Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
The Swiss National Bank said Wednesday that Credit Suisse is currently well capitalized but that the central bank will provide additional liquidity if necessary.
In a statement from the the Swiss Financial Market Supervisory Authority (FINMA) and the SNB said that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks” and that the central bank will step in if the situation changes. The regulators also said that the failure of two U.S. regional banks in the past week does not pose a “direct risk of contagion” to Swiss banks.
The statement comes after the Swiss-listed shares of Credit Suisse fell more than 20% on Wednesday. The bank had previously delayed its annual report and said Tuesday that it found “material weakness” in its financial reporting in prior years.
Additionally, the Saudi National Bank — which is Credit Suisse’s biggest financial backer — said it could not provide additional capital to the company because of a regulatory issue. The Saudi bank’s chairman did say that his group was happy with Credit Suisse’s transformation plan and that the firm’s financial position appeared strong.
The American depository receipts of Credit Suisse pared their losses after the announcement from regulators to about 14% for the session.
Former SEC lawyer-turned-stock-fraudster pleads guilty in second securities scam
Published: March 14, 2023 at 3:31 p.m. ET
Phillip Offill admitted stealing $1.3 million in penny-stock fraud after serving 8 years in a pump-and-dump scam
He certainly is an expert in securities fraud.
A former lawyer for the Securities and Exchange Commission has pleaded guilty to stock fraud for the second time, admitting ripping off investors for $1.3 million in a penny-stock scam after serving eight years in a pump-and-dump scheme.
Phillip W. Offill, Jr., who worked for the SEC in its Dallas office in the 1990s, pleaded guilty with his accomplice, Justin Herman, to misappropriating shares of a company with mining claims in Arizona and Idaho, manipulating their price and then foisting them on unsuspecting investors.
Herman, 52, of Canonsburg, Pa., had previously been a licensed stock broker.
Federal prosecutors say the 64-year-old Offill committed the scam while on probation for his previous conviction in 2010 for a different multi-million dollar pump-and-dump stock manipulation scheme.
According to court filings, Offill had taken advantage of his friendship with the controlling shareholder of Mansfield-Martin Exploration Mining Inc. and while helping him acquire a mining claim, stole 40 million shares from him. Offill then turned them over to Herman to sell to investors, with the two pocketing the profit.
Messages left with attorneys for Offill and Herman were not immediately returned.
Offill had spent 15 years working as an enforcement agent for the SEC before leaving to join a private law firm.
After his 2010 conviction, Offill had been barred from ever working in the securities industry again, but used the alias Jim Jimerson in his most recent scam, according to a separate civil charge filed against him by the SEC last year.
Offill and Herman face up to 25 years in prison when they are sentenced in June.
-- MarketWatch
Moody’s cuts outlook on U.S. banking system to negative, citing ‘rapidly deteriorating operating environment’
In a harsh blow to an already-reeling sector, Moody’s Investors Service on Tuesday cut its view on the entire banking system to negative from stable.
The firm, part of the big three rating services, said it was making the move in light of three key failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis.
“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.
The move followed action late Monday when Moody’s warned that it either was downgraded or placing on review for downgrade seven individual institutions.
Investor Michael Burry, on SVB management:
“People full of hubris and greed take stupid risks, and fail. Money is then printed. Because it works so well.”
Ken Griffin says SVB depositors should not have been bailed out: ‘It would have been a great lesson in moral hazard’
Ken Griffin, the founder and CEO of Citadel, isn’t a fan of the extraordinary measures taken by the U.S. Federal Reserve to protect depositors at Silicon Valley Bank and Signature Bank on Sunday.
“There’s been a loss of financial discipline with the government bailing out depositors in full,” Griffin said, in an interview with the Financial Times on Monday. Griffin continued that the measure was a betrayal of the U.S.’s capitalist economy, which he said was “breaking down before our eyes.”
On Sunday, the U.S. Federal Reserve said it would ensure that depositors at Silicon Valley Bank and Signature Bank, which also failed over the weekend, were protected in full, even beyond the $250,000 normally covered under federal deposit insurance. The Fed also said it would launch a new lending program where banks could pledge certain securities, valued at par instead of market value, as collateral.
Instead, Griffin suggested that, given the strength of the economy, the U.S. government could have let SVB’s depositors lose their money. “It would have been a great lesson in moral hazard,” said Griffin, predicting that losses “would have been immaterial.”
“It would have driven home the point that risk management is essential,” he said.
What is moral hazard?
Investors, economists and politicians have cited the idea of ‘moral hazard’ when debating the merits of a rescue package for Silicon Valley Bank, which collapsed on Friday after a bank run.
Moral hazard is the argument that an individual or business will engage in riskier behavior if someone, like an insurance company or the government, protects it from the consequences of its actions. This concept is often used to criticize bailouts, rescue packages or debt forgiveness plans. In the context of a bank bailout, the idea of ‘moral hazard’ suggests that if those involved in a bank—whether leadership, shareholders, or depositors—would not judge risk properly if they believed a rescue would come if something went wrong.
Nouriel Roubini, an economist at New York University commonly known as “Dr. Doom,” tweeted on Monday that the Fed’s protection for depositors at Signature Bank, which was connected to the cryptocurrency sector, was the “mother of [all] moral hazards,” and that it rewarded “criminals & con men.”
Even those who supported a rescue package, like former U.S. Treasury Secretary Lawrence Summers, had to dismiss the argument that rescuing the bank—or at least its depositors—would mean protecting people from allegedly poor decisions. “This is not the time for moral hazard lectures,” Summers tweeted on Sunday, before the U.S. announced its plan to protect SVB depositors.
Griffin’s rejection of the SVB rescue stands in sharp relief to other investors who supported forceful action, like fellow billionaire and hedge fund founder Bill Ackman, an early supporter of a bailout for the bank.
On Monday, Ackman suggested on Twitter that the U.S. government should extend deposit insurance to cover the full value of deposits rather than just $250,000. He suggested that, given the speed of social media and digital banking, “no bank is safe from a run” without full deposit protection.
“The rewards for being a depositor are minimal compared with the risk of loss from losing access to funds needed to run your business or household. Until this problem is solved, our banking system is at risk,” he continued.
Other investors took issue with Griffin’s comments specifically. Linking to Griffin’s interview on Twitter, tech investor Bill Gurley claimed that previous rescue packages, like those for big banks in 2008 or airlines in 2020, protected equity shareholders and bondholders, were more generous than what was offered to Silicon Valley Bank.
“I’m all for being tough, & I fully understand why ‘failure” is a necessary part of capitalism. But in this case SVB has already been treated much more harshly,” Gurley tweeted. “Protecting stockholders in these situations is a far worse direct harm to capitalism.”
Shares of regional banks crashed on Monday as investors feared that they would face similar problems as Silicon Valley Bank. Stock exchanges halted trading in companies like First Republic Bank and Western Alliance Bancorp due to volatility, as share prices plunged by as much as 85% for some companies as markets opened. -- Fortune
Wedbush analyst Daniel Ives on Tuesday summed up the impact of the Silicon Valley Bank collapse as the end of the “Cinderella story” for the bank and the venture capital community it served. “While venture debt lines and credit was much more easy to attain by the tech friendly Silicon Valley Bank, now startups face the arduous task of getting loans and banking relationships with large money center banks or other regionals that will greatly scrutinize funding with a lab microscope,” Ives said. Before its collapse last week, Silicon Valley Bank was the “Godfather of the Silicon Valley banking ecosystem” for the past few decades, he said. “With SVB, we believe this is the tip of the iceberg for the broader tech startup world that has shaken venture capitalists in the Valley and around the world with this black eye collapse,” he said. -- MarketWatch
The Federal Reserve’s review into the collapse of SVB Financial is likely to lead to more capital and liquidity rules for regional banks, says Jaret Seiberg, an analyst at TD Cowen. Seiberg said so-called TLAC rules, which the brokerage already thought would be extended to the biggest regionals, may now be applied to banks with more than $100 billion in assets. Seiberg also expects scrutiny of held-to-maturity securities, a full liquidity coverage ratio test for banks with over $100 billion in assets, and more intense review of interest-rate risk. However, he doesn’t expect stress tests to be applied to regional banks. -- MarketWatch
Volatility will be the Word of the Week.
WAL down more than that.....
But...but...but...what about inflation?!
FDIC Acts to Protect All Depositors of the former Silicon Valley Bank, Santa Clara, California
https://www.fdic.gov/news/press-releases/2023/pr23019.html
Those experiences with SVB gave people who work in tech a very different sense of what was at stake in this crisis from most Americans.
To much of the country beyond the San Francisco Bay Area, the bank just sounded like a place for tech people to stash their riches. In an era of growing unease with big tech firms' power and wealth, some cheered the bank's woes.
"I believe that if Silicon Valley Bank were instead called Farmers Bank Of Santa Clara (they bank a lot of winegrowers!) we would have had this easily resolved," veteran investor and OpenAI CEO Sam Altman tweeted Sunday.
https://www.axios.com/2023/03/13/silicon-valley-bank-startups-tech-bust
Unsecured debtholders damn well know the risks before they initiate their positions.
I expect even more twists and turns than we've already endured. My crystal ball has yet to return from its weekend tune-up and polish in preparation for the trading week - so we'll just have to wait a bit and see how things shake out.
I'm not surprised.
As the punchline goes, "It only hurts when I laugh...."
That's a tight ship, indeed.
Well, it ain't gonna be Yellen.....
?Asked whether the government might bail out banks as it did during the 2008 crisis, @SecYellen says, “We’re not going to do that again.” But she adds, “We are concerned about depositors and are focused on trying to meet their needs.” pic.twitter.com/sg5WBFWfPj
— Face The Nation (@FaceTheNation) March 12, 2023
You may be right about the ringing phone, considering his history:
Buffett Then: 2008 Financial Crisis
As big banks faced potential failure and confidence in the system began to falter, the Oracle of Omaha pumped $5 billion into Goldman Sachs, $3 billion into General Electric, and later invested $5 billion to help shore up Bank of America; in 2009, he bought Burlington Northern Santa Fe Railway for around $26 billion.
In October 2008, Buffett penned an op-ed in the New York Times under the headline, “Buy American. I Am,” explaining why he was buying U.S. stocks and why others should do the same.
Berkshire’s total crisis-era investments, which totaled more than $25 billion, earned $10 billion in profit within the first five years of those deals.
During a crisis, “The factories don’t disappear, the farmland doesn’t disappear, the skills of the people don’t disappear,” Buffett said, explaining his 2008 investments.
-- Forbes
Ackman Holds Court
The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or…
— Bill Ackman (@BillAckman) March 11, 2023
Silicon Valley Bank paid out bonuses hours before seizure...
https://www.axios.com/2023/03/11/silicon-valley-bank-paid-bonuses-fdic
This weekend is everything for Silicon Valley Bank and its customers.....
https://www.axios.com/2023/03/10/silicon-valley-bank-collapse-customer-money
My concern is the biotech sector.....
"The crisis that erupted Thursday at Silicon Valley Bank is setting off deep worries in the biotech sector, which has close ties to the bank, both as a key lender to early-stage companies and as an important depository for the sector’s cash." -- Barron's
"The past 24 hours has reshaped the tech and life sciences ecosystem. Imagine what it might look like by tomorrow."
https://www.axios.com/2023/03/10/silicon-valley-bank-run-svb-stock
Silicon Valley Bank Financial in talks to sell itself after attempts to raise capital have failed, sources say.
SVB Financial, parent of Silicon Valley Bank, is in talks to sell itself, sources told CNBC’s David Faber.
Attempts by the bank to raise capital have failed, the sources said. Large financial institutions are looking at a potential purchase of SVB.
Our thought bubble, via Axios' Felix Salmon: The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded.
The intrigue: "Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don’t have direct access to central bank liquidity," Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. "But Silvergate does — and yet it didn’t use it."
The bottom line: That would appear to be an oversight for the bank, but also its regulator.
https://www.axios.com/2023/03/08/crypto-bank-silvergate-liquidated
THIS Elizabeth Is MUCH More Impressive:
https://www.c-span.org/video/?525448-1/supreme-court-hears-challenge-biden-administration-student-loan-debt-relief-program
What was he thinking? He'll likely have plenty of extra time in the coming years to contemplate that crucial question. Even if it is answered during trial.
‘Oh what a tangled web we weave/When first we practice to deceive’
Perhaps SBF would have been smarter to have read Sir Walter Scott in high school - or, at the very least, had perused this more contemporary piece:
"You may have heard the expression “Culture eats strategy for breakfast.” This famous quotation is often attributed to business management guru Peter Drucker. What does this actually mean? In essence it means that culture can constrain strategy. In a battle between an organization’s strategy and the organization’s culture, culture usually wins. In fact, culture determines and limits strategy. Therefore, if the culture is not aligned with the strategy, the strategy is at risk."
https://eapj.org/oh-what-a-tangled-web-we-weave/
FTX founder Sam Bankman-Fried hit with four new criminal charges
https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.80.0.pdf
“It’s getting worse and getting worse fast.....”
https://www.axios.com/2023/02/21/chatbots-misinformation-nightmare-chatgpt-ai