[avelis]

This a small reminder that Schwab has trillions in Assets Under Management. Unlike SVB, they can't skip the regulatory stress test audits like SVB could because they are so large. Unless they are fraudulently presenting false data, I am personally doubtful of that.

So, this is literally the market reacting the news of SVB & SBNY going into receivership and taking a dump in the whole financial sector.

[paulusthe]

100% agree

And even if Schwab had svb symptoms, the Fed facility announced yesterday fixes it. That program gives loans of up to a year with collateral priced at face value, not market value.

There is zero risk of Schwab running out of cash to cover deposits.

[q1w2]

This is correct, but remember that the stock may also be down because they do still have losses on these longer maturity low-interest rate loans.

...I'm not sure how much of that is new information though. So while bankruptcy is not likely, a depressed stock price may still make sense.

[guywithabowtie]

If that was the case, you would see similar drop into JP Morgan Chase as well. However it is very different. Charles Schwab has dropped exceptionally.

[mattnewton]

JP Morgan isn’t really seen as being “exposed” to tech, in the way Schwab is. Schwab has a ton of customers in Silicon Valley, a lot of the big tech companies use them for RSU disbursement. So maybe the drops are seen as % exposure to Silicon Valley tech? Not saying the drop is rational, just trying to explain it to myself too.

[rabidonrails]

I believe that Schwab is not a money center bank. The money center banks have federal requirements to keep a large amount of their cash liquid. In this case that's providing them converage because this bank run wouldn't really have a devastating effect on them. Examples of the money center banks are Chase, BofA, WFC, and Citigroup.

The regulations that required that cash had been, in the past, seen as a detriment to the banks and people argued that the regionals would be strangled if they had the same requirements.

Right now specifically, it's not great to be really large but not a money center bank.

[pksebben]

obvious gpt is obvious.

I think you meant Charles Schwab there, Mr GPT.

[mattnewton]

Whoops, or a lack of coffee And phone autocorrect. Thanks, fixed.

[Scoundreller]

They can’t touch most of those trillions to cover losses because they have to be 1:1 backed for their customer’s security holdings.

E.g. I have hundreds of thousands of dollars in stocks in my brokerage account, but $100 in uninvested « float ».

They could invest that $100 to make some money for themselves, but that’s where they might be taking some risk. If they screw it up and don’t have my $100 available, they can’t go fractional on my stocks to make up for it.