FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#201

Post by timr » Fri, Mar 10, 2023, 5:23 PM UTC

prasadjoglekar wrote: post #174

vineyardmike wrote: post #127

Earlier quoted context omitted.

> If you had more than $250k in SVB yesterday you probably just took a huge haircut. You may not lose money. The money isn’t gone yet. The restructuring may save the money. There’s a playbook for this sort of thing.

You most definitely will. SVB already fire-sold 21Bn in MBS and took a 1.8Bn loss on that. Someone is eating that loss.... Separately, this is going to cause a lot of finance vultures to look at other banks who also have MBS portfolios on their books. The show's only beginning.

No, this isn't true. SVB has some unknown amount of cash and other assets on hand. We have no idea what that is right now, or what percentage this is of the shortfall.

Someone will buy SVB, and they will put capital in as part of the purchase.

Re: FDIC Takes over Silicon Valley Bank

#202

Post by CyanLite2 » Fri, Mar 10, 2023, 5:23 PM UTC

omgomgomgomg wrote: post #165

woeirua wrote: post #52

LMAO. Can't even believe how many people were confidently asserting that nothing was wrong yesterday. If you had more than $250k in SVB yesterday you probably just took a huge haircut. Hundreds of startups will become illiquid as a result of SVB's collapse, and there will be major layoffs here in the next 90 days as founders realize that they lost their funds and cannot raise in the current VC environment.

But why would the startups become illiquid? Do they get the investments from the banks or do they park the investment money in this bank? And why this bank, when there are many more risk averse institutions out there?

They become illiquid because they don't have access to their money that was in SVB. They can't make payroll, can't pay vendors and landlords. The employees will leave first. Vendors next.

Re: FDIC Takes over Silicon Valley Bank

#203

Post by [deleted] » Fri, Mar 10, 2023, 5:23 PM UTC

tedivm wrote: post #121

TechBro8615 wrote: post #51

Earlier quoted context omitted.

40% of startups just had their bank accounts cut down to $250k, so... a lot.

I'm not sure how true this is. I worked at a startup that took in over $100m in investment, and I was curious so I asked the cofounder how they protected that. According to him the money was divided up into chunks smaller than $249k, pushed off to a custom entity made just for the purpose, and then invested in bonds or CDs on a rotating basis. I'm sure a lot of startups will be in trouble, but those that are working…

[deleted]

Re: FDIC Takes over Silicon Valley Bank

#204

Post by banku_brougham » Fri, Mar 10, 2023, 5:23 PM UTC

version_five wrote: post #40

game_the0ry wrote: post #11

2008 bear sterns vibes. The fed's move in interests rates was bound to break something. This is the first big name and, while banks are taken over by the FDIC often and it never makes the news, this one will be especially interesting bc it is Silicon Valley Bank. Naturally, people and the media will associate with the rest of silicon valley, bringing extra scrutiny to every brand name tech company, especially the one…

Re Bear Sterns, there were lots of political reasons it was allowed to fail while others were protected. If I remember right something about them not helping with the Long Term Capital Management collapse for example. There will have been people who had the opportunity to help SVB and collectively decided it was better to let it fail. It will be interesting to understand the decisions that were made when the dust set…

great callback. revenge on Jimmy Cayne for when genius failed.

Dont forget it was Lehman that failed first, Bear got special treatment amongst the Citi, AIG, et al bailouts.

Re: FDIC Takes over Silicon Valley Bank

#205

Post by NordSteve » Fri, Mar 10, 2023, 5:24 PM UTC

bombcar wrote: post #176

gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

The thing that's strange is FDIC took control and setup a receiving bank for liquidation. That's not normal; FDIC works quite hard to find a bank willing to take over - usually they can work out what the "cost" is to take over, and FDIC pays the receiving bank that amount to "eat" the dying one. If they don't announce they have a bank to assume SVP by Monday, it's quite abnormal.

Most FDIC bank takeovers are slow moving crashes, allowing for a longer negotiation where buyers can evaluate the loan portfolio they are buying. This is a reaction to a classic run, so no time for that.

Re: FDIC Takes over Silicon Valley Bank

#206

Post by ehhthing » Fri, Mar 10, 2023, 5:24 PM UTC

nnx wrote: post #173

But I thought only crypto was risky? And that over-regulated bank sector was totally safe? Imho, this is a great argument for the return of Free banking (including crypto) as we see time and again that regulations do not work. Fail early and fast, let the market innovate and pick its winners and losers.

Except in this case, when SVB fails their customers will get the vast majority of their money back as the FDIC liquidates all of SVB's assets. When FTX fell, nobody got squat.

Re: FDIC Takes over Silicon Valley Bank

#207

Post by tiffanyh » Fri, Mar 10, 2023, 5:24 PM UTC

testfoobar wrote: post #43

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731...

Imagine having a life changing amount of personal wealth deposited at a Crypto exchange, and before you can spend it - the exchange sets it on fire.

Re: FDIC Takes over Silicon Valley Bank

#208

Post by Eumenes » Fri, Mar 10, 2023, 5:24 PM UTC

xt00 wrote: post #150

Eumenes wrote: post #97

Why did startups use SVB over larger commercial banks? Every place I've worked has used them for some reason. I don't get it.

common wisdom held that it made it easier for investors to get you money -- especially from the usual sand hill road folks..

I could understand like, getting the funds deposited to SVB, then managing your corporate funds in a larger more regulated bank

Re: FDIC Takes over Silicon Valley Bank

#209

Post by ejb999 » Fri, Mar 10, 2023, 5:24 PM UTC

reducesuffering wrote: post #113

Does this mean $SIVB stock holders who had $265 shares two days ago now have worthless shares? JFC no wonder bank stocks are priced so low compared to earnings... You're just hoping the dividends pay out enough before the inevitable implosion.

pretty much.

Re: FDIC Takes over Silicon Valley Bank

#210

Post by tinco » Fri, Mar 10, 2023, 5:24 PM UTC

gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

But by the time the depositors get their money all of their employees will have left, and some other company will have an N year lead on cornering the AI dog washing market.