‘Old-School’ Signature Bank Collapsed After Its Big Crypto Leap | Hacker News Reader

‘Old-School’ Signature Bank Collapsed After Its Big Crypto Leap

bloomberg.com

106 pointsJumpCrisscross79 comments

There's a lot of speculation that Signature was solvent and this is a conspiracy against crypto.

Let's look at their balance sheet: https://www.cnbc.com/quotes/SBNY?tab=financials

$110B assets against $102B liabilities. That's 7.8% more capitalization, one of the lowest I've seen across all banks.

Want to guess how much of those were hold to maturity (HTM) and thus actually market value of 5% - 20% less?

If their portfolio was as conservative as just a 3 year Treasury bond, which has risen 3% in the past year, they would've lost 9% and been insolvent now. But we already know banks like SVB have been going far riskier for yield; 10 year MBS compared to 3y Treasuries...

Also, this thread for evidence of the clown show running the bank https://twitter.com/GRDecter/status/1635322707746357254

It's ironic that you cite GRDecter's Twitter feed for exposing anything as a clown show

Can you point to an official statement declaring insolvency?

We can get ~close with public info..

On March 8th - they had $89 billion in deposits. It's unclear what happened on March 9th, but on March 10th, clients withdrew a further 20% of that balance so ~$19 billion. On March 8th, they had $4.5 billion cash. So they would need to find another $15 billion in assets just to cover the withdrawals from that one day. They had already markedly increased their loan drawdown from FHLB from $3B in 2021 to almost $9B in 2022, so their ability to draw it further in the face of a bank run was definitely impacted.

It's astronomically more likely that their financial condition deteriorated further from there rather than some bizarre anti-crypto conspiracy theory as is apparently favored by commenters here.

We'll get confirmation in the coming week or two as more details on their condition over the weekend are released, which of course is another point in favor of the boring answer.

https://investor.signatureny.com/pme/press-releases/news-det...

> They had already markedly increased their loan drawdown from FHLB from $3B in 2021 to almost $9B in 2022

For that matter, I kinda wonder about the risk assessment and loan decision mechanisms of those FHLBs. Even aside from the fact that I don't know how the crypto stuff of Signature would fall under the "housing finance and community investment" that the FHLBs are supposed to provide liquidity for, I can't really imagine how the people who let those loans increase by 6·10⁹$ within just a year could look at where the money would go at Signature and tell themselves "oh that's okay, we're gonna get that money back".

Check the capitalization report from SVB; they had way more assets than liabilities (on paper).

https://www.theblock.co/post/219391/barney-frank-regulators-...

According to The Block: Regulators shuttered Signature Bank to show 'crypto is toxic'.

“They closed us even though there was no good, compelling reason to do that because they wanted to show that banks shouldn't be involved in crypto,” Frank, a Democrat, said in a telephone interview. “We were the kind of poster child for having been involved in crypto."

They’re quoting Barney Frank, an ex Signature Board member. Of course a failed bank’s Board will blame everyone but themselves.

Worth noting that's Barney Frank of the "Dodd–Frank Wall Street Reform and Consumer Protection Act" of 2010.

Also worth noting that it appears Barney Frank helped the effort to nerf Dodd-Frank in 2018 [0] (although I haven't dug deeply into that and from the fact that 3 of the articles supporting this were added today, the wikipedia editor might be injecting a biased view).

[0] https://en.wikipedia.org/wiki/Economic_Growth,_Regulatory_Re...

That was Rep. Barney Frank.

This is private citizen and board member Barney Frank.

But the objective fact of the matter is that crypto IS toxic.

While of course true for many reasons (including facilitating the existence of ransomware while providing literally no other offsetting value) that's not why the bank was shuttered. It was shuttered for the same reason SVB and Silvergate were closed. They had long-duration assets but needed capital now to facilitate withdrawals, which they had a lot of because of the crypto downturn. It was their lack of diversification and failure to adequately manage maturity risk. Which Barney is in part to blame. So of course the fingers are pointed in all directions, especially the gubmint.

> that's not why the bank was shuttered. It was shuttered for the same reason SVB and Silvergate were closed

Silvergate was significantly impaired by the crypto blow-ups [1]. That forced them to sell their short-duration, liquid holdings. It also started their stock-price slide [2]. The combination put them in a uniquely vulnerable and continuously degrading position. Signature wasn't as badly hit by the blow-up, but its stock started sliding with Silvergate. Perceptions matter, and when Silvergate folded, non-crypto depositors began pulling money from Signature.

Had Signature not banked crypto, or been publicly affiliated with it, they would have likely survived.

[1] https://www.bloomberg.com/news/newsletters/2023-03-09/silver...

[2] https://www.barrons.com/articles/crypto-silvergate-signature...

"Objective fact" lol please. Not an objective word in this sentence that you can back up with literally anything. Or we can just take your hyperbole and apply it to literally anything that has any negative sides to it.

Is that why more banks than crypto exchanges have collapsed in the past week?

Got any proof to back up that "fact" or is it really just an opinion?

Your sputtering rage and denial of the obvious is pretty illustrative of my point about crypto's toxicity and cultish obsessiveness.

Do you have any NFTs or ICOs or shitcoin rug pull scams you want to shill, or are you finally too embarrassed to do that in public under your own account because of the toxicity of crypto?

Why don't you prove it's not toxic by telling us how much and why you love and recommend crypto yourself, and explaining what it's actually good for?

You mean besides every day of the last fourteen-and-a-half years?

So the answer is no, got it.

Except there’s truth to it because no one can prove Signature had the same HTM issues as SVB did. Or that whatever outflows they suffered Friday rendered it insolvent.

The former holders of ~4bn of equity will sue, and the many people that are aware of the inolvency will be demonstrate it in court.

They have audited financial statements and more or less real time valuation of their assets, of course they can prove their solvency.

Great, and I’ve seen no evidence that they suffered the same risks as SVB based on publicly known financials.

We'll make sure to have the FDIC CC you on the emails next time, must have been an oversight.

the claim is that the closure was political which I agree with

but keep thinking that could never happen

Love that weird inclusion of "a democrat" in there. It's irrelevant and I have no idea why they thought that was an important factoid, but the oddity of it made me laugh.

Most articles will usually include something along those lines for former politicians, though with a bit more detail. He did co-author the Dodd-Frank reforms, after all, so there's actually relevant context buried in theree.

I'm not believer in character assassination, but facts don't lie. Barney Frank's credibility is worthy of examination.

https://www.businessinsider.com/the-one-thing-no-one-is-ment...

He sat on the board of the bank; his opinion on this matter is worth less than nothing. I hear Sam Bankman-Fried also thinks FTX did nothing wrong and was also shut down by the government meanies.

Operation chokepoint in action.

Operation chokepoint is a government project to target lawful but disfavored businesses such as pornography by using soft power such as unaccountable regulatory oversight to pressure commercial players such as banks and payment processors to execute their free association right to refuse to do business with these players.

Once locked out of banking they either can't do business or they move to using cryptocurrency and the government then exploits the unconventional payment method to lob money laundering charges at the operation.

Only tangentially related, check out their website if you haven't previously: https://www.signatureny.com/

For a bank with $100B+ in assets, that's a seriously amateur looking site.

Personally, sites like that increase my confidence a bit for those sorts of businesses.

If a company spends a lot on a fancy, flashy site, the implication (for me) is that they're more about marketing and image than they are about whatever their business is. If their business is retail, that's OK. I get it. If their business is handling my money, though, it raises a tiny bit of doubt in my mind about their priorities.

Same for this site https://www.berkshirehathaway.com/

Something about this statement on Berkshire's website is really amusing:

"If you have any comments about our WEB page, you can write us at the address shown above. However, due to the limited number of personnel in our corporate office, we are unable to provide a direct response."

Nothing on that website needs a login, unlike Signature's site, so it doesn't matter if it looks like it was made in Microsoft Frontpage.

Even that has an ad at the end, lmao.

I honestly think that's a point of pride for many financial services.

If you don't want retail consumers, you don't wow retail consumers. You don't provide arbitrary confidence boosters to poor people who could never be in your network and leverage real wealth even if they tried for 100 years. You don't provide arbitrary confidence boosters that change every 2-3 years because anybody can learn the latest layout design pattern.

I think its far beyond having a World Wide Web strategy in 1995 and never revisiting it.

Its "Hm, never heard of you" good, its working.

Are just the landing pages that are intentionally kept simple or even the real site behind logins? A bad site typically also reflects low confidence in technological abilities, is that not the case here?

That isn't their intent at all here. You can view archive of the site and see that they were chasing trends, this was just their latest redesign that happened late 2014. Once you get past the cover page, they even had a very trendy full height drawing (that was removed in 2019).

Contrast this to Berkshire Hathaway, no additional scripts (gtag excluded) or frameworks, no plethora of css defined. Now that is defining a strategy and never revisiting it. Including still using adobe pagemill to publish pages.

I think some (all?) Berkshire Hathaway pages were just Word documents saved as html.

What specifically? Because they don't use the latest hip UI framework that breaks interoperability in order to appeal to the selfsame 20somethings that advocated for it?

The site works for me, and probably everyone else. My accessibility-enhancing addon is able to detect the interface elements. It's functional, which is almost a four-letter word these days.

https://archive.ph/awkdM

Post Hoc fallacy:

>Short for “post hoc, ergo propter hoc,” a Latin phrase meaning “after this, therefore because of this.” The phrase expresses the logical fallacy of assuming that one thing caused another merely because the first thing preceded the other.

(edited as I incorrectly called it ergo proctor hoc fallacy before)

Silvergate and Signature went down because they did crypto. SVB did not. (Cross River and Customers are under pressure.)

What evidence do you have to support your claim?

I read the article and it never establishes a causal chain.

Both lost significant deposits from crypto blow-ups, reducing their liquidity and tanking their stock prices [1]. That left them uniquely vulnerable to both perceptions [2] and rates (as they sold the short-dated, liquid, low-duration assets first to plug the crypto hole).

[1] https://www.bloomberg.com/news/newsletters/2023-03-09/silver...

[2] https://www.barrons.com/articles/crypto-silvergate-signature...

@JumpCrisscross is there a way to email or signal you?

From TFA:

"The bank’s digital-asset clients represented more than a fifth of its deposit base, and Signature’s executives said in December it would work to shrink that without leaving the space entirely. Earlier this month, the company reported it had pushed out $1.5 billion in funds from crypto platforms in the year’s first two months, while taking in $682 million in regular deposits. By then it was touting all the ways it wasn’t handling crypto in a presentation.

It's the first part, post hoc.

You omit the words ergo propter hoc.

Thanks!

Let's just be clear, Signature didn't 'collapse', the FED killed Signature to send a message to other banks.

Barney Frank straight up says as much: https://twitter.com/nic__carter/status/1635328056234766337?s....

Edit: FWIW, I have no insider knowledge of what was happening at Signature, but there's no one I've talked to in Crypto who was aware of risk at that bank. This is quite in contrast to Silvergate where it was well known that the bank was not healthy.

I was not a signature customer, but at Silvergate, even things as simple as changing an authorized user on an account took months or years to complete. I'm still an authorized user on an account at Silvergate that I haven't worked at in ~4 years (despite many, many customer service requests to be removed including repeatedly signed documents).

So much of why Silvergate failed was simply business execution.

> Let's just be clear, Signature didn't 'collapse', the FED killed Signature to send a message to other banks. Barney Frank straight up says as much

I think you mean the FDIC killed them - and if you can't trust the word of a Boardmember of a bank whose equity just got zeroed out, who can you trust?

> and if you can't trust the word of a Boardmember of a bank whose equity just got zeroed out

, former congressman, and leading co-sponsor of the 2010 Dodd–Frank Act.

I consider Mr. Frank to have been regulatory captured once he started receiving potentially multi-million paychecks from banks.

Right - it should be a negative symbol that a former regulator with no applicable banking experience is on your board, not a positive one. 20% of the banks deposit base was withdrawn o Friday. I'm guessing the FDIC had a much better view into the bank's health than a bunch of random commenters.

I make no judgement about a former congressman sitting on a board raking in the checks -- it's a valid retirement strategy.

But it is possible he was right. But it's also possible he's wrong, and making these claims similar to those made by Sam Bankman-Fried (woulda/shoulda/coulda) to preempt a deeper investigation.

But yeah, I trust the FDIC more than I trust any member of a board on any bank.

So why would you not say the same for the folks spearheading their closure? Yellen has gotten multi million checks from banks

SVB was actually shut down by state banking regulators, not the FDIC or Fed itself (Yellen is the Fed). The state of California then listed the FDIC as the receiver of the bank's assets.

So I believe this was purely the work of the banking regulators and not the Fed. FDIC called the Fed for help to reduce the contagion, and the Fed agreed. It's possible the Fed didn't have to agree...

https://www.fdic.gov/resources/resolutions/bank-failures/fai....

Yellen has been intimately involved in the process so I don't think there's too much of a difference right now, especially since they all had a zoom call including hundreds of senators at like 1 in the morning over the weekend.

So? Former (and even current) congressmen are people too and can have bias, especially when their own money is involved.

Sure, but I think it's relevant context.

> there's no one I've talked to in Crypto who was aware of risk at that bank

That is not worthy of a conspiracy theory, it just reinforces the poor financial understanding of anyone involved in crypto.

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