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Emergency bridge loan for SVB customers

brex.com

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Re: Emergency bridge loan for SVB customers

#141

Post by zarzavat »

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

Let’s say I owe $100.

If I have assets worth $110 today but they are locked up, and I have to pay back what I owe today, then I’m facing a liquidity crisis.

If I have assets worth $90 today, but $110 in a few years, and I have to pay back the money I owe in a few years, then I’m solvent and everything is good.

If I have assets worth $90 today, but $110 in a few years, and I have to pay back what I owe today then I’m insolvent.

Re: Emergency bridge loan for SVB customers

#142

Post by petesergeant »

fnordpiglet wrote: post #122
tekla wrote: post #114

Earlier quoted context omitted.

https://dfpi.ca.gov/wp-content/uploads/sites/337/2023/03/DFP... California has declared it insolvent. It literally by definition is now.

No, it’s not. SBV was unable to meet its obligations and was insolvent. Then the FDIC stepped in and a part of its function will be to ensure liquidity. So it’s is therefore not insolvent. The FDIC won’t take a loss so it may become insolvent again and might have to resort to insurance to make depositors partially whole. The fact that it has a) access to sufficient credit liquidity via governmental ownership b) asset…

> No, it’s not [insolvent]

from the article op linked, in "Findings of Fact", by the Commissioner of Financial Protection and Innovation:

> the bank is now insolvent

Re: Emergency bridge loan for SVB customers

#143

Post by petesergeant »

MrMan wrote: post #97
throwntoday wrote: post #8

Earlier quoted context omitted.

I believe the only ones SOL are SIVB shareholders. It's my understanding that SVB has enough to mostly cover their liabilities.

that's not true -by "mostly" do you mean 70 to 80%? losing 20% of your principal is a huge loss

> losing 20% of your principal is a huge loss

losing 20% of your cash-on-hand, where that's above $250k. For most startups, that's going to be a haircut their investors take, where the founders can say "yeah, literally none of this was our fault".

For mature, profitable businesses with recurring income, this is going to bite, but they haven't lost 20% of their customers or 20% of the amount of money they expect to get paid next month.

For startups, where the money was investment, unlikely their investors are going to blame them for this loss. It might shorten runway by up to 20% for some pre-revenue startups, by less for startups with actual revenue.

Re: Emergency bridge loan for SVB customers

#144

Post by startupsfail »

Dylan16807 wrote: post #128
anonu wrote: post #67

Earlier quoted context omitted.

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...

Let's say you're a bank. You have $1B in deposits. You use it to buy bonds that will be worth $1.1B in 2030. All good so far. Then the government starts selling those bonds a lot cheaper. To buy the same bonds you have today would only cost $900k. Even though the 2030 value of those bonds is the same, the 2023 value just plummeted. (And they will gain more per day to eventually make up the difference.) When your cust…

There could be a bailout though. A massive fire in Silicon Valley caused by the Fed tweaking interest rates doesn’t look like a good thing, so we’ll likely see a fire brigade coming along and pouring some money in.

Re: Emergency bridge loan for SVB customers

#146

Post by TheAlchemist »

Startup ecosystem is safe. VCs are very motivated to put everybody in the same basket here - small depositors, startups, themselves...

FDIC is VERY efficient. Most probably, the bank will be open on Monday morning, albeit with another owner, and most small depositors and startups wouldn't even notice if it's not for all these 'breaking news'.

The guys that are on the hook here, and their exact job is to manage money, are the VCs. They will most probably loose a relatively small percentage of money (say 10%).

Re: Emergency bridge loan for SVB customers

#147

Post by [deleted] »

maximilianroos wrote: post #135
arcticbull wrote: post #132

Earlier quoted context omitted.

> Treasuries can and do lose value. They are not like cash which does not lose face value. > Long term treasuries have declined 40% in value since they peaked in 2020. This is inaccurate. What you linked to (TLT) aren't bonds, these are bond funds . The way a bond ETF works is that they have a stack of bonds that track the benchmark interest rate. They periodically sell off their old bonds and buy new ones, they don'…

A HN comment for the ages. Reply to two basically correct statements, make a claim that's completely false, and then — and here's the genius — say a bunch of true statements that come around to support the view you're disagreeing with!

[deleted]

Re: Emergency bridge loan for SVB customers

#148

Post by svnt »

tedivm wrote: post #98
DeepYogurt wrote: post #12

Earlier quoted context omitted.

so it sounds like a gamble on what brex expects that actual return to be

Brex isn't making the gamble, they're just managing it- > This credit line is funded by 3rd-party capital (and not Brex directly), who are working with Brex to minimize the impact of this event to the startup ecosystem. It sounds like a bunch of VCs are gambling on the return, while also knowing it helps stabilize the system that built (and likely holds, in some way or another) their wealth.

The run, predominantly by VCs, is what destabilized the bank.

In a regime of rising interest rates this gives them pricing power on the loans where they were just passive depositors previously. Since SVB loans were essentially only to companies who were already customers of these VCs, you could view this move fairly cynically.

Re: Emergency bridge loan for SVB customers

#149

Post by FireBeyond »

ummonk wrote: post #139
MrMan wrote: post #99

Earlier quoted context omitted.

this is a lie, I am petty sure. why are you posting this stuff

I mean we'll find out shortly enough. If they can't find a buyer for SVB, then it's likely insolvent. If they do then it's obviously solvent.

I mean both Californian and federal regulators have specifically published press releases saying that the bank is actually insolvent...

Re: Emergency bridge loan for SVB customers

#150

Post by IG_Semmelweiss »

fnordpiglet wrote: post #123
IG_Semmelweiss wrote: post #117

Earlier quoted context omitted.

it is insolvent. It sold assets at firesale. That wiped out SVB's entire equity!! If SVB literally had a way to hack the time-space continuum and wait out for asset prices they own , to stabilize ("maturity") , or to pay them back in full ( a loan)...SVB would STILL likely lack enough funds to pay back their deposits.

That hack of space time is called “credit,” and they can collateralize their entire liability sheet if they had a credit willing to lend them massive amounts of cash on their illiquid assets. The FDIC owns them now and has access to credit. As a business they’re fine. The issue wasn’t the selling of assets, it was the panic that their actions took to prop up a balance sheet hole. It’s not like Enron or Lehman.

I don't think it is even chicken or egg. I think you have it wrong here

I contend there is no private entity credit that would go near SVB because precisely they realized more losses than they had more depositors, and such credit would have never been secured at the top of the pile with the FDIC lurking nearby.

No credit facility would save a doomed bank after the realized losses. It was a matter of time.

The panic was not the cause. The panic was always going to happen. A public company would have never been able to do a firesale/equity raise without inducing a panic in the first place.

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