9 minutes ago
The SVB situation is the result of loose monetary policy, says Leon Cooperman
Silicon Valley Bank went bankrupt on Friday, and investor Leon Cooperman believes the situation is a by-product of the Federal Reserve’s low interest rates.
“This is the result of stupid monetary policy of zero to negative interest rates for a decade,” Cooperman, head of Omega Advisors, told CNBC’s Scott Wapner.
The Fed cut interest rates to zero to stabilize the economy after the 2008 financial crisis. Interest rates stayed low for years until the Fed began raising them in the late 2010s. In 2020, however, the central bank cut interest rates back to zero as Covid-19 spread around the world.
Over the past year, the central bank has raised interest rates to curb inflationary pressures.
—Fred Imbert
48 minutes ago
Focus on companies with strong balance sheets, says the investor
Investors will need to be much more selective going forward, especially following the collapse of SVB Financial, said investor Ann Miletti.
Focus on companies with strong balance sheets and free cash flow “and management teams that have excellent risk control and experience in tough times,” Miletti, the head of active equity at Allspring Global Investments, said during a CNBC special on Sunday.
Her comments came after regulators announced a plan to freeze depositors at Silicon Valley Bank following the bank’s collapse last week.
Regulators “will not be available to help all companies,” she said. “We’ve had a lot of bailouts over the last few years and I think investors are getting pretty used to it. We must be aware that we are in a new regime.
“There are higher interest rates, higher inflation and we will see bankruptcies. There will be no bailouts for everyone,” Miletti added.
—Fred Imbert
Before an hour
Regulators promise access to deposits from Monday
Regulators scrambled to avert a banking crisis over the weekend, with a key objective being to boost “public confidence” in the US banking system.
A joint statement by Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and FDIC Chair Martin Gruenberg said depositors at Silicon Valley Bank and New York’s Signature Bank were granted access to their bank account as early as Monday will have all the money.
“No losses related to the dissolution of Silicon Valley Bank will be borne by the taxpayer,” they said.
– Christina Cheddar Berk
Before an hour
Regulatory backstop to SVB failures to protect economy, officials say
Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and FDIC Chair Martin J. Gruenberg issued a joint statement Sunday night explaining their reasons for developing a depositor restraint and protection plan explained by financial institutions with money at Silicon Valley Bank.
“We are taking decisive action to protect the U.S. economy by enhancing public confidence in our banking system,” the statement said. “This move will ensure that the U.S. banking system continues to fulfill its important role in protecting deposits and providing access to credit for households and businesses in a way that supports strong and sustainable economic growth.”
Silicon Valley Bank failed on Friday in the largest bank collapse since the 2008 financial crisis. This then raised concerns about other banks who might see similar risks.
“The US banking system remains resilient and is on solid foundations, in large part due to post-financial crisis reforms that provided better protection for the banking industry,” the officials said in a statement.
“These reforms coupled with today’s measures demonstrate our commitment to taking the necessary steps to ensure depositor savings remain safe,” they added.
—Fred Imbert
Before an hour
Cryptocurrencies jump with stock futures even after Signature Bank shuts down
Bitcoin and ether rose with stocks as US regulators unveiled a plan to ensure Silicon Valley bank depositors would receive their money after the bank’s spectacular collapse on Friday.
Bitcoin and Ether were each up about 7% after 6:30 p.m. ET, according to Coin Metrics.
The moves came even as New York’s Signature Bank was shut down by the New York State Department of Financial Services on Sunday, according to a joint statement from the Treasury Department, the Federal Reserve, and the FDIC.
Signature Bank was another notoriously crypto-friendly institution and the next largest alongside Silvergate, which announced its imminent liquidation last week.
Its closure fuels fears from crypto investors and entrepreneurs that the industry will be de-risked by the US banking system, leaving it without “ramps” that allow fiat money to flow into crypto assets. Silvergate and Signature helped solve this problem by creating simple banking services and payment platforms for crypto businesses.
Wall Street analysts maintained their buy ratings for Signature Bank on Friday, despite bad news about its peers earlier in the week.
– Tanaya Macheel
Before an hour
Gold hits the highest level in more than a month amid uncertainty over SVB uncertainty
Gold futures for delivery in April were up more than 1% in early trade, hitting their highest since Feb. 9. The precious metal, often viewed as a safe haven during times of market volatility and uncertainty, was last seen at $1,896 an ounce.
– Fred Imbert, Gina Francolla
Before an hour
Futures jump after regulators announce backstop for SVB depositors
Futures extended gains just before 6:30 p.m. ET after US regulators unveiled a plan to stem the damage from the Silicon Valley bank collapse.
Dow futures were last up 297 points, or 0.9%. S&P 500 futures were up 1.1% and Nasdaq Composite futures were up 1.2%.
– Tanaya Macheel
Before an hour
SVB’s demise underscores “deteriorating” conditions for technology and biotech companies, says Trivariate Research
“This will be a bad bout for equities, with multiple contraction likely until more is understood of the non-SVB issues overall,” Trivariate Research’s Adam Parker wrote in a research note on Sunday.
Parker downgraded healthcare stocks earlier this year, but now he’s even more cautious on biotechnology stocks and is underweight technology.
SVB’s demise indicates a “deteriorating” environment for biotech and select technology companies, he said. The declining deposit base at SVB is an example of “slowing down fundamentals in these parts of the economy”.
Parker also said it was “prudent” to sell financials as some companies will reassess their banking risks, which could lead to more cases of large withdrawals as early as Monday.
– Christina Cheddar Berk
Before an hour
Ed Hyman says Fed should pause rate hikes amid SVB shock
Before an hour
First Republic Says Its ‘Capital Remains Strong’
First Republic Bank said in a letter to customers Sunday that its “capital remains strong” and “significantly exceeds regulatory requirements.”
“We stand ready to process transactions and remittances, fund loans, answer questions and meet all of your financial needs — as we do every day,” the letter reads.
Aimed at high-end customers and businesses, First Republic has a below-average share of retail deposits as a percentage of its assets — though not to the same extent as SVB.
The letter from Chairman Jim Herbert and CEO Mike Roffler states that First Republic has $60 billion in available borrowing capacity at the Federal Home Loan Bank and the Federal Reserve. The bank had a total of $176 billion in deposits as of December 31.
Shares of the bank fell almost 15% on Friday.
— Jesse Pound
2 hours ago
PNC decides not to bid on Silicon Valley Bank
PNC Financial Group has decided not to bid for Silicon Valley Bank because regulators struggled to find a buyer for the failed bank’s assets, according to a source familiar with the matter.
The Pittsburgh, Pennsylvania-based bank sent an initial expression of interest to the Federal Deposit Insurance Corp for a deal for the SVB and held brief and preliminary discussions with the agency, the source said. However, after conducting initial due diligence, PNC notified the FDIC Saturday that it had decided not to proceed, the source said.
— Yun-Li
2 hours ago
SVB failure could mean Fed exits tightening cycle earlier, says Ed Yardeni
Wall Street veteran Ed Yardeni said in a note that the failure of the Silicon Valley bank could prompt the Federal Reserve to complete its rate hike campaign sooner than expected.
“If the run on Silicon Valley Bank is right, it could mean ends are tightening earlier and bond yields have peaked,” wrote the Yardeni Research president. “We cannot say with certainty that this is the case, but we can say that the debacle should keep the tech sector in its rolling recession much longer.”
“Although the SVB crisis does not change our economic and stock market outlook for now, it adds uncertainty until resolved in a way that minimizes systemic shocks,” he added.
Evercore ISI’s Ed Hyman echoed Yardeni’s comments, noting that it “might be a good idea for the Fed to take a break.”
“If the Fed paused and accelerated inflation, they could easily tighten again,” Hyman said.
—Fred Imbert
2 hours ago
Stock futures open higher
Stock futures opened higher Sunday night as investors awaited details on the next steps in the Silicon Valley bank crisis.
Futures linked to the Dow Jones Industrial Average gained 134 points, or 0.4%. S&P 500 futures were up 0.6% and Nasdaq 100 futures were up 0.5%.
– Tanaya Macheel