The bombshell dropped at the Senate back in hearing yesterday that a hundred billion dollars would have and more importantly could have left svb in a single day. Threatens potentially far-reaching changes in the banking industry and to regulation here’s what fed Vice chair, Michael Barr, told the Senate Bank committee happened after svb.
It was the day after $42 billion had already left the bank that morning. Let us know that based on customer requests and what was in the queue, they expected the releases to be much bigger. A total of $100 billion was due to be repaid that day, and the bank did not have enough collateral to cover it.
All right by comparison, Senator Warner said in the biggest bank failure in U.S. history, Washington Mutual 16 billion dollars left in 10 days. Regulators faced with bank failures always try to hit the weekend, where they get two free days to find a buyer.
But the money moved too fast this time and the bank had to be closed, before it could be resolved. So what’s the potential result of all this it means potentially faster Bank runs, it means banks will need to hold more liquidity.
Regulators need to be tougher earlier, not the case in this in with Silicon Valley that there may be a need for more Deposit Insurance to prevent these fast runs and costly your bank resolutions. Because it costs more to shut a bank and sell it, than it does to find the buyer before you close the doors, former New York President Bill Dudley told me the other day.
When the bank is closed the franchise is damaged, as customers flee and there may be other cost such as, writing off stranded technology, assets winding up business lines that are less attractive, and legal exposure from the failure.
That could account guys for the large 20 billion dollar Tab and Counting for shuttering svb. There’s a theory of SUV that says, hey, all of this is unique the bank run. Lack of oversight, mismanagement of resources, and failed sales by the FDIC, so major changes are not needed. That may ultimately mean that you don’t have to do much, but another idea is that bank regulation and bank liquidity need to reach the age of Fast Money Joe.
