Stock Markets
Breaking Down the $285 Million Fee Impact in SVB’s Emergency Financing Fiasco
© Reuters. Breaking Down the $285 Million Fee Impact in SVB’s Emergency Financing Fiasco
Quiver Quantitative – The failure of Silicon Valley Bank (SVB) last year came with a hefty price tag, not just for the bank itself, but also for the US banking system at large. A crucial yet overlooked aspect of SVB’s collapse was the $285 million in fees charged for prematurely ending emergency financing from the Federal Home Loan Bank (FHLB) system. This fee, necessary to retire billions in financing obtained by SVB in a desperate bid to survive a run on deposits, is the largest of its kind for any bank failure since before the 2008 financial crisis. This situation highlights the significant role of FHLBs in providing emergency lending, even to banks that eventually fail, and brings into focus the ongoing debate in Washington about reforming this Depression-era system initially designed to finance mortgage lending.
In the wake of this incident, the Federal Housing Finance Agency, which oversees the home-loan banks, is considering revising the rules regarding prepayment fees. The rationale behind allowing FHLBs to charge such fees, even from failing borrowers, is to let these institutions recoup the costs associated with retiring the debt, ensuring their financial stability. However, these fees also stoke the debate over the appropriate use of FHLBs in the modern banking landscape, especially concerning their support to struggling banks. The SVB incident, where the FHLB of San Francisco provided $30 billion in emergency financing, underscores the significant reliance of banks on the FHLB system for more than just mortgage financing.
Market Overview:
-FHLB System Scrutinized: The collapse of Silicon Valley Bank (SVB) raises questions about the Federal Home Loan Bank (FHLB) system’s practices, particularly regarding fees charged for early repayment of emergency financing.
-Record Fee Charged: A $285 million fee levied against SVB for early repayment is the largest of its kind for a failed bank since before 2006.
-Reform Debate Ignited: This incident fuels discussions about potential reforms to the FHLB system, with concerns about profit prioritization over responsible lending practices.
-Focus on Core Mission: Consumer advocates urge the FHLB system to return to its original purpose of supporting mortgage lending, rather than acting as a general source of liquidity for failing institutions.
Key Points:
-Record Fee for FHLB: The $285 million fee charged to SVB for early repayment of emergency financing is the largest on record for a failed bank since at least 2006.
-Reform Debate: This incident fuels the debate surrounding FHLB practices, with concerns about the system’s prioritization of profit over responsible lending practices.
-Prepayment Fee Impact: The Federal Housing Finance Agency (FHFA) is considering rule changes regarding prepayment fees, aiming to encourage FHLBs to conduct more thorough assessments before offering substantial financing to struggling institutions.
-FHLB Defense: The Council of Federal Home Loan Banks argues that these fees compensate the institutions for costs incurred when unwinding financing agreements.
-Focus on Core Function: Consumer advocates urge the FHLB system to refocus on its core mission of supporting mortgage lending, rather than serving as a general source of liquidity for failing banks.
Looking Ahead:
-The FHFA’s potential rule changes regarding prepayment fees will be closely monitored to see if they address concerns about FHLB practices.
-The broader debate about the FHLB system’s role and its adherence to its original mission is likely to continue.
SVB’s decision to pay back the FHLB financing early, along with the hefty fees, was a critical move in managing the bank’s collapse. This action allowed full control of SVB’s assets, which had been pledged as collateral to the home-loan bank. Silicon Valley Bank was ultimately acquired by First Citizens BancShares, which continues to use the SVB brand. This scenario is part of a broader trend where numerous banks, amidst last year’s financial turmoil, chose to repay their FHLB advances early, incurring penalties. The FHLB system loaned out approximately $676 billion in a single week at the peak of the crisis, demonstrating its vital role in stabilizing the banking industry.
The incident with SVB and the subsequent fees charged by FHLB reveal the evolving role of these institutions in the modern financial system. While FHLBs were originally created to support housing finance, their function has expanded significantly, often being utilized as a convenient source of liquidity for financial firms for various purposes. The reliance on FHLBs for emergency funding and the associated penalties in cases of early repayment raise questions about the broader use of these banks and their role in addressing financial crises and housing issues. The debate over FHLB reform and the proper scope of their activities continues to be a pressing issue in the US financial regulatory landscape.
This article was originally published on Quiver Quantitative
By Maggie Fick and Ahmed Aboulenein
WASHINGTON (Reuters) – Members of Donald Trump’s presidential transition team are laying the groundwork for the United States to withdraw from the World Health Organization on the first day of his second term, according to a health law expert familiar with the discussions.
“I have it on good authority that he plans to withdraw, probably on Day One or very early in his administration,” said Lawrence Gostin, professor of global health at Georgetown University in Washington and director of the WHO Collaborating Center on National and Global Health (NS:) Law.
The Financial Times was first to report on the plans, citing two experts. The second expert, former White House COVID-19 response coordinator Ashish Jha, was not immediately available for comment.
The Trump transition team did not immediately respond to a Reuters request for comment.
The plan, which aligns with Trump’s longstanding criticism of the U.N. health agency, would mark a dramatic shift in U.S. global health policy and further isolate Washington from international efforts to battle pandemics.
Trump has nominated several critics of the organization to top public health positions, including Robert F. Kennedy Jr., a vaccine skeptic who is up for the post of secretary of Health and Human Services, which oversees all major U.S. health agencies including the CDC and FDA.
Trump initiated the year-long withdrawal process from the WHO in 2020 but six months later his successor, President Joe Biden, reversed the decision.
Trump has argued that the agency failed to hold China accountable for the early spread of COVID-19. He has repeatedly called the WHO a puppet of Beijing and vowed to redirect U.S. contributions to domestic health initiatives.
A WHO spokesperson declined to directly comment but referred Reuters to comments by WHO Director-General Tedros Adhanom Ghebreyesus at a press briefing on Dec. 10 in which he was asked whether he was concerned that the Trump administration would withdraw from the organization.
Tedros said at the time that the WHO needed to give the U.S. time and space for the transition. He also voiced confidence that states could finalize a pandemic agreement by May 2025.
Critics warn that a U.S. withdrawal could undermine global disease surveillance and emergency response systems.
“The U.S. would lose influence and clout in global health and China would fill the vacuum. I can’t imagine a world without a robust WHO. But U.S. withdrawal would severely weaken the agency,” Gostin said.
U.Today – MicroStrategy has made headlines again by purchasing 5,262 BTC for approximately $561 million at an average price of $106,662 per BTC. The company now holds a staggering 444,262 BTC, accumulated at a total cost of approximately $27.7 billion, with an average purchase price of $62,257 per BTC.
Despite impressive returns of 47.4% since the beginning of the quarter and 73.7% since the beginning of the year, skepticism about the company’s strategy is growing.
It is believed that to sustain its purchases, MicroStrategy raises capital through methods such as issuing convertible and corporate bonds, securing credit lines and selling shares.
This cycle appears to operate as follows: shares are sold to acquire the cryptocurrency, and the rising price per BTC increases asset value, enabling further loans, which are then reinvested in more purchases.
Some observers warn that a significant decline in Bitcoin’s price or MicroStrategy’s stock could trigger a cascade effect. A sharp fall in MSTR shares would weaken the collateral backing its loans, potentially leading to forced asset sales, including BTC.
This scenario could exert downward pressure on the broader cryptocurrency market, as the company holds 2.2% of the global Bitcoin supply now.
Thus, while some view Michael Saylor’s approach as a bold bid to cement the cryptocurrency’s role in the financial system, others see it as unsustainable. History offers a cautionary note: in 2000, MSTR shares surged to $333 before plummeting 99%, a collapse that took 24 years to recover from.
National homebuilder ranked No. 12 on inaugural list ranking companies based on trust
SCOTTSDALE, Ariz., Dec. 23, 2024 /PRNewswire/ — With a longstanding reputation for trust, national homebuilder and land developer Taylor Morrison (NYSE:) (NYSE: ™HC) has been recognized by Forbes on their inaugural list of the Most Trusted Companies in America. The homebuilder ranked No. 12 out of 300 companies across all industries.
“There are few things more powerful than trust and it’s something we strive to earn amongst all company stakeholders, from our customers to our team members, our shareholders, and our local communities,” said Taylor Morrison Chairman and CEO Sheryl Palmer. “To be included on this esteemed list in its inaugural year is especially meaningful and these awards are important reminders of the relationships we’re building across all aspects of our business.”
Fueled by hundreds of millions of data points, the Most Trusted Companies in America list combines data on a wide range of factors across four categories: employee trust, customer trust, investor trust and media sentiment. The ranking was created in partnership with research companies HundredX, Signal AI and Glassdoor.
Taylor Morrison also earned the No. 67 spot on Forbes’ inaugural America’s Best Companies list. The ranking is Forbes’ most comprehensive company ranking to date and factored in ratings for financial performance, customer and employee satisfaction, cybersecurity, sustainability, companies’ remote work policies, media coverage and more. Forbes’ America’s Best Companies list assessed more than 60 metrics across 11 primary categories to identify which organizations excel across the board. Of the more than 2,000 U.S.-based publicly traded companies that were eligible, only 300 qualified for each list.
In addition to being named among the Most Trusted and Best Companies in America by Forbes, Taylor Morrison holds several additional accolades including being named on Newsweek’s America’s Most Responsible Companies and America’s Greenest Companies lists, U.S. News & World Report’s Best Companies to Work For list, the American Opportunity (SO:) Index, America’s Most Trusted ® Home Builder for nine years, Hearthstone’s 2021 BUILDER Humanitarian Award, and inclusion on the Fortune 500 list since 2021.
About Taylor Morrison
Headquartered in Scottsdale, Arizona, Taylor Morrison is one of the nation’s leading homebuilders and developers. We serve a wide array of consumers from coast to coast, including first-time, move-up, luxury and resort lifestyle homebuyers and renters under our family of brands”including Taylor Morrison, Esplanade and Yardly. From 2016-2024, Taylor Morrison has been recognized as America’s Most Trusted ® Builder by Lifestory Research. Our long-standing commitment to sustainable operations is highlighted in our annual Sustainability and Belonging Report.
For more information about Taylor Morrison, please visit www.taylormorrison.com.
CONTACT:
media@taylormorrison.com
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