The American Federal Deposit Insurance Corporation (FDIC) made the unusual step of shutting down the flailing Silicon Valley Bank (hereafter, SVB) during business hours yesterday (Friday). (FDIC Friday usually involves teams swooping in after the close on Friday.) Since I have to write this article quickly in the morning, I am not sure of what the latest developments are for SVB, rather I want to discuss the possibility of contagion.
SVB was taken over by the state authorities,, not by the FDIC. The latter was then appointed by the former as receiver. I don't know if the difference is significant or not, but it might explain the unusual timing. See
That document also summarizes what happened. The bank was forced to sell not only treasuries but also MBSs. After a bank run, the bank was unable to cover its end of the day position against the Fed with sufficient collateral. This triggered the state takeover the next day.
Okay, it is settled, there is 74.98142%(+/-77.923%) chance it's back to a 0.25% rate hike for at least the next 27.576(+/-37.623) hours.
There's more than a dollop of tragicomical truth to the footnoted sentence.
Or, paraphrasing Michael Burry, now we've found our Enron; next we find our WorldCom, patience.
Your wonderful footnote encapsulates pretty much everything that is wrong with the economies that the West has built.
SVB was taken over by the state authorities,, not by the FDIC. The latter was then appointed by the former as receiver. I don't know if the difference is significant or not, but it might explain the unusual timing. See
https://dfpi.ca.gov/wp-content/uploads/sites/337/2023/03/DFPI-Orders-Silicon-Valley-Bank-03102023.pdf?emrc=bedc09
That document also summarizes what happened. The bank was forced to sell not only treasuries but also MBSs. After a bank run, the bank was unable to cover its end of the day position against the Fed with sufficient collateral. This triggered the state takeover the next day.