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SVB Hall of Shame

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Re: SVB Hall of Shame

#241

Post by notch898a »

antics wrote: post #238
notch898a wrote: post #236

Earlier quoted context omitted.

I agree the best action is to not say anything to the public until all of their money is quietly taken out (if possible). The question is if FF had done nothing, would they have been better off? That's a hell of a bet to make, to assume that no one else is part of the run and that given the deteriorating financials that it won't be coming soon (even if inadvertently in the normal course of business).

Ok, I'm not sure where this is going. You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover…

>You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover's portfolio.

The (alleged) 'prime mover' you cite is FF. They (the fund itself) got ALL their money out [0]. FF also gave their portfolio companies a chance to get their money out by alerting them of problems with SVB. You cite a single company portfolio in FF that did not, yet no evidence they would have been able to get their money out had they not been alerted. There's no reason to believe the portfolio was worse off for being tipped off earlier than later, in the quite possible scenario FF wasn't even the first mover.

The claim that no one got money out in the run is plainly untrue. FF got their money out, Hustle Fund brags of pulling the trigger before it was too late. Non-zero transactions were made.

> first movers might be able to get more money out

First movers in a bank run get more money out than those at the end. This is basic principles of fractional reserve banking in a bank run. That you find this "factually incorrect" is absolutely mind bogglingly wrong. There is literally nothing to be gained to being at the end of the bank run, which is effectively where those who do nothing end.

Yes this isn't prisoner's dilemma for a variety of reasons, but since we agree it is not (and I never claimed it was) we'll not belabor that point.

The point is this. It is anything but "swift and extremely stupid" to see deteriorating bank financials that suggest you are at risk of a bank run or failure and transfer your money to a different bank. Doubly so for the second and beyond actors, who find themselves in a run and nothing to gain by letting everyone in front of them in line. Anyone who thinks otherwise is going on my "personal docket of people who are too stupid and impulsive to trust."

final note regarding 'participation.' : Once the bank run starts you have no choice not to 'participate.' You are a participant who can either try to get the money out before it's all gone or you are a participant who chooses to exercise the superior game theory or whatever of letting everyone else suck up the remaining liquidity.

[0] https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-f...

Re: SVB Hall of Shame

#242

Post by pas »

tsunamifury wrote: post #219
dahdum wrote: post #27

Put 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.

No. There was only a 1.8 billion dollar temporary hole in the books. If they wanted to they could have plugged this in minutes and ensured their partner in banking survived. Then cashed out with 1:1.01 tbills or whatever in its stead. Follow on benefits would have been a statement of strength and cooperative SV culture. Instead they panicked like children and told everyone else to panic too It’s not a good look and i…

yep, even though it seems "can't find their own mouth" level incompetence to try to raise cash through equity sale (which prompts everyone to think about their situation) instead of getting a loan, but they may have already exhausted that option.

... though finance is very much about connections, charisma and acting tough, and backchannels. aaand sometimes fundamentals. it's very hard to know if they could have organized/coordinated/managed to put together a rescue package.

there was a 15B liquidity hole after all.

https://blogs.cfainstitute.org/marketintegrity/2023/03/13/th...

by forcing a bank run and crying about payroll they managed to get the government to step in and basically undo SVB's bad deals, at the cost of sacrificing SVB itself. but VCs are happy now, they had the opportunity to both enjoy SVB up to now and have a financially zero-cost exit.

if the fallen SVB management gets the same treatment as the fallen WeWork management their egos will be fine at the golf courses.

Re: SVB Hall of Shame

#243

Post by 2-718-281-828 »

gmd63 wrote: post #220
dahdum wrote: post #75

Earlier quoted context omitted.

In a slightly different reality… “Sorry team, our main VC advised us to keep our money in SVB because it’s the right thing to do. We can’t make payroll. Our VC, true to their ideals, kept their cash in SVB too. They can’t help us. Kindly cast your blame on the thousands of startup peers that withdrew and remain unscathed. Their blatant self-interest may have killed us, but we are the true moral victors.”

Or in another "How was your weekend?" "Oh nice had a walk with the boys, saw a bald eagle" We don't know that this would have been a crisis without a sudden 42 billion dollar withdrawal over 24 hours

I don't get that joke. Please, elaborate.

Re: SVB Hall of Shame

#245

Post by fmajid »

rrrrrrrrrrrryan wrote: post #240
threatofrain wrote: post #228

Earlier quoted context omitted.

> 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.

Sometimes they've been able to make all the depositors while by wiping out all the investors and selling all the assets (buildings, office chairs, etc.) What was unprecedented this time was the promise that they'd do it regardless of whether or not they could recover enough assets. When Washington Mutual and IndyMac collapsed in 2008, some depositors indeed never got all their money back from their uninsured accounts…

The government could make that promise because they have the power to tax, i.e. they have the guns.

https://www.federalreserve.gov/newsevents/pressreleases/mone...

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

Now you may argue it is unfair to other banks to penalize them for the failings of a few. What the SVB fiasco showed is that systemic risk is not just in the too big to fail institutions, but also ones like SVB that are important to specific sectors of the economy, like SVB for Tech or GMAC for cars. As it turns out, SVB had recently gotten TBTF and started the risk management compliance process, including the so-called "living will" to give the Feds a roadmap for an orderly wind-down of the bank, which must have been well-thumbed over the weekend. I expect one of the consequences of this is that more banks will be subject to oversight.

Re: SVB Hall of Shame

#246

Post by Spooky23 »

ineedasername wrote: post #90
Spooky23 wrote: post #25

Earlier quoted context omitted.

Illiquid to the point that you cannot satisfy your debts is essentially the definition of insolvent.

No, it really isn’t. It may lead to insolvency, but that is by no means a foregone conclusion and can play out in different ways. At a simple scale, If I own a $200k home outright and have $50k in credit card debt that I cant pay then I file for bankruptcy, negotiate with creditors to sell my home and pay the debts, and come out with $150k in assets with no liabilities. I was always solvent. This happens daily in the…

The key thing is you are not a bank required to pay depositors on demand.

Re: SVB Hall of Shame

#247

Post by fmajid »

pas wrote: post #242
tsunamifury wrote: post #219

Earlier quoted context omitted.

No. There was only a 1.8 billion dollar temporary hole in the books. If they wanted to they could have plugged this in minutes and ensured their partner in banking survived. Then cashed out with 1:1.01 tbills or whatever in its stead. Follow on benefits would have been a statement of strength and cooperative SV culture. Instead they panicked like children and told everyone else to panic too It’s not a good look and i…

yep, even though it seems "can't find their own mouth" level incompetence to try to raise cash through equity sale (which prompts everyone to think about their situation) instead of getting a loan, but they may have already exhausted that option. ... though finance is very much about connections, charisma and acting tough, and backchannels. aaand sometimes fundamentals. it's very hard to know if they could have organ…

As a former SVB customer, they understood the needs of startups like no other bank, and this will have adverse implications for the startup ecosystem, innovation and future economic growth not just in the US but also China and Europe. The incompetent top management who invested deposits in long-maturity T-bills with mediocre rates are not the same as the front-line personnel who had the relationships with the startups.

As for moral hazard, past bonuses for executives including the past Chief Risk Officer who left a year ago and cashed in her chips can and should be clawed back.

Re: SVB Hall of Shame

#249

Post by op00to »

fmajid wrote: post #247
pas wrote: post #242

Earlier quoted context omitted.

yep, even though it seems "can't find their own mouth" level incompetence to try to raise cash through equity sale (which prompts everyone to think about their situation) instead of getting a loan, but they may have already exhausted that option. ... though finance is very much about connections, charisma and acting tough, and backchannels. aaand sometimes fundamentals. it's very hard to know if they could have organ…

As a former SVB customer, they understood the needs of startups like no other bank, and this will have adverse implications for the startup ecosystem, innovation and future economic growth not just in the US but also China and Europe. The incompetent top management who invested deposits in long-maturity T-bills with mediocre rates are not the same as the front-line personnel who had the relationships with the startup…

Why do tech startups have different banking needs than other ventures?

Re: SVB Hall of Shame

#250

Post by leereeves »

2-718-281-828 wrote: post #243
gmd63 wrote: post #220

Earlier quoted context omitted.

Or in another "How was your weekend?" "Oh nice had a walk with the boys, saw a bald eagle" We don't know that this would have been a crisis without a sudden 42 billion dollar withdrawal over 24 hours

I don't get that joke. Please, elaborate.

I'm pretty sure they mean that if the VCs hadn't advised companies to withdraw all at once, the crisis might never have happened, and March 11th might simply have been a nice day for a walk.
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