There's something about SVB that most people aren't talking about. In their SEC filings at year end 2022, out of $212 billion in total assets they had $120 billion in Federal Securities, which is what most people blame. But they also list $61 billion as "Other Loan Assets". These aren't commercial loans or mortgage loans, which are different categories. These were "fund backing" loans, loans that VCs would take out backed by securities (their invested money, their stock, art?... crypto???). But when VC's took this cash and gave it to the startups, they required the startups to put the money... back into SVB as a deposit. Which SVB can then use to lend out more money. And when you are a customer of SVB for one thing, they really push you to do your personal loan stuff there too. So the real problem was that SVB was extremely incestuous with its deals, and when its one and only market started to turn a little, its lopsidedness made it fall over. That's probably why no one wanted to buy it. If it was just a cash-flow problem, a bigger bank could handle it. But if there is a $61 billion turd in the balance books, everyone is going to say no. I'm sure most of that is going to be paid back eventually, but a large enough part won't be - large enough to question the worth of the whole enterprise. And if you want to know why Signature Bank was taken down at the same time...well, it was for a lot of reasons. Like being a big crypto bank during crypto winter. And running SigNet, the trillion dollar crypto/money moving network used by drug cartels and money washers. But they were also doing the same thing as SVB with the fund backing loans. And there's a reason for that: they hired people from SVB to goose their loan books.
Oh, and SigNet is still running. Don't tell your drug cartel friends that it's being run by the Federales at the moment.
This is a problem and is spread mostly among smaller and mid-sized banks. Commercial real estate mortgages tend to get re- upped at 5 -20 yr terms. Property values for empty office buildings and higher inerest rates likely mean a crash in this loan income stream for banks. More pressure on these banks. "This year will be critical because about $270 billion in commercial mortgages held by banks are set to expire, according to Trepp—the highest figure on record. Most of these loans are held by banks with less than $250 billion in assets." @WSJ @petergrantwsj | Like we said...— Richard Christopher Whalen (@rcwhalen) March 21, 2023
I have been keeping an eye on this the past three years and I am surprised the commercial real estate market has not crashed yet.
It's most bizarre in New York City, where all the storefronts are empty but the rent keeps climbing. I don't know why - there some weird financial incentive to say you have a high rent even if you are not renting to anyone.