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FDIC Takes over Silicon Valley Bank

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Re: FDIC Takes over Silicon Valley Bank

#681

Post by misssocrates »

tempsy wrote: post #591
somenameforme wrote: post #367

An 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!…

honestly disgusted by the blatant PR moves by YC and Founders Fund yesterday in leaking their “advice” to their founders to get out of SVB Very blatant weaponization of FUD to drum up deposits for their investments in Brex, Ramp, and Mercury.

Would it be better to keep good advice private?

Re: FDIC Takes over Silicon Valley Bank

#682

Post by gregruss »

twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

If you don't understand the sentiment, I recommend that you read about what happens in a "run on the bank". Too many large withdrawals at the same time results in a liquidity crisis. No bank in the country has enough reserves to pay all of its customer accounts at the same time; it's part of our system of fractional reserve banking. A massive spike in withdrawals forces a bank to sell long term securities in a disadvantageous environment, often for a huge loss. That undermines customer confidence and exacerbates the issue, causing more people to withdraw. A single person could bring the most successful bank to its knees in that environment, as long as enough customers believe them; it's a self-fulfilling prophecy.

https://en.wikipedia.org/wiki/Bank_run

Re: FDIC Takes over Silicon Valley Bank

#683

Post by mydriasis »

flutas wrote: post #417
katmannthree wrote: post #24

Yikes. Does anyone have an idea of which orgs have significant exposure (like Molly White's FTX contagion graph[0])? [0] https://www.mollywhite.net/etc/ftx-contagion

Potential contagion: https://imgur.com/a/Xh6Kudp These are companies, sorted by PPP loan size who had SVB as their servicer.

Holy cow, O'Reilly in the top ten. That doth not bode well.

Re: FDIC Takes over Silicon Valley Bank

#684

Post by mcenedella »

dang wrote: post #563
somenameforme wrote: post #367

An 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!…

(We detached this subthread from https://news.ycombinator.com/item?id=35097120 , which contains "that tweet".)

Great moderating dang! Appreciate your tireless work to make hackernews great.

Re: FDIC Takes over Silicon Valley Bank

#685

Post by alfalfasprout »

opportune wrote: post #648
twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

This, these bonds/mbs are liquid instruments, they just lost value at market prices. When I make a deposit in a bank I am not purchasing a CD - I expect full liquidity. If the bank invested my deposit in something that lost money but should be worth my deposit amount in X years that is purely the bank’s fault, not my fault.

Here's the more mindblowing thing... not only are those MBS and treasuries completely liquid... they're correlated to interest rates! The fed has been forecasting interest rate hikes every single quarter. Every. Single. Quarter. They had plenty of time to roll over these investments at a slight loss. Heck, even reducing their exposure 50% would have been enough to not end up in this mess.

Instead, they waited until it was way too late (by most accounts, the fed is going to do another 50bps hike next) and all it took was some fear for the house of cards to come crumbling down.

This does feel like a regulatory failure though. Reserve requirements don't quite prevent a bank taking on massive undiversified risk like this.

Re: FDIC Takes over Silicon Valley Bank

#686

Post by twelve40 »

gregruss wrote: post #682
twelve40 wrote: post #635

So it seems like they mismanaged their assets and their liabilities, taking on a lot of expensive deposits while investing at low yield. What I don't get is all this pro-SVB, anti-VC sentiment, how "some VC's yelled fire in a crowded theater" and caused the poor bank to collapse. Isn't it just common sense though, to protect your money? The bank fucked up by doing risky reckless things, it got exacerbated because the…

If you don't understand the sentiment, I recommend that you read about what happens in a "run on the bank". Too many large withdrawals at the same time results in a liquidity crisis. No bank in the country has enough reserves to pay all of its customer accounts at the same time; it's part of our system of fractional reserve banking. A massive spike in withdrawals forces a bank to sell long term securities in a disadv…

So my personal takeaway: pick a bank that is too big to fail, because if it happened to a bigger, non-niche bank they probably would have used the taxpayers' money to bail it out.

PS. the sentiment still makes no sense, SVB customers did not sign up for the bank to gamble with their money and they have a full moral right to do whatever it takes to get their working capital back the second they start to sense any trouble. These withdrawals are not just stupid meme stock lulz, this money belongs to the customers.

Re: FDIC Takes over Silicon Valley Bank

#687

Post by rvnx »

kmlx wrote: post #215

Silicon Valley Bank UK confirms it’s a standalone independent UK regulated bank. London, 10 March, 2023: Silicon Valley Bank UK, the financial partner of the innovation economy, today moved to confirm to its UK clients, partners and external stakeholders its financial position as a standalone independent banking institution that is regulated and governed by the PRA in the UK. Silicon Valley Bank UK has been an indepe…

The announcement is somewhat funny in a way that "independent Silicon Valley Bank"'s announcement actually happens on the website of the US website they are not supposed to have links with.

Re: FDIC Takes over Silicon Valley Bank

#688

Post by woeirua »

vineyardmike wrote: post #127
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.

> 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.

No one knows for sure. We don't know what the value of their HTM MBS actually is on the open market.

What we do know for sure though, is that this process will take months, maybe years, to play out and many startups will run out of money long before this is resolved.

Re: FDIC Takes over Silicon Valley Bank

#689

Post by NovaDudely »

azinman2 wrote: post #68

> Silicon Valley Bank is the first FDIC-insured institution to fail this year. Wow FDIC is fully calling it a failed bank. Just yesterday they were releasing statements saying they’re in a good position. Uncle Sam just fully opened Pandora’s box and made the judgement public!

It is fun (in a morbid kind of way) just seeing how quickly the confidence on these things turn.

"Company is 200 years old and we will go for another 200 years more!"

2 Days later

"Whoops, all the moneys gone. Bye!"

Re: FDIC Takes over Silicon Valley Bank

#690

Post by [deleted] »

rsync wrote: post #445
somenameforme wrote: post #367

An 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!…

"97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%." I'd like to learn more about the dramatic drop in MBS - elsewhere, downthread, it is asserted that they have dropped 30-50% ? I understand the inverse relationship between bond price and yield ... ... but I am surprised that an asset yielding ~1.5% drops 30% in value when treasuries of similar duration rise to 3-4%. Are there other fac…

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