Stay Updated with Latest Business News and Views from All Corners of the World.
Monday 13 March 2023
LIVE: Silicon Valley Bank's collapse fanned fears of a financial meltdown, but officials seem to have averted a crisis for now. Here's what's happening, what experts are saying, and what it all means.
Silicon Valley Bank's HQ in Santa Clara, California.
Getty Images
We're live-blogging the fallout from Silicon Valley Bank's collapse last week.
US authorities have guaranteed the lender's deposits and promised its customers will be made whole.
Bill Ackman, Michael Burry, and others have weighed in on the fiasco rocking financial markets.
Good morning from London. We're live as Silicon Valley Bank's collapse continues to rattle investors and stoke fears of further bank runs and financial catastrophe.
The US Treasury, Federal Reserve, and the Federal Deposit Insurance Corp. helped assuage those worries on Sunday by announcing deposits at the country's 16th-largest bank would be guaranteed, and the bank's customers would have access to all of their money on Monday. The FDIC took control of SVB on Friday, while the Fed plans to offer loans to banks and other deposit holders in case they face a wave of withdrawals.
Some experts have celebrated the intervention as necessary to prevent a crisis. Others have warned it could encourage banks to be more reckless, and SVB might be the first of several institutions to fail.
Follow along for the latest developments, analysis of what it all means, and what the likes of Bill Ackman, Michael Burry, Mark Cuban, Paul Krugman, and Elon Musk are saying.
US financial stocks are feeling the pain
US financial stocks slumped in premarket trading on Monday. As of 7:16 a.m. ET, First Republic was down 68%, Charles Schwab was down 20%, KeyCorp was down 9%, Comerica was down 8%, and Bank of America was down 6%.
Futures underlying the main US stock indices were higher. S&P 500 futures were up 0.4%, Nasdaq futures were up 1%, and Dow Jones Industrial Average futures were up 0.1%.
Key European stock markets were trading in the red. Germany's DAX was down 2%, Britain's FTSE 100 was down 1.6%, and the Euro Stoxx 50 was down 2.2%.
A former FDIC chair expects more banks to fail
A former top banking regulator believes SVB will be the first of several banks to fold in the weeks ahead.
"There's no doubt in my mind: There's going to be more. How many more? I don't know," William Isaac, the former chairman of the FDIC, told Politico on Sunday.
"Seems to me to be a lot like the 1980s," Isaac added. More than 1,600 FDIC-insured banks were closed or received financial assistance between 1980 and 1994, the largest number in the agency's history.
First Republic Bank stock plunges 60% on contagion fears
Markets Insider
First Republic Bank shares plunged by over 60% in premarket trading on Monday, as SVB's collapse fanned fears that the San Franscisco-based lender would also implode.
First Repuplic has rushed to calm nervous investors, noting on Sunday that it has secured access to additional cash from the Fed and JPMorgan, boosting its available liquidity to over $70 billion.
Bill Ackman says he's relieved
In a Monday tweet, billionaire investor Bill Ackman dismissed claims that authorities protecting SVB's deposits constituted a bailout.
Ackman argued that if the Fed, FDIC, and Treasury hadn't swooped in, the US would have faced a "1930s bank run continuing first thing Monday causing enormous economic damage and hardship to millions."
The Pershing Square boss cautioned that more banks will probably collapse despite the intervention, but suggested it's reassuring to know how the government might contain the fallout.
"Bond King" Jeffrey Gundlach, the head of DoubleLine Capital, warned in a Monday tweet that the sudden shift in bond yields on the back of the SVB fiasco indicates the US economy is barreling towards a downturn.
Keep scrolling for our coverage of the big news and commentary before SVB's deposits were guaranteed:
David Friedberg expects lower rates and higher prices
David Friedberg, an agriculture-technology entrepreneur and co-host of the "All In" podcast, suggested on Sunday that the banking fiasco could pave the way for lower interest rates and higher inflation for a prolonged period.
The Wall Street Journal reported on Sunday that SVB could be the first of several banks to be exposed, and other smaller US banks could see an exodus of cash.
"I think this could be the first cockroach in the cellar," Fredric Russell, the boss of an investment manager, told WSJ. "Banks get thrown into the dark pool of complacency, and then they lower their quality standards."
"If the resolution of SVB Financial isn't handled well, there's a systemic risk that uninsured depositors will flee small banks," Bob Elliott, the cofounder and chief investor of asset manager Unlimited, told the newspaper.
Gary Cohn calls for depositors to get their money back
Gary Cohn, the director of the National Economic Council under President Trump and a former president and operating chief of Goldman Sachs, warned there could be painful fallout if depositors aren't made whole.
Mark Cuban says consumers and businesses shouldn't suffer from a bank's failure
Tech billionaire Mark Cuban emphasized on Saturday that if SVB's deposits aren't protected, it would be the consumers and businesses holding their money there who would be hurt.
Jim Chanos warns a bailout could be political ammunition
Jim Chanos, the famed short seller who helped bring down Enron, underscored the risk that politicians frame any aid to SVB as a bailout of wealthy elites.
Nouriel Roubini says the Fed might hold off on hiking interest rates
Nouriel Roubini, nicknamed "Dr. Doom" for his pessimistic predictions, suggested on Sunday that the Fed will only hike interest rates by 25 basis points or not at all, as it waits to see how the banking fiasco plays out.
The economics professor at NYU Stern also flagged the risk that the fallout from SVB's implosion spreads internationally.
Sacks later emphasized that he wants investors and executives to be wiped out by SVB's collapse, but he believes it's harsh for people who simply opened a bank account there to lose money.
Michael Burry compares SVB to Enron, and says the next WorldCom is coming
Michael Burry, the investor of "The Big Short" fame, appeared to compare SVB to Enron in a now-deleted Thursday tweet.
The Scion Asset Management chief, best known for predicting and profiting from the collapse of the mid-2000s US housing bubble, also warned another major company will implode in time.
Bethany McLean, the author of "The Smartest Guys in the Room," told Insider that she didn't see too many similarities between SVB and Enron, given the latter was found to be fraudulent and its collapse didn't bring down the system.
"Maybe the lesson is, don't be Enron!" she said. "If you're going to collapse under the weight of your bad decisions, make sure you take enough others down with you - particularly innocent others like employees who may not get their paychecks - so that the government has to step in."
Burry later bemoaned the greed and recklessness that led to SVB going under, and hinted that printing money would likely cause problems such as asset bubbles and inflation.
Paul Krugman dismisses comparisons of SVB to Lehman Brothers
Paul Krugman brushed away fears that SVB's implosion could echo the collapse of Lehman Brothers in 2008, which helped spark the financial crisis.
The Nobel Prize-winning economist noted SVB's large volume of deposits made it vulnerable to a bank run, but its focus on Treasuries is nowhere near as dangerous as the subprime mortgages that helped inflate the housing bubble.
No comments:
Post a Comment