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Emergency bridge loan for SVB customers

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Re: Emergency bridge loan for SVB customers

#61

Post by JumpCrisscross »

hackernewds wrote: post #44
ivalm wrote: post #14

Earlier quoted context omitted.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

That's a liquidity crisis, not insolvency. They were invested in long term maturity US treasuries! The safest asset there is (arguably)

> a liquidity crisis, not insolvency

Ish. On a mark-to-market basis they had insufficient reserves. That's closer to insolvency than illiquidity. The mismanaged duration is closer to illiquidity. But not of the sort a lender of last resort could save them from.

Re: Emergency bridge loan for SVB customers

#62

Post by JumpCrisscross »

462436347 wrote: post #25

The VCs collectively orchestrated a bank run that destroyed a bank that serviced them for 40 years, when they should have instead cooperatively organized an LTCM-style consortium bailout for it, and helped them raise capital. The selfishness and short-sightedness of VCs never ceases to impress.

> when they should have instead cooperatively organized an LTCM-style consortium bailout for it

I was on the phone with portfolio companies, friends and clients yesterday ensuring they pulled their funds to a back-up bank account. SVB was a national bank. It's not a charity, or even a local bank serving a niche community. It was a big bank, and a badly-run one at that. Nothing they do isn't done by others. I believe in my friends and their missions more than anything SVB was up to. (I'm not a VC.)

Re: Emergency bridge loan for SVB customers

#63

Post by flangola7 »

gruez wrote: post #50
Aeolun wrote: post #33

Earlier quoted context omitted.

I’m inclined to say they will if it guarantees they get it back.

But a dollar in 10 years is worth less than a dollar today. In either case the result is the same: you take a haircut on the present value of your deposits.

No but $1 in ten years will be worth more than $0.50 today.

Re: Emergency bridge loan for SVB customers

#64

Post by anonu »

nostrebored wrote: post #6
gpm wrote: post #3

Honestly this makes a ton of sense. The FDIC will be returning most (or all) of the deposits in SVB, so the debt is reasonably safe (at least as far as debt that startups take on ever is). Whoever is funding this is probably not taking on all too much liability, and if they're heavily invested in the startup ecosystem could easily be making enough back from this indirectly to make it worthwhile. For brex this has to…

97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.

Is that number by account? By assets? By client? ROKU just announced they have close to have a billion in cash there. So 97 percent doesn't really indicate how many individuals are affected.

Re: Emergency bridge loan for SVB customers

#65

Post by gpm »

JumpCrisscross wrote: post #57
gpm wrote: post #11

Earlier quoted context omitted.

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

> the assets of the balance sheet exceed the liabilities by a reasonable percentage Until the FDIC pores over their books, nobody can say anything sensible about what they own, what they sold, what they sent out and what is secured as collateral.

I mean, I'm just going off the FDIC's assertion that

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.

And I'm not trying to claim that the balance sheet necessarily entirely reflects reality

Re: Emergency bridge loan for SVB customers

#66

Post by ummonk »

hackernewds wrote: post #45
ivalm wrote: post #15

Earlier quoted context omitted.

But that’s not an option if you have to pay out now .

That's a liquidity crisis

It's insolvency if the current market value (not the hold to maturity value) of the assets is less than the liability. As far as I can tell though, SVB was solvent despite its losses, and just needed to raise money to cover reserve requirements after it realized the losses. What did it under was a lack of liquidity after everyone panicked and did a run on the bank, with 45 billion (out of ~175 billion in deposits) in withdrawals overnight.

Re: Emergency bridge loan for SVB customers

#67

Post by anonu »

eek2121 wrote: post #47
gpm wrote: post #11

Earlier quoted context omitted.

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

Uh, no? Do you know how they got into this mess to begin with? They were over-exposed to US treasuries. Let's talk about that for a moment: 1) When yields go up, treasury prices fall. 2) When yields go down, treasury prices rise. 3) The only way you get the basis cost for a treasury back is if you hold to maturity. When a bank run happens, you (if you are bank) need cash. Lots of it. If you own assets, you have to se…

Over exposed to US treasuries? I don't think anyone has put those words together before. It's like saying they were over exposed to cash. You're saying a bank run occurred because they had a duration mismatch on US government debt where maturities were less than 1 year. I don't buy that explanation at all...

Re: Emergency bridge loan for SVB customers

#68

Post by dwater »

hackernewds wrote: post #44
ivalm wrote: post #14

Earlier quoted context omitted.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

That's a liquidity crisis, not insolvency. They were invested in long term maturity US treasuries! The safest asset there is (arguably)

All they had to do was freeze withdrawals for 10 years and it all would have worked out fine.

Re: Emergency bridge loan for SVB customers

#69

Post by Blackthorn »

flangola7 wrote: post #63
gruez wrote: post #50

Earlier quoted context omitted.

But a dollar in 10 years is worth less than a dollar today. In either case the result is the same: you take a haircut on the present value of your deposits.

No but $1 in ten years will be worth more than $0.50 today.

Specifically, it's worth about $0.65 today.

Re: Emergency bridge loan for SVB customers

#70

Post by NovemberWhiskey »

ivalm wrote: post #14
ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

It’s more complicated than that: debt assets can be classified in a number of different ways i.e. hold-to-maturity, available-for-sale or trading.

Hold-to-maturity assets are not required to mark to market, for example.

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