Tech Bank Fails, Rattles Markets --- Startup-focused lender Silicon Valley is taken over by FDIC, dragging down financial stocks

"SANTA CLARA, Calif. -- Silicon Valley Bank collapsed Friday in the second-biggest bank failure in U.S. history after a run on deposits doomed the tech-focused lender's plans to raise fresh capital.

The Federal Deposit Insurance Corp. said it has taken control of the bank via a new entity it called the Deposit Insurance National Bank of Santa Clara. All the bank's deposits were transferred to the new bank, the regulator said.

Insured depositors will have access to their funds by Monday morning, the FDIC said. Depositors with funds exceeding insurance caps will get receivership certificates for their uninsured balances, meaning businesses with big deposits stuck at the bank are unlikely to get their money out soon.

The bank is the 16th largest in the U.S., with some $209 billion in assets as of Dec. 31, according to the Federal Reserve. It is by far the biggest bank to fail since the near collapse of the financial system in 2008, second only to the crisis-era failure of Washington Mutual Inc.

The bank's parent company, SVB Financial Group, was racing to find a buyer after scrapping a planned $2.25 billion share sale Friday. Regulators weren't willing to wait. The California Department of Financial Protection and Innovation closed the bank Friday within hours and put it under the control of the FDIC.

The bank's troubles have dragged down the industry and unnerved stock investors overall. The blue-chip Dow Jones Industrial Average fell 345.22 points, or 1.1%, to 31909.64. The S&P 500 closed down 56.73 points, or 1.4%, while the Nasdaq Composite lost 199.47 points, or 1.8%.

All S&P 500 sectors closed lower, and the broad-based index had its worst week since September.

Treasury yields tumbled, with the yield on the 2-year note dropping 0.314 percentage point to 4.586%, its largest single-day decline since September 2008.

The bank's collapse dragged down a swath of the industry. The KBW Bank Index fell 16% on the week, its worst weekly performance since March 2020. After investors dumped the shares of banks big and small on Thursday, the megabanks recovered Friday, but many smaller peers continued to plunge. Several were halted for volatility.

Investors are worried about banks with a similar profile to SVB. Shares of San Francisco-based First Republic Bank, which caters to businesses and wealthy individuals, have fallen about 30% since Wednesday. "First Republic's deposit base is strong," the bank said in a statement Friday.

Shares of PacWest Bancorp have fallen 54% in the past two days. More than two-thirds of its lending portfolio is tied to real estate, with a sizable portion lent to venture-capital firms.

SVB catered mainly to the insular ecosystem of startups and the investors that fund them. Its deposits boomed alongside the tech industry, rising 86% in 2021 to $189 billion and peaking at $198 billion a quarter later. The bank poured large amounts of the deposits into U.S. Treasurys and other government-sponsored debt securities.

Tech tumbled after the Federal Reserve began raising rates last year to curb inflation. Startups, as a result, drained their deposits with SVB faster than the bank expected. And new investment stalled, meaning fresh money wasn't coming into the bank.

Rising interest rates, meanwhile, dented the value of SVB's massive bond portfolio. The bank needed fresh capital.

SVB hired Goldman Sachs Group Inc. this week to execute a private stock sale, with plans to announce it upon completion to avoid spooking investors, according to a person familiar with the offering.

Then Moody's Investors Service informed SVB that it planned to downgrade the bank's credit ratings, the person said. As a practice, Moody's informs issuers 24 hours in advance of a credit rating change.

Bankers and SVB executives feared a downgrade would harm the company more than a share sale, the person close to the deal said. They scrambled to bring on private-equity firm General Atlantic to anchor the deal with a $500 million commitment and announced the planned sale after the market closed Wednesday. Moody's downgraded the company later that evening.

SVB shares fell sharply after the market opened Thursday. The violent move in the stock alarmed customers, who began pulling their money out to avoid getting stuck with losses in the event of a failure.

Chief Executive Greg Becker tried to reassure customers on a call Thursday, telling them the bank was on solid footing. It didn't work. 

Venture-capital investors advised startups to pull their money out to avoid losses on deposits in excess of FDIC's $250,000 insurance cap. 

The bank had more than $151 billion worth of deposits that were over the FDIC limit at the end of 2022.

Rival banks were flooded with calls from potential customers looking to move their balances.

Alison Greenberg, co-founder of Los Angeles-based maternity care startup Ruth Health, was in a meeting Thursday when she got a frantic email from a seed investor.

"It basically just said 'Things are imploding at SVB, it's urgent that you get your money out,'" Ms. Greenberg said.

Audrey Wu, a Ruth Health co-founder, began making transfers out of the company's account of different denominations, hoping not to trip up any automated systems that would flag the transactions and potentially delay them.

As she prepared to carry out the final transfer, SVB's website crashed and she couldn't log back in, she said.

Some supporters tried to rally support for the bank. Financial-technology investor Restive Ventures said in an email early Friday that it was keeping its money at SVB and encouraging portfolio companies to do the same. 

"Moving corporate treasury under time pressure, on the internet, is a recipe for disaster," the email said.

The share sale was canceled a few hours later. The bank told employees to "work from home today and until further notice," according to a copy of the email viewed by The Wall Street Journal.

Before 9 a.m. on the west coast, regulators had seized the bank.

More than two dozen people, some who identified themselves as customers, descended on the bank's Santa Clara headquarters Friday morning. 

An FDIC press release announcing the bank's closure was taped to a locked door.

"We are in a whole lot of trouble right now," one customer said on a phone call. "We shouldn't have had all our eggs in one basket," he added." [1]

 

 Now is the best moment to tax the surplus profits of Scandinavian banks in Lithuania. If panic withdrawals start, it will be too late.

 

1. Tech Bank Fails, Rattles Markets --- Startup-focused lender Silicon Valley is taken over by FDIC, dragging down financial stocks
Ensign, Rachel Louise; Driebusch, Corrie; Bobrowsky, Meghan.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 Mar 2023: A.1.

 

Saudo Arabija ir Iranas atkuria santykius susitarimu, tarpininkaujant Kinijai

„RIJADAS, Saudo Arabija – Iranas ir Saudo Arabija penktadienį susitarė atkurti diplomatinius santykius, Kinijai tarpininkaujant, susitarimu, užbaigiant septynerius metus trukusį susvetimėjimą ir sukrėčiant Artimųjų Rytų geopolitiką.

 

     Šis susitarimas rodo staigų Pekino įtakos padidėjimą regione, kuriame JAV ilgą laiką buvo dominuojantis energijos tarpininkas, ir gali apsunkinti JAV ir Izraelio pastangas stiprinti regioninį aljansą, siekiant susidoroti su Teheranu, kai šis plečia savo branduolinę programą. Tai vyksta tuo metu, kai JAV bando sudaryti taikos susitarimą tarp Saudo Arabijos ir Izraelio, o šias JAV pastangas dabar aptemdo netikrumas.

 

     Kinija pastaraisiais metais užmezgė glaudesnius ekonominius ryšius su Iranu ir Saudo Arabija, kurios abi yra svarbios naftos tiekėjos antrai pagal dydį pasaulio ekonomikai. Tačiau šios tilto kūrimo pastangos yra pirmas kartas, kai Pekinas taip tiesiogiai įsikišo į politines Artimųjų Rytų konkurencijas.

 

     Santykiai tarp JAV ir Saudo Arabijos, ilgą laiką siejusių su Vašingtonu, įtempė dėl mažėjančių Amerikos saugumo garantijų ir Rijado sprendimo sumažinti naftos gavybą, kad per Ukrainos įvykius išliktų aukštos naftos kainos.

 

     Irano ir Saudo Arabijos susitarimas buvo surengtas Pekine už uždarų durų tarp aukščiausių abiejų šalių pareigūnų, sakoma jų bendrame pareiškime. Pasak žmonių, susipažinusių su šiuo klausimu, Kinijos lyderis Xi Jinpingas neseniai idėją apie derybas iškėlė per valstybinį vizitą Rijade gruodį.

 

     Pasak Saudo Arabijos, Irano ir JAV pareigūnų, pagal susitarimą Iranas įsipareigojo sustabdyti atakas prieš Saudo Arabiją, įskaitant husių sukilėlius, remiamus Jemeno pilietiniame kare. Iranas ir Saudo Arabija per du mėnesius vėl atidarys savo ambasadas ir atstovybes viena kitos teritorijoje ir susitarė, kad jų užsienio reikalų ministrai netrukus surengs viršūnių susitikimą, kuriame bus aptariamos kitos detalės.

 

     Teheranui susitarimas palengvina tarptautinę izoliaciją, su kuria jis susidūrė nuo antivyriausybinių protestų praėjusį rudenį ir žlugus deryboms, kuriomis siekiama atkurti 2015 m. tarptautinį branduolinį susitarimą, kas sužlugdė jo viltis atsipalaiduoti nuo ekonominių sankcijų. Rijadui tai suteikia karalystei daugiau svertų, nes ji siekia naujų JAV saugumo garantijų iš Bideno administracijos.

 

     "Iranui tai yra išsigelbėjimas nuo diplomatinės izoliacijos. Kinijai tai – stiprinti savo dalyvavimą regione ir parodyti, kad tai ne tik energijos vartotojas. O Saudo Arabijai tai susiję su amerikiečiais", – sakė Užsienio reikalų tarybos Irano ekspertas Ray'us Takeyhas. Santykiai ir buvęs Valstybės departamento pareigūnas bei buvęs JAV diplomatas.

 

     Tikėtina, kad diplomatinių santykių atkūrimas iš karto nesumažins ilgalaikės saugumo ir sektantiškos įtampos, kuri dešimtmečius skaldė Rijadą ir Teheraną ir pakurstė jų konkurenciją dėl dominavimo regione, teigia analitikai.

 

     Abiejų šalių ryšiai nutrūko 2016 m., kai Saudo Arabijos ambasada Teherane buvo užimta per protestus dėl Saudo Arabijos vyriausybės įvykdytos egzekucijos garsiam šiitų dvasininkui. Nuo tada Irano ir Saudo Arabijos nesutarimai atspindi dažnai smurtinę šiitų ir musulmonų sunitų skilimą, kuris dešimtmečius dominavo Artimuosiuose Rytuose.

 

     Saudo Arabija ir iraniečiai jau beveik dešimtmetį palaikė priešingas puses konfliktuose nuo Sirijos iki Jemeno. 2019 m. jie buvo ant karo slenksčio, kai Iranas buvo apkaltintas dėl raketų ir dronų atakų Saudo Arabijos naftos telkinyje.

 

     Dabartinis suartėjimas rodo požymius, kad Rijado ir Teherano vykdomi pavaldiniai karai atšalo. Jungtinių Tautų remiamos paliaubos tarp Saudo Arabijos ir Irano remiamų Jemeno karo pusių tęsiasi beveik metus.

 

     Pilietinį karą Sirijoje daugiausia laimėjo prezidento Basharo al Assado vyriausybė, padedama Irano ir Rusijos.

 

     Kitas Irano varžovas Persijos įlankoje – Jungtiniai Arabų Emyratai – praėjusiais metais vėl atidarė savo ambasadą Irane ir tęsia prekybą bei atviras komunikacijos linijas su Teheranu.

 

     Šis susitarimas nepaliko dėmesio Irano branduolinei programai, kuri jau du dešimtmečius buvo Teherano ir daugelio pasaulio šalių, įskaitant Kiniją, trinties šaltinis.

 

     JAV sankcijos Iranui sužlugdė jo ekonomiką, o pastarosiomis savaitėmis šalį sukrėtė valiutos krizė.

 

     Saudo Arabijos vyriausybė nuolat informavo JAV pareigūnus apie jų diskusijas dėl diplomatinių santykių su Iranu atkūrimo, kurios prasidėjo per pastarųjų metų derybas Bagdade ir Omane, ir palaikė pastangas, tikėdamasi, kad tai padės išspręsti kai kurias didėjančią įtampą Persijos įlankoje, sakė pareigūnai. Pasak pareigūnų, JAV tiesiogiai šiose derybose nedalyvavo.

 

     Galiausiai JAV pareigūnai teigė, kad tikslas buvo užkirsti kelią bet kokiems tolesniems išpuoliams prieš Saudo Arabiją, įskaitant Irano remiamų husių kovotojų Jemene. Pareigūnai mano, kad Iranas turėjo paskatą prisijungti prie derybų, nes nori sumažinti didėjantį politinį ir ekonominį spaudimą namuose, ir tikisi, kad bet kokie diplomatiniai proveržiai su savo kaimyne gali padėti.

 

     JAV pareigūnai sakė, kad ateinantys du mėnesiai iki oficialaus ambasadų atidarymo bus labai svarbūs vertinant, kaip rimtai Teheranas laikosi susitarimo.

 

     „Tai nėra režimas, kuris paprastai gerbia savo žodį, todėl tikimės, kad jie tai padarys“, – penktadienį žurnalistams sakė Baltųjų rūmų Nacionalinio saugumo tarybos strateginis koordinatorius Johnas Kirby. „Norėtume, kad šis karas Jemene pasibaigtų ir kad šis susitarimas, kurį jie turi, galėtų padėti mums pasiekti tokį rezultatą.

 

     Kinijos vaidmuo derybose yra teigiamas taškas Pekino ambicijoms regione. Kartu su Rusijos įsikišimu į Sirijos pilietinį karą Kinijos diplomatija yra dar vienas JAV įtakos mažėjimo požymis.

 

     Teheranas vis labiau nerimavo, kad dėl stiprėjančių Pekino ryšių su Saudo Arabija, galintis likti dar labiau izoliuotas. Pono Xi vizitas į Saudo Arabiją gruodį sukėlė neigiamą reakciją Irane po to, kai Pekinas prisijungė prie arabų pareiškimo, raginančio Teheraną bendradarbiauti su Tarptautine atominės energijos agentūra dėl jo branduolinės programos." [1]

 

Kinijos pastangos suprantamos. Kadangi JAV stropiai balansuoja vienas regionines jėgas prieš kitas (musulmonus Saudo Arabijoje prieš musulmonus Irane, slavus Ukrainoje prieš slavus Rusijoje), Kinija panaudoja jos turimą svorį tarptautinėje arenoje, kad suardyti šį balansavimą. Tai tiesioginiai bandymai pakenkti JAV. Įdomiausia, kaip tokia Kinijos politika pasireikš arčiau Kinijos namų - Azijoje.

1. Saudis, Iran Restore Relations With Accord Brokered by China
Kalin, Stephen; Faucon, Benoit; Salama, Vivian; Cloud, David S.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 Mar 2023: A.1.

Saudis, Iran Restore Relations With Accord Brokered by China

"RIYADH, Saudi Arabia -- Iran and Saudi Arabia agreed to re-establish diplomatic relations Friday in a deal mediated by China, ending seven years of estrangement and jolting the geopolitics of the Middle East.

The deal signals a sharp increase in Beijing's influence in a region where the U.S. has long been the dominant power broker, and could complicate efforts by the U.S. and Israel to strengthen a regional alliance to confront Tehran as it expands its nuclear program. It comes as the U.S. has been trying to broker a peace deal between Saudi Arabia and Israel, an effort now clouded with uncertainty.

China in recent years has built closer economic ties with Iran and Saudi Arabia, both of which are important suppliers of oil to the world's second-largest economy. But this bridge-building effort is the first time Beijing has intervened so directly in the Mideast's political rivalries.

Relations between the U.S. and Saudi Arabia, long aligned with Washington, have grown strained over America's diminishing security guarantees and Riyadh's decision to cut oil production to keep crude prices high during Ukraine events.

The agreement between Iran and Saudi Arabia was hammered out behind closed doors in Beijing between top officials of the two countries, they said in a joint statement. Chinese leader Xi Jinping raised the idea of the talks most recently during a state visit to Riyadh in December, according to people familiar with the matter.

As part of the deal, Iran pledged to halt attacks against Saudi Arabia, including from Houthi rebels it backs in the Yemen civil war, according to Saudi, Iranian and U.S. officials. Iran and Saudi Arabia will reopen their embassies and missions on each other's soil within two months and agreed that their foreign ministers will hold a summit soon to hammer out other details.

For Tehran, the accord eases the international isolation it has faced since antigovernment protests last fall and the collapse of talks aimed at restoring a 2015 international nuclear deal dashed its hopes of relief from economic sanctions. For Riyadh, it gives the kingdom more leverage as it seeks new U.S. security guarantees from the Biden administration.

"For Iran it's about escaping diplomatic isolation. For China, it's about deepening their engagement in the region and showing it's not just an energy consumer. And for Saudis it's about the Americans," said Ray Takeyh, an Iran expert at the Council on Foreign Relations and former State Department official and former U.S. diplomat.

Re-establishing diplomatic relations isn't likely to immediately lessen the longstanding security and sectarian tensions that have divided Riyadh and Tehran for decades and fueled their competition for regional dominance, analysts said.

Ties between the two countries were cut in 2016 after the Saudi Embassy in Tehran was overrun amid protests over the execution of a prominent Shiite cleric by the Saudi government. Since then, the Iran-Saudi rift has represented the often violent schism between Shiite and Sunni Muslims that has dominated the Middle East for decades.

The Saudis and Iranians have backed opposite sides in conflicts ranging from Syria to Yemen for nearly a decade. In 2019, they were on the brink of war when Iran was blamed for missile and drone attacks on a Saudi oil field.

The current rapprochement follows signs that the proxy wars waged by Riyadh and Tehran were cooling. A United Nations-supported truce between Saudi- and Iran-backed sides in the Yemen war has held for nearly a year. 

The civil war in Syria has largely been won by President Bashar al-Assad's government, with help from Iran and Russia.

Another Persian Gulf rival of Iran, the United Arab Emirates, reopened its embassy in Iran last year and has been pursuing trade and open lines of communication with Tehran.

The deal left unaddressed Iran's nuclear program, which has been a source of friction between Tehran and much of the world, including China, for two decades. 

U.S. sanctions on Iran have left its economy in ruins, with a currency crisis in recent weeks roiling the country.

The Saudi government had kept U.S. officials apprised of their discussions to re-establish diplomatic relations with Iran, which dates back to talks in recent years in Baghdad and Oman, and supported the efforts in the hope that it would resolve some of the growing tensions in the Gulf, officials said. The U.S. wasn't directly involved in these talks, officials said.

Ultimately, U.S. officials said the aim was to prevent any further attacks against Saudi Arabia, including those by Iranian-backed Houthi militants in Yemen. The officials believe that Iran had an incentive to join the talks because it wants to ease the growing political and economic pressure at home, and hopes that any diplomatic breakthroughs with its neighbors might help.

U.S. officials said the next two months, until the official reopening of the embassies, would be critical in gauging how serious Tehran is in honoring the agreement.

"This is not a regime that typically does honor its word, so we hope that they do," White House National Security Council Strategic Coordinator John Kirby told reporters Friday. "We'd like to see this war in Yemen end, and that this arrangement that they have, might help lead us to that outcome."

Mr. Kirby added: "This is not about China. We support any effort to de-escalate tensions in the region. We think that's in our interests, and it's something that we worked on through our own effective combination of deterrence and diplomacy."

China's role in the talks marks a watershed moment for Beijing's ambitions in the region. Along with Russia's intervention in the Syrian civil war, China's diplomacy is another sign of the U.S.'s waning influence.

Tehran had been increasingly worried Beijing's growing ties with Saudi Arabia could leave it further isolated. Mr. Xi's visit to Saudi Arabia in December triggered a backlash in Iran after Beijing joined an Arab statement calling on Tehran to cooperate with the International Atomic Energy Agency over its nuclear program." [1]

 

 China's efforts are understandable. As the US diligently balances one regional power against another (Muslims in Saudi Arabia against Muslims in Iran, Slavs in Ukraine against Slavs in Russia), China uses its weight on the international stage to upset this balancing. These are direct attempts to harm the United States. The most interesting thing is how this Chinese policy will manifest itself closer to China's home - in Asia.

 

1. Saudis, Iran Restore Relations With Accord Brokered by China
Kalin, Stephen; Faucon, Benoit; Salama, Vivian; Cloud, David S.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 Mar 2023: A.1.