SVB in court

Last week we mentioned that there would be more to the story of SVB and Signature Bank.  Frankly, this story has so dominated the news that it is very difficult to avoid even as we think about a very broad set of asset classes.  A few days into this crisis we can’t help but feel a touch unsettled by what we’ve seen.  The government clearly bailed out depositors.  They said they didn’t, but they did.  The fact that other banks foot the bill just means that fees will be passed through to depositors later.  It’s a gross mischaracterization of what happened for the Biden Administration to suggest that this wasn’t a bailout.  

As we look at the rest of the regional bank group, we pose the question; what happens when investors start to look at the funding that underlies other banks’ balance sheets?  The always difficult to interpret Accumulated Other Comprehensive Income accounts on most banks’ balance sheets turned negative last year and some have turned massively so.  Depositors will notice eventually and then we wonder how they will feel about the backing of their deposits.  Furthermore, how many deposits can be guaranteed by insurance programs that are “not a bailout”?  It would be great if just once we would enforce the rules as they’re laid out so that the spirit of laws like Dodd Frank can actually be upheld and market participants would be more careful about the risks that they take.  

That said, we got more than one text from former Lehman Brothers bankers this week who were experiencing some level of schadenfreude watching Barney Frank’s company fail. 

Sources: Pitchbook, Trepp, Wall Street Journal, cnbc


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