« Battle of the Tech Bands 2 | Main | In the Globe again »

Looks like every bank can get a bailout

According to BailoutSleuth.com, my friends at Silicon Valley Bank are recipients of some bailout money.  Silicon Valley Bank is a great partner for many start-up companies.  They provide banking services as well as venture debt.  Silicon Valley bank is also our bank at Sempre Management.

But, I don't understand why we (as taxpayers) are investing in Silicon Valley Bank.  BailoutSleuth says that SVB has received $235M despite having $27M in profits (the $21.3M that BailoutSleuth mentions is from the prior quarter, Q2).  After a quick look at their financials, it seems that the biggest difference is that they are not making as much money from investment gains as they did a year ago (no surprise in this environment).  Their balance sheet looks as strong as ever.  And, since they are primarily a business bank, I don't think they got involved in any mortgage backed securities.

According to the company's press release on the receipt of this bailout (TARP) money:

SVB Financial Group's Tier 1 capital ratio of 9.94% at September 30, 2008, already exceeds that of a "well-capitalized" institution. On a pro forma basis, the new capital would have increased the Company's Tier 1 capital ratio on that date to approximately 12.79%.

It's great that SVB is in such good shape.  But, why does the government have to invest in them to make them stronger and to fund their growth (as their announcement says)? 

I think that the bailout is going way too far.  SVB isn't going to collapse.  And, if it did, I have a hard time believing that our banking system would go down with it.  It just seems now that we are in the business of investing in just about every bank.  Since I'm an owner now, I guess I can order around our account rep!

TrackBack

TrackBack URL for this entry:
http://www.thefeinline.com/blog-mt1/mt-tb.fcgi/444


Hosting by Yahoo!

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)