>Keep in mind 93% of SVB's assest were not FDIC insured.
>> Silicon Valley Bank Had About $209.0B in Assets
I'm not an expert, but aren't deposits in a bank liabilities? Assets are things like treasury bills and loans held by the bank.
>> Silicon Valley Bank Had About $209.0B in Assets
I'm not an expert, but aren't deposits in a bank liabilities? Assets are things like treasury bills and loans held by the bank.
The 10Y treasury was worth $100 in 2021, but today is only worth $80. The bank still owes Alice $100 (a $100 liability), but the asset's value has declined. This has caused... issues... culminating in the past week of events.
You may hold 100K in treasuries today, but if your employer can't make payroll, you're gonna sell to pay rent.
Funny it seems like VC GPs were on the horn yesterday to withdraw, and I know a number of LPs telling me last Sun/Mon they'll be "out of the country" next month. Looks like some folks had early info.
Can you clarify this part?
I'm not super familiar with the intricacies of banking, so my guess is that this is simply due to part of it I don't know about, but...given all the "creative financial instruments" I've heard about since the runup to the 2008 crash, I have to wonder if this "market force" was at least partly due to something SVB was doing that wasn't terribly wise.
A startup-focused bank probably shouldn't have been investing into 10Y, 20Y, or 30Y US Treasuries, when their customers might only have 2 or 3 years worth of life in them.
So yeah, there's a bit of stupidity here for sure. But its the kind of stupid that I can imagine a lot of banks making.
If I deposit $100 into a demand account, I expect to get $100 when I demand it.
If you want to sell me $100 in the future for less today, that's something worth considering, but that wasn't the deal depositors had.
Therefore although bank runs aren't normal, they will almost surely happen to you if you put yourself in a situation where a bank run would destroy you. So you have to work as if bank runs are normal, or they will be normal.
> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
I think this is Google's first hit when one searches this, but I do not believe this is correct. Here is a source saying the opposite, as an example.
A liability, in general terms, is something owed to another (e.g., a deposit)
https://courses.lumenlearning.com/wm-macroeconomics/chapter/...
And another more reputable source:
Edit: Seems that this is what's explained in the investopedia article you linked to:
"When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank."
So, I think the person you are responding to is trying to explain the distinction between a bailment and a loan.
Let's pretend that someone had a safety deposit box with $1B at SVB. They'd get to keep the full amount, because that is a bailment. The money never becomes the bank's.
In contract, if someone deposited $1B at SVB, then the actual money becomes the property of SVB. And the depositor then is a creditor to SVB - they have an unsecured load to SVB of that amount. But after SVB gets taken over by the feds, they have to stand in line with the other creditors and get what they get. They aren't guaranteed to be made whole.
"The deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited. When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank."
The ACCOUNT is the liability, the CASH is the asset.
The (say) $100 cash I deposited to the bank becomes both an asset (they have "my" $100 in the vault) and a liability (they own me $100). So the accounting equation still balances.
edit: Judging by a quick downvote trigger-finger, there seems to be some folks having trouble believing this; check this out from the source: https://www.federalreserve.gov/releases/h8/current/ ... look at the category names of where deposits and loans are listed.
The deposit itself is not a liability. The deposit account is. There are many ways to get money into a DDA. The bank will never give you your original paper currency back.