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SVB Hall of Shame

svbhallofshame.wordpress.com

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Re: SVB Hall of Shame

#11

Post by nl »

Hmm

It was 100% possible to genuinely hold the belief that "Silicon Valley Bank is safe" and to advise portfolio companies to remove money to reduce risk.

In-fact, that looks like it was the prudent way to behave: depositors probably haven't lost their money but it sure is a lot less liquid.

And this is exactly why bank runs are dangerous - once there is risk of one the safe thing to do is to remove your money as well. The only way to stop one is for an institution with a LOT of money to step in an guarantee it.

Re: SVB Hall of Shame

#12

Post by 23B1 »

cowpig wrote: post #4
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

> The people in the VC community who triggered the bank run did the right thing by their startups. How do you arrive at this conclusion? Without a run on the bank none of this would have happened.

Rumor is uncontrollable and often unattributable – and each organization acted in the best interests of its employees and shareholders, as is their duty.

Ugly, but rational.

Re: SVB Hall of Shame

#13

Post by bandrami »

nickff wrote: post #8
cowpig wrote: post #4

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. How do you arrive at this conclusion? Without a run on the bank none of this would have happened.

The bank run seems to have occurred after the insolvency. The bank was appears to have been insolvent (from the currently available information), though they avoided their books showing the fact by having bonds marked as “HTM”. When a bank is insolvent, it’s best to shut it down as soon as possible, to avoid the bank engaging in risky behavior to ‘make back’ the missing money.

Not insolvent, illiquid. Calling SVB insolvent is like calling Elon Musk "poor" because his income this year was $0.

Re: SVB Hall of Shame

#15

Post by simonh »

davidw wrote: post #6
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do.

If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.

Re: SVB Hall of Shame

#16

Post by kamikaz1k »

davidw wrote: post #6
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

You're right, but it is entirely prisoner's dilemma.

The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday?

And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive you for missing their payroll, because you thought it was the ethical thing to do.

Re: SVB Hall of Shame

#17

Post by TheJoeMan »

nl wrote: post #11

Hmm It was 100% possible to genuinely hold the belief that "Silicon Valley Bank is safe" and to advise portfolio companies to remove money to reduce risk. In-fact, that looks like it was the prudent way to behave: depositors probably haven't lost their money but it sure is a lot less liquid. And this is exactly why bank runs are dangerous - once there is risk of one the safe thing to do is to remove your money as wel…

If you’re interested in maintaining the partnership, why not leave the FDIC insured amount?

Re: SVB Hall of Shame

#18

Post by rexreed »

nl wrote: post #11

Hmm It was 100% possible to genuinely hold the belief that "Silicon Valley Bank is safe" and to advise portfolio companies to remove money to reduce risk. In-fact, that looks like it was the prudent way to behave: depositors probably haven't lost their money but it sure is a lot less liquid. And this is exactly why bank runs are dangerous - once there is risk of one the safe thing to do is to remove your money as wel…

The best way to prevent a bank run is not to run. A stampede isn't caused by the movement of a lone animal, but by the herd. It's a classic feedback loop.

Re: SVB Hall of Shame

#19

Post by taxman22 »

bandrami wrote: post #13
nickff wrote: post #8

Earlier quoted context omitted.

The bank run seems to have occurred after the insolvency. The bank was appears to have been insolvent (from the currently available information), though they avoided their books showing the fact by having bonds marked as “HTM”. When a bank is insolvent, it’s best to shut it down as soon as possible, to avoid the bank engaging in risky behavior to ‘make back’ the missing money.

Not insolvent, illiquid. Calling SVB insolvent is like calling Elon Musk "poor" because his income this year was $0.

SVB was insolvent.
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