by WorldTribune Staff, March 13, 2023
Regulators on Sunday seized Signature Bank, two days after the collapse of Silicon Valley Bank (SVB).
Signature’s failure is the third-largest in U.S. history. Most banks felt the aftershocks Monday.
Shortly after Joe Biden addressed the nation on March 13 with assurances that “‘Americans can have confidence that the banking system is safe,” trading was temporarily halted in dozens of regional banks as shares fell by up to 75 percent when the market opened.
Major U.S. banks were also hit with Wells Fargo dropping 7.5 percent, Bank of America 7.4 percent, Citigroup 5.8 percent and JP Morgan down 2.7 percent.
The stock price for regional bank Western Alliance plummeted by three quarters when the market opened, while shares in First Republic dropped 67 percent and PacWest by more than 35 percent.
New York-based Signature failed to find a buyer or another solution to shore up its finances before Monday morning, the Wall Street journal cited people familiar with the matter as saying.
Signature Bank board member Barney Frank, the former congressman who formed one half of the landmark Dodd-Frank financial law after the 2008 financial crisis, said Signature suffered a bank run of billions of dollars on Friday.
“It was an SVB-generated panic.” Frank said. “We were fine until the last couple of hours on Friday.”
Banking regulators said Signature customers will get all of their deposits back, including money above the $250,000 limit for federal deposit insurance.
“Signature Bank was reeling from a bet on crypto banking that foundered after the sector imploded and banking regulators cracked down on lenders’ exposure to digital assets,” the Wall Street Journal noted.
Frank said customer concern over Signature’s exposure to crypto spiraled after SVB’s collapse. Customers told executives they felt more comfortable at giant banks such as JPMorgan Chase & Co., he said.
When he joined the Signature Bank board in 2015, Frank had said: ”As a commercial bank catering primarily to privately owned businesses, Signature Bank knows firsthand the importance small business plays in the health and vibrancy of our nation’s economy. I am excited to be part of all this in my new capacity as board member and in working with the other directors and management.”
Signature Bank at that time had $28.6 billion in assets. As of Dec. 31, 2022, the bank had total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion.
The meltdowns of SVB and Signature Bank were “partly caused by a chasm between its assets and what they were worth in the market,” the Washington Examiner’s Ryan King noted in a March 13 report. “Eventually, SVB sold some of those assets, spooking investors and triggering a run on the bank. But SVB isn’t alone, as banks across the United States were sitting on $620 billion in unrealized potential losses at the end of last year, per the Federal Deposit Insurance Corporation.”
“The reason for this predicament is that banks compiled a plethora of bonds and treasuries during times when interest rates were hovering near zero. But now, the Federal Reserve has begun jacking up rates in an effort to combat inflation, which has caused many of those assets to plunge in value,” King wrote. “This is because higher interest rates mean that new bonds accrue higher rates of returns for investors. As a result, older bonds have comparatively lower rates of return, rendering them less desirable for investors and therefore triggering a plunge in the value of older assets.”
2022: Jim Cramer recommends Signature Bank.
2023: Signature Bank shuts down.
How does he do it? pic.twitter.com/2QskFTUPe6
— kanekoa.substack.com (@KanekoaTheGreat) March 12, 2023
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