Wouldn’t it make more sense to shame people who pulled out of SVB while simultaneously advocating for a bailout?
Only a couple of prominent investors on that list fit the bill
SVB Hall of Shame
21–30 of 307 posts
Re: SVB Hall of Shame
#22Earlier 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.
It was cited to be insolvent in addition be illquid when be taken over by DFPI[1] and most observers and analysts agree .
If it were only illquid, it would be far easier to find a buyer and it would have already been sold by now.
[1] https://dfpi.ca.gov/2023/03/10/california-financial-regulato...
Re: SVB Hall of Shame
#23Earlier 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.
They were liquid. They could sell the $80 bill or so of bonds they had quickly and at fair value. Their problem was selling forced them to face the reality that they'd lost $12 or $13 bill on a wrong way interest rate bet.
Re: SVB Hall of Shame
#24VCs are lemmings. This run is yet another example. Very few think for themselves.
Re: SVB Hall of Shame
#25Earlier 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.
Illiquid to the point that you cannot satisfy your debts is essentially the definition of insolvent.
Re: SVB Hall of Shame
#26> 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.
> Without a run on the bank none of this would have happened.
A bank run is an almost inevitable consequence of a loss of confidence in a bank.
The loss of confidence was caused by their $1.8B loss on securities sales and plan to go to the market for $2B in funding.
The next day shares plummeted, and people began to remove their money (including those advised by VCs)[1]
Given the fact that only $250K of funds is FDIC guaranteed, in the face of a balance sheet crisis at the bank the withdrawal of funds was entirely rational. Arguably not doing it would have been irresponsible.
Even if there hadn't been a bank run it's pretty easy to see cases where the bank would have "temporarily restricted the amount of money an entity can withdraw in a day" or something. That potential restriction on liquidity is something any responsible business owner would want to avoid.
[1] https://abcnews.go.com/Business/timeline-silicon-valley-bank...
Re: SVB Hall of Shame
#27Put another way, this is a list of VCs that prioritize their portfolio companies health and success more than their personal banking relationships or public perception.
That’s a pretty strong signal to future startups they’ve got your back when the shit hits the fan.
I’m not saying it’s good, but I’m betting a lot of founders are feeling pretty thankful. The bailout was never guaranteed.
Re: SVB Hall of Shame
#28Earlier 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.
Illiquid and insolvent play off each other to the point that one implies the other at this state.
The only way to make back the $100 they spent on a 1.25% 10 year $100 treasury was to wait 8 more years.
Those 8 years they'd either have to become slowly become insolvent by offering their depositors 3-4% savings accounts like every other bank, or become illiquid because what depositor would keep their money in an account earning 0.5% so that SVB can keep the lights on. They had to sell and book the loss eventually.
Re: SVB Hall of Shame
#29Earlier 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.
Bonds that are HTM would have been profitable. They just weren't sellable for a profit on the open market (at the time they needed to sell them), because their yield was too low. So, as far as I have read, it wasn't until there was a run that they needed to dramatically increase liquidity. With so much of their holding being HTM, they were stuck. The issue was a mismatch in the timeframes (which was the fatal problem, and should not have happened).
But without that pressure, there probably would have been enough time for this to have been a much more orderly transition. The panic didn't help anyone, it just made SVB's existing problems more difficult to manage.
To put it another way -- SVB went bankrupt the old fashioned way... slowly and then all at once. The bank run was the inflection point.
Re: SVB Hall of Shame
#30I can’t believe this narrative is at the top of HN. It’s disappointing.