together. What will come under a lot of scrutiny next week is whether there are many _other_ small banks who have been equally foolish in managing their interest rate risk. But as I said earlier, this comes in a generally positive environment for the business of banking going forward. Normal interest rates are much better for business than zero interest rates. > **[How Silicon Valley Bank's fate was sealed at the moment of its triumph just a...](https://fortune.com/2023/03/10/how-silicon-valley-banks-fate-sealed-2021-venture-capital-bonds-interest-rates/)** > > Tens of billions of dollars flooded into SVB during venture capital's bumper 2021, and it bet on interest rates staying steady by investing in longer-term bonds. [Previous page](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997.md?page=2) [Next page](https://boards.straightdope.com/t/have-you-checked-your-bank-account-today-you-better-silicon-valley-bank-is-crashing/980997.md?page=4)