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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#191

Post by JohnFen »

recursivedoubts wrote: post #114
chollida1 wrote: post #73

Earlier quoted context omitted.

Who is lying in this case? Banks are one, if not the most, regulated companies in the US. What are banks lying about and who are they lying to? I'd assume the government would come down on them pretty hard if it turns out that all banks are lying to their customers as federal and state regulations on banks are pretty heavy handed to make sure that the vast majority of banks are healthy at any given time.

The bank is telling two or more people they own (or, at least, have access to) the same dollar at the same point in time. With duration matching you can have loans, but it is clear that depositor A can't get dollar X back until time point T, and that borrower B can have the dollar until then.

> The bank is telling two or more people they own (or, at least, have access to) the same dollar at the same point in time

But they don't do that. Or, I've literally never seen them do that.

What the bank tells me is what my current deposit is. That's the truth. They aren't representing that the amount they're listing is a specific dollar somewhere, they're telling me how much money I've given to them.

Re: Bank run on Silicon Valley Bank

#192

Post by vonnik »

SVB is an institution that has supported a lot of businesses in tech.

There are a lot of harmful clowns out there fearmongering. They should stop.

The failure of a bank like this, if it occurs, would be bad for a lot of people.

Re: Bank run on Silicon Valley Bank

#193

Post by capableweb »

throwaway20222 wrote: post #23
pjc50 wrote: post #13

Earlier quoted context omitted.

It's more slow dominoes from the crypto crash, I suspect. I'm not worrying about contaigion yet, these guys aren't exactly Lehman.

Anecdotally about SVB and crypto; I really wanted to put my funding round assets into Silicon Valley Bank for my last start up. However, when I was speaking to their bankers, I mentioned that there was a possible element of the platform that would be Web3 based. The SVB team immediately paused my application and insisted that they do a deep dive into all of my investors, my bank accounts, and my pitch decks. My pitch…

Probably they just perform more extensive due diligence because of the market, as cryptocurrencies are more risky. I know of plenty of cryptocurrency companies that use SVB.

Re: Bank run on Silicon Valley Bank

#195

Post by Enginerrrd »

danielmarkbruce wrote: post #181
anon291 wrote: post #19

Earlier quoted context omitted.

Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?

Everyone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more…

That FDIC thing is so laughable to me because it's purely symbolic. Even the feds would have some serious trouble absorbing bank-run losses.

Re: Bank run on Silicon Valley Bank

#196

Post by ttobbaybbob »

ericpauley wrote: post #58

I'm really curious why banks like this are popular in the first place. I get why startups would want to lend from them, but what is the advantage of parking cash in a "startup-focused" bank? The rest of the business is exciting/risky enough, wouldn't you want your banking to be as boring as possible?

they provide services/incentivies specifically catered to startups and their needs (eg free checking, aws credits, payment processing APIs/etc)

and not unlike aws/stripe/etc they want to be the bank for small companies that grow into huge companies. startups are a good segment to target (eg like vc) because they might also turn into a large company with much more cash and more banking needs

Re: Bank run on Silicon Valley Bank

#197

Post by [deleted] »

recursivedoubts wrote: post #114
chollida1 wrote: post #73

Earlier quoted context omitted.

Who is lying in this case? Banks are one, if not the most, regulated companies in the US. What are banks lying about and who are they lying to? I'd assume the government would come down on them pretty hard if it turns out that all banks are lying to their customers as federal and state regulations on banks are pretty heavy handed to make sure that the vast majority of banks are healthy at any given time.

The bank is telling two or more people they own (or, at least, have access to) the same dollar at the same point in time. With duration matching you can have loans, but it is clear that depositor A can't get dollar X back until time point T, and that borrower B can have the dollar until then.

[deleted]

Re: Bank run on Silicon Valley Bank

#198

Post by notch898a »

tempsy wrote: post #172
cjensen wrote: post #26

Earlier quoted context omitted.

If the Bank is federally insured, it's not a problem that the bank won't be able to make it work. That's why generally speaking bank runs only happen on uninsured banks in the US. SVB is not, as far as I can see, insured and should definitely be careful in their choice of words.

You’re kidding right? There’s a limit of like $250k An individual could easily have that much let alone a startup with millions.

It's crazy to me there aren't banks with 100% reserve ratio fully insured for a nominal fee of 0.4% or whatever (gold/silver storage with full insurance is ~0.4% so this probably isn't far off).

I'd much rather lose 0.4% of my money than lend it out at +0.01% to whatever checking accounts pay nowadays while they lend out to some asshole that does business with the bank.

Re: Bank run on Silicon Valley Bank

#199

Post by TMWNN »

johnbellone wrote: post #36
mikesun wrote: post #29

Earlier quoted context omitted.

FDIC only insures up to $250K

Per account. Edit: It seems I am incorrect. > The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.

>The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category

My understanding is that this might cause an unwelcome surprise to (for example) someone with a personal account at Bank A, and a sweep account at Brokerage P that sends its funds into accounts at Banks A, B, and C.

Re: Bank run on Silicon Valley Bank

#200

Post by cm2187 »

nradov wrote: post #186
recursivedoubts wrote: post #21

Daily reminder that bank runs wouldn't be a thing if we did duration matching, forbidding banks from borrowing short and lending long. As always, the underlying problem in banking is that the banks are lying, telling two or more people they own the same dollar at the same point in time. If they locked deposits for a period of time they could safely (and morally) loan that money out without lying, and, in fact, there…

That's not a real problem as long as banks are adequately capitalized. Shareholders might get wiped out but that's fine, they know the risks.

You may be confusing solvability and liquidity. You may be well capitalised but if you run out of cash it's game over. Being well capitalised only protects you against losses (eg bad loans).
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