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SVB Hall of Shame

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Re: SVB Hall of Shame

#191

Post by dforrestwilson »

zaptheimpaler wrote: post #166
davidw wrote: post #6

Earlier quoted context omitted.

> 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…

The founders represented by the VCs were looking at a company they spent years building and all its money potentially disappearing overnight. They had to act quickly under a lot of uncertainty and took the decision that minimized risk. I guarantee if SVB hadn't been bailed out people here would be questioning the VCs who didn't pull out instead. I don't blame them. It was irrational if they were omniscient beings wit…

That first part is fine. Killing risk is key.

But within 24 hours we had VCs from Founder’s Fund and the All In podcast personas who intentionally and knowingly fueled a panic on social media.

That panic was designed to benefit them and it worked, to the detriment of everyone reading this who has a deposit at a US bank, and who will now be assessed a fee to cover the cost.

Re: SVB Hall of Shame

#192

Post by kondro »

TylerE wrote: post #127
jrumbut wrote: post #111

Earlier quoted context omitted.

Fixed terms of 5 years would be a very hard change to swallow in the US.

Might fix the Airbnb problem though.

Negative gearing (a way to merge unlimited losses from investment property into your personal tax return) and the core, multi-generational opinion that investment property is the best way to build wealth in Australia and no property tax (equivalent is rates which are significantly lower on average than the US and stamp duty which is only payable on the sale of a property) has causes massive investment in non-PPOR properties as well as massive property inflation costs in general.

Re: SVB Hall of Shame

#193

Post by mavelikara »

xoa wrote: post #69
kamikaz1k wrote: post #16

Earlier quoted context omitted.

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're right, but it is entirely prisoner's dilemma. But part of what makes that whole bit of game theory interesting is that it has a lot more complexity then just the simple version. Yes in a plain prisoner's dilemma betray can make sense, but in an iterated prisoner's dilemma that's no longer true. That's been part of the debate around the whole debacle, for much of SV's history it was very much iterated, it was…

> There was an HN piece sometime in the last few days I think talking about this and speculating/arguing that the rise of unicorns changed the community from iterated towards the more singular game.

https://stratechery.com/2023/the-death-of-silicon-valley-ban...

Re: SVB Hall of Shame

#194

Post by jsemrau »

hn_throwaway_99 wrote: post #95
jsemrau wrote: post #76

Auditors signed-off their audits : https://www.businesstoday.in/silicon-valley-bank/story/silic... with a clean bill of health nonetheless.

This was commented elsewhere, but the auditors were correct in that situation. This was not a case of fraud, where the bank had less money than they said they did. KPMG's job was to verify that SVB's public statements were accurate, and they were. SVB's precarious position was not a secret - saw a good post from mid-Feb that predicted exactly how this eventually played out. The only other thing KPMG could have done i…

Well, when I was working with auditors (internal AND external) in previous roles in major financial institutions, we always performed tests if risk management tools are sufficient and reserves are proper. In the case of SVB it would have been possible to point out the concentration risk before bringing this into the public domain. But then, I do agree with you that the situation evolved as a sum of many parts, which included the, at the time, highly unlikely result of a bank run by the VC community. Looking back, I still shake my head how this came to be.

Re: SVB Hall of Shame

#195

Post by jliptzin »

sacnoradhq wrote: post #173
kondro wrote: post #161

Earlier quoted context omitted.

Cash is basically illegal for many transactions related to financial services and is likely to become illegal for everything greater than $10k in Australia very soon: https://treasury.gov.au/policy-topics/economy/black-economy/...

Australia and India are among those who bought (no pun intended) into the fallacy that cash is for criminals, and you're only a good consumer if you use traceable electronic funds from megacorp SIBs. There are millions, if not billions, of unbanked people whose survival depends on cash. And the US has civil asset forfeiture, were cops call "dibs" on cash and the owner has to essentially disprove a negative they're us…

This happened to my friend, he was caught with a small amount of marijuana and cocaine in his house while police were there for an unrelated domestic dispute. They then searched the rest of his house and stole approx $10k cash he had in a safe, accusing him of making that money from drug sales (it was really just emergency cash he wanted separate from his bank account, he wasn’t a drug dealer). He never got it back, it was not even in the record of items police seized.

Re: SVB Hall of Shame

#196

Post by adityaathalye »

Siren call for a VC Union? I'm only half-serious :)

Under the circumstances, I'd have pulled out money while I could. Money in hand is better than a hope in hell.

But seriously, I wonder if it makes sense to have some common ground to greatly reduce odds of SVB-likes happening?

Dealing with this kind of emergency is all about communication. The final collapse happened frightfully quickly. There is no time to organise when the car pile-up has begun. You got to have groundwork in advance, and comms open too.

Maybe its too black of a black swan that you can't ever prevent. Maybe the competitive dynamics of the startup world do not lend support for a commons. Yet, maaaybe if you can see that your number one business partner's books have become crazy, someone should be able to say something, at the very least?

Re: SVB Hall of Shame

#197

Post by jessaustin »

evancox100 wrote: post #86
walterbell wrote: post #64

Why didn't more SVB depositors take advantage of the SVB offering for sweeping cash funds into insured accounts? https://prospect.org/economy/2023-03-13-silicon-valley-bank-... > Importantly, SVB was part of the network of cash sweep banks; it had an offer on its website about it. But according to Adam Levitin, there were only $469 million in reciprocal deposits, which is where cash sweep would show up. In other word…

Roku had nearly half a _billion_ uninsured at SVB! I get how a small startup maybe overlooks their cash management, but how do you get to the size of Roku and have that? Treasurer/CFO should be fired.

Roku should have been nationalized.

Re: SVB Hall of Shame

#198

Post by the_gipsy »

taco_philips wrote: post #106
acomjean wrote: post #55

Earlier quoted context omitted.

FYI: prisoners dilemma is an interesting game theory experiment where you do better if everyone cooperates. You do better than your "opponent" if you don't. The wikipedia explains it well. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

Prisoner's dilemma requires that the parties cannot communicate with each other.

Communication is meaningless in prisoner's dilemma.

Re: SVB Hall of Shame

#199

Post by borski »

sacnoradhq wrote: post #179
borski wrote: post #109

Earlier quoted context omitted.

> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.

Please do us a favor: don't assume the other party is ignorant of fundamentals because such a comment doesn't serve a purpose.

I made no such assumption. GP implied that bank runs wouldn’t hurt Australian banks. They would. That’s all.

Re: SVB Hall of Shame

#200

Post by gmd63 »

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…

It's unknown whether it was in their best interest, because we can't observe the alternate reality where 42 billion dollars wasn't withdrawn in one day.

The raindrop never feels responsible for the flood, but it is.

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