Retirement thoughts Past Present Future

[two_bit_score]

FDIC is going to cover everyone except the stockholders.

Our little bank holding company has the annual shareholders meeting in a couple weeks. Very interested in this one. Usually I just attend for the bacon wrapped shrimp.

 

[bigtiller]

Has a precedence been set and the $250,000 FICA insured cap been increased to infinity?

 

[California]

Our little bank holding company has the annual shareholders meeting in a couple weeks. Very interested in this one. Usually I just attend for the bacon wrapped shrimp.

Ask them in advance to put their Risk Management officer on the podium at that meeting.

You might get a scary answer. "We've never had a problem, why do we need that?"

As an absolute minimum no matter how small the bank there should be an audit committee that includes at least one outside, independent bank Director. A committee responsible to contract for truly independent audits, not by somebody's brother in law. And that then verifies that the auditor's Internal Controls recommendations actually get implemented.

Internal Controls are routine processes that exist so management can't possibly claim ignorance (and can be held liable for everything) and, that assure that errors or fraud can't stay concealed.

Madoff's Ponzi scheme was the clearest example of a CPA complicit by not commenting on these deficiencies, as necessary footnotes to the annual reports.

A friend once got away with an audit title We Can Find No Focus Of Authority Or Responsibility after our shop was asked to evaluate the transition from paper records to computers in a Large Public Agency. That got everyone's attention.

 

[California]

Has a precedence been set and the $250,000 FICA insured cap been increased to infinity?

Not in this case. It's not the same as the investment bank failures of 2008 where pools of leveraged junk were claimed as valuable assets. SVB's claimed capital assets exist. They just aren't very liquid (easy to sell immediately). Sounds like FDIC will take those assets in exchange for lending the cash needed to pay off the paniced depositors, immediately. And the bank's stockholders will be wiped out. That's the risk they took. Capitalism at work.

 

[RustyA]

Except for the stockholders that dumped their shares just before the public was in the know. They should be prosecuted and pay the proceeds back.

 

[ruffdog]

Except for the stockholders that dumped their shares just before the public was in the know. They should be prosecuted and pay the proceeds back.

The DOJ and SEC is already looking into that. It sounds like that money may be clawed back.

 

[MossRoad]

The DOJ and SEC is already looking into that. It sounds like that money may be clawed back.

Well, shoot. Now we'll have to return the new Subaru.

 

[OldMcDonald]

Regarding previous advice to talk to a financial adviser....

Nearly half of SVB shares were held by investment advisors, about 30% in mutual funds, 10% in hedge funds, and 8% in pension funds, according to data from FactSet .

Ask them in advance to put their Risk Management officer on the podium at that meeting.

You might get a scary answer. "We've never had a problem, why do we need that?"

So called "Financial (aka Investment) Advisors" invest client funds in whatever they think is appropriate. To continue in business they need to obtain a better return than the opposition so will always include some higher risk investments - in addition to making sure that their payoff for investing in something gives them something to pocket. Due to my background I would never use one. If you feel you need advice then I would suggest banking with a very large bank and asking the advice of the bank. All of them have very knowledgeable people on staff.

Every person in business, no matter how small, and even a husband/wife arrangement, should have a Risk Manager. I have always had that position in our own businesses, and held it (officially) in several where I was an employee. It becomes a part of the person's day to day work and does not have to be included in the job title, although it can be - just include it in the list of responsibilities so it is known who is resonsible. Most people with some financial background should be able to understand and undertake the task. If not, it is easy to obtain some basic instruction and even qualifications in the field.

 

[JasperFrank]

"Has a precedence been set and the $250,000 FICA insured cap been increased to infinity?" - Big Tiller.

I think this is a central question, with no easy answers. SVB was unique in that venture capital is usually dealing with numbers that are far larger than $250,000, for day to day transactions. Its as if we need to redefine "what" a bank is, and create an entire other category. And let it be known that this other category, either carries the risk, in a private manner, or it can not. SVB was clearly something where 97% of the deposit holders were way over the insurance limits. It should have lost its charter. To me, this isn't a "bank" any more, its something else that regulators need to hold to a higher safety reserve margin. Which we seem unable to enforce.
I understand why the pubic was assured that their deposits are all covered. We don't want RUNS on banks, cause that never ends well.

20 years ago, if you looked at Amazon's, or Apple's balance sheets, you would have thought, who is carrying these companies as they bleed red, year after year. These aren't going to survive. They did, and later became the huge companies they are because of "VC" banks like SVB. In those cases no one on the upper levels of management, got greedy, or wanted to put Risk, to even more Risk. SVB went the other way and took more Risk, out of what was already a bit risky.
For this, I suggest, we seriously think about how these institutions are set up.

As in "This is a VC bank," and your deposit is limited to X number of dollars, in X number of bridge loans that you have to be able to cover. This is not covered by FDIC, in any way. Its a different sort of "Bank."

 

[MossRoad]

So called "Financial (aka Investment) Advisors" invest client funds in whatever they think is appropriate. To continue in business they need to obtain a better return than the opposition so will always include some higher risk investments - in addition to making sure that their payoff for investing in something gives them something to pocket. Due to my background I would never use one. If you feel you need advice then I would suggest banking with a very large bank and asking the advice of the bank. All of them have very knowledgeable people on staff.

Every person in business, no matter how small, and even a husband/wife arrangement, should have a Risk Manager. I have always had that position in our own businesses, and held it (officially) in several where I was an employee. It becomes a part of the person's day to day work and does not have to be included in the job title, although it can be - just include it in the list of responsibilities so it is known who is resonsible. Most people with some financial background should be able to understand and undertake the task. If not, it is easy to obtain some basic instruction and even qualifications in the field.

Not my financial advisors. Neither one tried to sell me anything. The free one at the Credit Union looks at the funds we have with Fidelity, the funds our Roth IRAs are invested in, the amount of cash we have on hand, our total net worth, what it's composed of, etc. and makes suggestions as to how we tweak our contributions. The free one at Fidelity draws up plans and suggestions for use every so many years, and it's up to us to follow or vary from our suggestions. Neither one makes money off of us.