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SVB in talks to sell itself after attempts to raise capital fail

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Re: SVB in talks to sell itself after attempts to raise capital fail

#221

Post by Zetice »

jrumbut wrote: post #194
Zetice wrote: post #153

Earlier quoted context omitted.

Hmm, I suggest reading about some of the pre-fed crises to understand better why these modern problems are much better to have if given the choice…

And this situation is similar. A bad thing happened, so we were going to feel some pain. Instead of letting that lead to complete chaos we let it lead to some chaos and some inflation.

Exactly, and just to drive it home, I’m going to feel zero pain as a result of SVB imploding, Thanks to the fed.

I felt no pain in ‘08, in ‘20, also thanks to the fed. It was just news to me, abstract and happening to other people. That would not have been true without the fed.

Re: SVB in talks to sell itself after attempts to raise capital fail

#222

Post by twoodfin »

almost_usual wrote: post #127
ancorevard wrote: post #112

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday. However, sad to see what looks to be another government caused implosion. - First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditio…

I’d argue preventing a total financial collapse in 2020 is more important than SVB and some startups failing.

Sure, but it's debatable whether spending a few $T more in early 2021 was more helpful than not.

Re: SVB in talks to sell itself after attempts to raise capital fail

#223

Post by jccooper »

late2part wrote: post #182
rcme wrote: post #128

Earlier quoted context omitted.

He's making it sound like depositors are going to get 80% of their money back tomorrow. It's going to be a years-long legal battle while affected companies are going to potentially shutter due to an inability to meet obligations. Also, his number of 80-85 is based on the yield of the treasuries, but old treasuries like this are hard to move.

Why won't the FDIC resolve this quickly for depositors?

For customers who are startups, investors, and large tech concerns, FDIC insurance of $250k may not cover the balance. Sure don't want the $2M you have left from your last funding round to evaporate, or even be frozen.

Re: SVB in talks to sell itself after attempts to raise capital fail

#224

Post by rosywoozlechan »

ncallaway wrote: post #203
airza wrote: post #185

Earlier quoted context omitted.

This isn't bitcoin world though, deposits are FDIC insured to stop this

Deposits ate FDIC insured up to 250k per depositor per bank. Companies with > $250k in the bank need to take the risk that they really can lose that money into account.

Per bank and per account with different ownership categories, so if a company had multiple accounts in different ownership categories those would each be insured up to $250,000

Re: SVB in talks to sell itself after attempts to raise capital fail

#225

Post by vishnugupta »

rich_sasha wrote: post #87

One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…

SVB situation is made worse 'coz it seems about 93% of bank's $160B deposits are uninsured as they are above FDIC's $250K limit. So all the more reason for depositors to pull out their money.

Re: SVB in talks to sell itself after attempts to raise capital fail

#227

Post by brian_cloutier »

mhluongo wrote: post #204
samstave wrote: post #191

Earlier quoted context omitted.

The fed seems to have never had a problem when all their customers [i.e. banks/hedgies/wallstreet] come asking.

It's easier when you can print money :)

I believe the implication is: why aren't we using the fed for our banking, this kind of bank run would be impossible. The fed provides guarantees to banks but not to retail and that's a policy decision we could change, if we wanted to.

Re: SVB in talks to sell itself after attempts to raise capital fail

#228

Post by makestuff »

SteveNuts wrote: post #201
airza wrote: post #185

Earlier quoted context omitted.

This isn't bitcoin world though, deposits are FDIC insured to stop this

Not to the amount that most startups would have in their account

The startup I worked for used SVB. While I am unsure if all of their money was with SVB, it was company that had raised over 100m. I wonder if there will be issues with paychecks going out. Surely they diversified their accounts, but who knows.

Re: SVB in talks to sell itself after attempts to raise capital fail

#229

Post by samstave »

dmix wrote: post #17
rickreynoldssf wrote: post #13

I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.

I can't count how many times I've read similar comments on HN in the last 10yrs

Were you around during the 2001 bust? It was surreal. I had a BBQ at my house and had ~75 attendees... all tech workers. of the ~75 people there, ~3 had jobs.

I was out of work for 18 months during that period. Luckily I had a background in Animation and Architecture to fall back on and got a job designing tech companies when the crisis lifted.

2008 was worse though.

Re: SVB in talks to sell itself after attempts to raise capital fail

#230

Post by glasshug »

hnfong wrote: post #148
rich_sasha wrote: post #87

One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…

> That's a lot but also means depositors get 80-85% of their money back That's not what happens. Let's say 100 clients each deposited $1 in the bank, and the bank loses $20, so only has $80 to pay out when liquidated. Let's say half (50) depositors withdraw their funds early, they each get $1 back. So now the bank has $30 in assets and has to pay 50 people. Suppose 20 people demand withdrawals, and the bank pays $20…

You're also forgetting about clawbacks of preferential transfers that happened less than 90 days before bankruptcy. 11 U.S.C. 547.
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