How bad is this for wide economy? I’m scared.
Unless you had your money there the only change in your life will be the headlines you glaze over.
FDIC Takes over Silicon Valley Bank
431–440 of 1001 posts
Re: FDIC Takes over Silicon Valley Bank
#432LMAO. 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.
> Hundreds of startups will become illiquid as a result of SVB's collapse, I know SVB was like a "high tech bank" that partnered with things like Stripe Atlas, but is there any reason that startups were using it for their regular operating funds? Other than the name, was there something that actually made this bank particularly suitable for them?
Try to walk to BofA as an entity that didn't exist yesterday and see how that goes.
Re: FDIC Takes over Silicon Valley Bank
#433[deleted]
Re: FDIC Takes over Silicon Valley Bank
#434The FDIC hasn't taken over the SVB web site yet.[1]
"Through our relationships with more than 50% (approximate) of all venture backed companies in the US, and with funds and corporations across the globe, SVB Capital’s family of investment solutions give you unmatched access to this unique asset class."
Their online operations have to be drastically changed. Did their ATM cards stop working yet?
The FDIC usually takes over banks at the close of business on a Friday, using the weekend to audit and reorganize. That this happened at the end of Thursday hints that the situation was bad, so bad that another day of withdrawals would have been too much.
Re: FDIC Takes over Silicon Valley Bank
#435An explainer post [1] connected to that Tweet is something I found extremely informative (assuming it's accurate): "- In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!…
I have some family who (with some other partners) founded a small community bank that has grown over the years.
They expanded in some areas by buying other small community banks, specifically in areas where there was a big increase in income in the local area (from mineral rights, etc).
The smaller banks that they bought were in a situation where suddenly they had large amounts of cash incoming, and customers who were paying off / not taking out loans like they used to.
They didn’t have the reach (mostly confined to a small rural region) to use that cash to give out loans elsewhere so they looked to merge or be bought by someone who did.
Until I heard about those banks I hadn’t considered “too much money” was a problem.
Re: FDIC Takes over Silicon Valley Bank
#436What 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.
That sounds terrible and I feel bad for them.
Re: FDIC Takes over Silicon Valley Bank
#437What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…
> Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. Now imagine you've finally settled on a cost structure that can pay all of your insurance,…
Not if you make inducing bank runs by means of marketing legal.
Re: FDIC Takes over Silicon Valley Bank
#438Earlier quoted context omitted.
> 10+ year duration, with a weighted average yield of 1.56%. > the value of SVB’s MBS plummeted. How much 'plummeting' did they do in numerical terms? Something with those kinds of yields doesn't sound like it ought to be a super risky asset. The mortgage lending market tightened up a lot after the great recession...right?
That has to be an inflation adjusted yield, right? Why would anyone do anything remotely risky for such terrible returns? You can almost find government bonds with similar average yields.
Weren't the rates on government bonds negative if you were a large investor like a bank?
Re: FDIC Takes over Silicon Valley Bank
#439What I don't understand is why do banks work this way? Imagine you were designing the bank from scratch having no knowledge of the current banking system. How would you do it? The most obvious thing would be if a customer deposits money, you would hold 100% of the money 1 to 1 exactly how they deposited it. Then the bank could make money by providing services to their customers. If I had to bet, most people who have…
If you have a large sum of money that you don’t expect to need them soon, do you put the in the bank or do you invest them? Probably invest then. Why would the bank put its money in the bank if you are not?
The bank can happily choose to invest *its* money, it shouldn't be investing *my* money.
Re: FDIC Takes over Silicon Valley Bank
#440Earlier quoted context omitted.
Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
> Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! SVB was an old stodgy banks that companies went to instead of the new kids like Mercury, specifically because of the trust. They have terrible UX and mobile app but at least they were solid and had a 40 year track record.
Speaking of Mercury, they recently announced increasing customers FDIC insurance maximum to $1M for customer accepting to enroll in their sweep program. Not sure SVB offers this but I hope they do.