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SVB Hall of Shame

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Re: SVB Hall of Shame

#221

Post by sacnoradhq »

borski wrote: post #199
sacnoradhq wrote: post #179

Earlier quoted context omitted.

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.

You didn't quantify or qualify "harm". The ARPA document states AGS permit a bank to stay fully liquid (100% reserve requirements) to cover any potential run. These requirements avoid the failures of bygone eras. Do you have a specific point based on evidence?

Re: SVB Hall of Shame

#222

Post by gmd63 »

As I post this, the original post has 360 points posted 3 hours ago and is ranked lower than a post with 260 posted 14 hours ago.

Interesting.

Re: SVB Hall of Shame

#223

Post by antics »

I am a founder who had assets tied up in SVB. As someone with something to lose, I'm going to be honest that I think the people on this list mostly look incredibly stupid—both at the time and in retrospect. And I think it's worth dwelling on why.

* In a catastrophic (_i.e._, non-backstopped) bank run, _most_ deposits are not getting out of the bank. Especially when the deposit sizes are very large, as they are with corporate treasuries.

* Thus, if a catastrophic bank run is already in progress you are unlikely to succeed at saving any of your portfolio treasuries.

* BUT, if a catastrophic bank run is not in progress, the downside is that you lose 100% of portfolio treasuries because you started one.

I am seeing a lot of people like Elizabeth Yin say that they are proud for telling everyone to pull the plug. I get it. They are on the side of their founders and they want to be helpful, and they believe decisive action helps.

My message to all of those investors is that "makes swift but extremely stupid decisions" is not a quality that is admirable in a capital allocator. I don't think this rises to a moral failing but pretty much everyone on this list is going on my personal docket of people who are too stupid and impulsive to trust in emergency business contexts.

Re: SVB Hall of Shame

#224

Post by drc500free »

dang wrote: post #209
drc500free wrote: post #35

The amount of victim-blaming astroturfing I've seen on hn this week has been quite surprising. Depositors are never, ever to blame for bank runs. Edit: From the about page: > Who I am is not important. Holding accountable the hypocrites responsible for Silicon Valley Bank’s collapse is. I can be reached at svbhallofshame@protonmail.com. All correspondence will be kept anonymous. It's just missing a PAC called somethi…

Please make your substantive points without resorting to the "astroturfing" canard. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html . I don't disagree with you on the topic, but I promise you that the volcano of anger and indignation that spewed forth about this is basically all from entirely legitimate users.

Fair point, you're right. I appreciate how you cultivate things around here, thanks for keeping us centered.

Re: SVB Hall of Shame

#225

Post by notch898a »

antics wrote: post #223

I am a founder who had assets tied up in SVB. As someone with something to lose, I'm going to be honest that I think the people on this list mostly look incredibly stupid—both at the time and in retrospect. And I think it's worth dwelling on why. * In a catastrophic (_i.e._, non-backstopped) bank run, _most_ deposits are not getting out of the bank. Especially when the deposit sizes are very large, as they are with c…

I had to parse this a few times to understand. I think your thesis is that an investor has multiple ventures in their portfolio. And many of those ventures park their treasuries at the same bank. And by telling them a run is happening, your thesis is some or none of those ventures pull their money out faster than others, and the stragglers of the portfolio can't due to the bank run started by the investor and/or other companies in the investor's portfolio?

Re: SVB Hall of Shame

#226

Post by drc500free »

fastball wrote: post #202
zaroth wrote: post #183

Earlier quoted context omitted.

They’ve been insolvent for some time. The bank run didn’t cause the insolvency, the bank run exposed it, and laid it bare.

What is your source for this? From everything I have read, the first point at which they were clearly insolvent was what I mentioned previously, when they sold a huge swath of bonds at a massive loss at or around March 8th 2023, which was less than two weeks ago.

My read is that they were either holding the MBSs as tradeable assets (in which case they had taken a massive real loss that wiped out their equity) or until maturity decades away (in which case they didn't have enough current assets to remain solvent as a bank).

The depositor withdrawals forced them to admit that they had taken a massive loss because of insufficient hedging against interest rate hikes, but they didn't really seem to have a path to unwinding their underwater positions in any realistic timeframe. HTM was an accounting misdirection to try to hide the hole in their ship while they bailed water, but it was a massive hole and they had a tiny bucket.

Re: SVB Hall of Shame

#227

Post by notch898a »

tablespoon wrote: post #149
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

> Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Then the product you really want is a safe deposit box to put your literal cash in. Th…

It would be a lot cheaper and probably less risky for the safe deposit box to be numbers in an account like it is with fractional reserves, except the part where they lend it out privately. Even better if those reserves can be kept at the central bank overnight to earn a bit of interest.

I also can't do an ACH or wire transfer from a safe deposit box.

Re: SVB Hall of Shame

#228

Post by threatofrain »

naet wrote: post #61

I don't think I agree with this as a mark of "shame". Were these companies wrong to pull money out of SVB when they (correctly) thought the bank might be insolvent or headed for trouble? Are we celebrating those who left their money in, despite the warnings, when they could have potentially lost it all if the government didn't step in and make an unprecedented promise to honor the deposits? Would that have been "hero…

> when they could have potentially lost it all if the government didn't step in and make an unprecedented promise to honor the deposits

Was this unprecedented? I thought the US government has always covered depositors in full beyond the $250k.

Re: SVB Hall of Shame

#229

Post by [deleted] »

notch898a wrote: post #225
antics wrote: post #223

I am a founder who had assets tied up in SVB. As someone with something to lose, I'm going to be honest that I think the people on this list mostly look incredibly stupid—both at the time and in retrospect. And I think it's worth dwelling on why. * In a catastrophic (_i.e._, non-backstopped) bank run, _most_ deposits are not getting out of the bank. Especially when the deposit sizes are very large, as they are with c…

I had to parse this a few times to understand. I think your thesis is that an investor has multiple ventures in their portfolio. And many of those ventures park their treasuries at the same bank. And by telling them a run is happening, your thesis is some or none of those ventures pull their money out faster than others, and the stragglers of the portfolio can't due to the bank run started by the investor and/or othe…

[deleted]

Re: SVB Hall of Shame

#230

Post by twelve40 »

danielmarkbruce wrote: post #217
twelve40 wrote: post #71

Earlier quoted context omitted.

I have no idea if this is correct or not, but by some accounts, there were noticeable issues with regular transfers which caused the initial concern about the bank. It's not like someone started this out of boredom. https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-f...

They lost $12 billion on an interest rate bet. The fact they didn't need to mark it to market under an accounting rule didn't mean people ignored it. It was a giant, known problem. It's why they were out trying to raise capital.

I'm talking about the "rumors" that caused the bank run. From what I've read (quoted above), these weren't really rumors but problems with day-to-day transfers that prevented the fund(s) from completing their deals, in which case one has to be insane not to let their friends know that the bank is not transferring money like they are supposed to. In hindsight we know they had problems like you said, but the "spread rumors" part seems to have been triggered by legitimate problems with regular transfers.
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